Nov. 4 – Jim Rogers tells Reuters the Greek bailout plan merely pushes the debt crisis into the future, and could cause spark an end to the euro zone in five years.
News and Views
U.S. employment climbed in October at the slowest pace in four months, illustrating the “frustratingly slow” progress cited by Federal Reserve Chairman Ben S. Bernanke this week.
The 80,000 increase in payrolls was less than forecast and followed gains in the prior two months that were revised up by 102,000, Labor Department figures showed today in Washington. The unemployment rate fell to a six-month low of 9 percent from 9.1 percent even as the labor force expanded. http://www.bloomberg.com/news/2011-11-04/u-s-payrolls-increased-by-80-000-in-october-as-jobless-rate-falls-to-9-.html
World leaders expressed impatience and irritation with Europe’s inability to defeat its two-year financial crisis as they urged swift resolution for the sake of the global economy.
With Greece’s debt-ridden government at risk of collapsing as soon as today, Group of 20 chiefs meeting in Cannes, France, yesterday pushed European authorities to flesh out and enact a week-old rescue plan that has already shown signs of unraveling.
“We are grappling with a lack of confidence in markets that leaders will act,” Australian Prime Minister Julia Gillard said in the French seaside resort. “It is therefore very important for leaders to act.”
Such calls — echoed by the U.S., Britain, China and Russia — highlight international disappointment that Europe missed the G-20’s deadline of this week to deliver a fix for its fiscal woes. German Chancellor Angela Merkel and French President Nicolas Sarkozy sought to regain the initiative by keeping aid for Greece on ice and demanding Italy accelerate austerity. http://www.bloomberg.com/news/2011-11-03/g-20-leaders-urge-europe-to-quell-debt-crisis-as-greece-government-teeters.html
Greece has dropped its plans to hold a controversial referendum on the country’s euro zone membership, which had threatened to plunge the bloc into a crisis, the country’s finance ministry said on Friday.
Finance Minister Evangelos Venizelos made the pledge in telephone calls made to Eurogroup Chairman Jean-Claude Juncker, European Commission’s Economy and Monetary Affairs chief Olli Rehn and German Finance Minister Wolfgang Schaeuble, the Greek finance ministry said in a statement.
“Venizelos informed his interlocutors about the decision to not hold a referendum,” the statement said. http://www.reuters.com/article/2011/11/04/us-greece-referendum-idUSTRE79U5PQ20111104
Indexes
European stocks pared their gains after Germany’s September manufacturing orders unexpectedly fell, sparking concern that the region’s economic growth is faltering.
The Stoxx Europe 600 Index rose 0.2 percent to 242.61 at 11:14 a.m. in London, after earlier rising as much as 0.6 percent on Greece’s cancellation of a referendum on euro-area’s bailout package. The gauge has retreated 2.6 percent so far this week as the referendum call stunned investors. The MSCI Asia Pacific Index jumped 2.5 percent. Standard & Poor’s 500 Index futures dropped 0.2 percent before a U.S. jobs report.
German factory orders unexpectedly plunged in September as demand from the euro region slumped, adding to signs the region’s debt crisis is damping growth in Europe’s largest economy. http://www.bloomberg.com/news/2011-11-04/stock-index-futures-in-europe-advance-hermes-commerzbank-may-be-active.html
Asian stocks rose for the first time in five days as Greece scrapped a plan to hold a referendum on a bailout package and the European Central Bank cut interest rates, reducing concern the debt crisis will spur a credit crunch.
HSBC Holdings Plc (HSBA), Europe’s No.1 lender by market value, climbed 3.2 percent in Hong Kong. Komatsu Ltd. (6301), Asia’s largest maker of construction equipment by market value, surged 6.9 percent after a report showed orders at American factories increased in September. China Petroleum & Chemical Corp, China’s biggest oil refining company by sales, led the nation’s energy companies higher on speculation the government may allow the mainland’s fuel producers to adjust prices on their own.http://www.bloomberg.com/news/2011-11-04/asian-stocks-climb-for-first-time-in-five-days-on-europe-rate-cut-greece.html
Currencies
Japan’s slide back toward deflation means bond investors are getting some of the highest returns among developed nations even with the world’s lowest yields.
Annual inflation slowed to zero in September, meaning investors in the nation’s benchmark 10-year securities receive the full 0.99 percent yield. That’s the highest so-called real yield for any Group of Seven nation except Italy’s 2.79 percent.
The Bank of Japan cut its inflation forecast last week and said it would buy more government bonds to underpin an economic recovery being threatened by the yen’s surge to a postwar record. The government intervened on Oct. 31 to weaken the currency for the third time this year. With the Federal Reserve discussing more steps to spur its economy and Treasuries yielding less than U.S. inflation, Japan’s efforts may not curb the yen’s strength. http://www.bloomberg.com/news/2011-11-03/deflation-driving-up-real-yield-hampers-effort-to-weaken-yen-japan-credit.html
Canada’s dollar dropped for the first time in three days after a government report showed the jobless rate unexpectedly increased in October as the nation’s employers eliminated positions.
The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, extended its weekly decline on increased speculation that the Bank of Canada will lower borrowing costs.
“It’s a miss in a very meaningful way,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, in a telephone interview. “This is likely to contribute to some Canada lagging.” http://www.bloomberg.com/news/2011-11-04/canadian-dollar-drops-as-employers-unexpectedly-eliminated-jobs-in-october.html
Commodities
Wheat is heading for the biggest slump in three years as the second-largest harvest on record swells stockpiles, easing shortages that drove global food costs to an all-time high.
Prices that plunged 20 percent to $6.375 a bushel this year in Chicago will probably drop as low as $5.90 before the end of December, according to the median estimate of nine analysts and traders surveyed by Bloomberg. Supply in the 12 months ending June 30 will expand 5 percent to 684 million metric tons, boosting inventories to the highest in a decade, the London- based International Grains Council estimates.
Production is expanding after last year’s 47 percent price rise led farmers to plant more grain, while Russia and Ukraine recovered from drought that ruined crops. Cheaper wheat will reduce strains caused by rising corn and rice prices and add to pressure on United Nations-monitored food costs that have declined 9 percent from a record in February. http://www.bloomberg.com/news/2011-11-03/wheat-plunging-as-decade-high-stockpiles-ease-world-shortages-commodities.html
Gold prices in euros will rise to a record as Europe’s sovereign-debt crisis erodes the appeal of the 17-nation currency and boosts demand for the precious metal as an alternative asset, according to economist Dennis Gartman.
Gold has had an inverse relationship to the euro during the past week, as the metal jumped 3.8 percent and the currency slid 2.6 percent. The euro, which has declined in three of the last four months, may fall below $1.30 from about $1.38 yesterday, Gartman said.
“The driving force in the gold market is the problems in the euro,” Gartman said in a telephone interview from Suffolk, Virginia, where he publishes his Gartman Letter. “Central banks in Europe and individuals will want to lower their euro holdings and buy gold since no one knows what is happening to the euro. The euro is heading towards parity once again.” http://www.bloomberg.com/news/2011-11-03/gartman-sees-gold-in-euros-at-record-as-currency-slides-chart-of-the-day.html
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