October 31, 2011: Some News That Matters

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Ft.com
Japan’s Ministry of Finance intervened in the currency market for the first time since August to weaken the yen, sending the currency down as much as 5.1 per cent against the US dollar, the FT reports. Jun Azumi, http://ftalphaville.ft.com/thecut/2011/10/31/715896/japan-intervention-pushes-yen-lower/MF Global spent the weekend desperately trying to sell itself as the broker moved to secure a deal before the US open, and talks were continuing late on Sunday in New York.

After a hectic weekend of board meetings and courting potential buyers, the talks have apparently narrowed to one bidder, http://ftalphaville.ft.com/thecut/2011/10/31/715951/mf-global-in-talks-with-interactive-brokers/

Qantas began resuming flights on Monday afternoon, after a labour relations tribunal ordered a stop to industrial action at the Australian flag-carrier. The FT reports Qantas shares rallied in response and were up 6.8 per cent by midday in Sydney on Monday. Alan Joyce, http://ftalphaville.ft.com/thecut/2011/10/31/715871/qantas-resumes-flights-after-ruling/

Wolfgang Schäuble, Germany’s finance minister, wants the European Union to take the global lead in introducing a financial transaction tax to curb speculative trading, along with tougher regulation of big banks and the “shadow” banking sector, http://ftalphaville.ft.com/thecut/2011/10/31/715716/schauble-says-eu-should-lead-on-tobin-tax/

Martin Coward, the multimillionaire co-founder of the hedge fund Ikos, is preparing to launch his own new fund, in a move likely to aggravate further tensions between him and his estranged wife, Elena Ambrosiadou. The fund will launch next year, http://ftalphaville.ft.com/thecut/2011/10/31/715886/ikos-co-founder-to-launch-rival-hedge-fund/

The European Central Bank enters uncharted waters this week when Mario Draghi takes the helm and has his first chance to signal possible strategy changes that could be vital for the eurozone’s future. The Italian central bank governor has so far kept a low profile to avoid undermining Jean-Claude Trichet, departing ECB president, at a critical moment for Europe’s 13-year old monetary union. But from Tuesday, when Mr Trichet’s non-renewable eight-year mandate expires, Mr Draghi will have to make clear his plans on issues stretching way beyond the traditional central bank function of setting interest rates. http://www.ft.com/intl/cms/s/0/4b1f7708-ffb1-11e0-89ce-00144feabdc0.html#axzz1cKpSLAnz

The man spearheading China’s invasion of Brazil’s car market could hardly be more Brazilian. Sérgio Habib, a marketing wizard from São Paulo, has turned JAC Motors, a Chinese car brand hitherto little-known in Brazil, into a household name in a matter of months. The inroads made by JAC and other Chinese carmakers into Latin America’s largest economy are revolutionising the country’s fast-growing car market, which last year overtook Germany as the world’s fourth-largest and is set to exceed Japan as the third-biggest after China and the US by 2015. http://www.ft.com/intl/cms/s/0/140e1818-ffc1-11e0-8441-00144feabdc0.html#axzz1cKpSLAnz

Wsj.com
Asian stock markets were lower on Monday, with shares in Tokyo choppy as the yen tumbled after Japanese authorities intervened to cap the strong currency.  Australia’s S&P/ASX 200 fell 0.8%, South Korea’s Kospi Composite lost 0.9%, Hong Kong’s Hang Seng Index declined 1.1%, and China’s Shanghai Composite Index was 0.5% lower. Japan’s Nikkei Stock Average was choppy on confirmation of the yen-selling intervention, and was recently down 0.2% after climbing as much as 0.8%. Dow Jones Industrial Average futures were down 51 points in screen trade. http://online.wsj.com/article/SB10001424052970204394804577008733785052346.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Despite all the cheering about Europe’s latest debt deal, worries are mounting that it won’t succeed without stronger economic growth. At the current pace of expansion, unemployment will stay high and incomes will stall. Debt-saddled governments will have an even tougher time generating revenue to pay bills. That could spark more default fears or higher interest rates in Greece, Italy and others under pressure. Projections for global growth have been falling. The forecasting firm IHS Global Insight now expects the world economy to expand just 3% this year and next, down from 4.2% in 2010. The U.S. is forecast to grow just 1.4% next year, a pace that could push the 9.1% jobless rate higher. The 17-nation euro zone, meanwhile, will flirt with recession in 2012 with projected growth slightly above zero. http://online.wsj.com/article/SB10001424052970204394804577007714099089038.html?mod=WSJEurope_hpp_LEFTTopStories

Irish Prime Minister Enda Kenny dismissed suggestions that Ireland’s favourable tax rate is the only thing that attracts global corporations to the country, and said his government has made technology a key part of the bailed-out nation’s efforts to restore long-term growth. http://online.wsj.com/article/SB10001424052970204394804577007251749828464.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

A senior official from the Japanese finance ministry said Monday that the country will buy more bonds from the European Financial Stability Facility, but may not maintain the same purchasing rate. “I told (EFSF Chief Executive Klaus Regling) that we will continue to purchase EFSF bonds,” the official said, after Mr. Regling met with senior officials at the ministry earlier Monday. When asked whether Japan might buy more than 20% of future EFSF bond issues—the portion of past issues it has purchased—the official said “that could be difficult.” http://online.wsj.com/article/SB10001424052970204528204577008772637733162.html?mod=WSJAsia_hpp_LEFTTopStories

South Korean President Lee Myung-bak said he wouldn’t flinch from his tough approach toward North Korea for the sake of political gain as he heads into his final year in office. Speaking in an extensive interview with The Wall Street Journal, the 69-year-old former Hyundai executive-turned-politician said Seoul would maintain its principle of offering Pyongyang a route to peaceful co-development if the North drops its nuclear program.http://online.wsj.com/article/SB10001424052970203707504577007560549498688.html?mod=WSJASIA_hpp_LEFTTopWhatNews

Both the dollar and euro are vulnerable to monetary policy decisions this week, although the Federal Reserve poses a bigger risk to the greenback than the European Central Bank does to the common currency. A blitz of data and policy meetings await investors, including reads on global manufacturing and the all-important U.S. payrolls figure. And summit fatigue notwithstanding, the Group of 20 developed and developing nations will meet in France to discuss the global economy and address the plan that euro-zone leaders unveiled last week to solve their region’s sovereign-debt crisis. http://online.wsj.com/article/SB10001424052970204505304577004202084865574.html?mod=WSJASIA_hpp_LEFTTopWhatNews

Marketwatch.com
A major phase of China’s long-anticipated leadership turnover kicked off Saturday, with the appointment of three new chairmen at China’s financial regulatory agencies.  Under the new leadership, these State Council agencies are faced with growing investor concerns over the banks’ exposures to manufacturing losses, China’s real-estate bubble and local-government debt, as well as a shadow-banking system that recently drew heavy scrutiny after hundreds of chief executives in Wenzhou went into hiding to escape repaying their loans. http://www.marketwatch.com/story/meet-chinas-new-financial-regulators-2011-10-30

In the wake of last week’s new deal on European debt, China is serving up a steely reminder to Europe: you may have to start borrowing in renminbi to gain a sympathetic hearing from the world’s largest creditor. Already officially enshrined by U.S. Secretary of State Hillary Clinton as bankers to the world’s biggest debtor the Americans, the Chinese have no wish to become, too, a last-ditch lender to the Europeans. The idea of renminbi borrowing has been put forward by Beijing advisers and officials as a way of lowering Chinese foreign-exchange risks caused by further exposure to Europe — and also of using the Europeans’ latest discomfiture to advance China’s international monetary-policy agenda. http://www.marketwatch.com/story/china-advocates-europe-borrow-in-renminbi-2011-10-31

Iron-ore spot prices have come under pressure lately, and a steep, sustained downturn in prices for the industrial resource could have notable implications for the Australian economy. Since August, commodity prices in general have been weighed by concerns about ongoing strength of demand in an environment of slowing global economic growth, with exchange-traded base metals, such as copper, seeing sharp volatility. http://www.marketwatch.com/story/iron-ore-price-drop-may-hit-australia-hard-2011-10-30

Reuters.com
Gold prices dropped about 2 per cent on Monday, after Japan’s intervention in the currency market triggered a rapid rally in the dollar, spooking precious metals investors. The most-active U.S. gold futures contract dropped as much as 2.3 per cent to $1,707.7 an ounce, and recovered slightly to $1,713.80 by 0254 GMT. It was headed for a monthly rise of 5.6 per cent. Spot gold fell nearly 2 per cent to $1,705.89 earlier and regained some lost ground to $1,711.79, but was still on course for a monthly rise of more than 5 per cent after suffering a nearly 11 per cent decline in September. http://www.reuters.com/article/2011/10/31/us-markets-precious-idUSTRE78M11C20111031

Oil prices fell on Monday, weighed down by a stronger dollar and weaker demand, with investors eyeing a Group of 20 meeting later this week which will focus on the European debt crisis. The U.S. dollar climbed to a three-month high against the yen on Monday after Japan intervened in currency markets to stem the yen’s rise. The U.S. dollar index .DXY climbed around 1.5 per cent against a basket of currencies. Brent crude fell 97 cents to $108.94 a barrel by 0435 GMT (12:35 a.m. EDT) after closing at 109.91 on Friday. U.S. crude fell 90 cents to $92.42 per barrel. http://www.reuters.com/article/2011/10/31/us-markets-oil-idUSTRE7922QH20111031

The dollar stayed glued near 79.20 yen for over an hour on Monday due to a large bid at that level following intervention, spurring market talk Japan may be trying to set a Swiss-style floor for the dollar/yen. The dollar surged more than 4 per cent to above 79 yen as Japanese authorities intervened to buy dollars. The dollar had fallen earlier to a post-World War Two record low of 75.311 yen. The dollar hit an intraday high near 79.55 yen and saw some choppy trading from there before stabilizing at 79.20 yen, from around 0245 GMT or so. http://www.reuters.com/article/2011/10/31/us-markets-forex-idUSTRE74U02L20111031

The nondescript stretch of asphalt is an unlikely symbol of Brazil’s attempt to lift its economy into a new high-tech era. If officials in the industrial town of Jundiai get their way, it will soon be named Steve Jobs road — in homage to the late Apple Inc co-founder and a nod to the expected windfall that producing iPads and iPhones here will bring. Brazil’s government has loudly proclaimed a deal it says is worth $12 billion for Taiwanese technology giant Foxconn to produce iPads and build a whole new industry based around screens used in an array of consumer electronics from smartphones to televisions. http://www.reuters.com/article/2011/10/30/us-foxconn-brazil-idUSTRE79T17C20111030

Bloomberg.com
Italian Prime Minister Silvio Berlusconi said he alone can deliver the country’s promised deficit cuts as European leaders ramp up demands that his government do its part to combat the region’s debt crisis. Berlusconi ruled out early elections and said the current legislature in Rome will last until 2013, according to an interview published yesterday in Corriere della Sera. He said the European Central Bank’s support will only be maintained if his administration follows through on the pledged measures. http://www.bloomberg.com/news/2011-10-30/berlusconi-defiant-as-europe-s-focus-shifts-to-reforms-in-italy.html

French President Nicolas Sarkozy came under fire from opposition leaders for seeking China’s help to resolve the euro area’s debt crisis. “It’s shocking,” Martine Aubry, the general secretary of the Socialist Party, said in the Sunday newspaper, Journal du Dimanche. “The Europeans, by turning to the Chinese, are showing their weakness. How will Europe be able to ask China to stop undervaluing its currency or to accept reciprocal commercial accords?” http://www.bloomberg.com/news/2011-10-26/euro-rescue-fund-chief-goes-to-china-as-europe-seeks-investors.html

U.S. stock futures fell, following a fourth straight weekly advance that left the Standard & Poor’s 500 Index poised for the biggest monthly rally since 1974. Futures on the S&P 500 expiring in December fell 0.5 per cent to 1,274.70 at 9:15 a.m. Tokyo time. The benchmark measure for U.S. stocks advanced 3.8 per cent last week and has climbed 14 per cent this month. http://www.bloomberg.com/news/2011-10-30/u-s-stock-futures-drop-as-s-p-500-index-heads-for-best-month-since-1974.html

Singapore‘s unemployment rate unexpectedly fell last quarter after companies in the services and construction industries increased hiring. The seasonally adjusted unemployment rate eased to 2 per cent in the three months through September from 2.1 per cent the previous quarter, the Ministry of Manpower said in a statement today. That’s better than the median estimate of eight economists surveyed by Bloomberg News for a rate of 2.3 per cent. The economy added an estimated 32,300 jobs last quarter, compared with 24,800 in the previous period. http://www.bloomberg.com/news/2011-10-31/singapore-jobless-rate-falls-unexpectedly.html

Cnbc.com
Eurogroup chairman Jean-Claude Juncker said on Sunday it made sense for China to invest its surplus in Europe to help the region overcome its debt crisis, but this would not involve political concessions. European leaders agreed a plan last week to restore financial market confidence and end a two-year crisis started by Greece, with a contribution from Beijing if possible. However, the appeal for Chinese help has come under fierce criticism for potentially weakening Europe’s negotiating position in political and economic disputes with Beijing. http://www.cnbc.com/id/45097498

Europe should not expect China to ride to the rescue as its “saviour ” from the debt crisis, though Beijing will do what it can to help a friend in need, state-run news agency Xinhua said in a commentary on Sunday. The head of Europe’s rescue fund sought to entice China on Saturday to invest in the facility by saying investors may be protected against a fifth of initial losses and that bonds could eventually be sold in yuan if Beijing desires. Though China has expressed confidence that Europe can survive its crisis, it has made no public offer to buy more European government debt. http://www.cnbc.com/id/45093944

Foxbusiness.com
A monthly gauge of Australian inflation rose 0.1% in October, according to a survey out Monday. The TD Securities – Melbourne Institute gauge showed that inflation rose 2.6% on an annual basis.http://www.foxbusiness.com/markets/2011/10/30/australian-inflation-up-01-in-october-survey/#ixzz1cKwgG5ZX

USAtoday.com
Yet another study shows how the richest 1% of Americans have been getting far richer over the last three decades while the middle class and poor have seen their after-tax household income only inch up by comparison. This report is from the non-partisan Congressional Budget Office. Average after-tax income for the top 1% of U.S. households almost quadrupled, up 275%, from 1979 to 2007, the CBO found. For people in the middle of the economic scale, after-tax income grew by just 40%. Those at the bottom experienced an 18% increase. http://www.usatoday.com/money/economy/story/2011-10-27/income-gap/50952720/1

Washingtonpost.com
Azumi pledged to keep selling the yen in the aftermath of today’s unilateral intervention in the foreign-exchange market, Japan’s first since August, as the currency climbed to a postwar high against the dollar. The yen and the Swiss franc have soared to records this year as investors sought safe heavens from Europe’s fiscal debt woes. “There was growing frustration among exporters” amid a strengthening exchange rate and flooding in Thailand that has impaired production, said Martin Schulz, a senior research fellow at Fujitsu Research Institute in Tokyo, who used to do research for the Bank of Japan. “The government wanted to show that they get the message and are giving exporters a chance to buy back their losses.” http://washpost.bloomberg.com/story?docId=1376-LTWQBP6TTDS601-0C3BCB2MT0F6R2V3VON8VPV4VB

BBC.co.uk
Outgoing president of the European Central Bank (ECB) Jean-Claude Trichet has warned the eurozone debt crisis is “not over”. He urged leaders to implement measures agreed at last week’s eurozone summit as quickly as possible in an interview with German newspaper Bild am Sonntag. He added that inflation in the region was likely to be “very low” for the next 10 years. http://www.bbc.co.uk/news/business-15512876

Italy’s cost of borrowing has reached a record high, despite the deal reached to contain the eurozone debt crisis. Italy paid 6.06% to borrow for 10 years at an auction on Friday, the most since the euro was created in 1999. The rate jumped from 5.86% – the previous record high – at its last auction a month ago. The auction came as stock markets failed to follow up on their global rally on Thursday, with shares in many European banks turning lower. http://www.bbc.co.uk/news/business-15490890

Telegraph.co.uk
China has stressed it will not be a “saviour” to Europe as President Hu Jintao embarks on an official visit to the continent that will take in this Thursday’s crucial G20 summit in Cannes.  The warning came as European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy urged G20 leaders to use the meeting of major economies to address Europe’s debt crisis, saying measures proposed last week were not enough by themselves. http://www.telegraph.co.uk/finance/financialcrisis/8858816/China-warns-it-cannot-cure-eurozones-debt-crisis.html

The multi-billion pound public sector pension deficit should be plugged by the creation of a sovereign wealth fund that would back a radical programme of infrastructure investment, pensions expert Edward Truell has said.  Whitehall officials are assessing the merits of the proposal as the Government seeks new ways to stimulate economic growth. David Cameron is expected to say today the Government has signed off a series of infrastructure projects, including two new gas and biomass power stations in Yorkshire. http://www.telegraph.co.uk/finance/financialcrisis/8858775/Plan-to-ease-1.3-trillion-UK-pension-deficit.html

Guardian.co.uk
The Treasury select committee is on a collision course with the Bank of England over its refusal to disclose information detailing how it handled the financial crisis. Andrew Tyrie, the Conservative MP who chairs the committee, has sent a warning shot to the Bank’s court – akin to the board of a company – that MPs intend to call for changes in the way the central bank accounts for its actions. http://www.guardian.co.uk/business/2011/oct/31/bank-of-england-accountability-financial-crisis

Smh.com.au
Capital city home prices fell for the ninth straight month in September, with Sydney posting the deepest fall.  Home prices fell 0.2 per cent in September after falling a 0.4 per cent in August, according to property research group RP Data-Rismark. The median house price in the month was $450,000. Home prices sank 0.6 per cent in Sydney and 0.3 per cent in Melbourne, seasonally adjusted. Canberra home prices dropped 0.5 per cent in September. “This represents a reversal of sorts given Sydney and Canberra have had the shallowest peak-to-trough falls of all the cities,” said RP Data research director, Tim Lawless. Read more: http://www.smh.com.au/business/home-prices-continue-to-slide-20111031-1mr93.html#ixzz1cL09TGz1

A private gauge of consumer inflation rose only marginally in October as a further sharp fall in the cost of fruit and vegetables helped offset higher petrol prices, adding to the case for a cut in interest rates tomorrow. The TD Securities-Melbourne Institute measure of consumer prices edged up 0.1 per cent in October, following a similar increase the month before. The annual pace slowed to 2.6 per cent, from 2.8 per cent, well within the Reserve Bank of Australia’s (RBA) long-term target of 2 to 3 per cent. http://www.smh.com.au/business/one-more-reason-for-a-rate-cut-20111031-1mr3c.html#ixzz1cL0Fb3g9

Xinhuanet.com
Brazil will become the world’s sixth largest economy in 2011 due to the global financial crisis that has affected the main economic powers including Britain, the International Monetary Fund (IMF) and several other organisations said Sunday. According to the data, which was quoted by local newspapers, Brazil’s gross domestic product (GDP) in 2011 will surpass Britain’s, reaching 2.44 trillion U.S. dollars against Britain’s 2.41 trillion and making Brazil the world’s sixth largest economy. http://news.xinhuanet.com/english2010/business/2011-10/31/c_131221723.htm

South Korea’s business sentiment remained weak in October as local firms were still worried about global economic uncertainties amid fragile domestic demand, the central bank said Monday. The monthly business survey index (BSI), which gauges local manufacturers’ assessment of current business conditions, edged up one point on-month to reach 82 in October, according to the Bank of Korea (BOK). A reading below 100 means pessimists outnumber optimists.http://news.xinhuanet.com/english2010/business/2011-10/31/c_131220742.htm

European Union (EU) leaders called for a “renewed collective G20 spirit” while highlighting the bloc’s objectives late Saturday for the upcoming summit of world’s major economies. To solve the European debt crisis, “there is a continued need for joint action by all G20 partners in a spirit of common responsibility and common purpose,” said European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy ahead of the summit in Cannes, France, on Nov.3-4. http://news.xinhuanet.com/english2010/business/2011-10/30/c_131220576.htm

Cs.com.cn
China will make proper fine-tuning on its macro policy, keeping it “more targeted, flexible and forward-looking,” and continue measures to control consumer prices, China’s State Council, or Cabinet, said Saturday. The government should maintain control of the intensity, pace and focus of economic regulation and grasp the changes in economic development trend, according to a statement released after a State Council executive meeting chaired by Premier Wen Jiabao. China’s economy has maintained a stable and rapid development this year, with domestic and external demand more balanced and inflation initially under control, it said. http://www.cs.com.cn/english/ei/201110/t20111031_3107587.html
Thehindu.com
India on Saturday said it is willing to play a “supporting” role in any multi-lateral effort to help Eurozone tide over its debt crisis after European leaders sealed a deal crucial to world economy to fix the lingering problem. Planning Commission Deputy Chairman Montek Singh Ahluwalia welcomed as positive the “important” deal clinched by European leaders at their summit early this week shoring up the 17-nation Eurozone’s bailout fund, pledging new funds for Greece and pushing banks to share the pain to combat the sovereign-debt crisis. “We are willing to do our bit whatever supporting role which the international institutions would need to support the Eurozone… We would support multi-lateral efforts,” Dr. Ahluwalia said replying to questions from media. http://www.thehindu.com/business/Economy/article2580066.ece

Economictimes.com
India and European Union are at an “intense” stage of negotiations for reaching the much-delayed free trade agreement, hoping that a deal can be struck before their annual summit in February.  “Intense efforts are underway. Both the sides are determined to conclude the negotiations, preferably before India-EU Summit in February here,” Commerce Secretary Rahul Khullar told media. Having held several rounds of talks, the two sides are likely to finalise their positions on opening of trade in services in November, sources said. http://economictimes.indiatimes.com/news/economy/foreign-trade/india-eu-free-trade-pact-likely-by-february/articleshow/10539080.cms

Yonhapnews.co.kr
South Korea’s industrial output continued to grow in September from a year earlier, despite persistent uncertainties in the global economy, a government report showed Monday.
According to the report by Statistics Korea, production in the mining and manufacturing industries expanded 6.8 per cent last month from a year earlier. The September figure represents the 27th consecutive on-year expansion since July 2009. The report also showed production gaining 1.1 per cent compared to the previous month, marking the first rebound following two months of contraction. In August, industrial output grew 4.7 per cent on-year but contracted 1.9 per cent from July. http://english.yonhapnews.co.kr/business/2011/10/31/50/0502000000AEN20111031005000320F.HTML

Tehrantimes.com
Iran exported over $24 billion worth of non-oil goods, including gas condensates, in the first seven months of the current Iranian calendar year (began on March 21, 2011), up by 35.5 per cent compared to the same period last year, the Customs Administrations data shows.  The Mehr news agency reported on Sunday that the on-oil exports, excluding gas condensates, surged 23.6 per cent in the mentioned period compared with the year before, reaching 18.4 billion dollars from $14.8 billion. http://www.tehrantimes.com/index.php/economy-and-business/4080-irans-non-oil-exports-up-355-hit-24b

Khaleejtimes.com
Current OPEC president Iran does not envisage holding an emergency meeting of the oil producers’ group ahead of a scheduled one in December, Iran’s OPEC Governor Mohammad Ali Khatibi was quoted as saying by the student news agency ISNA on Sunday.  “I find it improbable to have an OPEC emergency meeting because there is no emergency matter and the market is balanced,” he was quoted as saying.  “Libya is getting back to the oil market and it is predicted that by next year its production will return to normal,” Khatibi said. http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/internationalbusiness/2011/October/internationalbusiness_October50.xml&section=internationalbusiness

Thetrader.se
Last week Europe Circus was like reading press releases from Pink Sheet Gold Exploration companies. “We (think we) have found Gold. We are confident we will explore it and dig it to the surface. We have no machines (yet), but we will get them soon. There is quite some Gold, but we are not sure how much yet. It looks like good quality, but we are not sure. The best is that we have a buyer in China, you know, they buy all the Gold in the World. We haven’t asked them about it yet, but we will call them first thing in the morning and offer them Gold, we don’t have, yet”. And the Euro Bail Out explanation for Dummies. http://www.thetrader.se/2011/10/30/euro-bail-out-for-dummies/

This post originally appeared at The Trader.

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