By Shiyin Chen and Saeromi Shin - Sep 29, 2011 2:26 PM GMT+0700
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The euro strengthened against most of its major peers. Photographer: Chris Ratcliffe/Bloomberg
Sept. 29 (Bloomberg) -- Brian Barish, the Denver-based president of Cambiar Investors LLC, talks about global financial markets, Europe's sovereign debt crisis, and his investment strategy. Barish speaks with John Dawson on Bloomberg Television's "First Up." (Source: Bloomberg)
The euro strengthened against most of its major peers and U.S. stock-index futures rose before German lawmakers vote on changes to a European bailout fund. Metals dropped and the cost of insuring Chinese government debt from default climbed to the highest since 2009.
Europe’s shared currency advanced 0.5 percent to $1.3616 and gained 0.4 percent to 104.16 yen as of 8:22 a.m. in London. Standard & Poor’s 500 Index futures jumped 0.9 percent, signaling a rally from yesterday’s 2.1 percent drop. The Stoxx Europe 600 Index slid 0.1 percent, paring earlier losses of as much as 0.7 percent, and the MSCI Asia Pacific Index added 0.4 percent. Copper slumped 2.1 percent and zinc fell 1.5 percent.
German Chancellor Angela Merkel is seeking support from lawmakers for the vote today to expand the European Financial Stability Facility’s firepower. Concern Greece will default is dragging global equities and commodities toward their biggest quarterly losses since 2008. About three-quarters of global investors surveyed by Bloomberg say the euro-area economy will fall into recession in the next year and more than half predict Chinese growth will slow to less than 5 percent annually by 2016.
“Investors appear to be pinning their hopes on the German vote on the euro-area rescue fund,” said Im Jeong Jae, a Seoul- based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion. “They seem to be betting that the region’s debt troubles, though there will be sporadic bumps, will eventually be resolved.”
Euro Rebounds
The 17-nation euro strengthened against 12 of its 16 major peers and rebounded from declines against the dollar and yen yesterday, when a European official said the European Commission is resisting a push to impose bigger writedowns on bank holdings of Greek debt than those previously agreed on.
The plan before the lower house in Berlin would allow the EFSF to buy bonds of distressed states and offer emergency loans to governments. Slovakia’s ruling coalition is close to approving the overhaul of the fund, Jozef Kollar, a lawmaker for the governing Freedom and Solidarity party told TV Markiza yesterday. Italy will auction as much as 9 billion euros ($12.2 billion) of bonds today.
Futures on the S&P 500 reversed an earlier drop of 0.7 percent. The gauge yesterday sank 2.1 percent, the first decline in four days. Advanced Micro Devices Inc. (AMD) fell in extended trading after the second-largest maker of processors for personal computers cut its forecasts for third-quarter sales and profits.
Treasuries headed for their biggest quarterly gain since the end of 2008 before an industry report today that economists said will show U.S. pending home sales fell for a second month. Ten-year yields were little changed at 1.98 percent.
Asian Stocks
About five shares gained for every two that fell on MSCI’s Asia Pacific Index, which rallied 4.4 in the past two days. The gauge has dropped 15 percent this quarter, on course for its largest quarterly loss since the three months ended December 2008. Japan’s Nikkei 225 Stock Average rose 1 percent, South Korea’s Kospi Index jumped 2.7 percent and Australia’s S&P/ASX 200 Index declined 0.8 percent.
Hong Kong shut financial markets after the city raised its highest storm signal this year. The Hong Kong Observatory said the No. 8 gale signal will remain for most of the day, according to its latest statement on its website.
“The market is priced for some kind of Lehman-like event,” Brian Barish, the Denver-based president of Cambiar Investors LLC, which oversees about $8 billion, said in a Bloomberg Television interview. “If for some reason, Greece goes into an uncontrolled default and it spreads to Italy, which is a $3 trillion bond market, I don’t know how you’re going to put Humpty Dumpty back together again in terms of the world economy.”
Metal Prices
A measure of mining companies on the MSCI regional index dropped 0.7 percent, the most among 10 industry groups. Rio Tinto Group declined 2.5 percent in Sydney and Korea Zinc Co. sank 2.8 percent in Seoul.
Three-month copper sank 2.3 percent to $7,081.75 a metric ton on the London Metal Exchange. A close at that level will be the lowest since July 2010. Zinc fell 1.9 percent and aluminum declined 0.8 percent. The S&P’s GSCI Index of 24 raw materials rose 0.2 percent, after yesterday dropping 2.7 percent. The gauge has declined 9.5 percent since June, headed for its largest quarterly loss since the final three months of 2008.
China’s stocks fell, sending the benchmark Shanghai Composite Index down 1.1 percent to a 14-month low. Fifty-nine percent of respondents to a quarterly Bloomberg Global Poll of investors, analysts and traders said China’s gross domestic product, which rose 9.5 percent last quarter, will gain less than 5 percent annually by 2016. Twelve percent see such a slowdown within a year, and 47 percent said it will occur in two to five years.
Bond Risk
The cost of insuring China’s debt against default jumped 14 basis points to 179.5 basis points, according to Royal Bank of Scotland Group Plc prices. That’s set for the highest close since March 20, 2009, according to data provider CMA.
The Markit iTraxx Australia index jumped 11 basis points to 219 basis points, Westpac Banking Corp. prices show, and the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 13 basis points to 239, according to Royal Bank of Scotland Group Plc prices. Both gauges are on track for the highest level in at least a year, according to CMA.
The South Korean won slid 0.3 percent to 1,173.70 per dollar after the Bank of Korea said the current-account surplus narrowed to $401.3 million in August from a revised $3.77 billion in July. The Taiwan dollar weakened 0.1 percent to NT$30.449. The island’s central bank may keep interest rates unchanged at a policy meeting today, according to 14 of 17 economists surveyed by Bloomberg. The ringgit dropped 1 percent to 3.1875.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
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