MARKET COMMENT: Europe Stocks Surge After Global Central Bank Action

By Barbara Kollmeyer


LONDON (Dow Jones)–European stock markets ended sharply higher Wednesday after global central bankers moved to ease pressures in money markets and China lowered bank reserve requirements for the first time in three years.

The Stoxx Europe 600 index ended the day up 3.6% at 240.08. And stocks on Wall Street also soared.

In simultaneous announcements, major central banks including the U.S. Federal Reserve and the European Central Bank agreed to lower the cost of dollar liquidity.

European banks have been struggling to acquire dollars amid soaring rates as the euro-zone sovereign debt crisis has mounted.

The German DAX 30 index soared 5% to close at 6,088.84, as Deutsche Bank AG surged 6.2%.

The U.K.’s FTSE 100 index jumped 3.2% to settle at 5,505.42. Barclays PLC rallied 6.7%.

“Dollar funding is a big problem and this move acknowledges that.

It is also a good thing that central banks from all over the world are acting together in a coordinated manner,” said Louise Cooper, strategist at BGC Partners, in emailed comments.

In a statement, the banks said they wanted to ease financial market strains that have been in turn weighing on credit supply to households and businesses and stifling growth.

Markets had gained ground in earlier action after the People’s Bank of China cut the reserve requirement ratio for all banks by 0.5 of a percentage point, starting Dec. 5.

That’s the first cut since December 2008, a move aimed at stimulating the country’s economy.

Koen De Leus, strategist at KBC Securities, said central banks have taken coordinated action before and history shows that the positive effects do not tend to last.

“It’s not enough. It’s a temporary liquidity initiative which is good, but it won’t solve the problem, because in a couple of days, the problems will put on their hats again,” De Leus said.

Weighing on markets and banks earlier, a meeting of euro-zone finance ministers in Brussels disappointed some by not setting a size target for the European Financial Stability Facility.

The next focus is the Dec. 9 summit of European Union leaders where markets are hoping for a once-and-for-all plan to contain the debt crisis.

“What’s going to happen there is anyone’s guess,” said De Leus.

“If they don’t do anything, then we’re probably over the edge and the end of the euro is near. They have to come up with something, anything.”

Resource stocks surged as commodity prices shot higher on renewed hopes for global growth.

Shares of energy groups BP PLC and Royal Dutch Shell PLC jumped 5% and 3.9%, respectively, and miner BHP Billiton PLC surged more than 6%.

Among stocks closely tied to the global economic outlook, Swedish-based Atlas Copco AB jumped 7% and retailer Hennes & Mauritz AB rose 3.7%.

Car maker Volkswagen AG rose 6.5%, while shares of Daimler AG and BMW AG rose over 5% each.

Earlier in the day, J.P. Morgan Cazenove upgraded BMW to overweight from neutral, and cut Daimler to neutral from overweight.

Those gains helped to further underpin the DAX 30.

Luxury-goods makers, sensitive to China growth issues, also soared.

In Paris, shares of PPR SA surged more than 6% and LVMH Moet Hennessy Louis Vuitton SA jumped 4.1%.

Burberry Group PLC leaped 6% in London.

Steelmaker ArcelorMittal SA (EAM:NL:MT) soared over 11%, helping lift the French CAC 40 index 4.2% to 3,154.62.

Insurer AXA SA surged 6.1% and banking group Credit Agricole SA jumped 8.4%.

Among other Stoxx 600 gainers, shares of French investment group Wendel SA jumped more than 16%. TE Connectivity Ltd. said it agreed to buy Wendel-owned Deutsch Group SAS, a maker of electronic connectors for harsh environments, for an enterprise value of around $2.1 billion.


-By Barbara Kollmeyer; 415-439-6400; AskNewswires@dowjones.com

UK Summary: London Stocks Close Sharply Higher

MARKET NEWS: 

FTSE 100            5505.42   +168.42   +3.16% 
FTSE 250           10315.29   +283.71   +2.83% 
FTSE AIM All-Share   696.40    +13.48   +1.97% 
Above are Wednesday's closing prices 

London Stocks Close Sharply Higher

1656 GMT [Dow Jones] FTSE 100 gains 3.2% to end at 5505.42 boosted by coordinated global central bank action to make dollar funding cheaper for European banks. Additionally, there have been an impressive set of U.S. economic data released in the afternoon. And earlier, China loosening monetary policy to spur growth, also lifted sentiment. As a result, risk-related stocks enjoy an impressive rally with banks and miners being the biggest risers. Barclays up 6.7% and Antofagasta up 9.2%. “As we head into the month of December tomorrow, historically a very bullish time of year for equity markets, you can tell there’s a sense of optimism amongst investors following today’s move and a shift in sentiment for the better,” says Capital Spreads. Thursday brings U.K. PMI manufacturing data at 0930 GMT. Individual euro zone manufacturing PMIs will also be released from 0845 GMT and for the euro zone as a whole at 0900 GMT.

 
TOP STORIES: 

WSJ: Central Banks Move To Support Global Financial System

The Bank of England and other leading central banks launched a joint action to provide cheap, emergency U.S. dollar loans to banks in Europe and elsewhere, a sign of growing alarm among policy makers about stresses in Europe and in the global financial system.

 
'Momentary' NYSE Interruption Affects 117 Stocks

NEW YORK (Dow Jones)–A glitch at the New York Stock Exchange Wednesday morning prompted at least two competitor exchanges to stop sending orders there and briefly interrupted trade and quote processing for scores of stocks. The Big Board operator suffered a “momentary” problem that affected stocks including Barclays PLC’s (BCS) American depositary shares.

 
UK Hit By Nationwide Public Sector Strike

LONDON (Dow Jones)–Thousands of teachers, passport officers and other public-sector employees staged what unions said could be the U.K.’s biggest strike for a generation Wednesday to protest plans to make them retire later and pay more towards their pensions.

 
UK Police Arrest Woman On Suspicion Of Illegally Intercepting Messages

LONDON (Dow Jones)–U.K. police arrested a woman that a person familiar with the matter identified as a former reporter at News Corp.’s (NWSA, NWS.AU) News of the World tabloid, part of the ongoing investigation into alleged wrongdoing at the now-closed newspaper.

 
COMPANIES NEWS: 

Lloyds Bank Promotes Brown To Head Leveraged Finance Division

LONDON (Dow Jones)–Lloyds Banking Group PLC’s (LYG) Wednesday said it has promoted Ian Brown to head up its leveraged finance division, Lloyds Bank Corporate Markets Acquisition Finance.

 
BP Plans Large Forties Crude Cargo To Asia -Shipbrokers

LONDON (Dow Jones)–BP PLC (BP) plans to send a 270,000-ton cargo of North Sea Forties crude to Asia in the middle of December, in an unusual move after months of Forties supply disruptions, shipbrokers told Dow Jones Newswires Wednesday.

 
Norwegian Safety Agency: "Very Serious Shortcomings" In BP Safety

BP PLC’s (BP) efforts to monitor and respond to sudden pollution releases such as oil spills in the Norwegian Sea suffer from “very serious shortcomings” that demand immediate improvement, Norwegian regulators said.

 
Glencore In Talks To Merge Oil Ops With Refiner Cepsa

Commodities-trading giant Glencore International PLC (GLEN.LN) is in discussions to merge its oil operations with Spanish refinery firm Cepsa, Reuters reported Wednesday, citing industry sources.

 
Watson Sells Generic Lipitor, Ranbaxy's Plans Unclear

Watson Pharmaceuticals Inc. (WPI) began selling a generic version of Pfizer Inc.’s (PFE) blockbuster cholesterol-lowering pill Lipitor in the U.S. Wednesday, marking the long-awaited loss of U.S. market exclusivity for the world’s top-selling drug.

 
Britvic Starts Manufacture In US

LONDON (Dow Jones)–Britvic PLC (BVIC.LN) Wednesday said it is to start manufacturing its products in the U.S. for the first time, as the U.K.-based soft drinks company bids to both cut logistical costs and grow its presence in North America.

 
Sportingbet Swings To Loss, Solid Start To 2nd Quarter

LONDON (Dow Jones)–Online sports betting firm Sportingbet PLC (SBT.LN) Wednesday swung to a loss in the first quarter because of one-off costs and new betting taxes, but said the group has made a “solid start” to its second quarter with trading in line with the company’s expectations.

 
Hogg Robinson Profit +25%, Will Meet Full-Year Views

LONDON (Dow Jones)–Corporate travel management company Hogg Robinson Group PLC (HRG.LN) Wednesday posted a 25% rise in first-half pretax profit, driven by growth across all travel regions, and said it expects full-year earnings to be in line with market expectations.

 
INTERVIEW: 

Creston Clients Continue To Spend Despite Economic Slowdown

LONDON (Dow Jones)–U.K. marketing and public relations group Creston PLC (CRE.LN) hasn’t seen any let up in client spending or suffered any project cancellations despite a worsening economic backdrop, the company’s chief executive said Wednesday.

 
Silverdell Eyes Acquisitions Away From Core Asbestos Business

LONDON (Dow Jones)–Environmental support services firm Silverdell PLC (SID.LN) is looking to make acquisitions away from its core asbestos removal business, possibly in the field of water hygiene testing, the firm’s chief executive said Wednesday.

 
ECONOMIC NEWS: 

UK's Osborne: Euro-Zone Crisis Having Chilling Effect

LONDON (Dow Jones)–The euro-zone debt crisis is having a “chilling effect” on the U.K. economy and a breakup of the currency union would further damage the U.K.’s prospects, Chancellor of the Exchequer George Osborne said Wednesday.

 
UK Cameron: Public-Sector Pension Reform Essential

Reform of U.K. public-sector pensions is essential, Prime Minister David Cameron said Wednesday as state employees staged what promises to be the biggest strike in a generation to protest plans to make them retire later and pay more towards their pensions.

 
OTHER NEWS: 

WSJ: Britain Closes Iranian Embassy In London

The U.K. said Wednesday it is closing Iran’s embassy in London in response to mobs attacking the British embassy in Tehran the day before and accused the Iranian government of consenting to the invasion.

 
BROKERS COMMENTS: 

Global Central Banks Move Improves Credit Supply

1427 GMT [Dow Jones] The move by global central banks to lower the price of US dollar swap arrangements “eases the stresses on banks and hopefully would improve the supply of credit to their economies,” says Berenberg Bank analyst Alexander Potter. Says “it is a signal being sent by central bankers that they do “get it” and they’re trying to head off a nascent credit crunch.” Says it is uncertain whether the move will signal a “definitive” solution to the current financial crisis but says “it certainly makes things better.”

 
UBS Cuts Novolipetsk Target Price

1442 GMT [Dow Jones] UBS cuts its target price for Novolipetsk Steel (NLMK.RS) to $29 per global depositary receipt from $37, following the company’s weak 3Q results released on Nov. 16. The bank slashes its forecast for Novolipetsk’s financials in the period between 2011 and 2014. It says the cut was triggered by the decline in its margin projections for Novolipetsk’s international business in the short term, “given the weaker demand environment and pressure on steel prices.” UBS cuts its forecast for Novolipetsk’s 2012 net profit to $1.74 billion from $2.23 billion and reduces its 2012 Ebitda forecast to $3.21 billion from $3.76 billion. The bank keeps the stock rated at buy. Novolipetsk shares are up 4.7% at $23.51.


Contact: London Services, Dow Jones Newswires; +44-20-7842-9319

UPDATE: Italian PM Monti Says IMF Aid Not Being Considered

By Giada Zampano 
   OF DOW JONES NEWSWIRES

BRUSSELS (Dow Jones)-Italy’s newly appointed prime minister Mario Monti said Wednesday that his country isn’t considering asking for aid from the International Monetary Fund to fight the debt crisis and added a new package of fiscal and structural measure will be delivered as early as next week.

Monti stopped short of quantifying the additional measures needed, but pledged they are aimed at meeting Italy’s target of balancing its budget by 2013.

In a joint press conference at the end of the Ecofin meeting in Brussels, Monti and his new deputy minister, Vittorio Grilli, said Italy, which is struggling to cut its enormous debt amid rising borrowing costs, will discuss and possibly approve the long-awaited measures at a cabinet meeting next Monday.

Monti said he provided “very few details” on the measures to its European counterparts, reiterating that the package will be hammered with the contribution of all the social parties involved.

The Italian premier is expected to introduce new measures that could bring in about EUR20 billion by 2013, two officials with direct knowledge of the matter said earlier Wednesday. The measures may include increases in sales taxes, new property taxes, an increase in the pension age and suspending inflation-indexed increases in some pensions, and will likely be tabled to Parliament in December, one of the officials said.

In a 16-page document presented to the Eurogroup of euro-zone finance ministers Tuesday, the European Commission said that Italy’s twin challenges of excessive public debt and slow economic growth “predate” the economic crisis and need to be addressed directly even now that a broader Europe-wide crisis solution is necessary.

The document, seen by Dow Jones Newswires, warns of a “self-fulfilling run from Italy’s sovereign debt” in which a liquidity crisis would turn into a solvency crisis and impose “acute” repercussions on other large euro-zone nations.

The Commission said Italy should shift the tax burden on to consumption and property to lessen the burden on labor and business.

The European Union’s executive arm also urged Monti to “frontload” some of the promised new pro-growth reforms he has promised.

Monti said Wednesday that Italy’s plans were welcomed by the Eurogroup partners and added that Italy shares the European Commission’s view that additional steps will have to be taken in 2012 to counterbalance lower growth forecasts.

The Italian premier then called for “social responsibility” and warned that a failure in delivering the necessary measures would have “serious consequences for everyone,” in Italy and abroad.


-By Giada Zampano, Dow Jones Newswires, +39 348 7678016; giada.zampano@dowjones.com

(Costas Paris contributed to this report.)

Italian Lawmakers Give Initial Approval To Balanced Budget Law

MILAN (AFP)–Italy’s parliament Wednesday gave initial approval to a new constitutional law that will prevent Italian governments from using debt to finance the deficit in a bid to rein in public finances.

The law, which is set to be given final approval next year, is part of a raft of planned initiatives aimed at calming market mayhem that has driven Italy’s borrowing costs to record highs and set off alarm bells around Europe.

Minister for Parliamentary Affairs Piero Giarda said this is the “first concrete initiative” in parliament since Prime Minister Mario Monti, a former top European commissioner, took over from Silvio Berlusconi Nov. 16.

The text of the law, which amends the constitution, was adopted by Berlusconi’s cabinet in September. It had been announced in July by former Finance Minister Giulio Tremonti as market pressure on Italy began surging.

The draft was approved by 464 votes in favor with 11 abstentions.

It needs to receive a second approval in the lower house and two more votes in the upper house as it includes a constitutional amendment.

The principle enshrined in the law can be overcome but only by an absolute majority in parliament and in case of a grave economic crisis, which would ease the rules on when exactly the government has to return to a balanced budget.

Italy is suffering from a colossal public debt of 120% of gross domestic product and is aiming to restore budget balance by 2013.

This year the public deficit should be 3.9% of GDP, according to the last forecasts of the previous Berlusconi government.

Euro-zone member states said in October they were all aiming for similar laws in line with demands by Germany, which adopted the law in 2009.

France has still not adopted the law as it requires a three-fifths majority in parliament and the left has refused to accept the legislation.

Banche centrali in campo per salvare l’euro, balzo delle Borse

Giornata di roboanti rialzi per le Borse europee, lanciate al galoppo dall’annuncio dell’accordo fra le principali banche centrali per fornire liquidità ai mercati.

A Milano l’indice FtseMib ha messo a segno un balzo del 4,3%, Londra è salita del 2,9%, Parigi +3,9%, Francoforte +4,9%.

In rialzo anche Wall Street: a metà seduta il Dow Jones e l’S&P salgono del 3,5%.

La Fed, la Bce e le banche centrali di altri quattro Paesi (Inghilterra, Svizzera, Canada e Giappone) hanno deciso un’azione comune per garantire liquidità ai mercati e sventare il rischio di un credit crunch in Europa. Di fronte alla crisi di fiducia che blocca i prestiti in dollari dalle banche americane a quelle europee, le banche centrali hanno annunciato un taglio di 50 punti base sul tasso di scambio degli swap e sarà operativo dal prossimo 5 dicembre al febbraio 2013. “L’obiettivo ? si legge nel comunicato congiunto – è allentare le tensioni sui mercati finanziari e quindi mitigare gli effetti di queste tensioni sulla capacità delle banche di erogare credito a famiglie e imprese, per aiutare la ripresa economica”. Sarà la Fed a prestare i dollari alla Bce che li presterà alle singole banche.

La notizia è stata seguita da una forte crescita dell’euro, salito a 1,344 contro il dollaro, da 1,331 della mattina. E soprattutto è stata seguita da un forte miglioramento per i Btp, con il rendimento sceso al 6,98% (-20 punti base) e lo spread ridotto a 474 punti, dagli oltre 500 di stamattina.

All’euforia delle Borse hanno concorso altre tre buone notizie: 1) la banca centrale cinese ha abbassato di 50 punti base il requisito di riserva obbligatoria per le banche, portandolo al 20%. Dopo tre anni di azioni restrittive per contrastare l’inflazione, è il primo segnale che la politica monetaria di Pechino torna ad essere espansiva; 2) nel mese di novembre gli occupati del settore privato in Usa sono cresciuti di 206mila unità, contro le 130mila previste in media dagli economisti; 3) in ottobre in America le vendite di case in corso hanno segnato un incremento del 10,4% dopo il -4,6% di settembre: gli economisti si aspettavano un rimbalzo più modesto pari a +2%.

In Piazza Affari hanno galoppato le banche: Unicredit (UCG.MI) +3%, Intesa Sanpaolo (ISP.MI) +6,1%. Il rialzo più forte nel paniere principale lo ha messo a segno Banca Popolare dell’Emilia Romagna (BPE.MI) +12%. Ubi Banca (UBI.MI) è salita del 6,8%, Banco Popolare (BP.MI) +7,5%. Mediobanca (MB.MI) +7,6%.

Azimut (AZM.MI) ha guadagnato il 6,7%, Mediolanum (MED.MI) +5,6%.

Forte rialzo per i titoli dell’auto: Volkswagen (VOW.FRA) +6,4%, Daimler +5,4%. A Milano Fiat (F.MI) è salita del 6,2%, Fiat Industrial +6,6%, Pirelli (PC.MI) +3,6%.

Finmeccanica (FNC.MI) ha messo a segno un balzo del 7,2%, StM (STM.MI) +3,2%.

Fra i petroliferi, Eni (ENI.MI) +3,7%, Saipem (SPM.MI) +5,7%. Saras (SRS.MI) è balzata in rialzo del 22%.

Seat (PG.MI) è caduta in ribasso del 16% dopo la decisione presa ieri sera del cda di non pagare la cedola ai bond Lighthouse.

UPDATE: US Housing, Employment Reports Stronger Than Expected

By Eric Morath and Alan Zibel 
   Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)–The number of U.S. consumers signing contracts to purchase homes surged in October to the highest level this year, while a survey of business hiring grew far more than expected, in two unexpected positive signs for the overall economy.

The National Association of Realtors’ seasonally adjusted index for pending sales of existing homes increased 10.4% on a monthly basis to 93.3, the highest reading since November 2010, the industry group said Wednesday.

The results were 9.2% above October 2010 and were better than expected. Economists surveyed by Dow Jones Newswires had expected pending home sales would climb by 2.0%.

“Something seems to be stirring in the housing market, though we would certainly hesitate before calling a definitive start of a recovery,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics

The Realtors’ index tracks agreements to purchase homes. A sale is considered pending when the contract has been signed but the transaction hasn’t closed. Pending sales typically close within one or two months of signing.

Pending sales rose in three out of four U.S. regions. The biggest increase, of 24.1%, was in the Midwest. They rose 17.7% in the Northeast and 8.6% in the South and fell 0.3% in the West.

“We hope this indicates more buyers are taking advantage of the excellent affordability conditions,” said Lawrence Yun, the trade group’s chief economist.

The housing market, however, remains shaky. Prices declined by 0.6% in September from a month earlier, according to the widely followed Standard & Poor’s/Case-Shiller index of 20 major metropolitan areas. For the third quarter, prices were down 3.9% nationwide, compared with a year earlier, according to Case-Shiller.

Though sales picked up at the end of the summer, analysts said buyers were only closing deals they perceive as a bargain, which could help explain why prices are sliding again.

Meanwhile, nonfarm business productivity grew 2.3% in July through September, revised down from the previously estimated gain of 3.1%, the Labor Department said Wednesday.

The revision reflects that third quarter economic growth was not as robust as initially viewed and that the number of hours worked increased slightly. Economists surveyed by Dow Jones expected a 2.5% gain in the third quarter.

“Productivity has been rapidly decelerating recently after a sharp acceleration from early 2009 through early 2010,” said Steven A. Wood, chief economist at Insight Economics LLC. He said employers are more closely aligning hiring with output growth.

Unit labor costs declined at a 2.5% annual rate in the third quarter, the new data showed. Second-quarter costs were down 0.1%, after a significant downward revision.

With high unemployment, which is expected to remain at 9.0% for November when reported Friday, workers are in a weak position to demand higher salaries, allowing companies to keep labor cost in check.

As labor cost decline it makes it cheaper for employers to add to their payrolls.

Private-business hiring jumped in November, growing by 206,000 jobs, according to an employment report published by Automatic Data Processing Inc. and consultancy Macroeconomic Advisers.

The result far outpaced economists’ forecast for an increase of 130,000. The October figures were revised to show a rise of 130,000 versus 110,000 reported earlier.

The November increase was the largest monthly gain since December 2010 and nearly twice the average monthly gain since May, when employment decelerated sharply, the report said.

In another positive sign, the U.S economy expanded at a faster pace in November as orders and production picked up, according to a survey of Chicago-area purchasing managers.

The Chicago Business Barometer rose 4.2 points, to a seven-month high of 62.6 in November, the Institute for Supply Management-Chicago reported Wednesday, well ahead of the 59.0 consensus among analysts surveyed by Dow Jones Newswires. Above-50 barometer readings indicate the economy is growing.


-By Eric Morath, Dow Jones Newswires; 202-862-9279; eric.morath@dowjones.com


–Kathleen Madigan, Doug Cameron, Luca Di Leo and Jeff Bater, contributed to this article.

Eurodollar Futures See Funding Anxiety Ease On Central Bank Move

By Howard Packowitz 
   Of DOW JONES NEWSWIRES

CHICAGO (Dow Jones) — A coordinated plan by central banks to support the global financial system promoted traders of Eurodollar interest rate futures to price in a much lower interbank lending rates in the near term.

Prices for Eurodollar futures, which reflect expectations for the rate European banks will charge each other to borrow U.S. dollars in the London interbank market, shot up as fears of a bank funding crunch eased considerably. The three-month London Interbank Offered Rate, or Libor, priced in a rate as low as 0.445%, below Wednesday’s official interbank lending rate of 0.52889%, as reported by the British Bankers Association.

The dramatic market move followed an announcement by central banks from six developed nations, including the U.S. Federal Reserve and the European Central Bank, that they would keep U.S. dollars flowing into Europe’s troubled banking system. The central banks made it cheaper for European banks to make loans for U.S. dollars. Those loans have dried up in recent months as financial institutions sought to reduce exposure to European government debt.

“The Fed is coming out here and basically saying ‘we’re prepared to lend to the world at a cheaper rate via our central bank friends,'” said Michael Gregory, an economist at BMO Capital Markets.

At 11:10 a.m. EST, December Eurodollars futures erased some of the expected declines in Libor, putting the three-month Libor for U.S. dollar lending at 0.528%, from a 0.605% projected rate at Tuesday’s settlement.

The March Eurodollar contract, which is more actively traded compared to the December contract, predicted a three-month dollar Libor as low as 0.555%, down from 0.76% at Tuesday’s settlement. March Eurodollars priced in a rate of 0.61% in recent trading.


-By Howard Packowitz, Dow Jones Newswires; 312-750-4132; howard.packowitz@dowjones.com

(Jacob Bunge contributed to this report.)