Regions

[Muthukali]

World stocks fall on Europe debt worries, IMF view
By TOBY STERLING
Associated Press
2012-10-10 01:46 AM

World stock markets fell Tuesday on a gloomy forecast from the IMF and worries over Europe's debt crisis ahead of the start of earnings season.

The International Monetary Fund said confidence in the global financial system "remains exceptionally fragile" and it cut its estimates for global economic growth, warning that mature economies are at risk of recession. Europe's debt crisis continued to be a central theme, with yields on Spanish government bonds moving higher Tuesday even as European finance ministers meeting in Luxembourg said the country doesn't need a bailout.

"The IMF has predicted that Spain will miss its deficit and debt targets in 2012 and 2013, which underpins fears that already prevailed in the market," said Rabobank currency strategist Jane Foley.

Britain's FTSE 100 fell 0.5 percent to 5,810.25. Germany's DAX lost 0.8 percent to 7,234.53 and France's CAC-40 closed down 0.7 percent at 3,382.78.

Wall Street opened slightly lower and then fell further mid-morning. The Dow Jones Industrial index was down 0.6 percent to 13,500.67, and the S&P 500 was off 0.7 percent to 1,446.20. Aluminum maker Alcoa will be the first major U.S. company to report third quarter earnings later Tuesday.

In Asia the picture was mixed, as Chinese stocks rose on news the country's central bank has injected an estimated 265 billion yuan ($42 billion) into the money supply in what analysts said was the second-biggest such move to date.

In addition, China's sovereign wealth fund said it is buying millions of shares in Industrial & Commercial Bank of China, the world's biggest bank by market capitalization.

Mainland China's Shanghai Composite Index climbed 2 percent to 2,115.23, with financial and energy-related stocks gaining most, while Hong Kong's Hang Seng rose 0.5 percent to 20,937.28.

Australia's S&P/ASX 200 also gained, up 0.5 percent to 4,505.30 on hopes of upcoming interest rate cuts.

But other Asian shares were down. South Korea's Kospi fell 0.1 percent to 1,979.04. Japan's Nikkei 225 index tumbled 1.1 percent to 8,769.59, reopening after a holiday. Benchmarks in Singapore, Taiwan, Thailand and New Zealand also fell.

Some analysts suggested that Asia still remains a bright spot in the global economy and that investors should keep the big picture in mind.

"Asia has grown nearly 32 (percent) in the four years since Lehman Brothers collapsed," analysts at DBS Bank Ltd. in Singapore said in a market commentary. "That's how big Asia is today and how fast it is growing. A weak Europe will never be a plus for Asia. But it's never mattered less either."

Meanwhile, benchmark oil for November delivery was up $2.83 to $92.16 per barrel in electronic trading on the New York Mercantile Exchange.

In currencies, the euro fell on worries about Spain, pessimistic remarks by ECB President Mario Draghi about Europe's "uphill" economic prospects, and a hostile atmosphere during a visit by German Chancellor Angela Merkel to Athens. It declined to at $1.2877 from $1.2928 late Monday in New York.

The dollar was slightly lower against the yen at 78.24 yen from 78.34 yen.

 

[Muthukali]

Australia Adds More Workers as Unemployment Hits 2 1/2-Year High
By Michael Heath - Oct 11, 2012 10:14 AM GMT+0800

Australian employers hired almost three times the number of workers economists forecast for September, pushing up the local currency, even as the unemployment rate jumped to a 2 1/2-year high.

The number of people employed rose by 14,500, the biggest increase since May, after a revised 9,100 drop the prior month, the statistics bureau said in Sydney today. The jobless rate climbed to 5.4 percent, the highest since April 2010, from 5.1 percent as more workers sought employment. That 0.3 percentage point rise was the biggest since May 2009.

The local dollar gained for a fourth day as traders pared bets Reserve Bank of Australia Governor Glenn Stevens will reduce the benchmark interest rate by another quarter point next month after he lowered it to 3.25 percent last week. Australia’s economy expanded at an annual pace of about 4 percent in the first half, driven by resource investment, before commodity prices eased and companies including BHP Billiton Ltd. (BHP) delayed or scrapped projects.

“You’ve still got modest employment growth and the growth is being driven by full-time jobs, which is good,” said Kieran Davies, chief economist at Barclays Capital in Sydney who predicted a 17,500 gain and a higher jobless rate. Still, the RBA “would place the most weight on” the unemployment rate picking up, he said.

The number of full-time jobs advanced by 32,100 in September, and part-time employment fell by 17,700, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, gained to 65.2 percent in September from a five-year low of 65 percent a month earlier, it showed.

Currency Reaction
The Australian dollar bought $1.0246 at 12:37 p.m. in Sydney, compared with $1.0225 before the release. Traders are pricing in a 76 percent chance the RBA will lower the benchmark rate by a quarter percentage point to 3 percent at its Nov. 6 policy meeting, swaps data compiled by Bloomberg show.

Queensland recorded the biggest job losses, shedding 20,900 as the state’s unemployment rate climbed to 6.3 percent in September, the highest level in three years.

The state government said last month it will cut 14,000 public service jobs this fiscal year as it aims to return the budget to surplus. BHP, the world’s biggest mining company, and Xstrata Plc (XTA) last month announced almost 900 job cuts across their coal mines in Australia as they scale back production because of falling prices.

State Gains
New South Wales and Victoria, the two most populous states, added a combined 22,400 positions, today’s report showed. Employers in the key mining state of Western Australia added 11,100 workers.

Resource investment to meet Chinese demand and foreign investment funds seeking a haven have spurred gains in the currency, which closed above parity with the U.S. dollar for all but 23 days this year.

Today’s Australian data contrast with a drop in Australian help-wanted notices for a sixth straight month in September as project delays and cancellations eased demand for labor in mining states.

The median estimate in a Bloomberg News survey of 23 economists was for a 5,000 increase in employment in September and for the jobless rate to rise to 5.3 percent.

Unemployment at 5.4 percent “is now more in line with the reality of a softer labor market,” said Alvin Pontoh, an Asia- Pacific strategist at TD Securities Inc. in Singapore. An encouraging part of the report was a bounce in hours worked, he said.

RBA Deputy Governor Philip Lowe said this week that the labor market has “coped reasonably well” with adjustments including a strong currency triggered by the resource boom, and needs to adapt further to sustain low unemployment.

“The labor market appears to have generally softened in recent months, with only modest growth in total employment,” Lowe said in an Oct. 9 speech in Hobart, Tasmania. “Various indicators also suggest a lower rate of job creation than was the case a while back.”

To contact the reporter on this story: Michael Heath in Sydney at [email protected]

To contact the editor responsible for this story: Stephanie Phang at [email protected]

 

[Muthukali]

Jobless Claims in U.S. Fall to Four-Year Low
By Alex Kowalski - Oct 12, 2012 5:15 AM GMT+0800

Fewer Americans than forecast filed first-time claims for unemployment benefits last week, which may reflect difficulty adjusting the data for seasonal swings at the start of a quarter.

Applications for jobless benefits dropped 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008, Labor Department figures showed today. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. One state accounted for most of the plunge in claims, a Labor Department spokesman said as the data were issued to the press.

A decline in dismissals may mean employers are seeing enough demand to maintain current staff, a necessary first step to bigger gains in hiring. At the same time, a slowing global economy that is hurting exports and concern over looming changes in U.S. fiscal policy remain hurdles to a pickup in employment.

The report “is consistent with a labor market that is gradually getting better,” said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut, who had predicted a decline in claims. “Layoffs are at a low level and don’t seem to be going anywhere. Hiring is still very muted.”

Last week’s decline in claims may be short-lived. Before adjusting the data for seasonal variations, claims typically surge at the start of a quarter as people receiving benefits reapply in order for the government to recertify their applications, the Labor Department spokesman said.

The unadjusted increase in claims last week was smaller than projected because one large state showed a drop rather than an increase, said the spokesman, who declined to name the state. The breakdown by state will show up in next week’s report.

California Focus
Economists Daniel Silver at JPMorgan Chase & Co. in New York and Ted Wieseman at Morgan Stanley in New York were among those speculating that California may be the only state large enough to cause such swings.

California “provided all required” claims data on a “timely” basis to the Labor Department, Dan Stephens, a spokesman for California’s Employment Development Department, said in an e-mail to Bloomberg.

Stocks were little changed as a slump in Apple Inc. dragged down technology shares, erasing earlier gains on optimism over the drop in claims. The Standard & Poor’s 500 Index was at 1,432.84 at the close in New York, up less than 0.1 percent from yesterday. Ten-year Treasury yields were little changed at 1.67 percent.

Comfort Index
The Bloomberg Consumer Comfort Index fell to minus 38.5 in the week ended Oct. 7 from minus 36.9 in the prior period, according to figures released today. The drop was within the gauge’s margin of error of 3 percentage points and ended a six- week upswing that was the longest since early 2006. The measure has been higher than minus 40, a level associated with recessions and their aftermath, for the last three weeks

Consumer confidence in the U.S. held near a three-month high last week, with more Americans saying it was a good time to make purchases even as they grew more pessimistic about the economy, another report today showed.

Elsewhere today, South Korea and Brazil cut interest rates as economies around the world shield themselves from the risk of a deeper slowdown driven by weakness in China and austerity measures in Europe.

The trade deficit in the U.S. widened in August as exports dropped for a second month, evidence of decreasing demand overseas, figures from the Commerce Department also showed today. The gap grew 4.1 percent to $44.2 billion from $42.5 billion in July.

Global Slowdown
“The U.S. economy is gradually feeling the impact from the global growth slowdown,” said Harm Bandholz, chief economist at UniCredit Group in New York, who forecast the deficit would widen to $44 billion. “In the third quarter, the weaker global economy will leave its mark.”

Exports decreased 1 percent in August to $181.3 billion, the lowest level since February, after declining 1.1 percent the prior month, according to the Commerce Department’s data. A drop in foreign demand for industrial supplies such as fuel oil and petroleum products, and a slump in sales of American soybeans precipitated the decrease, the report showed.

Imports fell 0.1 percent to $225.5 billion, also the weakest since February, from $225.7 billion in the prior month. Purchases of autos, clothing and aircraft from overseas dropped.

Price Effect
After eliminating the influence of prices to produce the numbers used to calculate gross domestic product, the trade deficit climbed to $48.4 billion from $47 billion. It averaged $47.7 billion so far in the third quarter, up from $46.9 in the previous three months, indicating trade will subtract from growth.

Economists at Morgan Stanley in New York were among those cutting growth estimates for last quarter following the trade report. Their tracking forecast dropped to a 1.5 percent annual rate from 2.1 percent.

The slackening world economy is weighing on sales at companies such as Caterpillar Inc., which cut its forecast for 2015 earnings after commodity producers reduced capital spending. The world’s biggest construction and mining equipment maker said profit will be $12 to $18 a share, compared with previous projections of $15 to $20.

Peoria, Illinois-based Caterpillar is forecasting moderate and “anemic” growth through 2015, Chairman and Chief Executive Officer Doug Oberhelman said Sept. 24 in a presentation to analysts at a conference in Las Vegas. Construction in emerging markets will probably show modest improvements, he said.

Slowing Growth
“We’ve seen a slowing in economic growth that was more than we expected,” he said. “We think ‘13 could look like 2012 in terms of worldwide economic growth.”

The International Monetary Fund on Oct. 9 cut forecasts for global growth to 3.3 percent this year, the slowest since the 2009 recession, and said there are “alarmingly high” risks of a steeper slowdown. The Washington-based lender projects the 17- country euro area economy will contract 0.4 percent in 2012, worse than its prior forecast, while the U.S. will expand 2.2 percent, faster than an earlier prediction.

Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.

Labor market news was mixed last month, according to the most recent data on employment from the Labor Department. The jobless rate dropped to 7.8 percent in September, the first reading below 8 percent since January 2009. On the other hand, payrolls expanded by 114,000, the least since June.

Brighter job prospects may help President Barack Obama as the November elections draw nearer. With economic issues central to the race, the 0.3 percentage-point drop in unemployment aids the president’s case against Republican challenger Mitt Romney.

To contact the reporter on this story: Alexander Kowalski in Washington at [email protected]

To contact the editor responsible for this story: Christopher Wellisz at [email protected]

 

[Muthukali]

Worst Wall St. week since June (2:12)

Oct 12 - Summary of business headlines: Stocks drop big for the week, but flat for the day; U.S. consumer sentiment hits five-year high; JPMorgan Chase, Wells Fargo sink despite record profits; Apple may debut iPad mini on October 23 –source. Conway G. Gittens reports.

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[Muthukali]

Banks profit from housing rebound (2:06)

Oct 12 - JPMorgan Chase and Wells Fargo posted record profits in the third quarter as mortgage lending picks up, but there are bigger concerns around the corner. Jill Bennett reports.

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[Muthukali]

Trading at Noon: Workday, AMD & Travelzoo moving markets (5:09)

Oct 12 - Workday soars 72 pct in market debut. AMD & Travelzoo fall on weak Q3 revenue forecasts.

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[Muthukali]

Warnings on fourth quarter add to U.S. earnings worries

By Caroline Valetkevitch
NEW YORK | Fri Oct 12, 2012 5:00pm EDT

Oct 12 (Reuters) - Third-quarter U.S. earnings have just begun, but already U.S. companies are sounding alarm bells about the fourth quarter.

Outlooks for the fourth quarter - just two weeks old - are so far decidedly more negative than positive. Thomson Reuters data shows 11 negative outlooks so far from Standard & Poor's 500 companies and no positive outlooks.

Third-quarter guidance, meanwhile, at the comparable period showed 6 negative outlooks and no positive.

The market has seen this play out before - companies systematically lower the bar, only to exceed estimates by a fair amount, resulting in "surprises" that bolster stock prices. This hasn't happened yet in this earnings season, but investors are on the lookout for it.

"It's really an issue of whether companies are trying to set the bar lower and give themselves an easier target to beat or whether it really does reflect a substantial risk of a slowing global economy," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

However, U.S. companies so far are having a tougher time beating analyst expectations in the third quarter, with 59 percent of companies exceeding forecasts, below the 62 percent long-term average, based on Thomson Reuters data. And year-over-year growth is expected to be negative for the first time in three years.

Revenue trends have also been weak: Just 50 percent of companies that have reported have beaten estimates on revenue, compared with the 62 percent average, he said.

Warnings continue to come in for third-quarter reports, helping to drag down earnings estimates for the period. Several of those warnings have come from Kohl's and other retailers, which do not report results until early November.

"For a lot of companies, particularly the multinationals that rely on global growth, I suppose China and Europe are at the heart of their fears," Meckler said.

Europe was cited more than any other reason for negative forecasts from S&P 500 companies for the third quarter, a Thomson Reuters survey showed, but China is a growing concern.

The slowdown in China's economy is expected to have one of the biggest effects on earnings in the U.S. technology sector, which had been among the earnings leaders. Since July 1, tech has seen a 10.4 percent drop in estimates, second worst only to materials - which is also affected by overseas demand.

Among companies guiding lower for the fourth quarter was software maker Adobe Systems. It cited a faster-than-expected shift to subscriptions by customers.

Aluminum company Alcoa Inc, which did not give a fourth-quarter earnings forecast, lowered its global aluminum consumption outlook to 6 percent growth, from 7 percent previously for 2012, and cited China as the main factor.

With results in from just 34 S&P 500 companies, estimates for earnings show a decline of 2.5 percent from a year ago, down from an Oct. 1 forecast for a 2.1 percent fall.

If the percentage of companies beating earnings expectations stays at 59 percent, it would be the weakest earnings beat rate for any quarter since the fourth quarter of 2008, said Thomson Reuters earnings analyst Greg Harrison.

Estimates for the fourth quarter show S&P 500 earnings growth of 9.6 percent, down slightly from an Oct 1. estimate for growth of 9.9 percent, Thomson Reuters data showed.

Analysts said stocks could be in for more losses if the trend continues. The S&P 500 is down 0.2 percent since Wednesday, the day after Alcoa reported, and is off 3.1 percent since its Sept. 14 intraday high for the year.

But Mike Jackson, founder of Denver-based investment firm T3 Equity Labs, believes the pessimism that has seeped into the market in recent weeks is overstated.

"Analysts overreact more negatively and lag positively," he said.

He sees S&P 500 industrials and telecommunications as sectors most likely to surprise to the upside on third-quarter earnings, along with energy, which has seen a big slide in earnings estimates.

 

[Muthukali]

Housing Starts Jump 15% to Four-Year U.S. High: Economy
By Alex Kowalski and Prashant Gopal - Oct 18, 2012 4:06 AM GMT+0800

Housing starts in the U.S. surged 15 percent in September to the highest level in four years, adding to signs of a revival in the industry at the heart of the financial crisis.

Beginning home construction jumped last month to an 872,000 annual rate, the fastest since July 2008 and exceeding all forecasts in a Bloomberg survey of economists, Commerce Department figures showed today in Washington. An increase in building permits may mean the gains will be sustained.

“It’s no longer a question of whether the industry is rebounding,” Larry Sorsby, chief financial officer of Red Bank, New Jersey-based Hovnanian Enterprises Inc. (HOV), the best-performing homebuilding stock this year, said in a telephone interview today. “There is clear evidence that we have bounced off the bottom and are in the midst of a recovery.”

A pickup in sales stoked by record-low mortgage rates and population growth combined with dwindling supply indicates construction can continue strengthening, contributing more to economic growth. Improving demand may also help revive a part of the job market that’s seen construction employment fall by almost 2 million since the end of 2007.

“This is good news for the labor market,” said Anika Khan, a Charlotte, North Carolina-based senior economist at Wells Fargo & Co., the biggest mortgage lender in the U.S. If single-family starts “continue to show this positive momentum, and we expect they will, we’ll likely start to see some construction jobs come back.”

Builders, Lumber
Shares of homebuilders and lumber futures rallied after the report. The Standard & Poor’s Supercomposite Homebuilding Index (S15HOME), which includes Toll Brothers Inc. (TOL) and Lennar Corp. (LEN), climbed 3.2 percent to 448.18 at 4 p.m. The broader S&P 500 rose 0.4 percent to 1,460.91.

The contract on softwood lumber expiring in January advanced 3.3 percent on the Chicago Mercantile Exchange. Lumber has surged $44 per 1,000 board feet in the last week.

In the U.K. today, a report from the Office for National Statistics showed that jobless claims unexpectedly fell in September and payrolls rose to a record in the quarter through August as the London Olympics helped boost hiring.

The jump in U.S. housing starts is the latest sign that the world’s largest economy is gaining strength after growth slowed to a 1.3 percent annual pace in the third quarter. Gains in retail sales and industrial production in September both exceeded economists’ forecasts.

Economists’ Forecasts
The median housing starts projection in the Bloomberg survey called for a 770,000 pace, and estimates ranged from 735,000 to 800,000. The prior month was revised up to 758,000 from a previously reported 750,000 pace.

Over the past 12 months, work began on 34.8 percent more homes, the biggest year-over-year increase since April.

“This data is catching up to the orders numbers that the homebuilders have been reporting for the last six months,” Martin Connor, chief financial officer for Toll Brothers said in a telephone interview. “It is reflective of the increased consumer confidence and buyer confidence that pricing is going up and it won’t be cheaper tomorrow.”

Horsham, Pennsylvania-based Toll Brothers, the largest U.S. luxury-home builder, reported a 57 percent increase in orders for the quarter ending in July over the previous year.

Less Pessimistic
The brighter building environment has made construction companies less pessimistic. The National Association of Home Builders/Wells Fargo builder sentiment index increased to 41 this month, the highest since June 2006 and the sixth-straight gain, figures showed yesterday. Still, readings below 50 mean more respondents said conditions were poor.

“There is going to be a continued housing recovery over the next few years,” Larry Seay, chief financial officer at Meritage Homes Corp (MTH).in Scottsdale, Arizona, said during an investor conference on Oct. 11. “Pent-up demand that has built up from people deferring household formation is going to help buoy the recovery. High affordability not only with house prices being very low, but also interest rates being as low as they’ve been in decades, and all that translating into an improved buyer confidence.”

Miami-based Lennar, the third-largest U.S. homebuilder by revenue, said Sept. 24 that its quarterly profit more than quadrupled as demand for new houses climbed. Third-quarter revenue rose to $1.1 billion from $820.2 million a year earlier. New orders climbed 44 percent to 4,198 homes, and contract backlogs, an indication of future sales, increased 79 percent.

Building Permits
Building permits, a proxy for future construction, jumped to an 894,000 annual rate, also exceeding the median forecast and the fastest since July 2008, the Commerce Department’s figures showed. They were projected to rise to 810,000, with a range of 780,000 to 850,000.

The number of permits swelled by 45.1 percent since September 2011, the biggest annual jump since 1983.

Construction of single-family houses climbed 11 percent from August to a 603,000 rate. Work on multifamily homes, such as apartment buildings, increased 25.1 percent to an annual rate of 269,000.

Demand for apartments nationwide is the strongest in a generation because of home foreclosures, stiffer lending standards and a growing number of young adults forming households.

The West showed the biggest gain in housing starts last month, with a 20.1 percent jump. The South and Midwest also showed increases, while the Northeast had a decline.

Boom to Bust
California, the state that led the U.S. into the housing boom and bust with some of the most reckless subprime mortgage lending, is now leading the way out.

A plunge in new defaults in California helped push U.S. foreclosure filings to the lowest level in five years last month, according to RealtyTrac Inc., a seller of home-loan data. The median price paid for a home in the state rose to $287,000 in September, the highest since August 2008, according to real estate research firm DataQuick.

At Hovnanian, orders in California climbed 31 percent in the nine months that ended in July and jumped 46 percent in Phoenix, Sorsby said.

“These markets were hit hard and now people are seeing home prices start to increase,” he said. “There is pent-up demand.”

A harbinger of progress for homebuilders, demand for new homes has hovered at a two-year high. Homes sold at a 373,000 annual pace in August and at a 374,000 rate in July, the best two months since the March-April 2010, according to Commerce Department figures.

Population Growth
That demand may, in part, be driven by a growing population. The number of households in the U.S. grew 2 percent in 2011, the biggest gain in 10 years, to 119.9 million, according to the most recent Census Bureau data.

Sales offices for new home communities are also drawing in traditional homebuyers who face growing competition from investors for a dwindling supply of existing houses.

Private-equity firms such as Colony Capital LLC and Blackstone Group LP are buying foreclosed homes and later renting them out. Such purchases have helped drive prices up 34 percent in a year in places like Phoenix.

Housing starts plummeted during the recession, with the three years between 2009-2011 marking the worst period for homebuilding in records going back to 1959. Starts reached a pre-recession peak of 2.1 million in 2005, the most in more than 30 years, before slumping to a low of 554,000 in 2009.

Supply Diminishes
As a result, the supply of new homes available for purchase has diminished. There were enough properties on the market in August to last 4.5 months at the current sales pace, matching July as the lowest level in almost seven years, Commerce Department figures show.

Housing, which traditionally leads economic recoveries, has lagged this time because the financial crisis led to the first nationwide decline in home prices since the Great Depression, leaving many homeowners with loans that exceeded the value of their homes.

Residential construction contributed 0.2 percent points to gross domestic product in the second quarter of this year after 0.4 point in the first three months.

In September, Federal Reserve Chairman Ben S. Bernanke called housing “one of the missing pistons in the engine” as he announced the third round of large-scale asset purchases intended to push down long-term interest rates and spur growth.

Now some policy makers are starting to take note of the revival.

‘Signs of Life’
“Housing is once more showing signs of life,” John Williams, president of the Federal Reserve Bank of San Francisco, said in a speech this week. “The housing recovery includes a rebound in home construction, something particularly important for the health of the overall economy.”

Borrowing costs pushed lower by the Fed are bolstering home demand, even as tighter credit standards make it harder for many Americans to get a mortgage. The average 30-year fixed rate was 3.39 percent in the week ended Oct. 11, near a record-low of 3.36 reported Oct. 4, according to data from Freddie Mac that dates back to 1971.

Weak employment growth is an obstacle to a rapid housing recovery. There were 12.1 million Americans unemployed in September, meaning incomes will be slow to grow.

To contact the reporters on this story: Alex Kowalski in Washington at [email protected]; Prashant Gopal in New York at [email protected]

To contact the editor responsible for this story: Christopher Wellisz at [email protected]

 

[Muthukali]

Shares of China life higher on 9-month results
Central News Agency
2012-10-18 11:51 AM

Taipei, Oct. 18 (CNA) Shares of Taiwan-based China Life Insurance Co. Ltd. moved higher Thursday morning after the company reported an impressive profit for the first nine months of this year, dealers said. Investors were also looking forward to potential benefits resulting from the company's investments in China's CCB Life Insurance, they said. As of 11:18 a.m., shares of China Life had added 1.54 percent to NT$26.30 (US$0.90) with 10.41 million shares changing hands, while the financial sector had risen 0.02 percent.

The benchmark weighted index was down 0.09 percent at 7,457.88 points on turnover of NT$27.95 billion. China Life reported the previous day NT$4.01 billion in net profit for the first nine months of this year, little changed from the NT$4.0 billion recorded over the same period of last year, despite the weakness of the economic fundamentals. In the nine-month period, China Life's earnings per share stood at NT$1.71, making it the second-most profitable life insurer in Taiwan after Fubon Life Insurance.

China Life said that although interest rates at home and abroad have been on the decline as major central banks around the world have continued to pump funds into the market, the company still witnessed its interest income for the nine-month period rise about 21 percent from a year earlier. "After a recent slump in its share price, investors simply seized the positive lead to hunt bargains," Hua Nan Securities analyst Henry Miao said. "That's why the stock outperformed the financial sector and even the broader market." Miao said the currency buying in China Life shares partly reflected the fact that China Life has a rich parent company -- Chinatrust Group -- which is one of the largest financial conglomerates in Taiwan. "It seems that many investors believe China Life is a safe bet at a time when the local bourse remains haunted by economic concerns," Miao said.

Currently, China Life holds a 19.9 percent stake in China's CCB Life, ranking it as the second-largest shareholder of the Chinese entity after China Construction Bank, which owns a 51 percent stake. China Life said that in the first nine months of this year, CCB Life posted 33 million Chinese yuan in (US$5.27 million) pretax profit, which topped the level recorded for the whole of 2011. CCB Life has generated premium income of 4.4 billion yuan so far this year, China Life said, adding that the premium income for 2012 is expected to total 6 billion yuan. (By Tien Yu-pin and Frances Huang)

 

[Muthukali]

Australian PM Gillard falls head over heels in India

Australian Prime Minister Julia Gillard falls as her shoe gets stuck in soft grass as she visits the Gandhi Memorial in Delhi, India. Rough Cut (no reporter narration).

http://sg.news.yahoo.com/video/australian-pm-gillard-falls-head-122958993.html

 

[Muthukali]

Black Monday Echoes With Computers Failing to Restore Confidence
By Nina Mehta, Rita Nazareth and Whitney Kisling - Oct 19, 2012 11:17 AM GMT+0800

http://bloom.bg/RGgEP9

A quarter century after the worst one-day stock crash in history, measures to prevent a repeat are failing to keep investors from losing confidence in the market.

The 23 percent plunge in the Dow Jones Industrial Average (INDU) on Oct. 19, 1987, came amid signs of a slowing economy, the threat of higher taxes and concern among individuals that trading was rigged for insiders. Today’s investors have pulled $440 billion from U.S. equity mutual funds since 2008 and sent trading to the lowest levels in at least four years, retrenching after the worst financial crisis since the Great Depression and the May 2010 stock crash, data compiled by Bloomberg and the Investment Company Institute show.

While Procter & Gamble Co. (PG) and McDonald’s Corp. are up more than 800 percent since 1987, protections adopted after the crash couldn’t stop unharnessed computer trading from erasing almost $900 billion of value in less than 20 minutes on May 6, 2010, based on data compiled by Bloomberg. E.E. “Buzzy” Geduld, 69, who oversaw about 60 equity traders 25 years ago at Herzog, Heine & Geduld Inc. and now runs investment firm Cougar Trading LLC, says crashes happen when investors become convinced they’ve lost control.

“In 1987 everybody tried to go to the exit at the same time, but the exit door wasn’t big enough,” Geduld said in a telephone interview. “You had literally a panic. Fast forward to 2012. The volumes we can handle are gigantic, but the exit door hasn’t changed in size.”

Abandoning Stocks
Individuals are abandoning stocks even after U.S. Federal Reserve Chairman Ben S. Bernanke held interest rates close to zero for a fourth year, valuations for the Dow remain 23 percent below the level at the market peak in October 2007, and exchanges installed safeguards following the so-called flash crash in 2010. U.S. stocks are in the 44th month of a bull market that has restored $9 trillion in share value, data compiled by Bloomberg show.

Average daily volume for U.S. equities was 6 billion shares in the third quarter, the lowest level since at least 2008 and about half the 10.9 billion average in the first three months of 2009. The total has decreased for 12 of the last 13 quarters as investors pulled money from American stock mutual funds for a record fifth year, according to data compiled by Bloomberg and Washington-based ICI.

The retreat from equities has been fueled by memories of 2008, when the Dow slumped 34 percent during the worst economic contraction in seven decades. Europe’s struggle to contain debt turmoil, which pushed daily swings in the Standard & Poor’s 500 Index to twice the five-decade average last year, and mishaps such as Knight Capital Group Inc. (KCG)’s trading malfunction on Aug. 1 also hurt investor confidence.

‘Scares People’
“Today when there’s volatility, it scares people to death,” Timothy Ghriskey, 57, the chief investment officer at Solaris Group LLC, which manages about $2 billion in Bedford Hills, New York, said in a phone interview. “What it has taught me is that there’s no such thing as a free lunch. You can theoretically protect yourself on the downside, but when things come unhinged, nothing’s going to protect you.”

Stocks crashed in 1987 two months after the end of a five- year bull market in which the Dow average tripled. The 30-stock gauge was up 37 percent through the first nine months of the year before losing 9.5 percent in the week ended Oct. 16. The decline came amid concern that 10-year bond rates, then at about 10 percent, would increase and speculation that Congress planned to kill tax benefits for leveraged buyouts.

Black Monday
On Black Monday, Japan’s Nikkei 225 Stock Average (NKY) fell 2.4 percent. By midday, stocks in London were down 10 percent. In New York, 11 of the 30 Dow components didn’t open in the first hour of trading. The Dow went on to fall 508 points, while the S&P 500 tumbled to 224 from 282.

In 1987 panic spread on Wall Street by phone and ticker tape. About $1 trillion in stock-market value was erased in four days, according to a report by a task force led by Treasury Secretary Nicholas Brady in January 1988. It took more than a year to restore it, compared with a week following the retreat on May 6, 2010.

Mike Earlywine, 47, a hedge-fund trader at Ecofin Ltd. whose first job was as a clerk at Salomon Brothers Inc. in New York, witnessed the magnitude of the 1987 plunge on the streets of New York’s financial district.

“We walked out to the exchange and literally people were spilling out,” Earlywine said. “You’re standing there in the street on the sidewalk and people were coming out of the exits and falling over, and guys were literally weeping into guys’ shoulders saying, ‘It’s gone, it’s all gone.’ One guy with tears streaming down his face is trying to comfort the other who’s also got tears on his face.”

 

[Muthukali]

Closing Down
The onslaught of selling almost capsized U.S. markets on Oct. 20 and led regulators to eventually adopt coordinated halts across stocks and futures markets to prevent a recurrence, according to David Ruder, chairman of the Securities and Exchange Commission in 1987 and now a professor at Northwestern University’s School of Law in Chicago.

“The most frightening part of that whole week was the thought that the NYSE might have to close because it did not have sufficient demand,” Ruder, a member of the advisory committee formed after the flash crash to make recommendations to the Commodity Futures Trading Commission and SEC, said by phone. “The theory of the circuit breakers was that if there were predetermined stopping points for the market then the market participants would know this wasn’t a panic closing.”

The challenge of handling about 600 million shares a day on Oct. 19 and Oct. 20, more than three times the New York Stock Exchange’s daily average earlier that year, led securities firms to automate trade processing and increase their capacity for volume.

New Rules
The NYSE also imposed stiffer capital requirements for specialists after the 1987 crash and restricted use of a system that delivered trade requests directly to specialists to limit disruption from index arbitrage in volatile markets. Nasdaq Stock Market mandated that its market makers quote on the Small Order Execution System after individual investors couldn’t get through to brokers who didn’t answer phones on Black Monday.

The NYSE and futures operator Chicago Mercantile Exchange approved separate curbs on intraday price moves in 1988. The focus was on mechanisms that would slow or briefly halt their respective market when trading became disruptive, Leo Melamed, the CME’s former chairman, said in a phone interview. They were later made uniform across equity-index futures and securities.

Circuit Breakers
The plunge in May 2010 didn’t trigger those circuit breakers. The Dow average fell 9.2 percent, most of it between 2:30 p.m. and 3 p.m., after aggressive selling of so-called E- mini S&P 500 futures by a mutual fund company caused a flight of liquidity. As equity market makers and other providers of bids and offers withdrew, trades in individual stocks took place at prices including fractions of 1 cent and $99,999.99.

While the flash crash wasn’t caused by high-frequency traders, their habit of buying and selling rapidly led to the sudden removal of liquidity, kicking off a related plunge in stocks, a report by the SEC and CFTC said on Sept. 30, 2010.

Curbs instituted after that crash, which halt stocks when they move 10 percent in five minutes, will be updated in February when the broad-market triggers adopted following the 1987 rout are overhauled. Amid increased automation, exchanges and brokers are also debating the benefits of so-called kill switches that would shut off a firm’s trading if it exceeds a certain level of activity or breaches pre-set parameters.

One Market
Both plunges accelerated as selling pressure in the futures market seeped into stocks. “From an economic viewpoint, what have been traditionally seen as separate markets -- the markets for stocks, stock index futures, and stock options -- are in fact one market,” the Brady Report said. “To a large extent, the problems of mid-October can be traced to the failure of these market segments to act as one.”

As equities tumbled 25 years ago, Wall Street tickers couldn’t keep up and back offices worked into the night for months to cope with record volume on the New York Stock Exchange and Nasdaq.

Within the exchange there was scant information about what was causing the selloff, according to Kenneth Polcari, a managing director in ICAP PLC’s equities unit. Traders at the NYSE could only see scrolling headlines, not full stories, he said in a phone interview.

‘Sell, Sell’
“Customers were calling and entering orders an hour earlier than usual,” said Polcari, who worked at William Latham & Co. in 1987. “You could feel from the minute you picked up the phone that this would be a different kind of day. You could tell it from their voices, you could see it in their orders. Instead of 10,000 shares in GE or Coke or Johnson & Johnson, it was, ’Sell 150,000 -- sell, sell, sell.’”

Some clerical people at Salomon Brothers didn’t go home for days, according to James Leman, who oversaw a trading floor support staff of more than 100 for equities and fixed income in the firm’s One New York Plaza headquarters. People slept on cots in their offices or got hotel rooms so they could process the surge in trade tickets and resolve problems with transactions that had missing information, no time stamps or incorrect terms, he said.

“The records were manual,” said Leman, managing director at consulting firm Westwater Corp. in New York. “We had paper tickets and paper floor reports. There was no PC, no e-mail. We were living on computer runs coming out of a mainframe computer.”

Automated Exchange
The NYSE, predominantly a market run by and for humans in 1987, is now an automated exchange with so-called designated market makers overseeing trading in their assigned stocks. There are four main market makers on the exchange’s trading floor, including Getco LLC, one of the largest automated trading firms, compared to more than 50 specialists at the time of the crash.

Nasdaq has since shifted from a phone-based dealer market to an exchange that matches buy and sell orders electronically. Both NYSE Euronext (NYX) and Nasdaq OMX Group Inc. (NDAQ) are public companies that each own three U.S. securities exchanges and have branched beyond equities into options, futures and technology services. CME Group Inc. (CME) is the world’s largest exchange company by market value.

Regulators should require brokers to be able to handle a certain multiple of trading, perhaps 10 times the normal volume, to limit disruptions that could worsen a panic, according to Geduld of Cougar Trading. They should also mandate that high- frequency firms have sufficient capital to complete transactions during the day if the market closes, he said. Firms need the “capacity and financial wherewithal to withstand a crazy day,” Geduld said.

Flash Crash
More than 19 billion shares traded in the 2010 flash crash on dozens of different venues, including platforms known as dark pools and among brokers matching orders away from exchanges. The number of market makers on the NYSE had fallen to five from 25 since 2000 as the business of providing liquidity became dominated by hundreds of automated traders across markets with less stringent rules about when they must buy and sell.

Both routs proved to be buying opportunities. Within 10 years of the 1987 crash the Dow average had quadrupled and investors were enjoying the biggest bull market ever. After falling 999 points on May 6, 2010, the gauge ended the day down 348. The Dow rose 6.5 percent through the end of the year.

“Twenty-five years later we’re still talking about the impact of technology on the markets and what kinds of solutions could be created to try to soften the movements,” Ken Leibler, president of the American Stock Exchange in 1987, now a consultant, said in a phone interview.

“With high-frequency trading, there are tremendous amounts of trading done, but now it’s done in thousandths of a second,” he said. “The problem is similar today to what it was back then. The solutions are also likely to be ways to halt trading.”

To contact the reporters on this story: Nina Mehta in New York at [email protected]; Rita Nazareth in New York at [email protected]; Whitney Kisling in New York at [email protected]

To contact the editor responsible for this story: Lynn Thomasson at [email protected]

 

[Muthukali]

Europe advances towards single banking supervisor

By Julien Toyer and Andreas Rinke
BRUSSELS | Thu Oct 18, 2012 10:34pm EDT

(Reuters) - European Union leaders took a big stride towards establishing a single banking supervisor for the euro zone, agreeing it would enter into force next year, opening the way for the bloc's rescue fund to inject capital directly into ailing banks.

European Council President Herman Van Rompuy said the 27 leaders agreed at a Brussels summit to adopt a legal framework by the end of this year giving the European Central Bank overall responsibility for banking supervision.

"Once this is agreed, the single supervisory mechanism could probably be effectively operational in the course of 2013," he told a news conference after nearly 10 hours of talks.

French and EU officials said all 6,000 banks in the single currency area would gradually come under ECB supervision by 2014, starting with banks receiving state aid, then large cross-border institutions. Most day-to-day oversight would be delegated to national bodies.

Creating an effective banking union, for which this deal was a first step, is regarded by the International Monetary Fund and market economists as a key component in overcoming the euro zone's three-year-old debt crisis.

French President Francois Hollande said the leaders did not discuss possible financial assistance for Spain, but he laid out a series of steps that could turn a corner in the crisis.

"Tonight, I have the confirmation that the worst is behind us," he told a 3 a.m. news conference.

"We are on track to solve the problems that for too long have been paralyzing the euro zone and made it vulnerable.

"If the December European summit confirms the decisions we took, if Greece finds a lasting solution, if Spain recovers funding mechanisms, then we will be done with a situation which weighed on markets and on the confidence in the euro zone."

German Chancellor Angela Merkel said it would take more than a couple of months before the supervisor was fully effective and direct bank recapitalization could be considered.

However, the agreement appeared to be a defeat for German Finance Minister Wolfgang Schaeuble's efforts to delay and limit the scope of European banking supervision.

Germany has been reluctant to see its politically sensitive savings and cooperative banks come under outside supervision. It rejects any joint deposit guarantee under which richer countries might have to underwrite banks in poorer states.

The deal came after the leaders of France and Germany, Europe's central powers, held a private meeting after clashing in public over greater EU control of national budgets.

The point when the ECB will effectively become the bloc's banking supervisor is important because it would open the way for the euro zone's bailout fund to inject capital directly into troubled banks, without adding to their host governments' debts.

A French government source said the European Stability Mechanism (ESM) could start recapitalizing troubled banks as early as the first quarter of 2013, but a German source said it was "very unlikely" to happen so soon.

Merkel earlier demanded stronger authority for the executive European Commission to veto national budgets that breach EU rules. She said a December EU summit would take decisions on these issues of closer euro zone economic governance.

For once, the summit was not under intense pressure from financial markets, which have calmed since the ECB pledged last month to intervene decisively if needed to buy bonds of troubled euro zone states to preserve the euro.

"FISCAL CAPACITY"
The EU leaders issued a statement welcoming Greece's progress towards an agreement with its lenders and saying good progress had been made in putting the bailout back on track.

In Athens, police clashed with protesters hurling stones and petrol bombs during a general strike that brought much of the near-bankrupt country to a standstill.

Merkel also advocated the creation of a European fund to invest in specific projects in member states which she said could be fuelled by a financial transaction tax which 11 euro zone countries have said they will adopt.

Her call echoed a proposal for the 17-member euro zone to have its own budget -- known in EU jargon as a "fiscal capacity" -- on top of the 27-nation union's common budget, which mostly funds agriculture and aid to poorer regions.

Several states, including the Netherlands, Finland and Austria, were uneasy at the idea but none rejected it outright.

Since the ECB said last month it was ready to buy the bonds of struggling euro zone states in unlimited amounts, state borrowing costs have fallen sharply, easing the immediate pressure for Spain to seek a bailout.

Spain's 10-year bond yields sank to their lowest since February at an auction on Thursday, helped by Moody's decision this week to leave its credit rating at investment grade.

But rather than signaling that Madrid does not need help, Moody's verdict was predicated on Spain soon applying for a euro zone assistance program to trigger ECB intervention.

Italy raised a bumper 18 billion euros from a four-year inflation-linked retail bond -- the most ever raised in a single debt offering in European markets -- reducing its need to issue debt before the end of this year.

On the banking union, much work remains to be done and the deeper the discussion union goes, the more complex and problematic it will get.

Countries outside the euro zone -- particularly Britain, which has Europe's biggest banking sector -- are concerned their banks could be disadvantaged if a balance is not maintained between the ECB and its oversight of euro zone banks and the powers of other authorities to oversee non-euro zone banks.

And if non-euro zone countries such as Poland join the banking union, as policymakers are hoping, it is unclear what representation they would have within the ECB, since the central bank is currently answerable only to euro zone member states.

(Additional reporting by Stephen Brown and Madeline Chambers in Berlin, Jan Strupczewski and Luke Baker in Brussels, Harry Papachristou and Lefteris Papadimas in Athens and Gilbert Krijger in Amsterdam. Writing by Paul Taylor, editing by Mike Peacock)

 

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Asia Week Ahead: China earnings, Japan trade data in focus (2:47)

Oct. 19 - Reuters Breakingviews discusses what's in store for the start of the China earnings season, Japan trade data and results from South Korean tech giant Samsung.

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[Muthukali]

Google results miss; shares dive after premature report

By Alexei Oreskovic and Edwin Chan
SAN FRANCISCO | Fri Oct 19, 2012 12:36am EDT

(Reuters) - Google Inc's quarterly results fell well short of Wall Street's expectations after its core advertising business slowed, stunning investors accustomed to consistently rapid growth from the Internet giant and wiping more than 9 percent off its market value.

The disappointing numbers on Thursday came hours ahead of schedule in a rare instance of premature filing. Google blamed the misfire on an unauthorized filing by its financial printers, RR Donnelley & Sons Co, and later confirmed the numbers' accuracy.

The earnings report, which had not been expected until after the market close, revealed a weakening in Google's core Internet advertising business and persistent losses at its recently acquired cellphone business, Motorola Mobility.

Shares of Google, the world's No. 1 Internet search engine, finished Thursday's regular trading session down 8 percent at $695 after a brief trading halt. Some analysts said the inadvertent results release spurred confusion and exacerbated its stock price decline.

Google executives maintained in a conference call on Thursday that the company's various businesses continued to benefit from healthy growth and that Google was well-positioned to capitalize on consumer's increasing use of mobile devices.

Chief Executive Larry Page, speaking on his first earnings call since an unspecified voice ailment sidelined him from public speaking in June, said that Google's mobile business was now generating revenue at an annualized run rate of $8 billion.

Page acknowledged that mobile ad rates were below the rates that Google garners for ads that appear on its standard website. But he said the variety of Web-connected devices used by consumers is creating "a huge new universe of opportunities for advertisers."

"We're uniquely positioned to get through that transition and to really profit from it," Page said, citing Google's Android mobile software, the world's top operating system for smartphones by market share.

Google, which has been struggling to turn around a Motorola Mobility hardware business it bought for $12.5 billion, reported a 20 percent dive in net income to $2.18 billion. Excluding certain items, it earned $9.03 a share, vastly underperforming the $10.65 analysts had expected, on average.

"We have been saying this thing was ripe for a pullback. It's not like they're Google not being Google, but you still have some major issues," said BCG analyst Colin Gillis.

"Click prices declined for the fourth consecutive quarter after rising for eight consecutive quarters before then. That's a negative. This is the mobile problem."

"The other bit is the Motorola millstone had been ignored by the market, and - boom - now you've got weak revenue from Motorola. When you acquire a business and you're about to whack all kinds of people and close offices, you know what happens to the employees? They take their eye off the ball. Sales are down," Gillis explained.

Net revenue growth at Google's main Internet business increased 17 percent year-over-year, the first time growth in that business has fallen below 20 percent since 2009. Google Finance Chief Patrick Pichette stressed on the conference call that the revenue growth rate was higher if the impact of foreign currency exchange rates was backed out.

"It was just too rapid a deceleration," said Pivotal Research Group analyst Brian Wieser. "Many of the same underlying trends drive Facebook advertising."

Shares of Facebook Inc, which headed south shortly after Google's inadvertent filing, closed down 4.6 percent. Google's snafu recalled Facebook's debut, which was marred by technical glitches that also spooked traders and contributed to the stock's first-day decline.

The decline in Google's shares come after a three-month run-up in its stock, which reached an all-time high of $774.38 earlier this month.

A BAD MISS?
Google reported net revenue - excluding traffic acquisition costs - of $11.3 billion for the third quarter, below Wall Street's expectations for about $11.9 billion.

For the fourth consecutive quarter, the company reported a decline in average cost-per-click (CPC), a critical metric that denotes the price advertisers pay Google.

Average CPC declined 15 percent from a year ago and 3 percent from the second quarter of this year. Analysts say that Google, like many of its peers in the Internet industry, has been struggling to adapt to the rapid consumer uptake in mobile devices. Advertisers pay far less for ads on smartphones and tablets than for similar ads on desktop computers.

"The core business seems to have slowed down pretty significantly, which is shocking," said B. Riley analyst Sameet Sinha. "The only conclusion I can look at is, search is happening more and more outside of Google, meaning people are searching more through apps than through Google search."

"That could indicate a secular change, especially when it comes to ecommerce searches. The big fear has always been, what if people decide just to go straight to Amazon and do their searches? And potentially that's what could be happening."

But Ryan Jacob, chairman and chief investment officer of Jacob Funds, said he viewed Google's results as only "minorly disappointing," with most of the weakness coming from Motorola as expected.

"Unfortunately, by dropping an 8K in the middle of a trading day, people kind of shoot first, ask questions later," said Jacob, whose fund owns Google shares.

JP Morgan analyst Doug Anmuth said in a note that the Google results were "light" but not as bad as they appeared at "first blush."

FILING SNAFU
Google, which recently overtook Microsoft Corp to become the second-largest U.S. technology company by capitalization, had been due to release its results after the market close.

The second paragraph of the press release merely read "Pending Larry quote," suggesting that space was reserved for comment from CEO Larry Page.

"Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorization," Google said in a statement. "We have ceased trading on NASDAQ while we work to finalize the document. Once it's finalized we will release our earnings, resume trading on NASDAQ and hold our earnings call as normal at 1:30 PM PT."

Shares of RR Donnelley, the U.S. printing services company, slid as much as 5 percent. They closed down 1 percent at $10.76.

Reed Kathrein, a plaintiff lawyer with Hagens Berman who sues companies on behalf of investors, said investors would not have a claim against either Google or RR Donnelley because the earnings disclosure was likely a mistake.

"There's no fraudulent intent here," Kathrein said.

However, Google could have a negligence claim against RR Donnelly to recover any additional costs it incurred in responding to the incident, Kathrein added.

"Everyone is trying to figure out if there's any legal issue with respect to RR Donnelley," said Michael Matousek, senior trader at U.S. Global Investors Inc, which manages about $3 billion in San Antonio.

(Additional reporting by Gerry Shih and Noel Randewich in San Francisco, David Gaffen and Jennifer Saba in New York; Editing by Bernard Orr and Gary Hill)

 

[Muthukali]

FACTBOX: The day that Google would like to forget (1:09)

Oct 18 - From surprise earnings release to results fiasco - the facts behind how Google messed up and missed on results. ( Transcript )

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[Muthukali]

North Korea threatens South over propaganda balloons

By Jack Kim and David Chance
SEOUL | Fri Oct 19, 2012 4:36am EDT

(Reuters) - Impoverished North Korea threatened on Friday to open fire on South Korea if it allows activists to go ahead with plans to drop anti-North leaflets on its territory, its most strident warning against its long-time foe in months.

North Korea, which is still technically at war with the South after their 1950-53 conflict ended in merely a truce, often uses shrill rhetoric denouncing its rich, capitalist neighbor and threatening all-out war.

A looming presidential election in the South and plans to deploy longer-range missiles by the government in Seoul have angered the North and prompted an escalation of belligerent commentaries from Pyongyang.

"We had similar threats last year and they did not stop us before and this is not going to stop us this time," said Pak Sang-hak, a North Korean exile who defected to the South 12 years ago.

He is the leader of a coalition of groups of North Korean exiles and human rights activists who plan to launch giant balloons containing 200,000 leaflets criticizing North Korea's government for the second year running.

Some of the leaflets, printed on plastic bags, will contain $1 bills. As well as the dollars, the bags themselves are said to be prized by North Koreans, many of whom often lack daily necessities.

South Korea's defense minister told parliament that its military would retaliate in the event of any attack.

South Korea's military has come under pressure after it failed to detect a North Korean soldier walking across the world's most heavily armed border until he knocked on the doors of soldiers' barracks.

"If (a North Korean strike) were to happen, there would be a perfect response against the source of the attack," Kim Kwan-jin told a parliamentary committee.

North Korea shelled a South Korean island almost two years ago, causing civilian deaths. It was also widely blamed for sinking a South Korean navy ship, although it denied responsibility.

North Korea said that if the leaflets were dropped on Monday, a "merciless military strike by the Western Front will be put into practice without warning", according to state news agency KCNA.

It said it would target a tourist area at the border city of Paju a few miles from the demilitarized zone that separates the two countries, the most specific threat in months.

"The KPA (Korean People's Army) never makes any empty talk," KCNA quoted military commanders as saying.

(Reporting by David Chance and Jack Kim; Editing by Nick Macfie)

 

[Muthukali]

China braces for miserable earnings season (2:04)

Oct. 19 - Grim results are expected from a raft of Chinese companies next week, possibly unnerving investors anxious for signs of an upturn in the Chinese economy. Tara Joseph reports.

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Reuters Today: Fresh hope in Europe, red faces at Google (5:47)

Oct. 19 - European leaders hammer out a deal on the banking union after late night talks. And Google has some explaining to do after it accidentally releases weak earnings numbers earlier than scheduled.

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Market Pulse: Devil in the detail for euro zone bank deal (4:39)
Oct. 19 - Europe's deal on banking union raises as many questions as it answers, but next week should see lenders post improved earnings, says Reuters European Banking Correspondent Steve Slater.

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Stocks pull back most in four months (2:12)
Oct. 19 - Summary of business headlines: Honeywell, GE sales fall short of forecasts; McDonald's sees worst sales growth in nine years; Existing home sales fall in September; Jobless rate falls in most states. Jeanne Yurman reports. ( Transcript )

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[Muthukali]

Asian shares fall after disappointing U.S. earnings

By Chikako Mogi
TOKYO | Sun Oct 21, 2012 11:46pm EDT

(Reuters) - Asian shares fell on Monday as lackluster earnings from leading U.S. companies and a sharp drop in Japan's exports, a key driver of the world's third-biggest economy, dented risk appetites and prompted investors to take profits on recent gains.

U.S. stocks had their worst day since late June on Friday, following disappointing results from Dow components General Electric (GE.N) and McDonald's (MCD.N), both barometers of the overall economy's health.

The MSCI index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.6 percent, led by a 0.8 percent decline in South Korean shares .KS11. Australian shares AXJO. followed with a drop of 0.7 percent on worries about metals demand in China, Europe's debt woes and weak U.S. earnings. Hong Kong shares .HSI, which touched a seven-month high last week, held steady.

Analysts said the drop in U.S. equities provided a good excuse for profit-taking in Asian stock markets, many of which had rallied to multi-month highs recently on new global central bank easing and the European Central Bank's plan to buy bonds of struggling euro zone countries that ask for aid.

"Profit-taking is overshadowing buying because any forward momentum has been exhausted," Oh Tae-dong, an analyst at Taurus Securities in Seoul wrote in a note to investors. He said he expects the Korea Composite Stock Price Index to hover around current levels for the time being.

The Korea's index was still up around 10 percent from lows hit in late July. The index hit a 5-month high in September.

Australian shares scaled a 15-month high last week and the benchmark index was up nearly 6 percent since a low on September 5.

"After a rally of several weeks, buying tends to run out of steam while profit takers become more trigger happy," said CMC markets analyst Ric Spooner.

Japan's Nikkei average .N225 slipped 0.5 percent from Friday's three-week closing high. .T

The dollar was steady around 79.28 yen but capped at its 200-day moving average around 79.40 after reaching a two-month high of 79.47 on Thursday.

Data on Monday showed Japan's exports in September tumbled at their sharpest on-year pace since the February 2011 earthquake, while manufacturers' mood hit its lowest since early 2010.

The reports reinforced concerns that Japan may slide back into recession as sales to China and Europe sag amid the global slowdown and domestic demand, led by rebuilding from last year's disaster, loses momentum.

While global growth worries have raised concerns about weak demand from China, a Reuters poll showed that the world's second-largest economy could stage a tepid economic rebound in the fourth quarter on higher public infrastructure spending, though growth will remain lethargic through 2013.

U.S. crude erased earlier losses to inch up 0.2 percent to $90.20 a barrel and Brent also edged up 0.2 percent to $110.32. <O/R>

Weaker equities weighed on Asian credit markets, pushing out the spread on the iTraxx Asia ex-Japan investment-grade index wider by 4 basis points.

MIXED SIGNALS IN EUROPE
The euro was resilient despite mixed signals from the euro zone over the progress of its three-year debt crisis, trading up 0.3 percent at $1.3046.

European shares snapped a four-day winning streak on Friday after disagreements among European Union leaders over how to help the region's debt-ridden banks hit financial stocks.

German Chancellor Angela Merkel raised new hurdles on Friday to using the euro zone's rescue fund to inject capital directly into ailing banks from next year, limiting the impact of a key agreement by European Union leaders on Thursday to establish a single banking supervisor from 2013.

Spain and Greece were still expected to get aid, with euro zone officials seeing a November 12 finance ministers' meeting as the next potential date for such decisions. Improving investor confidence was evident in government bond yields for highly-indebted Italy and Spain, which tumbled on Friday to multi-month lows after successful debt sales in both countries.

Some indicators were more cautious as investor focus turned to the corporate earnings seasons now under way in the United States.

The CBOE Volatility index .VIX, a gauge of expected volatility in the S&P, jumped 13.5 percent to close at 17.06 on Friday. It hit a five-month high earlier on Friday.

Spot gold recovered from a fresh six-week low of $1,713.39 an ounce hit earlier, and last traded up 0.2 percent at $1,723.09 on bargain hunting. <GOL/>

Hedge funds and other big speculators have cut their bullish bets on U.S. commodities to the lowest levels since the end of August, with funds mostly bailing out of gold after its repeated failure to breach the $1,800-an-ounce mark.

(Additional reporting by Somang Yang in Seoul and Victoria Thieberger in Melbourne; Editing by Richard Borsuk)