Encouraged by the Fed's positive comments, stocks rise sharply - The Christian Science Monitor Encouraged by the Fed's positive comments, stocks rise sharply - The Christian Science Monitor

Wednesday, June 13, 2012

Encouraged by the Fed's positive comments, stocks rise sharply - The Christian Science Monitor

Encouraged by the Fed's positive comments, stocks rise sharply - The Christian Science Monitor

Stocks staged one of their strongest rallies of the year Tuesday, erasing a big decline from the day before, after a Federal Reserve official said he supported more measures to stimulate the economy.

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The Dow Jones industrial average shot up 162 points, and every major category of stock in the U.S. market closed higher.

Charles Evans, president of the Fed's Chicago bank, told Bloomberg News that he supported action to produce faster job growth, including having the Fed commit to super-low interest rates until unemployment falls significantly.

Last week, Fed Chairman Ben Bernanke told a committee of Congress that he was ready to act if the economy needs it, but he laid out no immediate steps.

Investors have been worried about an escalating crisis in Europe over government debt and the health of banks, and job growth in the United States has been slower over the past three months than it was earlier in the year.

"If there's really bad news, it creates a heightened sense of anticipation that the Fed is going to ride to the rescue," said Jeff Lancaster, a prinicpal at the wealth advisory firm Bingham, Osborn & Scarborough in San Francisco.

"It's almost like you've crashed your car and you've got a $500 deductible, and you take the car to the body shop and you just have this perverse desire for the damage to be well over $500," he said.

Rob Lutts, president and chief investment officer of Cabot Money Management, said investors were looking for an excuse to buy.

"The question for Bernanke is should he add more medicine when he's already doped up the patient enough already," he said.

Materials companies, industrial companies and banks rose the most, but each of the 10 major categories of stock in the Standard & Poor's 500 climbed. Energy stocks also had an impressive day after the price of oil rose from an eight-month low.

Over the weekend, European countries committed to lend Spain up to $125 billion to save its failing banks. But on Monday, the Dow fell 142 points. Investors fretted that they did not know enough about the details.

The big rally in U.S. stocks on Tuesday came despite more discouraging signs from Europe. Spain's borrowing costs jumped for a second day, to the highest level since Spain adopted the euro currency.

The interest rate, or yield, on Spain's 10-year bond rose 0.20 percentage point to 6.67 percent. It rose as high as 6.81 percent earlier in the day. At 7 percent, economists say, countries generally can no longer finance their own debt.

The rescue loan will be funneled through the government of Spain, and investors are also worried about whether Spain will have to repay that loan before it pays its other debt.

That makes bondholders less willing to buy Spain's debt, and makes them demand a higher interest rate to compensate for the added risk that they will not be paid back first if Spain is unable to pay all its debt.

"The market needs some confidence and foreign buyers won't buy Spanish debt if they won't get paid first," said William O'Donnell, head of U.S. Treasury strategy at Royal Bank of Scotland.

Borrowing costs for Italy, which analysts fear will be the next European country to seek some kind of rescue, rose even more. They jumped 0.47 percentage point to 6.02 percent.

Investors are also nervous ahead of an election in Greece this weekend that may determine whether that country cuts itself free from the euro.

Stocks slipped early in Madrid, then turned positive and were up 0.1 percent after U.S. markets opened. France's CAC-40 rose 0.1 percent, and Germany's DAX gained 0.3 percent.

In the U.S., the Dow rose 162.57 points, or 1.3 percent, to close at 12,573.80. The Standard & Poor's 500 index gained 15.25 points to 1,324.18, and the Nasdaq composite rose 33.34 to 2,843.07. Trading was light for a second day.

Investors sold U.S. government debt, an indication that they were willing to move money into riskier assets. The yield on the benchmark 10-year U.S. Treasury note climbed 0.08 percentage point to 1.67 percent.

Michael Kors Holdings, a high-end clothing company, rose $2.06, or 5 percent, to $40.24 after reporting that its fourth-quarter profit more than tripled on strong demand grew for its luxury clothing and accessories.

The company also boosted its earnings forecast for the quarter and the year. Luxury spending has recovered from the recession faster than other consumer spending. Stocks of other upscale retailers, like Nordstrom, also rose.

Among other stocks making big moves:

VeriFone Systems, an electronic payments company, fell $2.02, or 6 percent, to $31.92. A jury ruled against it last week in a patent dispute, and VeriFone said late Monday that it was booking $18 million in expenses.

A123 Systems, which makes batteries for electric cars, jumped 54 cents, or 52 percent, to $1.58 after saying it had developed new lithium ion technology capable of operating in extreme heat or cold. Heat generated by powerful next-generation batteries is one of the biggest hurdles in developing cars that do not use fossil fuels.

Textron, which makes planes, rose 94 cents, or 4 percent, to $24.52, one of the biggest gains in the S&P 500. Business jet operator NetJets said it plans to spend up to $9.6 billion on planes from Textron's Cessna unit and from Bombardier.

— First Solar, the world's largest maker of a type of solar panel, rose $2.62, or 21.2 percent, to $14.95. It reported strong demand from Europe and will delay the closing of a German plant.



Stocks steady as eurozone woes linger - Financial Times

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Down-Under Greeks Send Money as Crisis Stirs Homeland Ties - Businessweek

Half a century after leaving Greece and more than 12,000 kilometers (7,500 miles) from Athens, Paul Afkos says there’s no escaping the calling of his motherland.

With Greek unemployment four times higher than in his adopted Australia, the 59-year-old head of Afkos Industries, a maker of mining components based near Perth, has plowed A$18 million ($17.9 million) into a 109-bed hotel in northern Greece that opened in April.

“I see it as a duty,” Afkos says, after bringing forward by eight months the opening of the Afkos Grammos Hotel Resort in Kastoria. “I can’t be seen as a hypocrite, not helping my fellow Greeks. I wanted to open early to provide some assistance to these people who are in need of a job.”

Australia’s Greek population has grown from seven pirates dispatched by Britain in 1829 to a diaspora of about half a million, making Melbourne the third-largest Greek city behind Athens and Thessaloniki. Armed with patriotism and the best- performing currency against the euro since late-2008, Australia’s Greeks are deploying wealth amassed in the fastest growing major developed economy to a nation that’s needed 240 billion euros ($300 billion) in bailouts. Greece votes June 17 in an election set to decide its future in the euro zone.

John Tripidakis, a Greek lawyer with an Athens practice who splits his time between Sydney and Melbourne, said half his clients are interested in buying property in Greece, up from less than 10 percent two years ago.

“They are looking for a bargain,” he said in an interview from Sydney. “Yet they are still connected to the sentimental criteria of buying something near the village of their father or grandfather.”

Prices Plunge

Beachfront summerhouses or suburban bargains in Athens are among the most-desired properties, said Tripidakis, a lawyer for 30 years who was born in the Greek capital.

Apartment prices in Greece fell 3.7 percent in 2009, 4.7 percent the following year and 5.1 percent in 2011, and house values have declined even further, the central bank said in April. The real-estate market is “without any signs of recovery,” the bank said.

“What better time than the present to buy?” Tripidakis said. “Cash is king.”

The Australian dollar has surged 66 percent against the euro since October 2008 as Lehman Brothers Holdings Inc.’s failure drove up credit costs, slowed global growth, and exposed the stretched finances of European nations such as Ireland and Greece. Spain last week asked euro-region governments for as much as 100 billion euros to rescue the country’s banking system.

Home Buyers

“Anecdotally, pretty much every person from my parents’ generation or their children are going over there and purchasing property in the town or area where they grew up,” said George Boubouras, 44, the Melbourne-based head of investment strategy at UBS AG’s wealth management unit in Australia and a Greek citizen.

“They are very strong and passionate about it, and it’s very much not with the brain, it’s with the heart,” said Boubouras, who was born in South Australia and inherited property in Greece, where his cousins and extended family live. Many properties change hands only for cash, he said.

Greece has at least a one-in-three chance of leaving the 17-country euro area within months of this weekend’s election, Standard & Poor’s said in a June 4 report. Greek deposit outflows have accelerated before the vote, two bankers familiar with the situation said, on concern the nation may move closer to abandoning the region’s currency.

Family Ties

The crisis dominates conversation in the Greek-owned shops, caf├ęs and accountancy firms in Melbourne’s eastern suburb of Oakleigh, the heartland of the city’s Greek community.

“The majority of people I speak to have family back home,” 36-year-old butcher Tom Droutsis said in his father’s shop, where posters of the historical Greek town of Nafpaktos, his mother’s birthplace, hang on the walls. “I feel for them.”

At least once a week, a visitor from Greece comes to the shop or he fields an inquiry about work or other opportunities in Melbourne from someone caught up in the crisis, he said.

Australia’s 2006 census counted 365,145 people of Greek ancestry in Australia and 109,980 Greek-born migrants among Australia’s population of 19.9 million at the time. Greece was home to 10.8 million at the end of 2011.

In Australia, the seven young sailors from Hydra transported when the colony was still accepting convicts from Britain were followed by exiles from Ottoman rule, then other Greeks seeking riches during Australia’s Gold Rush. Emigration increased in the 20th century amid conflict with Turkey, depression and civil war.

Plato, Olympics

According to a New South Wales state government website, between 1947 and 1982, almost 250,000 arrived in Australia from mainland Greece, its islands and Greek communities outside the nation that gave the world Plato and the Olympic Games.

“For Greeks living abroad, Greece is not a country, it’s a cultural ideology,” said Anastasios Tamis, author of “The Greeks in Australia,” published in 2005. “It’s what she has offered the world from the classical perspective. This has perpetuated love and patriotism.”

Almost half of Australia’s Greek community lives in the nation’s second-biggest city of Melbourne, and about 30 percent in Sydney, according to the NSW government site. More than a quarter of Australia’s Greek community returns to Greece for the northern hemisphere’s summer, Tamis said.

Still, some question the merit of investing in Greek property when the country’s immediate future is undecided.

Uncertain Times

“Greek Australians may be looking, but how many are actually proceeding?” Yannis Perrotis, managing director of CBRE Atria, a unit of real estate company CBRE Group Inc. (CBG) (CBG), said in an interview in Athens. “Nobody, and I mean nobody, knows what is going to happen to this country.”

Con Berbatis, a Perth-based pharmacist and a partner at the Holiday Inn Hotel in the city, said he sees opportunities in Greece but isn’t buying assets yet. Instead, he has met Greek consular officials in Australia to discuss how to donate as much as A$50,000 of medical supplies as the crisis cripples Greece’s healthcare system.

“A number of things need to stabilize before I put my money in there,” said Berbatis, born in Australia in 1946, 20 years after his father left Greece. “The prerequisites for me are a stable currency and a stable political structure.”

Stephen Koukoulas, managing director of Canberra-based Market Economics Pty, said a Greek exit from the euro would see investors “badly burnt” by currency depreciation as the nation returned to the drachma.

‘Risk-Reward’

“Investments should be related to risk-reward trade-offs, and if they’re done for reasons of the heart, not of the head, you can get buried if things move against you,” said Koukoulas, a third-generation Greek Australian whose grandfather arrived in Sydney in 1920.

Afkos said he’s “optimistic” that Greece, which has a jobless rate of 22 percent, won’t exit the euro. The former co- owner of the Perth Glory soccer team said the resort he built in Kastoria has given work to 25 local families.

“That’s the kind of help we Australian Greeks can do,” said Afkos, who followed his father to Australia in 1964 with his sister and mother. “I have a warm feeling for the people.”

To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net; Philip Lagerkranser at lagerkranser@bloomberg.net; Andreea Papuc at apapuc1@bloomberg.net



Europe Stocks Rise, Euro Erases Loss Before Italian Sale - Bloomberg

European stocks rose and the euro erased losses before an Italian debt auction today and after comments by Barclays Plc and Fitch Ratings bolstered confidence that the currency union will survive the debt crisis.

The Stoxx European 600 Index advanced 0.4 percent as of 8:21 a.m. in London. The MSCI Asia Pacific Index (MXAP) rose 0.4 percent, while futures on the Standard & Poor’s 500 Index dropped 0.1 percent. Oil was little changed after falling as much as 1 percent in New York. The euro added 0.1 percent to $1.2516. Credit-default swaps on Asian bonds dropped to the lowest in a month.

Barclays Chief Executive Officer Robert Diamond said the euro will survive even as the debt crisis slows economic growth, and Fitch’s head of Asia Pacific ratings said the currency bloc will probably “muddle through.” Italy plans to auction 6.5 billion euros ($8.1 billion) of debt today ahead of a Greek election on June 17. Asian stocks fluctuated amid signs of economic resilience in Japan, South Korean and Australia.

“The underpinnings of the single currency, the underpinnings of the integrated economy across Europe are very, very strong,” Barclays’ Diamond said in a Bloomberg Television interview in Hong Kong today. “We’re going to continue to see some event risk as we, in our opinion, march toward, over the next couple of years, closer to fiscal and political integration.”

MSCI’s Asian gauge of shares has fallen 12 percent from its peak this year on Feb. 29 as Europe’s debt crisis intensified, the U.S. recovery showed signs of losing steam and China’s economy slowed.

Whitehaven Coal

Hutchison Whampoa Ltd. (13), which operates ports in Germany and Spain, slipped 1.6 percent in Hong Kong. Whitehaven Coal Ltd. (WHC) jumped 4.5 percent after the Australian coal producer rejected a conditional takeover offer from its largest shareholder.

Esprit Holdings Ltd. (330) suspended trading in Hong Kong after its shares tumbled 22 percent. The company’s chief executive officer quit amid efforts to end an earnings slump at the Hong Kong-based clothing retailer.

Economic reports today showed that Japanese machinery orders rose in April at more than three times the pace estimated by economists and South Korean unemployment fell to a four-month low. Moody’s Investors Service said Australia’s economic strength is “very high.”

“In the lead-up to the elections, markets are quite nervous about the outcome and what it could mean for the rest of Europe,” said Belinda Allen, a senior investment analyst at Colonial First State Global Asset Management in Sydney, which oversees about $145 billion. “In the meantime, the improvements in the data we’re getting out of Asia are being been ignored.”

Europe ‘Integration’

If Greece exits the currency bloc and there is material contagion to periphery countries, all 17 euro members would likely face downgrades, Fitch’s head of Asia Pacific sovereign ratings Andrew Colquhoun said in Singapore today.

Greece’s election may determine whether the nation abides by spending reductions imposed upon it to receive two international bailouts and stay in the euro. Spain on June 9 became the fourth euro member to ask for a rescue.

Oil was lower for most of Asian trading amid speculation OPEC will keep production quotas unchanged even after prices dropped 16 percent this year. Crude for July delivery dropped as much as 82 cents to $83.05 a barrel.

The cost of protecting Asian bonds against default fell, according to traders of credit default swaps. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan declined 2 basis points to 190 basis, Royal Bank of Scotland Group Plc prices show. The gauge is poised for its lowest close since May 15, according to data provider CMA.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

Enlarge image Euro, Oil Decline Amid Europe Contagion Concern; Bond Risk Eases

Euro, Oil Decline Amid Europe Contagion Concern; Bond Risk Eases

Euro, Oil Decline Amid Europe Contagion Concern; Bond Risk Eases

Andy Rain/Bloomberg

MSCI’s Asian gauge of shares has fallen 12 percent from its peak this year on Feb. 29 as Europe’s debt crisis intensified, the U.S. recovery showed signs of losing steam and China’seconomy slowed.

MSCI’s Asian gauge of shares has fallen 12 percent from its peak this year on Feb. 29 as Europe’s debt crisis intensified, the U.S. recovery showed signs of losing steam and China’seconomy slowed. Photographer: Andy Rain/Bloomberg

June 13 (Bloomberg) -- Craig Ferguson, a currency hedge fund manager at Antipodean Capital Management in Melbourne, talks about the European sovereign debt crisis and its implications for global currencies. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

June 13 (Bloomberg) -- Barclays Plc Chief Executive Officer Robert Diamond talks about his company's business strategy and Europe's debt crisis. Diamond said the euro region is likely to survive even as the sovereign debt crisis slows economic growth and weakens the currency. He speaks in Hong Kong with Rishaad Salamat on Bloomberg Television's "First Up." (Source: Bloomberg)

June 13 (Bloomberg) -- Mauro Guillen, a professor at the Wharton School of the University of Pennsylvania, talks Europe's sovereign debt crisis. He speaks with Zeb Eckert on Bloomberg Television's "First Up." (Source: Bloomberg)

June 13 (Bloomberg) -- Scott Wren, senior equity strategist at Wells Fargo Advisors LLC, talks about U.S. stocks, the implications of Europe's debt crisis for markets and his investment strategy. Wren speaks with Zeb Eckert on Bloomberg Television's "First Up." (Source: Bloomberg)

June 13 (Bloomberg) -- Pranay Gupta, chief investment officer for Asia at Lombard Odier, talks about the outlook for global financial markets and economies. Gupta also discusses Felda Global Ventures Holdings Bhd.'s initial public offering. He speaks in Hong Kong with Zeb Eckert on Bloomberg Television's "First Up." (Source: Bloomberg)



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