By Rita Nazareth - Nov 7, 2011 11:09 PM GMT+0700
Nov. 7 (Bloomberg) -- Binay Chandgothia, a Hong Kong-based fund manager at Principal Global Investors, talks about global financial markets and his investment strategy. Chandgothia also discusses the Group of 20 summit and Europe's sovereign debt crisis. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Nov. 7 (Bloomberg) -- Andrew Freris, senior investment strategist for Asia at BNP Paribas Wealth Management, talks about the outlook for Greek politics and the nation's debt problems, and his investment strategy. Freris speaks in Hong Kong with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
U.S. stocks retreated, following the first weekly decline in the Standard & Poor’s 500 Index since September, as investors weighed prospects for political changes in Europe’s most-indebted countries.
Bank of America Corp. (BAC), Caterpillar Inc. (CAT) and Alcoa Inc. (AA) fell at least 1.4 percent, for the biggest losses in the Dow Jones Industrial Average. Jefferies Group Inc. (JEF), the investment bank that has battled investor concern that it will be hurt by Europe’s debt crisis, increased 1.7 percent after releasing details of its positions in sovereign bonds. Amgen Inc. (AMGN) rose 4.7 percent on plans to buy back as much as $5 billion in shares.
The S&P 500 declined 0.3 percent to 1,249.92 as of 11:08 a.m. New York time. The benchmark gauge slumped 2.5 percent last week. The Dow fell 25.77 points, or 0.2 percent, to 11,957.47.
“The market appears to be in no man’s land and at the mercy of Europe’s news flow,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $44 billion, said in a telephone interview. “The Europeans are doing some heavy lifting. They are going through the sausage-making process of crafting a solution. They just need to go from point A to point B. That’s challenging. It’s one of those days when you just have to put on your neck brace.”
Italian 10-year borrowing costs surged to a euro-era record as the focus shifted from Greece after Prime Minister George Papandreou agreed to step down to create a new unity government. Investors are betting Prime Minister Silvio Berlusconi may be forced to resign if he fails to win majority support in tomorrow’s vote on the 2010 budget report.
Failed to Agree
Global stocks slumped on Oct. 31 and Nov. 1 as Papandreou announced his desire to hold a referendum on a European Union bailout, spurring concern the deal would unravel. After rallying two straight days, the S&P 500 dropped on Nov. 4 as the Group of 20 nations failed to agree on increasing the International Monetary Fund’s resources to fight Europe’s debt crisis.
Some of the biggest companies retreated. Bank of America lost 1.7 percent to $6.38. Caterpillar sank 1.4 percent to $94.44. Alcoa slid 1.5 percent to $10.77.
Jefferies rose 1.7 percent to $12.27. The New York-based firm released a document summarizing its exposure to the debt of Italy, Spain, Ireland, Portugal and Greece. It also published a list of sovereign and government-guaranteed bonds from the five indebted nations in which Jefferies International Ltd. holds a position greater than half a million euros.
Financial shares tumbled the most in the S&P 500 last week, losing 5.4 percent, on concern about potential losses from Europe and as MF Global Holdings Ltd. filed for bankruptcy protection after making bets on European sovereign debt.
Reducing Margin
CME Group Inc. (CME) is reducing the initial margin required to back futures trades to ease the bulk transfer of accounts held by MF Global customers. The holding company for the broker- dealer run by former Goldman Sachs Group Inc. Co-Chairman Jon Corzine filed for bankruptcy protection on Oct. 31.
“The decision to roll back margin requirements is a positive,” Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said in an e-mail. “Otherwise there would have been a tremendous amount of margin calls, which could have caused a good amount of selling in other markets to pay for the margin calls.”
Amgen rallied 4.7 percent to $57.77. The world’s largest biotechnology company plans to repurchase as much as $5 billion in common stock for $54-$60 per share.
S&P 500 companies are poised to report the biggest annual sales increase on record even as analysts reduce their estimate for growth in 2012. Revenue in the benchmark gauge of American common equity will rise 11 percent to $1,052.42 a share in 2011, according to more than 10,000 forecasts compiled by Bloomberg.
Estimates Cut
Projections for next year have been cut 1 percent in the past month after 43 percent of S&P 500 companies from 3M Co. to Amazon.com Inc. missed third-quarter forecasts, the most since 2009, data show.
Bulls say record gains in sales mean the economy is doing well enough for equities to rally after price-earnings ratios fell 20 percent below the six-decade average. To bears, the deceleration in growth shows the European debt crisis is curbing the economy and that stocks will resume declines after the S&P 500 posted its biggest monthly rally since 1991.
“Everybody thinks the world’s coming to an end, but corporate America is doing great and it’s a function of good sales,” Eric Green, a Philadelphia-based fund manager at Penn Capital Management, which oversees about $6 billion, said in a telephone interview on Nov. 3. “It’s not unusual that you get these short-term slowdowns during panicky markets. The sales estimates coming down is a good thing because it allows to companies to meet or beat more easily.”
To contact the reporter on this story: {Rita Nazareth} in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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