Tin tức ngày 11/10/2013

U.S. Stocks Jump Most Since January on Debt-Deal Optimism
U.S. stocks jumped, with benchmark indexes rallying the most since January, as lawmakers moved toward an agreement to increase the debt ceiling and avoid a default.
Nike (NKE) Inc., Boeing Co. and American Express Co. rose more than 3.4 percent, leading advances among large companies. Wells Fargo & Co. and JPMorgan Chase & Co. gained at least 2.7 percent before reporting earnings tomorrow, propelling financial shares to the biggest gain in 16 months. Gilead Sciences (GILD) Inc. jumped 6.5 percent as the largest biotechnology company by market value said the cancer drug idelalisib improved survival times.
The Standard & Poor’s 500 Index (SPX) surged 2.2 percent to 1,692.56 at 4 p.m. in New York. The Dow Jones Industrial Average advanced 323.09 points, or 2.2 percent, to 15,126.07. Both gauges had their steepest climbs since Jan. 2. About 6.5 billion shares changed hands on U.S. exchanges, 12 percent higher than the three-month average.
“You’re taking the nuclear option off the table, the fact that we’ll blow through the debt ceiling, that’s not going to happen,” Dan Veru, the chief investment officer who helps oversee $4.5 billion at Palisade Capital Management LLC, said in a phone interview from Fort Lee, New Jersey. “This continues to put pressure on lawmakers to get a deal done because they’re seeing that just in fact talking is what markets want them to” do, he said.
Broad Rally
All but 12 members of the S&P 500 index rose today, the broadest advance this year. The gauge’s rally was the biggest since a 2.5 percent surge on the first trading day of the year, when lawmakers passed a bill averting spending cuts and tax increases known as the fiscal cliff. The index has climbed 0.7 percent since the government shutdown began Oct. 1, and has trimmed its decline to 1.9 percent since closing at a record of 1,725.52 on Sept. 18.
Investors reacted to a House Republican proposal for a short-term increase in the debt ceiling that would reduce the prospects for a U.S. default. The plan would push the lapse of U.S. borrowing authority to Nov. 22 from Oct. 17. It wouldn’t end the 10-day-old partial shutdown of the federal government.
President Barack Obama would support a short increase in the U.S. debt limit with no “partisan strings attached,” though he prefers a longer extension, Jay Carney, the White House press secretary, said today. The proposal could come up for a vote on the House floor as soon as tomorrow.
U.S. Treasury Secretary Jacob J. Lew warned Congress today that “uncertainty” over the debt limit is starting to stress financial markets and trying to time an increase to the last minute “could be very dangerous.”
‘Very Emotional’
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, slumped 16 percent today to 16.48 for its biggest retreat since April. The gauge is down 8.6 percent in 2013.
“The market has been very emotional,” Paul Mangus, head of equity strategy and research for Wells Fargo Private Bank in Charlotte, North Carolina, said in a phone interview. His firm manages $170 billion. “You had days of positive, relief rallies followed by days of angst and concerns over the debt ceiling and government shutdown. Until we reach a period where we have clarity on that, we’d expect volatility to be elevated.”
A Treasury Department report on Oct. 3 said consequences would be “catastrophic” should the U.S. default, including higher interest rates, lower investment and slow growth for decades to come.
Shutdown Effects
A partial federal government shutdown lasting through the end of this week would pare 0.2 percentage point from U.S. economic growth and cost as much as 0.5 point if it continues another two weeks, according to the median estimate in a survey of economists taken Oct. 4-9. The
Claims for U.S. jobless benefits jumped last week to the highest level in six months, a Labor Department report today showed, providing the first statistical warning that the damage from the partial federal shutdown is starting to ripple through the economy.
Most Fed officials last month predicted drag from fiscal restraint would be a reason for them to hold the benchmark lending rate at 2 percent or lower until the end of 2016 to support growth and job creation.
Investors will watch financial reports as more companies release third-quarter results. Profits for companies in the S&P 500 probably increased 1.7 percent during the three months while sales rose 2.2 percent, according to analysts’ estimates. The projections are down from 5.7 percent and 3.6 percent, respectively, from the end of June.
Cyclical Stocks
“There is not a pent-up expectation that this is going to be a gangbuster quarter,” Mangus said. “Consequently, you can have some positive surprises.”
All 10 S&P 500 industry groups jumped at least 1.4 percent. Companies whose earnings are most tied to economic swings led the gains. The Morgan Stanley Cyclical Index jumped the most in a month, adding 1.9 percent.
Industrial shares surged 2.7 percent to pace gains. Boeing, the world’s largest planemaker, rallied 3.9 percent to $118.90 for the biggest gain in the Dow.
Nike advanced 3.6 percent to $73.44. DA Davidson & Co. raised its stock-price estimate for the world’s largest sporting-goods maker to $76 from $75 after the company said yesterday that annual sales will rise to $36 billion by the end of fiscal 2017.
Banks, Insurers
Financial shares surged 2.9 percent as a group, the biggest rally since June 2012, as all 81 members of an S&P index advanced. American Express, the biggest U.S. credit-card issuer by purchases, jumped 3.4 percent to $74.66.
Wells Fargo gained 2.7 percent to $41.44 while JPMorgan added 3.5 percent to $52.52. JPMorgan is among lenders that said earnings will suffer from a bond-trading slump, while Wells Fargo guided analysts to expect mortgage originations to fall by almost 30 percent.
MetLife Inc. added 3.7 percent to $48.11 and Prudential Financial Inc. climbed 4.1 percent to $79.07, pacing gains among insurers as bond yields rose. The firms invest funds from clients in bonds and other assets to back future payouts.
Gilead Sciences jumped 6.5 percent to $62.74. The company said patients benefited enough from the cancer drug idelalisib to end a late-stage study early.
Netflix Inc. rose 5.4 percent to $303.99, snapping a three-day slide. Laura Martin, an analyst with Needham & Co., started coverage of the stock with a buy rating and said the video service provider has the ability to boost subscription prices. While Netflix fell 12 percent this week through yesterday, the stock has more than tripled since the start of the year.
Cable Partnership
Time Warner Cable Inc. jumped 6.1 percent to $116.95. The cable company and Univision Communications Inc., a media group that caters to Hispanic Americans, agreed to extend their partnership and deliver more content to Time Warner subscribers.
UnitedHealth Group Inc. surged 3.6 percent to $73.98. The biggest U.S. insurer had the outlook on its credit rating raised to positive from stable by S&P on expectation that the company will strengthen its leadership in the industry.
Citrix Systems Inc. (CTXS) slumped 12 percent to $58.75 as the technology company reported preliminary third-quarter earnings of 68 cents to 69 cents a share. That missed the average analyst estimate of 73 cents.
Quest Diagnostics Inc. slipped 4.9 percent to $58.66. The biggest U.S. operator of medical laboratories said preliminary results showed that, excluding some items, it earned $1.02 a share in the third quarter. Analysts, on average, estimated $1.20.
European Stocks Rise on Signs of Compromise on U.S. Debt
European stocks rose the most in more than five weeks amid signs U.S. lawmakers will agree on a compromise deal to avoid an unprecedented default.
Ladbrokes Plc rallied to a two-week high after a report that Playtech Plc founder Teddy Sagi may have acquired an almost 3 percent stake in the bookmaker. CGG gained 2.1 percent after saying third-quarter vessel-production rate jumped to a record. Rheinmetall AG declined after Moody’s Investors Service lowered its debt rating.
The Stoxx 600 added 1.7 percent to 310.29, its highest level since Sept. 2, as U.S. President Barack Obama prepared to meet Republican lawmakers to discuss the federal budget and debt limit. The benchmark gauge yesterday declined for a third day amid concern that the impasse may lead to a default.
“It’s very important for the markets that we got this news of a possible short-term deal and that Republicans and Democrats are having further discussions,” Andreas Lipkow, a senior market strategist at Kliegel & Hafner AG in Berlin, said by telephone. “The tone earlier this week was very negative and everyone was very concerned.”
The VStoxx Index, which measures the volatility that options traders expect in the Euro Stoxx 50 Index, tumbled 15 percent, the most in 13 months. The volume of shares changing hands on Stoxx 600-listed companies was 22 percent greater than the average of the past 30 days.
10th Day
House Republican and Senate Democratic leaders are open to a short-term increase in the $16.7 trillion debt limit, said congressional aides of both parties who spoke on condition of anonymity. Economists say a failure by the world’s largest borrower to repay its debt will devastate stock markets and throw the U.S. and world economies into a recession.
House Republican leaders are presenting their members with a proposal to raise the debt limit for six weeks without policy conditions, said a congressional aide familiar with the details. The move would lessen the risk of a U.S. default one week from a lapse in borrowing authority.
The U.S. government is in its 10th day of a partial shutdown and has just a week before the government’s borrowing authority lapses Oct. 17. Obama meets with 18 House Republican leaders and committee chairmen at 4:35 p.m. in Washington.
In Europe, the Bank of England left its benchmark interest rate unchanged today. Reports showed industrial output in France rose 0.2 percent in August, the first increase in four months. That fell short of the median estimate of economists, which forecast a 0.6 percent gain. A similar measure of output in Italy dropped 0.3 percent in August. Economists had projected a 0.6 percent increase.
National Markets
National benchmark indexes advanced in all 18 western European markets. The U.K’s FTSE 100 rallied 1.5 percent, France’s CAC 40 jumped 2.2 percent and Germany’s DAX climbed 2 percent. Spain’s IBEX 35 (IBEX) surged 2.4 percent to its highest level since July 2011.
Ladbrokes (LAD) rallied 2.9 percent to 185 pence, posting the biggest two-day gain since April 2009. A mystery buyer, thought to be Sagi, bought a stake in the U.K. bookmaker, the Telegraph reported. The deal, through Shore Capital, was just below the 3 percent disclosure limit, according to the Telegraph. The purchase fueled speculation about a possible bid, the newspaper said.
CGG jumped 2.1 percent to 15.83 euros. The oilfield surveyor said third-quarter vessel-production rate increased to 94 percent, from 90 percent in the same quarter last year and 92 percent in the second quarter of this year.
Lenders Rally
A gauge of bank shares in the Stoxx 600 rallied 2.5 percent. Commerzbank AG added 5.9 percent to 9.36 euros. Banco Popolare SC rallied 1 percent to 1.40 euros, while Intesa Sanpaolo SpA jumped 2.2 percent to 1.78 euros.
Arkema SA (AKE) added 4.7 percent to 83.93 euros. UBS AG raised its rating on the French chemicals maker to a buy from neutral, saying the stock is undervalued. The firm also boosted its price target to 100 euros from 80 euros.
Hays Plc gained 2.2 percent to 118.1 pence. The U.K’s largest professional-recruitment agency said first-quarter net fees rose 2 percent from last year on a comparable basis.
“We see clear growth opportunities as a number of markets continue to improve, including some that have been challenging for some time, such as the U.K. and Asia,” Chief Executive Officer Alistair Cox said in a statement.
Mediaset SpA rallied 5 percent to 3.47 euros. HSBC Holdings Plc lifted its price target on the broadcaster controlled by former Italian Prime Minister Silvio Berlusconi to 2.60 euros from 1.50 euros. The firm maintained its underweight recommendation, which is similar to sell.
Rheinmetall declined 0.9 percent to 42.38 euros. Moody’s lowered its rating on the German armored-vehicle maker’s senior unsecured notes due September 2017 to Ba1 from Baa3.
Gerresheimer AG dropped 3.4 percent to 43 euros. The company, which develops and produces specialty products made of glass and plastic, was cut to hold from buy at Kepler Cheuvreux.
“The key test for the stock will be the guidance for 2014,” analyst Oliver Reinberg wrote in a note to clients.
Asian Stocks Rise Most in Three Weeks on U.S. Debt Talk
Asian stocks rose, with the regional index heading for the biggest gain in three weeks, amid optimism U.S. lawmakers will lift the debt limit and avoid a default.
Great Wall Motor Co. added 3.1 percent in Hong Kong after the carmaker reported sales increased last month. Westpac Banking Corp. contributed the most to the regional stock gauge’s advance, gaining 2.6 percent in Sydney after agreeing to buy Lloyds Banking Group Plc’s assets in Australia. Fast Retailing Co., Asia’s largest clothing retailer, fell 4.5 percent in Tokyo after forecasting profit that missed analyst estimates.
The MSCI Asia Pacific Index jumped 1.3 percent to 140.93 as of 10:54 a.m. in Tokyo, poised for the steepest daily advance since Sept. 19. Talks between lawmakers will continue as Republicans and Democrats seek a “path forward” on the debt ceiling, according to Republican House Majority Leader Eric Cantor. The White House said “no specific determination was made” during an initial 90-minute meeting between the parties in Washington.
“Both sides are trying to step away from that cliff next week,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about A$170 billion ($161 billion). “People are assuming there will be some resolution before the 17th, but there’s clearly a long way to go.”
Debt Ceiling
Futures on the Standard & Poor’s 500 Index fell 0.1 percent. The U.S. equity gauge jumped 2.2 percent yesterday, the biggest rally since January. House Speaker John Boehner and other party leaders met with President Barack Obama for more than an hour at the White House to discuss delaying the lapse in U.S. borrowing authority to Nov. 22 to Oct. 17 without attaching policy conditions.
Separately, claims for U.S. jobless benefits jumped last week to the highest level in six months, a Labor Department report yesterday showed, providing the first statistical warning that the damage from the partial federal shutdown is starting to ripple through the economy.
Today’s rally puts the MSCI Asia Pacific Index on course for a 1.3 percent gain this week and its fourth straight daily advance.
Japan’s Topix index surged 1.7 percent today and South Korea’s Kospi index climbed 1.1 percent. New Zealand’s NZX 50 Index gained 0.6 percent and Australia’s S&P/ASX 200 Index rallied 1.7 percent.
Taiwan’s Taiex Index rose 0.6 percent as markets reopened following a holiday. Singapore’s Straits Times Index added 0.5 percent. Hong Kong’s Hang Seng Index (HSI) gained 1.5 percent. China’s Shanghai Composite Index rose 1.1 percent.
China is scheduled to release a series of economic reports over the weekend including September trade data. China’s economy may grow about 7 percent for the “foreseeable future,” as policy makers rein in house-price gains and local government debt, Deputy Central Bank Governor Yi Gang said yesterday.
“It looks like it stabilized after growth slowed down in the first half of the year,” Halmarick at Colonial said. “That’s positive.”

Obama, Republicans aim to end crisis after meeting, hurdles remain

President Barack Obama and Republican leaders appeared ready to end a political crisis that has shuttered much of the U.S. government and pushed the country dangerously close to default after meeting at the White House on Thursday.
No deal emerged from the 90-minute meeting, but talks continued into the night in an effort to re-open the government and extend the government's borrowing authority beyond an October 17 deadline. One senior Republican said an agreement could come on Friday, though hurdles remain.
The plummeting standing of congressional Republicans in public opinion polls helped spur a move toward ending the standoff, Oklahoma Republican Representative James Lankford said on CNN Thursday night. The latest, an NBC-Wall Street Journal survey published on Thursday, showed the public blaming Republicans by a 22-point margin - 53 to 31 percent.
The President's meeting with Republican leaders was the first sign of a thaw in a 10-day standoff that has weighed on financial markets and knocked hundreds of thousands of federal employees out of work.
"It was a very adult conversation," said Republican Representative Hal Rogers, who attended the meeting. "Both sides said they were there in good faith."
Republicans in the meeting offered to extend the government's borrowing authority for several weeks, temporarily putting off a default that otherwise could come as soon as next week. Obama pushed to also reopen government operations that have been closed since October 1.
Significantly, Republicans seemed to be steering clear of the restrictions on Obama's healthcare reforms and spending that prompted the crisis in the first place. Instead, negotiations centered on how far to extend the debt limit and how much funding they would provide the government when it opens, according to Republicans.
The two sides are working on "defining parameters to see if we can make progress," said Republican Representative Pete Sessions, a member of the leadership.
"The President looks forward to making continued progress with members on both sides of the aisle," the White House said in a statement.
The proposal is a significant shift for Republicans, who had hoped to use the threat of a shutdown and a default to undermine Obama's healthcare law.
But they have been hammered in opinion polls and pressured by allies in the business community who worry the brinkmanship is killing jobs and slowing the economy. Republicans worry that the standoff could imperil lawmakers in competitive districts, giving Democrats an increased chance of winning control of the House next year.
Now Republicans hope a short-term debt-limit extension, perhaps until the middle or end of November, will buy time to seek spending cuts, a repeal of a medical-device tax, or other measures they say are needed to keep the national debt at a manageable level.
Conflicting reports of the outcome of the meeting sent immediate ripples through financial markets. U.S. equity index futures tracking the S&P 500 index dropped after a report that Obama had rejected the Republican offer, but rose when details of the meeting trickled out. Major U.S. equity indexes closed 2 percent higher earlier on Thursday on hopes of a deal.
The crisis began in late September when Republicans tied continued government funding to measures that would undercut the Affordable Care Act, Obama's signature legislative accomplishment.
The gambit didn't work, as "Obamacare" unveiled its online health-insurance exchanges on October 1 even as much of the rest of the government shut down. Even so, the exchanges have been plagued by serious technical problems unrelated to the shutdown.
In recent days, Republican leaders have emphasized other goals, such as reining in the retirement and health benefit programs that pose a long-term threat to the country's fiscal health.
For the first time in weeks, lawmakers from both parties predicted they would be able to resolve their differences.
"Both sides will be able to claim victory," said Democratic Representative Chaka Fattah of Pennsylvania.
Many hurdles remain. Obama has said he will not negotiate on anything until Republicans agree to reopen the government and remove the threat of immediate default.
Rank-and-file Republican conservatives who remain focused on defeating "Obamacare" also could reject the deal. Even if disaster is averted for now, the entire dispute could come to the fore again when the temporary agreement expires.
House Speaker John Boehner's grip over his troops has been tenuous this year and many of the chamber's most conservative lawmakers have defied him repeatedly on other crucial votes.
Boehner has taken pains to show his party's most rebellious members that he listens to their concerns. He took a different approach when he told them of his plan to extend the debt ceiling.
"He put his best Coach Boehner voice and demeanor on and said, 'Guys, this is what we are going to do. The play has been called. I'm happy to answer questions,'" said Republican Representative Tom Cole of Oklahoma.
The Obama administration says it will be unable to pay all of its bills if Congress does not raise the $16.7 trillion debt ceiling by October 17. Treasury Secretary Jack Lew said he would be unable to prioritize some payments over others among the 30 million transactions his department handles each week.
"It would be chaos," Lew told the Senate Finance Committee.
But Lew and Federal Reserve Chairman Ben Bernanke told their counterparts of the G20 group of economies on Thursday that the standoff over the debt ceiling will be resolved by October 17, Russian Finance Minister Anton Siluanov said.
"Colleagues from the U.S. Treasury and the Federal Reserve have said that they hope to solve the issue soon. They said that the problem will be solved by the 17th," Siluanov told reporters after a dinner with G20 counterparts gathering on the sidelines of the IMF/World Bank meetings.
"It's an important issue for everyone. Both Lew and Bernanke believe that these difficulties can be overcome soon," Siluanov added.
Democrats who control the Senate are readying a vote, possibly on Saturday, that would extend government borrowing authority for more than a year, rather than the weeks-long time frame Republicans have proposed. Still, they did not entirely dismiss the Republican plan.
"Let's see what they have offered," House Democratic Leader Nancy Pelosi said.
House leaders canceled a recess planned for next week and said they would remain in Washington instead.
Opinion polls indicate that Republicans appear to be getting more of the blame for the standoff. The NBC/Wall Street Journal poll released on Thursday found approval of the Republican Party at 24 percent, a record low. Democrats won the approval of 39 percent of the U.S. public.
Business groups that have close ties to the Republican Party have pressed for an end to the brinkmanship and some are laying plans to mount primary challenges next year to lawmakers who refuse to raise the debt ceiling.
Hundreds of thousands of federal employees have been thrown out of work by the shutdown and individual businesses, from arms makers to motels, have begun to lay off workers as well.
The Labor Department said on Thursday that 15,000 private-sector workers have filed for unemployment benefits due to the shutdown.
Republicans Enter Talks With Obama on Debt Limit Increase
President Barack Obama didn’t accept or reject House Republicans’ plan to increase the debt limit as the two sides pledged to keep talking tonight about avoiding default and ending the partial government shutdown.
Both sides described the talks -- continuing tonight between staff members -- as constructive with a week remaining until U.S. borrowing authority lapses.
Obama told Republicans during a White House meeting that he wants to raise the debt limit and end the shutdown, now in its 10th day, said Representative Hal Rogers of Kentucky. The Republican proposal released earlier today included only a short-term increase in the debt limit.
“He would like the shutdown stopped,” Rogers said. “We are trying to find out what it is he would insist upon” in a spending bill and “what we would insist upon.”
Republican House Speaker John Boehner’s plan and Obama’s willingness to continue talking marked the first serious negotiations between the parties to resolve the impasse without the catastrophic economic consequences that the Treasury Department said would stem from a default.
The White House released a statement saying that “no specific determination was made” and that the two sides talked about “potential paths forward” during the 90-minute meeting. Obama has insisted on raising the debt ceiling and ending the government shutdown before starting broader fiscal talks.
‘Constructive Dialogue’
“House Republicans remain committed to good faith negotiations with the president, and we are pleased there was an opportunity to sit down and begin a constructive dialogue tonight,” party leaders said in a statement.
A vote on the debt-limit bill could occur as soon as tomorrow. The proposal from Boehner wouldn’t end the partial shutdown, though Representative Tom Cole of Oklahoma said a bill to end it would be considered soon. He wouldn’t say whether Republicans would insist on changes to Obama’s health law, the Patient Protection and Affordable Care Act.
“I hope the Republicans decide what they want and we’ll be happy to work with them in any way,” Senate Majority Leader Harry Reid of Nevada said at the White House after he and other Senate Democrats met with Obama for almost two hours earlier today. “We’ll just wait and see because they cannot decide what they want.”
The Debt Ceiling
Jay Carney, the White House press secretary, said today that Obama would support a short increase in the U.S. debt limit with no “partisan strings attached,” though he prefers a longer extension. Carney said the White House would need to see a bill before accepting it.
Budget Talks
Boehner and Republican leaders say they want to engage Obama in talks about the budget. Those conversations would start under an unwritten agreement that wouldn’t be part of the debt-limit measure, said Representative Dave Camp, a Michigan Republican and chairman of the House Ways and Means Committee.
Asian stock indexes from Japan to Australia rallied more than 1 percent, fueling a 1 percent jump in the MSCI Asia Pacific Index of regional equities. Futures on the Standard & Poor’s 500 Index pared declines of as much as 0.7 percent to trade little changed by 10:38 a.m. in Tokyo. The benchmark U.S. gauge surged 2.2 percent today, the most since Jan. 2.
While the dollar extended gains against the yen, the U.S. currency lost 0.3 percent against the Malaysian ringgit and South Korean won. Crude oil retreated 0.3 percent to $102.71 a barrel. Industrial metals climbed, with copper, nickel and zinc rising at least 0.3 percent.
‘Witching Hour’
The benchmark 10-year Treasury yield earlier rose two basis points, or 0.02 percentage point, to 2.68 percent, after touching 2.72 percent, the highest level since Sept. 23. The rates for all Treasury bills maturing through Nov. 14 fell.
Cole, a Boehner ally, said the shutdown could be “settled pretty quickly” after the debt-limit bill passes.
“This is like the witching hour,” he told reporters. “Everything has come to pass right here: obviously the debate over Obamacare, the sequester, the end of the fiscal year, the debt ceiling have all basically converged into a single opportunity for either disaster or negotiated success.”
Republicans are debating what policy conditions they would want to attach to a bill that would end the shutdown, said a Republican aide who requested anonymity to discuss strategy.
House Republicans are backing away from demanding major changes to the 2010 health-care law, the aide said.
Poll Numbers
A Wall Street Journal/NBC News poll released today found that 53 percent of those surveyed blamed Republicans for the fiscal impasse, compared with 31 percent who blame Obama.
The shutdown would pare 0.2 percentage point from U.S. economic growth if it lasts through this week and as much as 0.5 point if it continues another two weeks, according to the median estimate in a survey of economists.
Pushing back the debt-ceiling deadline will allow the debate to refocus on delaying the mandate for individuals who lack health insurance to purchase it, said Representative Raul Labrador, an Idaho Republican.
Under the House plan, the Treasury Department wouldn’t be able to use so-called extraordinary measures to further extend borrowing authority, creating a hard deadline, said Representative Tom Reed, a New York Republican. A vote is possible tomorrow or Oct. 12, said Representative Vern Buchanan of Florida.
Limit Flexibility
House Minority Leader Nancy Pelosi of California said ending the extraordinary measures “isn’t very smart” because it would limit Treasury’s flexibility.
Many Republicans want to tie the debt-limit increase to party priorities such as cuts in entitlement programs such as Social Security and Medicare. Still to be determined is whether rank-and-file members will agree to the leadership’s proposal.
Republicans have a 232-200 majority and can lose votes from only 15 members before they need to rely on Democrats.
If the U.S. fails to raise the debt limit by Oct. 17, the government will have $30 billion plus incoming revenue to pay its bills. It would start missing scheduled payments, including benefits, salaries and interest, between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
Senate Republicans will go to the White House at 11:15 a.m. tomorrow.
Meanwhile, Senate Democrats will press ahead with their preferred plan, which would push the next debt-limit fight into 2015 and include no policy conditions. A test vote could occur Oct. 12.
Senate Democrats
Democrats, who control 54 seats in the 100-member Senate, would need the support of at least six Republicans on procedural votes to pass their bill.
Reid’s proposal would suspend the debt ceiling through Dec. 31, 2014. Because the Treasury Department can use extraordinary measures to stave off default, another increase wouldn’t be needed until sometime in 2015. The previous debt-limit suspension expired on May 18 and the extraordinary measures are lasting five months.
The government shutdown started Oct. 1 after Republicans insisted that further funding for many programs be tied to a one-year delay in the health-insurance mandate.
Obama and Senate Democrats refused, and the resulting furloughs and agency shutdowns have slowed mortgage closings, small-business loans and nutrition assistance to poor mothers. Some programs, such as Social Security, continue uninterrupted.
The House has taken a series of bipartisan votes to fund narrow pieces of the government, including the Food and Drug Administration and the Federal Emergency Management Agency.
Obama and Senate Democrats reject that piecemeal approach, saying Republicans shouldn’t pick and choose politically popular items.
Debt-Ceiling Alarm Freezes Market With Least Supply: Muni Credit
Municipalities are borrowing at the slowest pace in more than two years, showing how the partial federal shutdown and prospect of a U.S. default are dissuading localities from taking on financing for new projects.
Cities and states are offering $4.3 billion of bonds this week after $3.7 billion last week, when the U.S. government shutdown began. Excluding holidays, it’s the skimpiest stretch of financing since May 2011, even as benchmark muni-bond yields have fallen from a two-year high.
As the political stalemate persists, supply may dwindle further. San Francisco and a school district in Utah are among issuers that may shift sales scheduled for Oct. 17, the day U.S. borrowing authority lapses. The ebbing tide of new bonds is echoed in diminished trading: Volatility on benchmark 10-year muni yields has dropped close to a 10-month low.
“Without new issues to give a little bit of price discovery, offers are drying up, bids are getting quiet, and when you add in the politics, the shutdown and the debt ceiling, it seems like people are sitting on their hands,” said Dan Toboja, vice president of muni trading at Ziegler Capital Markets in Chicago. “I would almost call it complete malaise.”
Already Down
The federal gridlock is exacerbating a drop in local financings as interest rates have risen from generational lows seen in December. Cities and states have issued $233 billion of fixed-rate long-term debt through Oct. 4, down 15 percent from the same period last year.
Municipalities planning their financing amid the standoff in Washington have to consider the potential impact on market interest rates and the economy. The Treasury Department has said any U.S. default from failing to raise the $16.7 trillion federal debt limit could have catastrophic consequences that might last decades.
The Sevier County School District in Utah, with about 4,500 students, has a $36 million bond sale set for Oct. 17. Proceeds from the competitive deal will go toward building a high school. Patrick Wilson, the district’s business administrator, said he has talked with his financial adviser about possibly changing the date.
“I have a little bit of concern” about selling the day of the debt-ceiling deadline, he said in an interview. “The market could be pretty wild.”
Volatility Vanquished
The federal government’s first partial shutdown in 17 years began Oct. 1, halting a rebound in the municipal market fueled by the Federal Reserve’s surprise decision in September to maintain the pace of its monthly bond buying.
Ten-year benchmark muni yields have barely budged over the past two weeks, fluctuating just 0.02 percentage point. Volatility has tumbled, deadening the market swings that generate trading opportunities. For 10-year yields, 60-day volatility is close to the lowest since December.
A stable muni market is uncommon in October. Benchmark 10-year muni yields have jumped about 0.24 percentage point on average in the month since 2009.
“The market is quiet right now, and that’s pretty rare, especially in October,” Toboja said.
Investing Antipathy
The federal government shutdown has slowed other fixed-income markets too. Corporate bond sales in the U.S. have dropped to $15.2 billion this month from $48.1 billion in the year-earlier period.
“Underwriters are very hesitant to advise issuers to come to market during somewhat unsettled times,” said Bart Mosley, co-president of Trident Municipal Research in New York. The shutdown and debt-ceiling debate are “keeping investors from feeling like they have to take action, which has led to subdued activity.”
San Francisco plans to sell about $37 million of tax-exempt bonds in a competitive deal Oct. 17 to pay for work at ports, including a cruise-ship terminal, and refinance commercial paper issued to move the project along.
The city has until 1 p.m. local time the day before the sale to postpone, said Nadia Sesay, director of the city controller’s office of public finance.
As Advertised
“We have advertised for a sale on the 17th and we’re hoping we can keep it, but we’re going to continue to monitor the market and see what’s happening with the debt ceiling,” Sesay said in an interview.
Cicero, an Indiana town of about 4,800 residents, has a $2.4 million sewer-revenue bond deal set for Oct. 17. Deen Rogers at H.J. Umbaugh & Associates, the town’s financial adviser, said officials have flexibility to shift the sale if necessary because of the debt-ceiling debate.
Stephen DeGroat, finance commissioner of Rockland County north of New York, said he’s concerned that its $34 million general-obligation issue is scheduled for Oct. 17. He said he plans to call the county’s financial advisers and is open to moving the date.
In 2011, Republicans and Democrats reached a deal to raise the borrowing limit ahead of an Aug. 2 deadline and avoid default. Similar to this month’s reduced volatility, 10-year benchmark muni yields were unchanged that year from the end of June to the end of July.
Offsetting Interests
“Sellers are saying maybe the market will tighten up if we pass the debt ceiling,” Toboja said. “Buyers are saying if we get any kind of supply, the market is going to cheapen up. The end result is you’ve got nobody doing anything.”
Deals in the municipal market this week include a $563 million general-obligation sale from Wisconsin.
The state is issuing with top-rated 10-year munis yielding 2.72 percent, close to the lowest since June. The interest rate compares with 2.66 percent for similar-maturity Treasuries.
The ratio of the yields, a gauge of relative value, is about 102 percent, compared with an average of 93 percent since 2001. The higher the figure, the cheaper munis are compared with federal securities.
Jobless-Claims Jump Flashes U.S. Shutdown Warning: Economy
Claims for U.S. jobless benefits jumped last week to the highest level in six months, providing the first statistical warning that the damage from the partial federal shutdown is starting to ripple through the economy.
While half the increase came from California as the state worked through a backlog following a switch in computer systems, another 15,000 reflected the furlough of non-federal workers from employers losing government business, a Labor Department spokesman said as the data was released to the press. Applications (INJCJC) for unemployment insurance benefits surged by 66,000 in the week ended Oct. 5 to 374,000, the most since late March, figures from the Labor Department showed today in Washington.
“The economic costs of a shutdown are going to increase the longer the shutdown occurs,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania and the second-best claims forecaster over the past two years. “If this drags along for the next couple of weeks, the economic toll will be even more significant.”
Shares surged today amid signs lawmakers were moving to reach agreement on increasing the nation’s debt ceiling to avoid a government default. Absent a deal, the possibility that federal agencies will need to slash spending once the borrowing limit is reached probably means hiring plans will be put on hold as business leaders prepare for an economic slump.
Shares Jump
The Standard & Poor’s 500 Index jumped 2.2 percent to 1,692.56 at close in New York, the biggest rally since January. The Obama administration endorsed a short-term in to the debt limit that would have no policy conditions attached, signaling support for a House Republican plan.
Other news today showed the world’s third-biggest economy was strengthening. Machinery orders in Japan jumped in August to the highest level since 2008.
A partial U.S. federal government shutdown lasting through the end of the week could cost the economy 0.2 percentage point in growth, according to the median estimate in a survey of economists issued today. The damage escalates to a 0.5-point loss if the shutdown carries through Oct. 25.
Last week’s surge in the number of jobless claims was the biggest since the aftermath of superstorm Sandy in November. The median forecast of 47 economists surveyed projected an increase to 311,000 from the prior week’s 308,000. Estimates ranged from claims of 304,000 to 340,000.
Diverging Views
Consumers for now aren’t letting the gridlock in Washington get them down, according to results of the weekly Consumer Comfort Index. The measure was little changed in the period ended Oct. 6.
While the government’s partial shutdown and the prospect of a default made Americans less optimistic about the economy, measures of personal finances and the buying climate improved, today’s report showed.
The divergence indicates views on the economy are more easily swayed by the rancor surrounding the political debate. Matters closer to home, on the other hand, including a resilient stock market and improving home values, are helping underpin sentiment, particularly for high-income consumers.
“Upper-end households, who are thriving in the current environment, remain confident,” said Joseph Brusuelas, a senior economist at LP in New York. At the same time, if the government conflict continues, it “will likely put a dent in consumer sentiment and business confidence in coming weeks,” he said.
Data Delayed
While the claims data will continue to be released, the lapse in appropriations has delayed the Labor Department’s September employment report and other government data releases. Payrolls were expected to climb by 180,000 last month, based on the median forecast in a survey, from 169,000 in August. Initial jobless claims reflect weekly firings and typically wane before job growth can accelerate.
Private employers added 166,000 workers in September following a revised 159,000 rise in August that was smaller than initially estimated, according to figures released last week by the ADP Research Institute. The median forecast of 40 economists called for an advance of 180,000.
“Claims are likely to be distorted for some time,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “Private firms are stepping back. Given all the uncertainty, they are unlikely to hire.”
The Labor Department’s claims reports in coming weeks won’t reflect furloughed federal workers. Those will be tallied in a separate category and will not influence the headline reading, though contractors’ dismissals will count.
Federal Contractors
Lockheed Martin Corp. (LMT), the top federal contractor, had planned to furlough 3,000 people, though it reduced furloughs by about 20 percent after the Pentagon said Oct. 5 most civilian employees sent home in the partial federal shutdown will be put back to work. Of the Lockheed employees still being furloughed, only 300 work on military programs.
“The Department of Defense’s decision will not eliminate the impact of the government shutdown on the company’s employees and the business,” Lockheed said in its statement.
Business owners may also worry that Congress won’t reach a timely deal on raising the debt limit before U.S. borrowing authority lapses around Oct. 17.
The Obama administration, global leaders and economists have warned that breaching the debt ceiling would have catastrophic consequences for the economy that would ripple across the globe.
“The effects of any failure to repay the debt would be felt right away, leading to potentially major disruptions in financial markets, both in the U.S. and abroad,” International Monetary Fund chief economist Olivier Blanchard said during a press conference this week.

IMF's Lagarde warns against a US debt default

International Monetary Fund chief Christine Lagarde on Thursday warned that a US debt default could damage the global economy, as Washington remained gridlocked in a budget battle.

International Monetary Fund chief Christine Lagarde on Thursday warned that a US debt default could damage the global economy, as Washington remained gridlocked in a budget battle.
One week before the United States faces a deadline to raise its borrowing limit, Lagarde underlined deep concerns about a looming first-ever default by the world's largest economy.
"It is not helping the US economy to have this uncertainty and this protracted way of dealing with fiscal issues and debt issues," the IMF managing director said.
"There will be very, very negative consequences for the US economy, and there will be very negative consequences outside of the US economy."
Speaking at a news conference as the IMF and World Bank annual meetings got underway in Washington, Lagarde stressed that the IMF does not involve itself in political matters.
"The IMF does not take a stand, and does not make a recommendation, as to how politically this matter can be resolved," Lagarde said.
But she stressed "that the fiscal house of the US be put in order."
The IMF has been studying the potential impact of a US default on the global economy, including how it could affect financial and trade flows and cause setbacks to economically weak countries.
But she stressed that the IMF does not expect that worst case to take place.
"I hope that in a few weeks time, we will look back and say, 'what a waste of time that was.'"
Lagarde's remarks came as US President Barack Obama was to meet separately with his fellow Democrats as well as Republicans in a bid to forge a path out of the budget crisis.
The US federal government has been partially shut down for 10 days since Congress failed to pass a budget for the 2014 fiscal year that began October 1.
Meanwhile the government was careening toward an October 17 deadline to raise the US$16.7 trillion debt ceiling or, the US Treasury says, it will run out of cash to pay all its bills.
World Bank President Jim Yong Kim also voiced concern about the US being forced to default on its debts if the country's borrowing ceiling remains frozen.
"The impacts are going to be severe" on the developing countries, said Kim, who has launched a goal to end extreme poverty by 2030 and boost share prosperity in the bottom 40 per cent of the population in developing countries.
He pointed out that an impact could still be felt even if the United States manages to avoid a default.
In the last showdown over the US debt ceiling, in July-August 2011, Kim said, Democrats and Republicans reached an 11th-hour agreement to raise the limit, but not before the fallout reached the emerging-market economies.
The borrowing costs of these countries jumped and stayed higher for months, he added.
The Organization for Economic Cooperation and Development warned Wednesday that a default could throw most of the world's major economies "back into recession next year" and badly damage emerging nations.
Meanwhile, crucial austerity-focused budget talks in the Netherlands kept Dutch Finance Minister and Eurogroup chairman Jeroen Dijsselbloem from attending the IMF/World Bank meetings.
Dijsselbloem announced early Thursday he had cancelled his trip to Washington because "this (budget talks) has more priority.,"

US default would "deeply" damage markets: Treasury

A US debt default would have dramatic economic repercussions and be "deeply damaging" to financial markets, Treasury Secretary Jack Lew warned lawmakers on Thursday, a week before a deadline to raise the nation's borrowing limit.

A US debt default would have dramatic economic repercussions and be "deeply damaging" to financial markets, Treasury Secretary Jack Lew warned lawmakers on Thursday, a week before a deadline to raise the nation's borrowing limit.
With the clock ticking toward a potentially catastrophic default that would see the United States fail to pay all its bills for the first time in its history, President Barack Obama was to meet his fellow Democrats as well as Republicans in separate White House meetings in a bid to forge a path out of the crisis.
But all eyes were first on Lew, who trooped up to Capitol Hill to deliver a stark message to Congress: end the political impasse and act immediately to avoid "self-inflicted wounds" and potential financial disaster.
"If Congress fails to meet its responsibility, it could be deeply damaging to the financial markets, the ongoing economic recovery, and the jobs and savings of millions of Americans," Lew told the Senate Finance Committee.
Washington has been locked in stalemate, with Obama and Republicans unable to agree on how to fund government.
Failure to agree on a budget led to the first government shutdown in 17 years on October 1, the beginning of fiscal year 2014.
Now the nation careens toward another, potential hammer blow, and Lew warned it would be a "grave mistake" if the US Treasury is not provided with new borrowing authority that would allow it to pay all its bills.
"It is important for Congress to reopen the government, raise the debt ceiling and then work with the president to address our fiscal problems," Lew said.
Lew warned of the "potentially catastrophic impacts of default, including credit market disruptions, a significant loss in the value of the dollar, markedly elevated US interest rates, negative spillover effects to the global economy, and real risk of a financial crisis and recession that could echo the events of 2008 or worse."
Rising interest rates would flood through all aspects of the economy and impact every American household, and the stock market could tumble.
Lew said the fiscal impasse was already "beginning to deliver an unnecessary blow to our economy," in the form of rising interest rates and market volatility reaching its "highest level of the year."
Fed officials split on policy, united on default danger
While officials of the Federal Reserve have sparred over whether the U.S. central bank should continue full-bore with its massive bond-buying stimulus, two Fed officials with differing policy views agreed on Thursday that a national debt default could have devastating effects.
Budget gridlock at the U.S. Congress led to an October 1 partial government shutdown that threatens to hurt economic growth and has already delayed the release of key economic data such as the September jobs report. Lawmakers are now locked in debate over how to raise the government's borrowing limit and avoid a U.S. debt default on October 17.
John Williams, the president of the San Francisco Fed and a policy centrist, on Thursday said politicians in Washington are playing a "very, very dangerous game" with their brinkmanship, and said the failure of the government to pay its bills could undermine world confidence in the U.S. dollar, and in the extreme could cause a global financial panic.
St. Louis Fed President James Bullard also had strong words for Congress.
"It's just imperative that we do not go in this direction and get into a situation where we're not paying some of our bills," Bullard said, noting the U.S. dollar is the world's reserve currency and the United States is seen as a safe-haven investment.
"There's no reason to let a self-inflicted wound put that at risk," he said. "We want to protect our international reputation ... and get this thing done."
On policy, though, the two officials staked out differing views that mirrored the split at the Fed's policy-setting panel as a whole.
Bullard, who is a voting member of the policy-setting panel this year and who supported last month's shock decision to keep the bond-buying program at its current level, said fiscal problems in Washington have "changed the odds" on whether the central bank will reduce the bond-buying program at its upcoming meeting on October 29-30.
Last month "we cited that fiscal uncertainty was a risk and that risk has materialized, so I think that's making it less likely than would otherwise be that we make a decision to taper in October," Bullard told reporters on the sidelines of a conference hosted by the St. Louis Fed, adding that the debt-ceiling debate also plays a big role.
He said he has not made up his mind and didn't want to pre-judge the October meeting, though he added that the Fed can be patient with its quantitative easing program until inflation rises closer to the Fed's 2 percent target.
The San Francisco Fed's Williams, who is viewed as a policy centrist and who does not have a vote on policy this year, said he would have been open to reducing the Fed's $85 billion-a-month in bond purchases at last month's meeting.
"I personally wasn't as far away from being willing to initiate a small taper" compared with some other top Fed officials, Williams told reporters.
Fed Chairman Ben Bernanke said in June the Fed would probably reduce its bond purchases later this year and end the purchases by mid-2014.
A decision on when to taper and end the program will hinge on the momentum in the economy, Williams said. When the time comes, he said, investors should expect the Fed to scale back bond-buying slowly.
"This won't be a slamming on the brakes, it will be an easing off the gas," he told a group of business leaders and politicians at Boise State University.
Williams, however, did not suggest that the budget debates would necessarily mean the Fed should hold off on tapering. If they do result in a new round of fiscal austerity next year, he said, the Fed may have to keep policy super-easy for longer than currently anticipated.
"We'll have to watch. I don't want to speculate on what Congress and the president are going to decide. What they decide obviously does frame the economic outlook and obviously that frames the policy outlook too," he said.
"I would hope that Congress and the politicians would come to agreements that would last longer than six weeks, to add a little bit more certainty to the environment."
U.S. government shutdown, debt impasse stalk earnings season
"Government shutdown" and "debt ceiling" will top the list of phrases that investors will track in the coming weeks as they listen to corporate chief executives and try to gauge the impact of Washington gridlock on U.S. company earnings.
Companies began reporting their quarterly results this week amid mounting worries about the partial federal government shutdown that began October 1 and the possibility that the United States could default on its debt. Investors see both as threats to already modest levels of consumer spending and economic growth.
Profit and revenue growth are slowing, too, raising concerns about equity valuations. Stocks are less than 3 percent off their record highs even after drifting lower since the fiscal stalemate between Republicans and President Barack Obama's Democrats began earlier this month.
The benchmark Standard & Poor's 500 Index surged more than 1.5 percent on Thursday after Republicans in the House of Representatives unveiled a plan that would avert a debt default. The Treasury Department says it would be unable to pay all of its bills if Congress does not raise the $16.7 trillion debt ceiling by October 17.
"It's hard to quantify at this point, but there will definitely be a negative impact" on the economy and earnings, said Natalie Trunow, chief investment officer of equities at Calvert Investment Management, which has about $13 billion in assets.
"Some capex might be delayed and some hiring might be delayed until the political situation resolves itself."
Some damage has already been done, and companies operating in the defense and health care sectors have borne the brunt because of their higher exposure to government contracts. A Goldman Sachs note listed companies that derive at least 20 percent of sales from the government, many of them in the defense and health care sectors.
Lockheed Martin Corp, among the biggest weapons systems vendors to the U.S. Department of Defense, has said it would furlough about 2,400 employees who work at government facilities idled by the shutdown. Its stock has dropped as much as 4.3 percent since the shutdown began before paring some losses on Thursday.
United Technologies Corp last week said it would furlough as many as 4,000 employees if the shutdown dragged into a second week. On Monday, however, the Defense Department recalled most civilian employees. United Tech shares have also fallen more than 4 percent during the shutdown before paring losses on Thursday.
Managed-care providers Humana Inc and Health Net Inc have said they face delayed payments on contracts to provide healthcare services to military families.
Even companies not directly affected through contracts are concerned about the budget impasse, including Starbucks Corp. The company's CEO, Howard Schultz, this week urged business leaders to push for an end to the stalemate.
A top concern of investors is that companies will announce reductions in profit estimates for the fourth quarter, and that cautious forecasts by companies will further dampen the rally in stocks this year.
The S&P 500 had lost 1.5 percent since the shutdown began, although Thursday's surge on signs of a possible compromise effectively erased all of that loss. The index remains up 18.1 percent since the start of the year.
"Earnings uncertainty is a reason to be cautious in the near term," said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management in New York. "We're going to be watching very closely the companies that come out with guidance."
So far, there has been a minimal impact on earnings expectations. Fourth-quarter S&P 500 profits are seen rising 10.8 percent from a year earlier, compared with an October 1 forecast for 10.9 percent growth, Thomson Reuters data showed.
By comparison, companies are expected to post third-quarter earnings gain of just 4.2 percent.
Still, many investors consider those fourth-quarter estimates, and for estimates for 2014, to be overly optimistic given U.S. economic growth hasn't picked up. The Federal Reserve in September cut its forecast for 2013 economic growth to a 2.0 percent to 2.3 percent range, and lowered its forecast for 2014.
Profit growth has averaged 4.1 percent over the past four quarters, while revenue growth has averaged just 1.3 percent.
Earnings for 2014 are expected to rise 11.4 percent, above the 5.8 percent expected for 2013, Thomson Reuters data showed.
Investors have closely watched changes in those numbers as valuations have risen. The current forward 12-month price-to-earnings ratio at 13.9, still considered a bit low historically, is above the 13.1 at the beginning of 2013.
"Until we start seeing a pickup in GDP growth, we don't think revenue targets will be met, even if those targets are reduced," said Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston.
A shutdown that lasts for two weeks could subtract a half of a percentage point from fourth-quarter gross domestic product growth, according to a note from Bank of America Merrill Lynch analysts, who estimate that lost government sales would equate to 0.2 percent of total annual sales.
While that is not a huge amount, the uncertainty generated by the shutdown could also sap consumer confidence.
"If it starts to detract from overall consumer confidence, then you could see it impacting overall consumption," said Dan Suzuki, equity strategist at Bank of America Merrill Lynch in New York.
"It's a risk for the more consumer-driven areas of the market, an area that we're already somewhat cautious on."
Lew: Benefits at risk without rise in debt ceiling
Treasury Secretary Jack Lew warned Thursday that timely payments to Social Security beneficiaries, veterans, active duty military personnel and Medicare providers would be at risk if Congress does not raise the debt ceiling.
In testimony before the Senate Finance Committee, Lew said the hit to the economy would go far beyond the disruption of financial markets that has gotten a lot of attention in recent days.
"Between October 17 and November 1, we have large payments to Medicare providers, Social Security beneficiaries and veterans, as well as salaries for active duty members of the military," he said in prepared remarks. "A failure to raise the debt limit could put timely payment of all of these at risk."
The statement was one of his most explicit warnings of the problems posed to the public if the debt ceiling isn't raised.
There are 1.4 active duty members of the military and nearly 800,000 civilian support staff in the Defense Department who are working during the government shutdown.
Lew disputed the claims of some Republicans that there wouldn't be a major problem if the ceiling is not raised soon, and that the Treasury Department can pick and chose which bills to pay to avoid default on U.S. debt and limit the damage to the public.
"The United States should not be put in a position of making such perilous choices for our economy and our citizens," he said. "How can the United States choose whether to send Social Security checks to seniors or pay benefits to our veterans? How can the United States choose whether to provide children with food assistance or meet our obligations to Medicare providers."
Sen Orrin Hatch, the ranking Republican on the committee, repeated his party's criticisms of the administration's refusal to negotiate on the debt ceiling.
"If the Obama administration won't negotiate on entitlements in the context of the debt ceiling, when will it negotiate?" he said in his opening remarks.
And other Republican lawmakers said the public is behind their demand that spending be cut before the debt ceiling is increased.
"I think this is 11th time I've been through this discussion about the sky is falling and the earth will erupt," said Mike Enzi, a Republican from Wyoming. "Wyoming families aren't buying these arguments. They're saying you can't spend more than you take in."
Lew repeated the administration's position that the ceiling has to be raised to cover the spending that Congress has previously approved.
"Those Wyoming families know that after they run up their credit cards, they don't get to ignore it," he said. "They have to pay their bills. The debt limit is just paying our bill."
Lew reiterated that by Oct. 17 he will exhaust the special accounting measures he's been taking since May to keep under the debt cap. After that point, without the ability to borrow, the government will run out of the cash it needs to pay all its bills on time. But he cautioned that Oct. 17 is only the best possible estimate.
"It is impossible to predict with accuracy," he said. "That's why Congress needs to act to raise the debt limit sooner rather than later."
Sen Pat Toomey, a Republican from Pennsylvania who has pushed legislation to mandate that interest on Treasuries be paid before other bills, asked Lew to guarantee that the government does not default on debt.
Toomey said it was "shocking" that Lew couldn't give him that assurance.
Lew said any missed payments -- not just those on the debt -- would constitute default and rattle the economy and financial markets.
Economists surveyed by CNNMoney also warned that a recession is very likely if the ceiling is not raised. To top of page
U.S. debt standoff could 'damage' world economy: ECB head
A prolonged U.S. debt standoff could hurt the global economy, European Central Bank President Mario Draghi said on Thursday.
The rest of the world believes the United States will resolve a deadlock that has left the federal government largely shut down and threatens to cause a default as October wears on, he said. Nevertheless, he noted, there could be a showdown among U.S. lawmakers that lasts weeks or even months.
"In that case, it's probably safe to say that this could cause severe damage to the U.S. economy and to the world," Draghi said at the Economic Club of New York ahead of attending weekend meetings of the International Monetary Fund and World Bank in Washington.
The U.S. federal government has been partially shut down since October 1, when Congress failed to reach an agreement on funding for the new fiscal year due to a standoff over healthcare reforms.
In addition, the U.S. government is expected to hit its borrowing limit by October 17, and a divided Congress might prove unable to raise that ceiling. That, in turn, raises the specter of a default.
In contrast, the euro zone economy is showing progress in recovering from a sovereign debt crisis that has lasted more than three years, Draghi said.
But he cautioned that the monetary union's path to further economic gains will be bumpy.
"The pace of recovery is going to be subdued, uneven and to some extent fragile, being exposed to many risks," he said.
The ECB, as expected, left its benchmark interest rate unchanged on October 2 at a record low 50 basis points, a level it has held at since May. After lifting rates in 2011, the bank reversed course and started to lower them in November of that year.
Not only has the sovereign debt market stabilized, Draghi said, but banks are also finding better prospects for raising capital than in recent years.
That has been a major result of raising transparency, he said, which has been a major goal for the ECB and key to restoring the health of the monetary union's banking system.
"Transparency is the key thing. By and large people outside Europe are convinced that if there is no more transparency, it is very unlikely they can actually invest in the banking system," Draghi said.
The ECB takes over supervision of the region's banks in about a year. A resolution mechanism to deal with problem lenders is expected to follow in 2015.
An asset quality review followed by stress tests will occur before the supervision starts to ensure banks are in good health. The central bank is also working to create a single mechanism to wind down failing banks.
"We've seen in the last month and a half, we have seen several banks capable of raising capital. So, the market prospects are way better than they were on the occasion (of) the last stress test two years ago," Draghi said.
Fed's Bullard: fiscal problems make October QE cut less likely
The Federal Reserve is less likely to reduce its bond-buying program this month given the U.S. government shutdown and resulting lack of economic data, as well as the ongoing debate over the debt ceiling, a top central bank policymaker said on Thursday.
St. Louis Fed President James Bullard, a voter on policy this year, said the fiscal problems in Washington have "changed the odds" on whether the central bank will trim the monthly $85-billion quantitative easing program (QE) at a meeting set for October 29-30.
Bullard supported the shock decision last month to maintain the $85-billion monthly pace of bond purchases meant to spur investment, hiring and growth. Markets at the time reacted sharply to the decision, with stocks soaring globally.
Bullard said the decision not to reduce stimulus was appropriate given this month's fiscal gridlock in Washington.
Last month "we cited that fiscal uncertainty was a risk and that risk has materialized, so I think that's making it less likely than would otherwise be that we make a decision to taper in October," Bullard told reporters on the sidelines of a conference hosted by his Fed bank, adding the debt-ceiling debate also plays a big role.
He said he has not made up his mind and didn't want to pre-judge the October meeting. But the fiscal problems have "changed the odds," he said, adding the Fed can be patient with its QE until inflation rises closer to its 2 percent target.
Budget gridlock at the U.S. Congress led to an October 1 government shutdown that threatens to hurt economic growth and has already delayed key economic data such as the September jobs report. Lawmakers are now locked in debate over when and how to avoid a government default raise on October 17.
"It's just imperative that we do not go in this direction and get into a situation where we're not paying some of our bills," Bullard said, noting the U.S. dollar is the world's reserve currency and the United States is seen as a safe haven investment.
"There's no reason to let a self-inflicted wound put that at risk," he said. "We want to protect our international reputation ... and get this thing done."
Bullard is usually seen as a policy centrist, but has become one of the central bank's most vocal doves due to concern that inflation remains too far beneath the Fed's goal of 2 percent, which he worries could lead to damaging deflation.
Draghi Says ECB Guidance Allows Rate Cuts on Volatility
European Central Bank President Mario Draghi said policy makers’ pledge to keep interest rates low explicitly allows for cuts in borrowing costs if market volatility resumes.
“The Governing Council has unanimously agreed to incorporate an easing bias that explicitly provides for further rate reductions, should the volatility in money market conditions return to the levels observed in early summer,” Draghi said at the Economic Club of New York yesterday.
ECB policy makers are seeking to prevent volatility in market rates from derailing a euro-area economic recovery that Draghi said was subdued, uneven and fragile. To that end, they pledged in July to keep official interest rates at or below current levels for “an extended period.” Borrowing costs had risen after the U.S. Federal Reserve said it was considering tapering its stimulus later this year.
The overnight rate that banks expect to charge each other by the ECB’s October 2014 meeting, as measured by Eonia forward contracts, was at 0.25 percent in Frankfurt yesterday. The measure was below 0.1 percent in May and climbed as high as 0.37 percent in June before the ECB announced its unprecedented forward guidance.
Unlike the Fed and the Bank of England, the ECB doesn’t give a specific time frame or a link to particular economic data for its rate pledge. Instead, Draghi reiterated that it depends on the outlook for prices.
Conditional Policy
“The path of the policy rates remains conditional on the outlook for inflation (ECCPEMUY),” said Draghi, who is in the U.S. to attend the annual meetings of the International Monetary Fund and the World Bank. “It will be reviewed over time against our analytical framework.”
Inflation in the euro area was at 1.1 percent in September. It’s forecast by the ECB to average 1.5 percent in 2013 and 1.3 percent in 2014. The Frankfurt-based central banks aims to keep annual consumer-price gains just below 2 percent. The benchmark interest rate has been at a record low of 0.5 percent since May.
ECB officials considered a rate cut at their meeting last week and decided against it. Draghi said at a press conference that the central bank is ready to use “all available” tools to contain market rates, a comment reiterated yesterday in its monthly bulletin.
Liquidity Measures
Economists don’t predict a further reduction in official rates for now, and see the central bank pursuing non-standard monetary policy instead.
While almost three in four respondents predicted Draghi will unveil new liquidity measures such as longer-term refinancing operations, the majority said interest rates will remain unchanged through the first half of 2015, according to separate surveys published yesterday.
One challenge facing the euro area’s financial system is a review of lenders’ balance sheets by the ECB next year before it takes over as the region’s single bank supervisor. That assessment and subsequent stress tests may identify capital shortfalls that need to be plugged.
“I have no idea whether to expect major disasters or not,” Draghi said yesterday. “Certainly, what is happening, what is positive, is that in view of this exercise, banks and supervisors are reacting very, very strongly everywhere. In convincing banks to raise more capital, in forcing very high levels of provisions in some parts of the area, so this is quite good.”
Eurogroup head cancels IMF trip due to Dutch budget talks
Dutch finance minister and Eurogroup head Jeroen Dijsselbloem pulled out of annual IMF meetings in Washington on Thursday to deal with threats at home to the governing coalition's budget strategy.
Dijsselbloem and Liberal Prime Minister Mark Rutte need the support of smaller opposition parties to push through 6 billion euros ($8 billion) in additional austerity measures in 2014.
Without more political backing, the Cabinet will not be able to get the budget approved. That could thrust the country into a political crisis just as the economy is at a turning point.
While analysts say the government is still likely to achieve the targeted cuts, it may now have difficulty making progress on promised changes to pensions and the labor market.
Dutch Central Bank President Klaas Knot said this week the government's failure to reach an agreement on the budget was the biggest threat to an economy still trying to escape a recession in which it has spent eight of the past 10 quarters.
Dijsselbloem had been due to represent the euro zone countries during the annual meetings in Washington starting on Thursday, but changed plans at the last minute, a Finance Ministry spokesman said.
"He regrets the decision, but at the moment he had to give priority to domestic matters," spokesman Michel Reijns said. "It is an attempt to find support for the budget measures."
Dijsselbloem announced the move after five hours of talks with opposition leaders dragged on into the early hours of Thursday. Two of five parties the Cabinet is seeking support from have already dropped out of the discussions.
Dijsselbloem was to continue the discussions on Thursday with the right-of-centre Democrats 66, the Christian Union and the conservative SGP, another small Christian party.
"D66 will want to make it easier to fire people," said Andre Krouwel, a political scientist at Amsterdam's VU University. Such a move would be unpopular with Dijsselbloem's Labour party, whose membership is already restive about the cuts agenda it has agreed with Rutte's austerity-minded Liberals.
With D66 the only major party left in the negotiations, Dijsselbloem would no longer be able to play interests off against each other, leaving D66 in a more powerful position, Krouwel said.
The three parties remaining in the talks would also be unlikely to pass a proposed increase in the pension age and would be in a position to extract spending promises from the government that could slow the pace of cuts, he added.
The Dutch government needs the cuts to meet the European Union's 3 percent budget deficit target in 2014, but does not have enough backing in the Senate.
The Netherlands is the only core euro zone country still in recession and is suffering from a property crisis, rising unemployment and sluggish consumer spending.
U.K. House Prices Rise to Record as First Timers Drive Demand
U.K. house prices rose to a record last month as easier access to credit drove first-time buyers back to the market, Acadametrics said.
Values increased 0.5 percent from August to an average 235,534 pounds ($376,000), the London-based real-estate researcher and LSL Property Services Plc (LSL) said in a report today. London is leading the property-market recovery, with annual house-price growth in the past three months more than double any other region in England and Wales.
The second phase of the government’s Help to Buy program was introduced this week, providing government-guaranteed mortgages to buyers with smaller deposits. The acceleration has fueled further concerns that the initiative may stoke a bubble. Mortgage approvals rose to the highest in more than five years in August, the Bank of England said last week.
“We’ve seen banks ease criteria on mortgages for people with small deposits, which has opened the door to new buyers who have spent years on the outside looking in,” said David Newnes, director of LSL Property Services. “Demand has increased significantly in a short space of time, and raced ahead of the supply of homes.”
Nine of the 10 regions tracked by LSL recorded price gains in the latest three months compared with a year earlier, according to the report. London price growth was 8.5 percent, compared with an average of 3.5 percent. In Wales, the pace of the decline eased. Nationally, house prices rose 3.8 percent, or 8,526 pounds, in September compared with a year earlier.
House sales rose 12 percent this year compared to 2012, with the increase in transactions predominantly in the first-time buyer sector of the market, Acadametrics said.
LSL said concerns about a housing bubble developing are overblown. While prices are rising, it is only a “fledgling recovery,” Newnes said. “It is not a boom or a bubble. It is a market correction, albeit a fairly quick one.”
The whole country will benefit from Help to Buy because it supports buyers in the southeast, where prices are higher, and in the north, where wage growth is slower, Newnes said. He added that the program must be complimented by more house building so supply keeps pace with demand.
Cameron’s Housing-Market Loan Fix Seen as Bad Policy for Britain
Prime Minister David Cameron’s Help to Buy plan to aid home buyers is the wrong policy for Britain, economists said, adding to criticism of an initiative that was ramped up just this week.
Two thirds of 31 economists described the measure as “bad,” according to a survey published today. The prime minister this month accelerated the second phase of the program, which gives people the chance to buy a home with a down payment of as little as 5 percent.
The new phase of the plan has heightened criticism it may fuel a bubble in Britain. While the government and the Bank of England say the property market is recovering from very low levels of activity, house-price growth is outpacing inflation and incomes, raising questions over how much support is needed.
“It is the wrong policy at the wrong time,” said Peter Dixon, global equities economist at Commerzbank AG in London. “Effectively what the policy is designed to do is encourage households to load up on debt. Surely a sustainable growth path can be achieved if households are not burdened.”
Mortgage lender Halifax said on Oct. 3 that property value rose for an eighth month in September as government aid helped demand outpace supply. Acadametrics said today that prices have increased 3.8 percent in the past year and sales have surged 12 percent.
Housing Battle
U.K. mortgage advances reached 68,212 in September, the highest since 2008, chartered surveyor e.surv said in a report today. The number of borrowers with deposits of 15 percent or less amounted to almost 8,200, a 60 percent increase from the previous year.
Ed Balls, the Treasury spokesman for the U.K.’s Labour opposition, has described Help to Buy as “totally ill-thought through” and criticized the government for not doing enough to boost homebuilding.
Cameron, facing local and European elections next year and a general election in 2015, used the annual conference of his Conservative Party to announce he was accelerating the initiative. He defended it last week, saying the mortgage market “isn’t working,” and he’s helping to correct “a market failure.”
Economic Outlook
The survey also showed that economists have become more optimistic about the outlook and see faster U.K. growth in the second half than previously projected.
Gross domestic product will rise 0.5 percent this quarter after expansion of 0.8 percent in the three months through September, according to the survey. That’s higher for both quarters than seen last month.
GDP will rise 1.4 percent this year and 2.2 percent in 2014, compared with predictions of 1.3 percent and 2 percent previously, according to the median of 50 economists. The median projection for 2015, based on 26 estimates, is 2.4 percent.
The International Monetary Fund raised its forecast for U.K. growth this week, and now sees expansion of 1.4 percent in 2013 and 1.9 percent next year. It signaled the economy isn’t yet fully recovered and said monetary policy should “stay accommodative.”
Echoing the IMF view, a majority of economists in the survey said the U.K. isn’t at what BOE Governor Mark Carney has termed “escape velocity.” Just 10 of 36 said it has reached that level.
Unemployment Threshold
As the outlook improves, economists are sticking to the view that unemployment will fall to the Bank of England’s 7 percent threshold before 2016. The threshold was introduced by Carney in August as part of forward guidance, under which policy makers won’t consider raising borrowing costs until the jobless rate, currently at 7.7 percent, reaches 7 percent.
While the BOE forecasts unemployment won’t decline to that point until late 2016, 21 of 34 respondents in the survey see it reaching the level by the end of 2015. Five of those predict it happening late next year.
The BOE’s Monetary Policy Committee kept its key interest rate at a record-low 0.5 percent yesterday and its bond-buying program on hold at 375 billion pounds ($599 billion).
Three months after Carney implemented guidance, economists are divided over its effectiveness. While 22 of 37 said it has has been ineffective so far, the rest said it’s working.
For Jens Larsen, a former BOE economist who now works at RBC Capital Markets in London, guidance has worked by pushing back against some of the impact of the stronger recovery on expectations for tighter policy.
“It’s helped keep the bank rate debate focused on whether rates should be raised in 2015 or 2016, rather than next year,” he said.

Bank of England keeps interest rate at 0.50%

The Bank of England kept its key interest rate at a record-low level of 0.50 percent on Thursday, as expected.

The Bank of England kept its key interest rate at a record-low level of 0.50 percent on Thursday, as expected.
BoE policymakers decided also to maintain the amount of cash stimulus that the central bank is pumping around the British economy at £375 billion ($598 billion, 442 billion euros), a statement said.
The crisis policies of some leading central banks involving the supply of low-interest money to stimulate their economies, and the question of when these taps will be turned off, is a hot issue on global financial markets.
This was shown by the focus on the appointment on Wednesday of Janet Yellen to head the US Federal Reserve.
Yellen is considered a so-called "dove" and therefore likely to delay the expected tightening of US monetary policy.
"The Bank of England's Monetary Policy Committee (MPC) at its meeting on 9 October voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5 percent," it said.
"The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £375 billion."
The outcome had been widely expected by markets. The BoE will publish minutes of the meeting, that will provide reasons behind the decisions, on October 23.
The latest BoE decisions, announced a day after they were taken, come amid an unexpected drop in British industrial output.
Wednesday's poor figures were in contrast to recent strong economic data, underscoring the fragility of Britain's recovery, analysts said.
October's MPC gathering was the second session since it announced a "forward guidance" strategy under new governor, Canadian national Mark Carney.
Under the policy change, any rise in record-low interest rates is to be tied to a drop in British unemployment.
The key interest rate will remain at the current level of 0.50 percent until Britain's unemployment rate falls to at least 7.0 percent, the central bank has said.
The Bank of England's own projections indicate that such a drop from Britain's current unemployment rate of 7.7 percent would not occur for three years, but markets are betting on this happening sooner.
The interest rates could in any case rise earlier should British annual inflation remain high above its target rate of 2.0 percent, the Bank of England has itself warned.
The BoE's main task is to use monetary policy as a tool to keep annual inflation close to a government-set level of 2.0 percent, in order to preserve the value of money.
British annual inflation fell to 2.7 percent in August from 2.8 percent in July, recent official data showed.
The BoE kickstarted its stimulus, or quantitative easing (QE) programme, in March 2009, coinciding with its decision to cut its main lending rate to 0.50 percent, where it has stood ever since.
Under QE, the central bank creates cash that is used to buy assets such as government and corporate bonds with the aim of boosting lending -- and economic activity.

Chinese, European central banks strike currency swap deal

The Chinese and European central banks said Thursday they reached agreement to set up a "currency swap" mechanism for the purchase and repurchase of their respective currencies, the yuan and euro.

The Chinese and European central banks said Thursday they reached agreement to set up a "currency swap" mechanism for the purchase and repurchase of their respective currencies, the yuan and euro.
The "bilateral currency swap arrangement" will be valid for three years, the European Central Bank said in a statement on its website.
When Chinese yuan are provided to the ECB, the maximum size of the arrangement will be 350 billion yuan (42 billion euro), the statement said.
It will stand at 45 billion euro when the single currency is provided to the People's Bank of China (PBoC), the statement said.
The PBoC released a similar statement on its website announcing the deal, which it said was agreed Wednesday.
"The swap arrangement has been established in the context of rapidly growing bilateral trade and investment between the euro area and China, as well as the need to ensure the stability of financial markets," the ECB statement said.
The deal is also meant "to serve as a backstop liquidity facility and to reassure euro area banks of the continuous provision of Chinese yuan", it added.
China has taken steps in recent years to increase international trading of its currency and has been working eventually to make it fully convertible for international transactions, though key restrictions remain.
It is convertible for trade purposes, for example, but the government keeps a tight grip on the capital account on fears that unpredictable inflows or outflows could harm the economy -- and reduce its control.
The euro mechanism follows a reciprocal, three-year sterling-yuan currency swap announced in June by the PBoC and the Bank of England, with a maximum value of 200 billion yuan and 21.1 billion pounds.
That deal came on the heels of an initiative launched in April by the City of London to make the British capital a centre for yuan business.
China Export Gains Understated on Fake-Data Distortions: Economy
China is poised to post its first slowdown in export growth in three months, a result that may understate the strength of demand after fake reports inflated figures in the year-earlier period.
Growth from last month through April 2014 will be “depressed” because of a high basis for comparison, Credit Agricole CIB says. Overseas shipments probably grew 5.5 percent in September from a year earlier, according to a survey ahead of tomorrow’s customs-administration report in Beijing, down from August’s 7.2 percent and 9.8 percent in September 2012.
The comparisons will complicate investors’ ability to gauge the strength of any economic rebound after two manufacturing gauges trailed projections in September, limiting a recovery that began earlier in the quarter. Additional skepticism over trade figures builds on broader questions about the quality of Chinese data from gross domestic product to jobs.
“The trade numbers in the next couple of months, especially on the export side, will not be a good reflection of demand for Chinese products abroad or overall economic activity, because they will be artificially depressed from what happened a year earlier,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole in Hong Kong.
Citigroup Inc. and Everbright Securities Co. researchers also said September’s gains may be understated because of last year’s data distortions. Kowalczyk estimates 1 percent growth in China’s exports for September, putting him at the low end of 43 projections ranging as high as 8.2 percent. He sees a “small contraction” in October, citing over-reporting of export gains.
The General Administration of Customs didn’t respond to a faxed request for comment.
Import Growth
The agency will also report tomorrow that imports rose 7 percent last month from a year earlier, equal to August’s pace, with a trade surplus of $26.2 billion after $28.5 billion in August, based on the median estimates of analysts.
The customs administration has no plans to revise January-April trade figures, Zheng Yuesheng, an agency spokesman, told reporters in July. The data for those months reflect arbitrage-related trade, and current figures with respect to Hong Kong trade are true to facts, he said at the time.
Bilateral trade data reported by China and Hong Kong showed widening differences over 2011 and 2012, with Hong Kong passing the U.S. in November to become the biggest export market in China’s figures. Since June, Hong Kong has returned to third place behind the U.S. and European Union.
Verify Documents
The customs administration may have no intent to revise data because it’s too difficult to verify documentation, said Ding Shuang, senior China economist at Citigroup in Hong Kong. “The customs agency can say that all its numbers have documents to back them up, although some documents are in fact forged.”
Even with the distortions, weak exports aren’t a “major drag on growth, as domestic demand, not external demand, will decide China’s growth performance,” said Xu Gao, chief economist with Everbright Securities in Beijing, who previously worked at the World Bank.
China’s National Bureau of Statistics is due to report third-quarter growth data Oct. 18 along with figures for September industrial production and retail sales and January-September fixed-asset investment. The bureau will report last month’s data on consumer and producer prices on Oct. 14. The People’s Bank of China will provide September numbers for money supply, credit and foreign-exchange reserves by Oct. 15.
Defend Goal
Premier Li Keqiang has rolled out fiscal support measures such as spending on railways and tax cuts to defend a goal of 7.5 percent economic expansion this year. Li said in a speech in Brunei yesterday that growth exceeded 7.5 percent in the first nine months of the year, a sign the government will next week report success in arresting a two-quarter slowdown.
Elsewhere today in the Asia-Pacific region, New Zealand said food prices were unchanged in September from the previous month, while India may say industrial-production gains slowed in August, based on an analyst survey. Europe will see inflation reports in Germany, Spain, Italy and Hungary.
A report on consumer confidence this month will be released in the U.S., as congressional Republicans entered talks with President Barack Obama about avoiding default and ending a partial government shutdown.
In China, the distortions may focus attention on other parts of the customs administration’s report, such as month-on-month changes, which would be free from any comparisons to last year’s figures. In addition, the agency publishes breakdowns by countries and markets, and exports to the U.S. and European Union didn’t exhibit the kinds of irregularities seen in the Hong Kong figures.
Too Early
Steve Wang, Hong Kong-based chief China economist with Reorient Financial Markets Ltd., said it’s too early for the effects of inflated data to show in September or October. The inflated figures mainly occurred with a few trading partners including Hong Kong and Taiwan, so the effects “should be visible for these partners if there is any,” Wang said.
He said he sees “fairly stable” export gains of about 8 percent in the coming months.
While China’s exports may now start to show some effects from last year’s inflated figures, the influence will become clearer in early 2014, Citigroup’s Ding said. “It’s very likely that Chinese exports will show year-on-year declines in the first quarter,” he said.

More Chinese firms looking to invest overseas

China is now the third biggest global investor behind the US and Japan, with outbound investment growing at an average of 35 per cent between 2005 and 2012.

Overseas investments by Chinese companies are expected to surge over the next five years.
At the current rate of expansion, China could very likely overtake Japan as the world's second biggest foreign investor after the US.
French resort chain Club Med operates a resort nestled in the midst of Guilin’s breathtaking hills, the second property in China. The venture was made possible with a 300 million yuan (approximately US$49 million) investment from a Taiwanese businessman, who owns the land occupied by the resort.
Club Med also happens to be the target of a takeover bid by China's Fosun Holdings. The acquisition, said to be worth nearly US$720 million, is the latest in a series of overseas investments by Chinese companies.

Last month, another Chinese company -- Shuanghui International Holdings -- got the greenlight to buy Smithfield, the world's largest pork producer, from its American shareholders in a deal worth US$4.7 billion.
Experts predict that China will become a net global investor by 2017 -- with outbound investment reaching US$172 billion -- becoming the world's second largest foreign investor after the US.

Besides basic necessities, Chinese firms with deep pockets are also looking to park their money in brands and sectors that can benefit from China's fast-growing middle-class consumer market.
Fosun Group chairman Guo Guangchang said: "A driver of China's development is the upgrading of the consumer, industries and cities. So China needs better products in tourism, aging, education and environmental protection.
“This is the direction which Fosun is investing in. Europe, for example, has a rich history of traditional food. They're not only filling, but they're full of culture and history -- like wine, olives and ham."
In seven years, China's ranking as a global investor has jumped from 16 to what it is now -- the third biggest global investor behind the US and Japan -- with its outbound investment growing at an average of 35 per cent between 2005 and 2012.
However, it is not always easy for Chinese firms to gain the trust of the companies they invest in. Fosun Group, for example, started small... with an initial seven per cent stake in Club Med back in 2010.
Club Med CEO Henri Giscard d’Estaing said: "Fosun (board members) have demonstrated to the other board members they're just shareholders, they're able to help us, in giving connections, in supporting us at our projects… they deeply respect the culture of the company and they use this know-how to grow Chinese tourism."

That strategy that has worked well, as Club Med aims to grow its presence in China with three more resorts in the next two years.  
Treasury Bills Risk Triggers Higher H.K. Margin Discount
Hong Kong’s futures and options market operator said traders will need to put up additional collateral when using some U.S. Treasury bills to back their positions, citing concern the U.S. is at risk of a default.
Hong Kong Exchanges & Clearing Ltd. (388) will impose a “haircut” of 3 percent on Treasuries with maturities of less than one year in margin requirements for index futures and options, it said today in a circular. That’s up from 1 percent previously, and charges for Treasuries with longer maturities aren’t affected, according to the circular.
An impasse in Washington over raising the U.S. debt ceiling is rippling through global financial markets as the Oct. 17 deadline for increasing the borrowing authority approaches. Rates on Treasury bills due Oct. 24 climbed as high as 0.50 percent today before falling to 0.31 percent. China and Japan, the biggest foreign creditors of the U.S., have urged action to head off the risk of a default. The decision in Hong Kong preceded a three-day holiday.
“Other countries may follow Hong Kong’s decision if the U.S. government stalemate continues next week,” said Roberto Mialich, a senior currency strategist at UniCredit SpA in Milan. A default “is not our base case as we expect lawmakers will reach a last-minute deal,” he said.
Lew Testimony
Financial markets are under stress because of “uncertainty” over the debt limit, U.S. Treasury Secretary Jacob J. Lew said in testimony prepared for a hearing before the Senate Finance Committee today. Congressional leaders are open to a short-term increase in the $16.7 trillion debt ceiling that may stave off the risk of default, according to Republican and Democratic aides who spoke on the condition of anonymity.
The rate on bills schedule to mature on Oct. 17 dropped for the first time in six days on speculation House Republican and Senate Democrats will begin work toward a budget deal.
House Republican leaders will present their members with a proposal to raise the debt limit for six weeks without policy conditions, said a congressional aide familiar with the details. The move would lessen the risk of a U.S. default one week from a lapse in borrowing authority.
Rates on Treasury bills maturing Oct. 17 fell 0.10 percentage point to 0.38 percent, at 2:10 p.m. in New York, according to Bond Trader prices. Yields fell for all bills maturing through Nov. 14.
Proposal Shift
The Hong Kong Monetary Authority reminded banks to manage liquidity risks properly and is closely monitoring the U.S. debt-limit developments, it said in an e-mailed statement today. It hasn’t made any change to its collateral arrangements, it said.
The SIX Swiss Exchange Ltd. is monitoring the situation in the U.S., spokesman Alain Bichsel said by phone. ICE Clear Europe’s current haircut for U.S. Treasuries is 3 percent, and any change would be communicated via a market circular, according to spokeswoman Claire Miller. Rachael Harper, a spokeswoman for LCH.Clearnet Group Ltd., declined to comment in an e-mailed response to questions.
In Hong Kong, investors using short-dated Treasuries to back up their trades will need to put up additional collateral to make up the shortfall caused by the new rules. The city hosts the third-largest stock index futures and options market in Asia by value of trades for the year through Aug. 31, according to data compiled by the World Federation of Exchanges.
Debt Status
“It’s possible there could be a U.S. debt default,” Lorraine Chan, a spokeswoman for Hong Kong Exchanges said by telephone. The extra measures don’t indicate an expectation of a default, she said. “We’ve been closely monitoring the operations of our clearinghouses and markets and as always we will take appropriate risk-management measures,” Chan said.
“It’s understandable that the HKEX would raise the haircut,” said Steven Leung, director of institutional sales at UOB-Kay Hian Holdings Ltd. (UOBK) in Hong Kong. “It’s reasonable for them to take the precaution.”
Longer-dated bill rates haven’t increased as much as those maturing immediately after the Oct. 17 deadline. The extra yield investors get for buying one-month securities instead of 91-day securities was 16.7 basis points, after reaching 28.9 basis points on Oct. 8, the biggest difference since March 2008, according to closing-market data. The longer-dated bills usually yield more than their one-month counterparts.
Hong Kong
The decision by the Hong Kong market operator looks “a bit premature,” said Patrick Jacq, a senior rates strategist at BNP Paribas SA in Paris. “We are not yet in a situation of default,” he said.
Chinese Premier Li Keqiang said China is paying “great attention” to the U.S. debt-ceiling issue, without elaborating, Xinhua News Agency said in a report posted today to the government’s website. He made the comment in a meeting yesterday with U.S. Secretary of State John Kerry at the Association of Southeast Asian Nations summit in Brunei, Xinhua said. Japan must consider the impact of any default on its bond holdings, even as the U.S. will probably avoid a fiscal crisis, Japanese Finance Minister Taro Aso said on Oct. 8.
“U.S. debt default risk isn’t at a stage for us to consider similar arrangements” to HKEX, Naoya Takahashi, a spokesman at Japan Exchange Group Inc., the operator of the world’s second-biggest stock market, said by phone. “If it does default we may take some steps.”
Singapore Exchange Ltd., Southeast Asia’s biggest bourse operator, already has “conservative haircuts on government securities that cover stress market conditions,” and it’s monitoring the situation closely, Agnes Siew, head of clearing risk, said by e-mail.
A Bank of England press officer declined to comment when contacted by phone today. The European Central Bank and Swiss National Bank don’t accept the U.S. securities as collateral.

Bank of Japan chief doesn't expect US default

A default by the United States on short-term Treasury bonds would not affect the Bank of Japan's acceptance of US bonds to secure loans, the bank's chief said Thursday.

A default by the United States on short-term Treasury bonds would not affect the Bank of Japan's acceptance of US bonds to secure loans, the bank's chief said Thursday.
"First, I don't expect a US default," Haruhiko Kuroda, governor of the Bank of Japan, said in response to a reporter's question.
"Second, even if it happens, that does not affect our collateral policy."
Kuroda's comments came during an appearance to discuss Japan's aggressive monetary stimulus policies at the Council on Foreign Relations, a New York think tank.
Japan's holdings of US Treasuries have been estimated at over US$1 trillion. US Treasuries are widely accepted by central banks as a form of insurance from a lender in case of a default.
Kuroda cited the US budget impasse as a potential risk to the global economy and to Japan's economic recovery.
The US could grow by 3 per cent "unless the ongoing fiscal stalemate delays the economic recovery," he said.
Kuroda said Europe's economy appears to have bottomed out, but he expects a slow recovery there. China continues to show solid growth, he said.
Overall, the global economy is growing "steadily, but slowly," Kuroda said.
Kuroda described Japan's economic resurgence as on track, thanks in part to an aggressive monetary policy championed under his watch that combines asset purchases, low interest rates and a 2 per cent inflation target.
Kuroda said additional stimulus measures were possible under hypothetical scenarios. But they are a "bit premature" to discuss at this point.
Past Bank of Japan efforts at stimulating the economy through low interest rates were harmed by a zero-inflation target and the weak state of Japan's banks compared with today's institutions, Kuroda said.
Growth in the Japanese economy had been anemic for more than two decades as the problem of deflation, or falling prices, depressed investment and consumption.
But early indicators show that the Bank of Japan's contribution to Abenomics, an aggressive program under Prime Minister Shinzo Abe to spur growth, are paying off, he said.
These positive readings include better consumer confidence, business confidence, inflation expectations, the selling of corporate bonds, a higher stock market and an increase in initial public offerings.
"The economy is on track, not only financial markets, but the real economy," Kuroda said.
Kuroda said long-term interest rates might "eventually" go up if the country is successful in reaching its inflation targets. But the country's goal will be to "contain" this rise with low or even negative interest rates for as long as the stimulus program is in place.
Kuroda reiterated support for an Abe plan to raise consumption taxes. He predicted the government would undertake structural reforms in the coming years.

Australian unemployment eases to 5.6%

Australia's unemployment rate eased to 5.6 per cent in September, retreating from a four-year high with the creation of 9,100 jobs in a better-than-expected performance boosted by election-related work.

Australia's unemployment rate eased to 5.6 per cent in September, retreating from a four-year high with the creation of 9,100 jobs in a better-than-expected performance boosted by election-related work.
The seasonally-adjusted jobless rate receded from August's 5.8 per cent -- a level not seen since the global financial crisis as Australia's mining-powered economy confronts a peak in resources investment due to slowing commodity prices.
Analysts had expected unemployment to hold steady at 5.8 per cent but a fall in the participation rate -- usually interpreted as evidence of jobseekers giving up on looking for work -- and a surge in jobs related to the September 7 election meant the result exceeded expectations.
"The employment numbers last month and this month have been flattered somewhat by the election," said National Australia Bank economist David de Garis.
The Australian dollar bounced from 94.48 US cents to 94.69 US cents after the headline rate beat forecasts, but analysts said the underlying picture was muted and unlikely to drive any move in the record low 2.5 percent interest rate.
"The recent improvement in confidence and stabilisation in labour market conditions is welcome but is still only tentative evidence that economic activity is improving from below-trend rates rather than just stabilising," said economist Justin Fabo from ANZ.
Slowing growth in key export market China and plunging commodity prices have hit Australia's key mining sector, with the central bank warning a decade-long, Asia-driven resources investment boom has peaked.
Australia's new conservative government has vowed to "reboot" the mining sector by slashing corporate taxes, but they face a steep task given China's slowdown and additional commodities supply coming online.
Top mining firms have taken a major hit, with BHP's annual net profit slumping 29.5 per cent to US$10.88 billion in the year to June and rival Rio Tinto down 71 per cent for the first half at US$1.72 billion.
Westpac Buys Lloyds Assets as Rules Encourage Retreat From Asia
By Narayanan Somasundaram, Brett Foley & Paulina Duran - Oct 11, 2013 10:27 AM GMT+0700

Westpac Banking Corp. (WBC) agreed to buy Lloyds Banking Group Plc (LLOY)’s Australian assets as tighter capital rules following the 2008 financial crisis prompt European and U.S. lenders to retreat from the Asia-Pacific region.
The transaction valued at A$1.45 billion ($1.37 billion) includes an A$8.4 billion leasing and corporate loan portfolio, Sydney-based Westpac, Australia’s second-largest lender by market value, said today in a statement. Macquarie Group Ltd. (MQG) and Pepper Australia Pty also made bids for the assets, according to people with knowledge of the offers.
Enlarge image Westpac Building
The Westpac Banking Corp. logo is displayed outside a building in Sydney. Photographer: Ian Waldie/Bloomberg
Enlarge image Lloyds Bank
Logos sit on signs outside the entrance to a Lloyds TSB bank branch, part of the Lloyds Banking Group Plc, in London. Lloyds, Britain’s biggest mortgage lender, is strengthening its balance sheet by selling assets and cutting costs following the bank’s 20 billion-pound ($32 billion) bailout in 2008. Photographer: Matthew Lloyd/Bloomberg
The transaction allows Westpac, prevented from merging with its three biggest rivals, to broaden a business dominated by mortgages. Lloyds, bailed out by the U.K. government in 2008, joins firms including Goldman Sachs Group Inc. (GS) that have raised more than $15 billion since 2012 by selling shares in Asian institutions as new banking regulations make it more expensive to hold minority stakes.
“Given capital implications, banks globally will be less willing to hold minority stakes as they think about returns,” said Mark Nathan, managing partner at Sydney-based Arnhem Investment Management, which manages about $3.8 billion. “In this deal, it was more of a bank-specific pressure to exit a market, which played into Westpac’s hands, given the low-growth environment.”
Today’s transaction is Westpac’s biggest acquisition since Chief Executive Officer Gail Kelly bought St. George Bank Ltd. for A$18.5 billion in 2008. Westpac’s shares rose 2.3 percent to A$32.95 at 2:11 p.m. in Sydney, poised for the biggest advance since June 14.
Cash Earnings
The acquisition is expected to add A$100 million to cash earnings by fiscal 2015, according to the statement. The purchase price includes about A$1.19 billion of net tangible assets and A$260 million in goodwill. Westpac expects pretax integration costs of A$130 million and pretax savings of A$70 million per year.
Westpac will gain A$2.9 billion in equipment finance, A$3.9 billion in motor vehicle finance, A$1.6 billion in corporate loans and 28 corporate customers, it said. The transaction will reduce Westpac’s common equity tier 1 capital ratio by 38 basis points. The lender’s common equity tier 1 capital ratio stood at 8.7 percent as of March 31, according to filings on May 3.
“The transaction meets our strict acquisition criteria and shareholders will see a benefit to earnings per share” in the year to September 2014, Kelly said in a statement to the stock exchange. “Our strong capital position has allowed us to expand our business without having to raise additional equity.”
Regulatory Approvals
The deal isn’t subject to regulatory approvals and is expected to be completed on Dec. 31, according to the statement. Westpac has notified the Australian Competition & Consumer Commission of the transaction and is co-operating with its informal merger review process, the bank said.
“We believe the transaction doesn’t substantially reduce competition,” Westpac Chief Financial Officer Philip Coffey said on a conference call with analysts.
The regulator asked for comments on the acquisition from “interested parties” by Oct. 30, the ACCC said in a posting on its website. Goldman Sachs Group Inc. is advising Lloyds on the sale, people familiar with the process have said.
Kelly, who ran St. George before the Westpac takeover, agreed in May to pay a special dividend for the first time since 1988 after first-half cash earnings rose 10 percent. Westpac shares have risen 21 percent since she took over on Feb. 1, 2008, the second-best performance among the four biggest Australian lenders.
Country Exit
Lloyds, Britain’s biggest mortgage lender, is strengthening its balance sheet by selling assets and cutting costs following the bank’s 20 billion-pound ($32 billion) bailout in 2008. The British government started selling part of its stake in the bank last month as part of a move to full private ownership.
Lloyds International Pty, the London-based lender’s Australian unit, reported a loss of A$148.3 million in 2012, after a shortfall of A$1.2 billion the previous year, according to company filings. The division reduced assets by 24 percent to A$12.2 billion last year, the documents show.
“The sale will enable our country exit from Australia, which will be effected a short time after completion, although we will continue to support core U.K.-linked clients in Australia,” Lloyds said in a statement.
The transaction is expected to lead to a gain on disposal of about 20 million pounds, while the group will write down a related deferred tax asset of about 350 million pounds, Lloyds said. Common equity core tier 1 capital ratio is expected to increase by about 20 basis points as the sale reduces risk weighted assets, Lloyds said.
Global Rules
Some European and U.S. lenders are selling their holdings of shares in Asian lenders as new rules set by the Basel Committee on Banking Supervision require capital deductions for holding minority investments in other financial institutions.
Bank of America Corp. sold its remaining shares in China Construction Bank Corp. for $1.5 billion in September. Goldman Sachs offloaded its final stake in Industrial & Commercial Bank of China Ltd. in May for $1.1 billion, capping a seven-year investment in the nation’s largest lender.
Citigroup sold its stake in Shanghai Pudong Development Bank (600000) in March 2012, nine years after buying it, for an after-tax gain of $349 million. In February, HSBC completed a $9.4 billion sale of shares in Ping An Insurance (2318) (Group) Co.
U.S. regulators are also pushing for bigger cushions against potential losses, proposing in July that lenders’ leverage ratios, or capital as a percentage of total assets, be pegged at 5 percent for holding companies, 2 percentage points more than the international minimum.
Outstanding Loans
Westpac, established in 1817 as the Bank of New South Wales, is Australia’s oldest lender. It had 1,273 branches across the country as of June 30, the Australian Prudential Regulatory Authority said Aug. 21.
Mortgages represented 69 percent of the lender’s outstanding loans in Australia as of March 31, according to a company filing. Business lending accounted for 27 percent.
Outstanding mortgages in Australia rose 4.7 percent in the year to Aug. 31 and business credit climbed 1.4 percent, according to central bank data. Housing loans advanced on average 10.8 percent annually over the past decade while business lending grew 7.5 percent, the data show.
Australia’s so-called four-pillar policy prevents the largest four lenders -- Australia & New Zealand Banking Group Ltd. (ANZ), Commonwealth Bank of Australia, National Australia Bank Ltd. and Westpac -- from buying each other.
Fast Retailing Drops After Profit Forecast Misses Estimates
Fast Retailing Co. (9983) fell the most in two months in Tokyo trading after Asia’s largest clothing retailer forecast profit that missed analyst estimates and said discounts hurt domestic earnings.
The maker of Uniqlo casual apparel fell as much as 5.4 percent, headed for the biggest drop since Aug. 7, to 32,700 yen before trading at 33,150 yen as of 9:40 a.m. local time.
Fast Retailing President Tadashi Yanai, 64, said his marketing emphasis is shifting away from low prices after per-customer spending in Japan fell for 10 months straight. Yanai is also adding higher-priced items to the product mix after working to boost the brand image by opening an outlet in Tokyo’s Ginza luxury shopping district and sponsoring athletes including tennis players Kei Nishikori and Novak Djokovic.
“The focus for the time being is on maintaining gross profit margins,” said Takashi Aoki, a Tokyo-based fund manager at Mizuho Asset Management Co.
Net income will probably be 92 billion yen ($936 million) for the year ending August 2014, the Yamaguchi, Japan-based company said yesterday in a statement after the market closed. That’s lower than the 99.3 billion yen average of 19 analyst estimates.
Operating margin plunged about 15 percent to 11.6 percent last fiscal year, the lowest since at least 2002. Sales jumped 23 percent in the year, surpassing 1 trillion yen for the first time as low-priced thermal underwear, stretch jeans and down jackets lured buyers.
Profit Margin
“We will control margins and boost profit at the domestic Uniqlo business,” Yanai, Japan’s richest person, told reporters in Tokyo yesterday. “We will change our marketing to focus on quality materials and high-function garments, rather than on price.”
The company forecast operating income of 114.5 billion yen for its Japan Uniqlo chain this fiscal year, 18 percent more than a year earlier.
The company’s targets for Japan this fiscal year are “highly challenging,” Taketo Yamate, an analyst at Credit Suisse Group AG in Tokyo wrote in a note to clients. He said a “very negative” share price reaction should be expected. He maintained his underperform rating.
Operating profit at the company’s Uniqlo chain in Japan slumped 5.4 percent to 96.8 billion yen in the year ended in August, while sales rose 10 percent to 683 billion yen.
Overseas profit soared 67 percent to 18.3 billion yen on sales of 251.1 billion yen, the company said.
Overseas Expansion
Net income climbed 26 percent to 90.4 billion yen for the year ended August as sales jumped to 1.143 trillion yen, according to the statement. The Japanese currency has slumped about 20 percent against the dollar in the past 12 months.
Fast Retailing has said it plans to open 200 to 300 outlets overseas annually and will found its first store in Australia and Germany in spring 2014. The retailer targets opening between 20 and 30 stores a year in the U.S. and hopes to reach 100 stores there in the next few years, Yanai said. The company had previously said it would open about 20 outlets a year in the world’s biggest economy. The company is also adding stores in China and Indonesia as it bets on global expansion to more than quadruple sales to 5 trillion yen by 2020.
Yanai yesterday said he plans to stay on in the role of president beyond his 65th birthday as the company is in the middle of international expansion. He has a net worth of $17.5 billion, according to the Billionaires Index, and had earlier said that he would step down at 65.
WTI Crude Poised for Weekly Decline Amid U.S. Debt-Limit Talks
West Texas Intermediate crude headed for a fourth weekly loss in five as President Barack Obama and House Republicans started negotiations to raise the U.S. debt ceiling and end the partial government shutdown.
Futures fell as much as 0.4 percent in New York. Both sides in the U.S. standoff said talks will continue after they failed to agree during a 90-minute meeting at the White House yesterday. Brent’s premium to WTI climbed to a four-month high as the detention and release of Libya’s prime minister bolstered concern that heightened instability may further curb the country’s crude exports.
“Last night’s developments reduce the risk of immediate crisis,” Ric Spooner, a chief market analyst at CMC Markets in Sydney, said by phone. “It shows U.S. politicians are reluctant to push things over the edge. They look as though they’re going to blink.”
WTI for November delivery slid as much as 45 cents to $102.56 a barrel in electronic trading on the New York Mercantile Exchange and was at $102.73 at 10:20 a.m. Singapore time. It rose $1.40, or 1.4 percent, to $103.01 yesterday. The volume of all futures traded was about 56 percent below the 100-day average. Prices are down 1.1 percent this week.
Brent for November settlement dropped as much as 30 cents, or 0.3 percent, to $111.50 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude at an $8.80 premium to WTI. The spread was $8.79 yesterday, the widest since June 6.
‘Under Threat’
House Speaker John Boehner and other Republican leaders met with the president to discuss delaying the lapse in U.S. borrowing authority to Nov. 22 from Oct. 17 without attaching policy conditions. The debt-limit bill could be voted on as early as today.
WTI may advance next week as lawmakers near an agreement, according to a survey. Fourteen of 33 analysts and traders, or 42 percent, forecast crude will increase through Oct. 18. Eleven respondents, or 33 percent, predicted a decline and eight projected no change.
Libya’s Prime Minister Ali Zaidan was freed yesterday hours after being held by the country’s anti-crime unit at a Tripoli hotel. Militia violence, which has plagued the North African nation since the capture and death of former leader Muammar Qaddafi in 2011, has intensified in recent months with groups refusing to heed government calls to disband.
“The situation in Libya has been resolved in the short term,” said Spooner. “But it’s a reminder that Libya is a very unstable place. Though production has recently been somewhat restored it remains under threat.”
OPEC Supply
Protests have disrupted oil production and exports from Libya, a member of the Organization of Petroleum Exporting Countries. Output fell to 300,000 barrels a day in September, the least since the same month in 2011, according to a survey of analysts and producers.
OPEC’s production in September dropped to the lowest level in almost two years amid losses in Iraq. The group is responsible for 40 percent of global crude supplies.
Its 12 members pumped 30.05 million barrels a day last month, the least since October 2011, OPEC said in its monthly report yesterday. Output from Iraq decreased by about 370,000 barrels a day to 2.8 million amid maintenance at the Basrah terminal.
Gold Fluctuates Below $1,300 on Optimism Over U.S. Debt Deal
Gold traded below $1,300 an ounce, swinging between gains and losses, on optimism that U.S. lawmakers will reach agreement to avert a default.
Bullion for immediate delivery rose and fell 0.3 percent before trading at $1,290.32 an ounce at 9:20 a.m. in Singapore. Prices slid 2.7 percent in the three days through yesterday, when they touched a one-week low of $1,281.10, and declined 1.5 percent this week.
President Barack Obama didn’t accept or reject a House Republicans’ plan to increase the debt limit as the two sides pledged to keep talking. An agreement to avoid default and end the partial government shutdown would put the economy back on track for recovery and potentially pave the way for the Federal Reserve to reduce stimulus. Gold has slumped 23 percent this year on speculation that the Fed may cut asset purchases.
“Gold fell on optimism over a short-term U.S. debt ceiling extension,” James Steel, an analyst at HSBC Securities (USA) Inc., wrote in a note. “The path of least resistance appears to be lower for gold.”
Fifteen analysts expect prices to decline next week, eight are bullish and four neutral, the highest proportion of bears since Sept. 13. Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, fell to 896.38 metric tons yesterday, the least since February 2009.
Gold for December fell 0.5 percent to $1,290.60 on the Comex, dropping for a fourth day and set for a second weekly loss. Trading was 2.5 percent above the average in the past 100 days at this time of day.
Silver for immediate delivery rose 0.3 percent to $21.7487 an ounce. Platinum gained 0.1 percent to $1,387.60 an ounce. Palladium added 0.4 percent to $709.95 an ounce.
Copper Climbs on China Trade Data Outlook, U.S. Debt Limit Talks
Copper rose for a second day ahead of Chinese trade data that may show sustained demand from the biggest metals user and as U.S. politician continued talks to avoid a debt default.
The contract for delivery in three months on the London Metal Exchange gained 0.4 percent to $7,170.25 a metric ton at 10:03 a.m. in Shanghai, trimming a second weekly decline.
Imports by China probably expanded 7 percent in September from a year earlier, according to the median of 42 estimates in a survey. President Barack Obama didn’t accept or reject House Republicans’ plan to increase the debt limit as the two sides pledged to keep talking tonight about avoiding default and ending the partial government shutdown.
“We may see a relatively high copper imports for September tomorrow as recent economic indicators show a stable Chinese economy,” said Yu Yi, an analyst with SDIC CGOG Futures Co. in Beijing.
Stockpiles tracked by the LME fell to 512,450 tons, the lowest since March 8, daily exchange figures showed.
Futures for delivery in December climbed 0.3 percent to $3.2585 a pound on the Comex in New York. The January contract on the Shanghai Futures Exchange increased 0.7 percent to 51,780 yuan ($8,471) a ton.
On the LME, zinc, nickel and lead also rose, while aluminum fell and tin was unchanged.
Rubber Set for 1st Weekly Gain in 3 as Yen Weakens on Debt Talks
Rubber is heading for the first weekly climb in three as optimism grew that U.S. lawmakers will lift the debt ceiling to avert a default, weakening Japan’s currency and boosting the appeal of yen-based futures.
The contract for March delivery rose as much as 2.7 percent to 266.3 yen a kilogram ($2,709 a metric ton) on the Tokyo Commodity Exchange, the highest level since Oct. 1. Futures traded at 265.5 yen at 10:17 a.m. and gained 4.4 percent this week, the first rally since five days through Sept. 20.
The yen dropped to 98.37 per dollar, the lowest level this month. Talks between Republican lawmakers and President Barack Obama will continue as they try to seek a “path forward” on the debt ceiling, according to Republican House Majority Leader Eric Cantor. The White House said “no specific determination was made” during an initial 90-minute meeting between the parties in Washington.
“Optimism that the U.S. will avert a default spurred investors to buy back riskier assets,” said Kazuhiko Saito, an analyst at broker Fujitomi Co. “A weaker yen is another support to futures in Tokyo.”
Rubber for January delivery on the Shanghai Futures Exchange rose 0.7 percent to 20,450 yuan ($3,344) a ton yesterday. Thai rubber free-on-board fell 0.3 percent to 79.25 baht ($2.52) a kilogram yesterday, according to the Rubber Research Institute of Thailand.
Rebar Set for Biggest Weekly Advance Since August on Restocking
Steel reinforcement-bar futures in Shanghai climbed, heading for the biggest weekly gain in eight weeks, as traders stepped up purchases for winter stockpiling and as raw material prices gained.
Rebar for delivery in January on the Shanghai Futures Exchange gained as much as 0.7 percent to 3,621 yuan ($592) a metric ton, before trading at 3,612 yuan at 10:43 a.m. local time. Futures have gained 0.7 percent this week, the most since the five days through Aug. 16.
Rebar inventory in China fell 1.8 percent to 6.29 million tons as of Sept. 27, the lowest since the week ended Jan. 25, according to Shanghai Steelhome Information Technology Co. Traders increased buying to replenish inventories, said Ren Xinlei, an analyst at Luzheng Futures Co. in Jinan.
“The winter restocking process looks normal, so we remain bullish on the rebar market,” Ren said. “Rebar is also supported by production costs as iron ore and coking coal prices have climbed.”
Iron ore for immediate delivery at Tianjin port rose for a third day, adding 0.9 percent to $133.0 a dry ton yesterday, according to a price index compiled by The Steel Index Ltd.
The average spot price of rebar gained 0.2 percent to 3,507 yuan a ton yesterday, according to Beijing Antaike Information Development Co.
Corn Trades Near 3-Year Low as U.S. Demand for Ethanol May Drop
Corn declined to trade near a three-year low on concern that demand for the grain for making ethanol will be reduced if the U.S. government scales back legal requirements on the use of biofuels.
The contract for delivery in December dropped as much as 0.7 percent to $4.35 a bushel on the Chicago Board of Trade, matching the Oct. 2 intraday low that was the lowest level for futures since August 2010. Corn was at $4.3525 by 10:56 a.m. in Singapore, set for a second week of decline and heading for a 38 percent slump this year on prospects for a record U.S. crop.
The U.S. Environmental Protection Agency is considering cutting the mandate on the use of corn-based ethanol in 2014. The agency would call for the use of 13 billion gallons of conventional corn-based ethanol, down from 13.8 billion gallons this year, the proposal said.
A cut in the ethanol mandate will be “negative” for corn, Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said by phone today.
Wheat for December delivery dropped 0.4 percent to $6.83 a bushel. Soybeans for November delivery declined 0.2 percent to $12.8575 a bushel.

Dollar treads water, investors hopeful of U.S. debt deal

The dollar treaded water in early Asian trading on Friday, holding just below two-week highs against major currencies hit in the previous session on hopeful signals of progress toward averting a possible U.S. debt default.
House leaders were huddled in House Speaker John Boehner's office after presenting their plan for a short-term hike in the debt limit to avoid a potential default to President Barack Obama.
The New York Times later reported Obama had rejected the plan, but Republican Paul Ryan told reporters Obama had neither accepted or rejected the proposal.
The confusion caused a brief wobble in the dollar's progress.
"Although it is unclear whether the deal will be accepted by the White House and Senate Democrats given the strings attached, the biggest effect has been on market sentiment, with U.S. equity markets seeing the largest response," strategists at Barclays wrote in a report to clients.
The dollar index .DXY, which tracks the U.S. unit against a basket of six major counterparts, was last at 80.472, up about 0.1 percent.
It rose as high as 80.595 on Thursday, its highest since September 26, though it remained not far off an eight-month low of 79.627 touched on October 3.
The dollar was slightly up from late U.S. levels at 98.18 yen, well off a two-month low of 96.55 yen plumbed on Tuesday.
The euro was slightly higher at $1.3525.
Hopes raised by the Republican offer helped major U.S. stock indexes mark their biggest gains in more than nine months on Thursday, leaving the S&P 500 less than 2 percent away from its record closing high set three weeks ago.
The U.S. government was partially shut for a 10th day on Thursday. The fiscal standoff has heightened fears that the U.S. debt ceiling will not be raised by the October 17 deadline, triggering a default on some short-term U.S. debt.
Two U.S. Federal Reserve officials with differing views on the central bank's policy agreed on Thursday that a U.S. debt default would have devastating effects.
Yen Falls Versus Peers as Stocks Gain Amid U.S. Debt-Limit Talks
The yen dropped versus all 16 major peers as Asian stocks advanced, sapping demand for safer assets, as U.S. lawmakers continued fiscal negotiations to avert a default.
The dollar climbed for a fourth day against the Japanese currency as U.S. Republicans and President Barack Obama pledged further discussions on a debt-limit increase and government shutdown. Australia’s dollar was headed for back-to-back weekly gains after the yield premium its two-year debt offers over the U.S. climbed to its highest since April.
 “An agreement on the debt ceiling is seen as a risk-on catalyst, while the opposite is risk off -- it’s as simple as that,” said Daisaku Ueno, the chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, a unit of Japan’s biggest financial group by market value. “It’s convenient to use dollar-yen to take part in this kind of swing trade.”
The yen lost 0.3 percent to 98.48 per dollar as of 11:38 a.m. Tokyo time after having slid 1.5 percent in the prior three sessions. It dropped 0.4 percent to 133.30 per euro. The greenback dipped 0.1 percent to $1.3537 per euro.
The MSCI Asia Pacific Index of shares climbed 1.2 percent. Japan’s markets will be closed on Oct. 14 for a holiday.
Obama didn’t accept or reject House Republicans’ plan to increase the debt limit as the two sides pledged to keep talking about avoiding default and ending the partial government shutdown. Both sides described the talks as constructive with a week remaining until U.S. borrowing authority lapses.
Republican Plan
The president told Republicans during a White House meeting that he wants to raise the debt limit and end the shutdown, said Representative Hal Rogers of Kentucky. The Republican proposal released earlier included only a short-term increase in the debt limit.
The dollar has climbed 0.5 percent this week, the biggest gain after the Aussie among 10 developed-nation currencies tracked by Correlation Weighted Indexes. The Australian currency rose 1 percent while the euro strengthened 0.3 percent and the yen weakened 0.6 percent.
Dollar gains may stall before a report today predicted to show confidence among U.S. consumers declined to the lowest level since January this month. The Thomson Reuters/University of Michigan preliminary index of sentiment decreased to 75.6 this month from 77.5 in September, according to the median estimate in a survey.
Data Delays
A report on U.S. retail sales scheduled to be released today is among those that have been delayed by the partial U.S. government closure that began Oct. 1 after Republicans insisted on changes to a 2010 health-care law.
A shutdown lasting through the end of the week could cost the economy 0.2 percentage point in growth, according to the median estimate in a survey of economists. The damage escalates to a 0.5-point loss if the shutdown carries through Oct. 25.
Concern that the lack of data and slower growth may sideline the Federal Reserve and delay a tapering of bond purchases has helped widen the yield gap between the U.S. and Australia. Australia’s two-year debt offered holders 2.47 percentage points more than similar-maturity Treasuries yesterday, the most since April 22. It was at 2.45 percentage points today.
China Imports
Aussie gains may be sustained before a report tomorrow that will probably show imports by China climbed for a third-straight month. Chinese imports rose 7 percent in September from a year earlier, according to the median estimate in a poll. China is Australia’s largest trading partner.
“The momentum has picked up and a lot of the fears have waned over Chinese growth,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “There’s no doubt that’s been one of the reasons the Aussie dollar has been more resilient than in the past.”
Australia’s dollar added 0.3 percent to 94.77 U.S. cents and has gained 0.5 percent this week. It climbed 0.6 percent to 93.32 yen, up 1.5 percent from Oct. 4.
Won Nears 8-Month High on U.S. Debt Talks Optimism; Bonds Rise
South Korea’s won rose to within 0.1 percent of an eight-month high on signs of progress in talks to avoid a U.S. debt default and as overseas investors pumped money into local equities. Government bonds rose.
President Barack Obama told Republicans at a White House meeting yesterday that he wants to raise the debt limit and end the partial government shutdown, now in its 10th day, said Representative Hal Rogers of Kentucky. Obama didn’t accept or reject a Republican plan as the two sides pledged to keep talking last night. South Korean Finance Minister Hyun Oh Seok said prolonged budget negotiations would hurt the U.S. and global financial systems.
“Speculation is increasing the budget talks will reach a deal, which may lift sentiment,” said Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. “Foreign inflows in local stocks are a strong support for the won.”
The won climbed 0.3 percent to 1,070.43 per dollar as of 10:10 a.m. in Seoul, according to prices from local banks. It earlier strengthened to 1,068.82, near the eight-month high of 1,067.07 reached Oct. 7. It was little changed for the week.
The currency’s exchange rate is determined by the market, and that’s desirable if there is no volatility, Finance Minister Hyun said in an interview in Washington yesterday. Foreigners were net purchasers of Korean stocks for a record 31st day, pumping more than $10 billion into the securities since the buying streak began on Aug. 23, exchange data show.
The won’s one-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 24 basis points, or 0.24 percentage point, today and 22 basis points for the week to 6.94 percent.
The yield on South Korea’s 2.75 percent sovereign notes due June 2016 fell one basis point to 2.86 percent, according to Korea Exchange Inc. prices.
Australian Dollar Set for 2-Week Gain Before China Trade Report
Australia’s dollar headed for a second weekly advance before a report tomorrow that may show imports by China, the nation’s biggest trading partner, climbed for a third-straight month.
The Aussie held gains versus most of its 16 major counterparts this week as U.S. President Barack Obama and Republican lawmakers continued discussions on increasing the nation’s debt limit and ending a partial government shutdown. New Zealand’s kiwi dollar snapped a loss from yesterday as Asian stocks headed for their biggest one-day gain in three weeks.
“The momentum has picked up and a lot of the fears have waned over Chinese growth,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “There’s no doubt that’s been one of the reasons the Aussie dollar has been more resilient than in the past.”
The Australian dollar gained 0.1 percent to 94.59 U.S. cents as of 12:11 p.m. in Sydney and has risen 0.3 percent since Oct. 4. New Zealand’s currency was little changed at 82.81 U.S. cents after falling 0.3 percent yesterday. It’s weakened 0.4 percent this week.
Australia’s 10-year yield fell three basis points to 4.13 percent. It closed at 4.16 percent yesterday, offering 148 basis points more than similar-maturity U.S. Treasuries, the most since June 24. The yield on the the South Pacific nation’s three-year debt declined three basis points to 3.09 percent.
Chinese imports probably rose 7 percent in September from a year earlier after increasing by the same amount the previous month, according to the median estimate of economists before tomorrow’s report. Exports climbed 5.5 percent after a 7.2 percent advance in August, analysts projected.
Best Performer
Bloomberg Correlation-Weighted Indexes show the Aussie was the best performer in the past week, rising 0.9 percent against a basket of nine other developed-nation currencies tracked by the gauges. The kiwi gained 0.1 percent.
In the U.S., Obama didn’t accept or reject House Republicans’ plan to increase the debt limit as the two sides pledged to continue talks. The government of the world’s biggest economy will run out of borrowing authority on Oct. 17.
The MSCI Asia Pacific Index of shares climbed 1 percent, poised for the largest advance since Sept. 19.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 3.51 percent after closing yesterday at the highest since Sept. 17.
Rupiah Forwards Rally Most in Three Weeks on U.S. Debt Progress
Indonesia’s rupiah forwards gained the most in three weeks after U.S. lawmakers said they had constructive talks on raising the debt ceiling, reducing the chance of a default and improving global risk sentiment.
President Barack Obama pledged to keep speaking with House Republicans to end the partial government shutdown and raise the debt limit before an Oct. 17 deadline to prevent non-payment on state borrowings. Indonesia’s current-account deficit at 2.5 percent to 2.7 percent of gross domestic product in 2014 would be “acceptable,” compared with 4.4 percent last quarter, Senior Deputy Governor Mirza Adityaswara said yesterday.
“Asian currencies across the board are rising as the U.S. debt ceiling discussion moves forward,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. (MAY) in Singapore. “Longer-term strengthening in the rupiah will be data-dependent, with all eyes on the external balance.”
One-month non-deliverable forwards on the rupiah rose 1.4 percent to 11,125 per dollar as of 9:22 a.m. in Jakarta, the biggest gain since Sept. 19. The offshore contracts gained 1.6 percent this week and were 3 percent stronger than the spot rate, which advanced 0.2 percent today and 0.4 percent this week to 11,473 per dollar, according to prices from local banks.
A fixing used to settle the forwards was set at 11,222 per dollar yesterday, according to the Association of Banks in Singapore. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose five basis points, or 0.05 percentage point, today to 15.6 percent.
Hedging Rules
Bank Indonesia set guidelines for individuals and companies, including state-owned firms, to hedge against currency swings, it said in an Oct. 9 statement. The rules are aimed at helping stabilize the rupiah, it said.
“We will see more impact on the volatility starting next month as local companies take out hedges,” Supaat said.
The yield on the government’s 5.625 percent bonds due May 2023 fell one basis point to 8.03 percent today, the lowest level since Sept. 24, prices from the Inter Dealer Market Association show. The yield dropped eight basis points this week.
Hint of Washington deal triggers rally; futures fall late
Major U.S. stock indexes posted their strongest rally in more than nine months on Thursday after signs of progress in negotiations to raise the U.S. debt limit.
The market rally left the S&P 500 less than 2 percent away from its record closing high set three weeks ago, with traders now focused on an earnings season that begins in earnest on Friday with results from top banks JPMorgan and Wells Fargo.
However, more than two hours after the close of regular trading, equity futures contracts dipped on reports that President Barack Obama rejected a Republican plan to extend the debt ceiling by several weeks because it did not also end the partial government shutdown.
"The activity in multiple asset classes will be very sensitive for the next few days. We are watching this very closely like everyone else. Some people have been going into cash. I wish we were all focusing on matters of economics and earnings, but we are unfortunately trading on this soap opera," said Michael Cuggino, president and portfolio manager at Permanent Portfolio Funds.
House Republican leaders acted to break a logjam in negotiations by proposing a bill to raise the federal government's debt limit without attachments. The move was a significant shift for Republicans, who had tried to use the must-pass legislation to extract concessions from Democrats on spending and gutting the new healthcare law known as Obamacare.
Their proposal, which they planned to present to President Obama at the White House, would postpone the threat of a U.S. default from October 17 until the middle or end of November. The federal government would remain in a partial shutdown.
"What this is, is opening the door to discussion and negotiation when before we had two sides just finger pointing," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
"We don't know if in six weeks we'll be in the same place, but at least this opens the possibility" of a lasting deal, he said.
In after-hours trading, S&P 500 E-mini index futures fell about 12 points after The New York Times reported on Obama's opposition to the Republican plan.
However, futures quickly pared those losses on news that Obama had neither accepted nor rejected the GOP proposal, and that talks were continuing. The E-minis were trading at 1682.25, down 2.75 points from the close at 4:15 pm ET.
The CBOE Volatility index .VIX, often used to measure the level of investor anxiety, plunged 15.9 percent to 16.48, near the level it was at in late September, prior to the U.S. government shutdown.
The Dow Jones industrial average .DJI rose 323.09 points or 2.18 percent, to 15,126.07, the S&P 500 .SPX gained 36.16 points or 2.18 percent, to 1,692.56 and the Nasdaq Composite .IXIC added 82.971 points or 2.26 percent, to 3,760.747.
The S&P posted its largest daily percentage gain since January 2, when yet another market pullback was reversed after politicians reached an agreement regarding the so-called fiscal cliff.
In one of the few economic indicators that continues to be published amid the federal government partial shutdown, data showed the number of Americans filing new claims for jobless aid touched a six-month high last week. A computer-related backlog of claims was processed and the partial government shutdown hit some non-federal workers.
This year's high-flying tech stocks rebounded after several days of declines. Facebook (FB.O) was up 4.9 percent to $49.05, Best Buy (BBY.N) gained 7.5 percent and Netflix (NFLX.O) rose 5.4 percent. Among the year's best performers on the S&P 500, the stocks were the top drags in the market's recent decline.
Citrix Systems Inc (CTXS.O) shares were off 11.9 percent to $58.75 after the cloud-computing software maker estimated quarterly results below analysts' expectations because businesses had delayed contracts.
About 98 percent of the S&P 500 components posted gains. On the NYSE, more than six issues rose for every one that fell and on Nasdaq winners outnumbered losers by a ratio of 5.3 to 1.
U.K. Stocks Jump Amid Signs of Compromise on U.S. Debt
U.K. stocks surged the most in three months amid signs that U.S. lawmakers may agree on a compromise deal to avoid a sovereign-debt default.
Hays Plc (HAS) climbed 2.2 percent after the recruitment company said quarterly fees increased in its European markets. WH Smith Plc (SMWH) jumped the most in six months after raising its final dividend and saying it plans to repurchase an additional 50 million pounds ($80 million) of shares. Melrose Industries Plc (MRO) added 1.8 percent after KKR & Co. said it will pay about $1 billion for two of its U.S. industrial-products companies.
The FTSE 100 Index advanced 92.58 points, or 1.5 percent, to 6,430.49 at the close of trading in London, halting a three-day losing streak after falling to a three-week low yesterday. The equity benchmark has lost 2.9 percent from a high on Sept. 19 as a standoff between U.S. lawmakers led to the first partial government shutdown in 17 years. The broader FTSE All-Share Index also added 1.5 percent today, as did Ireland’s ISEQ Index.
“If they do not agree, and the U.S. has automatic spending cuts, that will lead to a German-style austerity and the U.S. will go straight into recession,” Alain Bokobza, head of strategy at Societe Generale SA told Francine Lacqua on Television. “The probability of this happening is very small.”
The volume of shares changing hands in FTSE 100-listed companies today was 10 percent lower than the daily average in the past 30 days.
Debt Ceiling
House Republican leaders are presenting their members with a proposal to raise the $16.7 trillion U.S. debt limit for six weeks without policy conditions, said a congressional aide familiar with the details. The world’s biggest economy will exhaust its borrowing authority by Oct. 17 without a deal, according to the Treasury Department.
The Republican proposal wouldn’t end the partial government shutdown, said the aide, who asked for anonymity to discuss strategy. Obama will meet House Republican leaders at 4:35 p.m. in Washington.
The Bank of England held its key interest rate at 0.5 percent and kept its asset-purchase program unchanged today, matching predictions in two separate surveys. Governor Mark Carney has said the central bank won’t consider raising its benchmark rate at least until unemployment falls to 7 percent, which it forecasts may not happen until late 2016.
Hays climbed 2.2 percent to 118.1 pence. Comparable fees rose 8 percent in the U.K. and Ireland region for the three months ended Sept. 30, the company said today. Fees rose 7 percent in Germany from last year, contributing to a 2 percent increase for the group in the period.
Dividend Increase
WH Smith rallied 5.6 percent to 882 pence, its biggest increase since April 11 and the highest price since the chain-store split its units in 2006. The retailer proposed a final dividend of 21.3 pence per share, up from last year’s 18.6 pence a share.
Melrose rose 1.8 percent to 295.2 pence after KKR, a New-York based private-equity firm, said it will buy Crosby Group and Acco Material Handling Solutions from the U.K. company. Melrose, based in London, bought the manufacturing companies in 2008 with the intention of improving their performance and selling them.
Whitbread Plc (WTB) added 4.1 percent to 3,114 pence, its largest advance since September 2012. Oriel Securities Ltd. raised its rating on the shares to buy from hold, citing improvement in the U.K. hotel market.
Talvivaara Mining Co. Plc slumped 20 percent to 6.86 pence, extending losses so far this year to 75 percent. The Finnish commodity producer said it is assessing all options for additional funding to offset low prices and output.
Japan Shares Rise Fourth Day on U.S. Debt Negotiations
Japanese shares rose, with the Topix (TPX) index heading for its longest winning streak in a month, as U.S. lawmakers said they will continue talks on raising the nation’s debt limit to avoid a default.
Panasonic Corp., a consumer-electronics manufacturer that gets 14 percent of its sales from the Americas, added 3.2 percent. Orix Corp. jumped 3.9 percent as consumer lenders led gains among the Topix’s 33 industry groups. Nikon Corp. added 4.3 percent after Nomura Holdings Inc. raised its rating on camera maker. Fast Retailing Co. (9983), Asia’s largest clothing retailer, dropped 4.3 percent for the biggest decline in two months after forecasting profit that missed estimates.
The Topix gained 1.9 percent to 1,200.62 as of 12:35 p.m. in Tokyo, with all the gauge’s sectors advancing. The measure is headed for a 3.2 percent advance this week after falling the past two weeks. The Nikkei 225 Stock Average added 1.7 percent to 14,430.82.
“The likelihood of a short-term debt ceiling increase is looking very strong and the U.S. is unlikely to default, so there’s some sense of security there,” said Osamu Koizumi, a Tokyo-based executive officer at Meiji Yasuda Asset Management Co., which oversees the equivalent of $18 billion in assets. “But there’s still a long way to go. The yen is weakening on that now, so for the stock market, which is so sensitive to the currency, that’s good news.”
Debt Negotiations
Futures on the Standard & Poor’s 500 Index rose 0.1 percent. The U.S. equity gauge jumped 2.2 percent yesterday, the biggest rally since January, as House Speaker John Boehner and other party leaders went to the White House to negotiate.
Preident Barack Obama did not accept or reject House Republicans’ proposal for a short-term increase in the debt ceiling that would reduce prospects for a default. The plan would push the lapse of U.S. borrowing authority to Nov. 22 from Oct. 17. It wouldn’t end the partial shutdown of the federal government, which is going into its eleventh day.
“We’re going to be continually flung around by developments from the U.S.,” said Juichi Wako, a Tokyo-based equity strategist at Nomura Securities Co., the nation’s biggest brokerage. “But given it looks like they took a step forward, extreme risk aversion is retreating.”
Yen Weakens
The yen fell 0.4 percent against the dollar to 98.52, from as strong as 97.34 yesterday. Against the euro, the Japanese currency fell 0.5 percent to 133.40. A weaker yen boosts overseas earnings for exporters when repatriated.
Panasonic, which gets almost half its revenue abroad, gained 3.2 percent to 959 yen. Nintendo Co. (7974), which gets 37 percent of its sales from the Americas, added 2.4 percent to 11,520 yen. Toyota Motor Corp., Asia’s biggest carmaker, rose 1.1 percent to 6,420 yen.
Earnings per share for companies on the Topix will rise 35 percent in the next 12 months, according to analyst estimates.
Earnings Season
“We’re about to head full-swing into earnings season and expectations are for companies to raise earnings one-after-another,” Nomura’s Wako said. “The condition of earnings is improving.”
Matsuya Co. jumped 5.4 percent to 1,273 yen after the department-store operator raised its profit forecast 43 percent to 1 billion yen ($10.1 million). Nippon Express Co., a freight transporter, added 3.5 percent to 497 yen on a Nikkei newspaper report that first-half operating profit rose 10 percent to 17 billion yen as domestic demand recovered.
Among stocks that fell, Fast Retailing dropped 4.3 percent to 33,050 yen. The maker of Uniqlo casual apparel forecast net income of 92 billion yen for the year ending August 2014, compared with a 99.3 billion yen estimate from analysts. The retailer said discounts were hurting domestic earnings.
The Topix traded at 1.23 times book value yesterday, compared with 2.49 for the S&P 500 and 1.74 for the Stoxx Europe 600 Index. The Japanese gauge’s 30-day historic volatility was at 17.81 yesterday, compared with its five-year median of 19.31.
China’s Stocks Rise, Head Toward Biggest Weekly Gain in Month
China’s stocks rose, sending the benchmark index toward the steepest weekly gain in a month, as Cosco Shipping Co. reported a jump in profit and optimism grew U.S. lawmakers will lift the debt limit and avoid a default.
Cosco Shipping, a unit of China’s biggest shipping company, advanced 1.9 percent after its profit jumped 235 percent in the third quarter. SAIC Motor Corp. (600104), the nation’s largest carmaker, climbed to a two-week high after reporting higher vehicle sales last month. Xinjiang Goldwind Science & Technology Co., the biggest wind-turbine maker, jumped 10 percent to lead gains for industrial stocks on prospects for higher shipments.
The Shanghai Composite Index (SHCOMP) rose 0.9 percent to 2,210.32 at the 11:30 a.m. local-time break, extending this week’s gain to 1.7 percent. Premier Li Keqiang told Secretary of State John Kerry that China was paying “great attention” to the U.S. debt ceiling, the official Xinhua News Agency reported. China is the largest foreign owner of U.S. Treasuries.
“The temporary resolution to the U.S. debt ceiling issue has boosted the risk appetite for equities globally,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co., which oversees $120 million. “Market sentiment is postive and we believe economic data from next week will be good and stable.”
The CSI 300 Index gained 0.7 percent to 2,446.64, led by industrial and energy companies. The Hang Seng China Enterprises Index (HSCEI) advanced 1.3 percent. The Shanghai Composite has climbed 13 percent since June 27 as companies based in the city rose on speculation they will benefit from deregulation in the Shanghai free-trade zone.
Debt Ceiling
Trading volumes on the Shanghai index were 1.6 percent higher than the 30-day average for this time of day. It trades at 8.8 times projected earnings for the next 12 months, compared with the five-year average of 12.6 times.
The China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, added 2 percent in New York yesterday.
Discussions between Republican lawmakers and President Barack Obama will continue as they try to seek a “path forward” on the debt ceiling, according to Republican House Majority Leader Eric Cantor. Stocks and Treasury bills jumped in the U.S. trading day after the White House endorsed raising the limit until Nov. 22 without policy conditions attached.
“The market doesn’t like uncertainties,” Yi Gang, deputy governor of China’s central bank, said in Washington yesterday. “They watch this drama very closely.”
Trade Data
Xinjiang Goldwind Science led a rally for industrial shares, surging 10 percent for a second day to 8.57 yuan.
“The market is speculating the company will have higher shipments in the second half,” Demi Zhu, an analyst at Energy Finance, said by phone yesterday.
Cosco Shipping added 1.9 percent to 3.72 yuan. The company said yesterday shipping volumes rose 16 percent from a year earlier in September. SAIC Motor gained 2 percent to 14.05 yuan, heading for the highest close since Sept. 23. The automaker said sales increased 16 percent last month.
Bank of Ningbo Co. paced gains for lenders, rising 1.9 percent to 9.08 yuan. The lender won approval from the China Securities Regulatory Commission to set up a fund management firm, according to a statement to the stock exchange.
The customs office is due to release September data on foreign trade tomorrow. Exports probably increased 5.5 percent from a year earlier, according to the median estimate of 43 economists in a survey, compared with 7.2 percent growth in August. The statistics bureau will release data on inflation on Oct. 14 and third-quarter economic growth Oct. 18.
China’s economy may grow about 7 percent for the “foreseeable future,” as policy makers rein in the housing “bubble” and local government debt, Yi said in Washington.
The world’s second-largest economy has picked up in the third quarter and may expand about 7.5 percent or 7.6 percent this year, he said during a panel discussion yesterday in Washington. The economy grew 7.7 percent last year, the slowest since 1999, and compared with an average growth rate of 10.3 percent over the last decade.
Emerging Stocks Gain on U.S. as Russia Enters Bull Market
Emerging-market stocks climbed to a two-week high amid signs U.S. lawmakers will reach an agreement to avoid default. Russia’s RTS Index entered a bull market.
The MSCI Emerging Markets Index added 0.8 percent to 1,014.05. Russia’s RTS Index extended a surge from this year’s low to more than 20 percent as OAO Sberbank rose 2.1 percent. Polish lenders, led by Bank Pekao SA, jumped to the highest level in almost six years after Moody’s Investors Service raised the outlook for the industry. Brazil’s real led gains among the 31 major currencies after policy makers signaled they will keep the pace of rate increases.
The White House endorsed a short debt-limit increase with no policy conditions attached, signaling potential support for House Republicans’ plan for a monthlong reprieve from a default. The proposal by House Speaker John Boehner wouldn’t end the partial shutdown of the federal government. The plan would push the lapse of U.S. borrowing authority to Nov. 22 from Oct. 17.
“It’s all in the back of budget negotiations,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $130 billion of assets, said by phone. “Any type of deal regarding the debt ceiling will embolden risk appetite.”
All 10 groups in the MSCI Emerging Markets Index gained today, led by consumer shares. The benchmark measure for developing nations has dropped 3.9 percent this year to trade at 10.6 times projected earnings, compared with the valuation of 13.8 for the MSCI World Index.
Emerging ETF
The iShares MSCI Emerging Markets Index exchange-traded fund advanced 2.4 percent to $42.64. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, decreased 11 percent to 24.97.
Brazil’s Ibovespa (IBOV) rose a second day as Cia. Brasileira de Distribuicao Grupo Pao de Acucar, the nation’s biggest retailer, jumped. The central bank yesterday lifted the target lending rate by a half-percentage point for the fourth time in a row, setting it at 9.5 percent. The real gained 1.2 percent as policy makers, repeating language used in the August decision, said the increase will ensure slower inflation next year.
Russia’s dollar-denominated RTS added 1.6 percent, while the Micex Index (INDEXCF) rose to the highest since February. OAO Sberbank, the nation’s largest lender, jumped to a five-month high. Poland’s WIG20 jumped the most since November 2011 as Bank Pekao, the second-biggest lender in Poland, increased 3.5 percent. Benchmark gauges in Turkey, Hungary and the Czech Republic advanced more than 0.4 percent.
Tata Motors
Indian (SENSEX) stocks advanced, with the benchmark index rising to a three-week high, before the start of the earnings season tomorrow. Tata Motors Ltd. (TTMT) jumped to a record after sales of Jaguar Land Rover climbed in September, sending a gauge of automakers to a nine-month high. Software maker Infosys Ltd. (INFO) increased for the fourth day. The rupee climbed the most in a week on speculation that policy makers will ease restrictions on foreign investors’ purchases of the nation’s debt.
China’s stocks fell the most in two weeks as financial companies slumped on concern earnings growth will slow. Citic Securities Co. (600030) and Haitong Securities Co., the nation’s largest-listed brokerages, slid more than 3 percent after Bank of America Corp. said brokerages will suffer from government efforts to encourage banks to offer asset-management products.
The premium investors demand to own emerging-market debt over U.S. Treasuries declined four basis points, or 0.04 percentage point, to 322 basis points, according to JPMorgan Chase & Co.
High tyre prices despite natural rubber turning cheaper concern dealers
The tyre dealers have voiced concern at the tyre prices remaining high despite a drop in rubber prices and have urged the government to intervene in the matter to protect the interests of tyre trade and road transporters.
The All India Tyre Dealers’ Federation said two years ago the tyre makers hiked tyre prices by 26 to 30% in all categories of tyres, rather than raising the rates selectively on some categories of tyres, when the natural rubber prices touched Rs 240 per kg mark. The tyre makers benefitted from the higher prices. The first quarter results in 2013 saw most of the domestic tyre manufacturers posting good results.
The rubber prices have dropped to Rs 167.50 per kg now. Though the price of the main raw material has come down it has not been reflected in the end product prices. AITDF convenorS P Singh said this has resulted in undue increase in capital investment of tyre dealers and higher risk in their credit sales to the commercial vehicle owners.
The OEM tyre segment in medium and heavy commercial vehicle sales, passenger car sales and truck rentals have been showing a negative trend in the first two quarters. The tyre replacement market, which has been doing comparatively better, has been denied the benefit of steep drop in rubber prices through price cuts.
The fall in rupee, meanwhile, has led to tyre imports becoming costlier paving the way for undue protection to handful of domestic tyre manufacturers. As a result the tyre prices continue to remain high, S P Singh said in a statement.
Rubber imports jump three-fold in Sept on lower global rates
Natural rubber imports jumped by more than three-fold to 46,581 tonnes in September compared to the same period last year due to lower global prices and fall in domestic production.
Imports of rubber in September last year stood at 14,779 tonnes, according to rubber board data.
Total imports of rubber during April-September period in current year was higher by 59% at 179,292 tonnes compared to 112,641 tonnes a year ago.
However, production has dropped by 13% to 3,43,000 tonnes during April-September against 395,700 tonnes in the same period last year.
“Jump in imports during the month of September is mainly due to fall in production especially in Kerala and lower prices in the international market as compare to domestic market,” a rubber board official said.
Prices in international market are about Rs 156 per kg whereas prices in domestic market are at Rs 168 per kg.
In international market rubber is available at 8-10% lower prices than the domestic prices, therefore tyre manufacturers and other industries are more inclined to import rubber, he added.
India: Spot rubber declines
Spot rubber declined on Thursday.
The commodity lost further following the absence of genuine buyers as major manufacturers continued to abstain from the market and the sharp declines in domestic futures.
Meanwhile, the key Tokyo rubber futures fell more than two per cent tracking an over night decline in oil prices.
Sheet rubber weakened to Rs 166 (Rs 168) a kg, according to traders.
The grade dropped to Rs 166.50 (Rs 168) at Kottayam and Kochi, according to the Rubber Board.
The transactions were in an extremely low key.
October futures declined to Rs 164.88 (Rs 168.56), November to Rs 166.29 (Rs 170.15), December to Rs 168.15 (Rs 172.11), January to Rs 170.02 (Rs 174.90) and February to Rs 173.36 (Rs 176) for RSS 4 while March futures remained inactive on the National Multi Commodity Exchange. RSS 3 (spot) slipped to Rs 156.66 (Rs 156.80) at Bangkok.
October futures closed at ¥247.6 (Rs 156.55) on the Tokyo Commodity Exchange
Spot rubber rates Rs/kg were: RSS-4: 166 (168); RSS-5: 160 (162); Ungraded: 156 (158); ISNR 20: 157 (158) and Latex 60%: 127 (128).
Rubber Set for 1st Weekly Gain in 3 as Yen Weakens on Debt Talks
Rubber is heading for the first weekly climb in three as optimism grew that U.S. lawmakers will lift the debt ceiling to avert a default, weakening Japan’s currency and boosting the appeal of yen-based futures.
The contract for March delivery rose as much as 2.7 percent to 266.3 yen a kilogram ($2,709 a metric ton) on the Tokyo Commodity Exchange, the highest level since Oct. 1. Futures traded at 265.5 yen at 10:17 a.m. and gained 4.4 percent this week, the first rally since five days through Sept. 20.
The yen dropped to 98.37 per dollar, the lowest level this month. Talks between Republican lawmakers and President Barack Obama will continue as they try to seek a “path forward” on the debt ceiling, according to Republican House Majority Leader Eric Cantor. The White House said “no specific determination was made” during an initial 90-minute meeting between the parties in Washington.
“Optimism that the U.S. will avert a default spurred investors to buy back riskier assets,” saidKazuhiko Saito, an analyst at broker Fujitomi Co. “A weaker yen is another support to futures in Tokyo.”
Rubber for January delivery on the Shanghai Futures Exchange rose 0.7 percent to 20,450 yuan($3,344) a ton yesterday. Thai rubber free-on-board fell 0.3 percent to 79.25 baht ($2.52) a kilogram yesterday, according to the Rubber Research Institute of Thailand.
TOCOM (11/10/2013)
Day Session (9:00 - 15:30) As of Oct 11, 2013 13:20 JST
Trade Date: Oct 11, 2013   Prices in yen / kilogram  
Month Last Settlement Price Open High Low Current Change Volume Settlement
Oct 2013 246.5 250.4 255.0 249.7 251.1 +4.6 73 -
Nov 2013 247.8 252.5 254.9 252.1 254.3 +6.5 33 -
Dec 2013 251.1 255.0 258.0 255.0 256.5 +5.4 127 -
Jan 2014 254.0 257.8 261.2 257.8 260.2 +6.2 147 -
Feb 2014 256.7 260.2 264.3 260.2 262.7 +6.0 587 -
Mar 2014 259.4 262.6 267.0 262.6 265.0 +5.6 4,495 -
Total   5,462  
SHANGHAI (11/10/2013)
Contract Last Chg Open Interest Volume Turnover Bid-Ask Pre-clear Open Low High Lastv Comment
ru1310 18440 285 602 60 11026100 18050/18440 18155 18300 18300 18440   【tick】
ru1311 18560 270 3858 480 89067200 18535/18595 18290 18450 18385 18615   【tick】
ru1401 20595 285 151842 420420 87165587400 20590/20595 20310 20450 20450 20890   【tick】
ru1403 20805 240 144 24 5005700 /20925 20565 20895 20770 21025   【tick】
ru1404 21080 455 156 2 421600 20800/ 20625 21080 21080 21080   【tick】
ru1405 20820 190 51216 73518 15427451500 20815/20820 20630 20735 20730 21195   【tick】
ru1406 20565 165 1018 48 9997500 19385/20635 20400 20800 20565 20915   【tick】
ru1407 20575 0 90   0 19830/21570 20575         【tick】
ru1408 20640 0 128   0 20785/21670 20640         【tick】
ru1409 20855 200 730 94 19729000 20800/20950 20655 20880 20820 21215   【tick】
AFET (11/10/2013)
RSS3 (Natural Rubber Ribbed Smoked Sheets No 3)  Click for RSS's 3 bid & offer price Click for RSS3's relevant date Click for RSS3's historical chart Click for TOCOM's price Click for Auction's price contract = 5,000 kg; price quotation = Baht/kg
Open High Low Bid
Bid Offer Offer
Last Last
Chg. Settle. Price Volume Open Interest  
Prev. New Chg. Total* EFP
Prev. Curr. Chg.  
NOV 13       4 79.10 80.60 4       79.10     0   235      
DEC 13       4 79.50 81.00 5       79.50     0   125      
JAN 14       4 80.50 82.50 4       80.50     0   203      
FEB 14       4 81.00 82.80 1       81.00     0   394      
MAR 14       2 81.00 83.50 2       81.90     0   457      
APR 14 84.00 84.00 84.00 1 83.80 84.30 1 84.00 1 +1.00 83.00     3   516      
MAY 14 85.00 85.00 84.60 2 84.60 84.80 2 84.80 1 +1.15 83.65     18   381      
Total 21   2,311      
  Contract Month Last Chg From Prev Settle Bid Ask Open High Low Close Vol Open Int Settle Prev. Day Settle
E Nov 13 235.7 +3.5 234.3 235.3 234.0 235.8 234.0 - 265 3,223 - 232.2
E Dec 13 235.0 +2.6 234.2 236.0 235.4 236.2 235.0 - 101 3,956 - 232.4
E Jan 14 237.0 +2.6 236.6 238.4 237.5 238.5 237.0 - 40 3,071 - 234.4
E Feb 14 238.1 +2.5 237.8 239.6 238.5 239.5 238.1 - 55 3,596 - 235.6
E Mar 14 239.0 +2.4 238.6 240.4 239.2 240.5 239.0 - 77 1,656 - 236.6
E Apr 14 240.3 +2.6 239.1 241.5 240.3 240.3 240.3 - 5 814 - 237.7
E May 14 - - 239.2 242.4 - - - - - 591 - 237.8
E Jun 14 - - 239.0 241.9 - - - - - 406 - 238.0
E Jul 14 - - 239.1 242.1 - - - - - 222 - 238.6
E Aug 14 - - 239.2 242.3 - - - - - 263 - 238.2
E Sep 14 - - 239.2 242.4 - - - - - 237 - 238.4
E Oct 14 - - 239.1 242.7 - - - - - 60 - 238.4



519.32 Change
10/10 17:00
Currency Last Change % Change Trade Date/Time
LIGHT CRUDE CON1  Oct13 USD 102.84 -0.17 -0.17% 10/11 00:13
NO 2 HT OIL CON1  Oct13 USD 3.05 -0.02 -0.71% 10/11 00:07
NATURAL GAS CON1  Oct13 USD 3.75 +0.03 +0.70% 10/11 00:00
100 OZ GOLD CON1  Oct13 USD 1,291.60 -5.00 -0.39% 10/09 22:44
SILVER 5000 CON1  Oct13 USD 21.82 +0.00 +0.02% 10/10 15:10
HG COPPER CON1  Oct13 USD 3.24 +0.02 +0.61% 10/10 17:14
CORN CON1  Dec13 USC 435.25 -3.00 -0.68% 10/11 00:14
WHEAT CON1  Dec13 USC 683.00 -2.50 -0.36% 10/11 00:07
SOYBEANS CON1  Nov13 USC 1,284.00 -4.00 -0.31% 10/11 00:13
SUGAR 11 CON1  Feb14 USC 18.74 +0.15 +0.81% 10/10 13:59
COFFEE C CON1  Dec13 USC 114.45 -0.80 -0.69% 10/10 13:59
COCOA CON1  Dec13 USD 2,733.00 +30.00 +1.11% 10/10 13:59
FROZEN OJ CON1  Nov13 USC 127.10 -1.40 -1.09% 10/10 13:59
COTTON NO 2 CON1  Oct13 USC 84.36 -1.75 -2.03% 10/01 10:52
LIVE HOGS CON1  Oct13 USC 90.40 +0.15 +0.17% 10/09 22:00
LIVE CATTLE CON1  Oct13 USC 128.35 +0.05 +0.04% 10/09 20:30


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Gold 1,291.60 -5.00 -0.39%
Oil 102.84 -0.17 -0.17%
Corn 435.25 -3.00 -0.68%

Sector Summary

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