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10.11.2011 08:43

Stocks: Wednesday’s review

Asian stocks rose for the first time in three days as Italian Prime Minister Silvio Berlusconi’s offer to resign bolstered optimism Europe may find a way to contain its debt crisis, and China’s inflation rate eased. The sovereign-debt crisis has stirred political dramas across the region, with Berlusconi offering to resign just days after Greek Prime Minister George Papandreou agreed to step aside. Financial stocks were the biggest contributors to the MSCI Asia Pacific Index’s advance today as Chinese lenders in Hong Kong rallied after China reported inflation at the slowest pace in five months.

Japan’s Nikkei 225 (NKY) Stock Average rose 1.2 percent. South Korea’s Kospi Index added 0.2 percent. Australia’s S&P/ASX 200 advanced 1.2 percent. Hong Kong’s Hang Seng Index climbed 1.7 percent, while China’s Shanghai Composite Index gained 0.8 percent.

Industrial & Commercial Bank of China Ltd. led a rally among Chinese lenders in Hong Kong as the nation’s inflation rate moderated to 5.5 percent last month. China Construction Bank Corp., the second- largest, advanced 1.6 percent to HK$5.71. Agricultural Bank of China Ltd. rose 1.9 percent to HK$3.67.

Australian banks advanced after the nation’s home-loan approvals rose more than economists forecast in September, the sixth straight monthly gain, as more first-time buyers entered the market Westpac Banking Corp., Australia’s second-largest lender by market value, gained 1.3 percent. Australia and New Zealand Banking Group Ltd., the nation’s third-biggest lender, increased 0.8 percent to A$21.76. National Australia Bank Ltd. added 1.3 percent to A$25.76.

A gauge of energy companies led the advance among the 10 industry groups in the regional benchmark index crude oil traded near a three-month high. Copper futures rose for the first time in four days in London. BHP Billiton Ltd., the world’s biggest mining company, rose 1.5 percent, Cnooc Ltd., China’s biggest offshore oil producer, jumped 4 percent to HK$15.66 in Hong Kong. Glencore International Plc, the world’s largest commodities trader, increased 3.1 percent to HK$55.75.

European stocks dropped for the third day in four as Italian bond yields surged to their highest since the introduction of the euro and Italy’s credit-default swaps jumped to a record.

Italian bonds tumbled, pushing two-, five-, 10- and 30-year yields to euro-era records. The 10-year note yield climbed to 7.25 percent.

Berlusconi last night said he will step down as soon as parliament passes austerity measures. He had pledged to cut spending in a bid to convince investors that Italy can manage the euro area’s second-largest debt. The government has yet to write the austerity bill, said Mario Baldassarri, head of the Senate Finance Committee.

In Greece, Prime Minister George Papandreou’s talks on forming an interim government to avert the economy’s collapse dragged into a third day as a near-agreement with the biggest opposition party stalled on European Union demands for written commitments. The makeup of Greece’s new government is to be announced today, the Associated Press reported, citing a government official who it did not name.

China’s inflation slowed by the most in almost three years, giving officials more room to support growth as industrial production cools, a report today showed. Consumer prices rose 5.5 percent in October from a year earlier, the statistics bureau said. The measure declined 0.6 percentage points from September, its biggest slide since February 2009.

National benchmark indexes fell in all of the 18 western European markets. France’s CAC 40 Index and Germany’s DAX Index retreated 2.2 percent. The U.K.’s FTSE 100 Index lost 1.9 percent.

HSBC Holdings Plc, Europe’s largest bank, retreated 5.8. The bank said pretax profit at its investment bank led by Samir Assaf fell to about $1 billion in the third quarter from a year-earlier. Bad-loan provisions increased to $3.89 billion from $3.15 billion, mainly related to its U.S. unit, the bank said.

Bank shares fell 3.7 percent, among the biggest drops of the 19 industry groups in the Stoxx 600, as Greek and Italian lenders slid. Piraeus Bank SA retreated 6.3 percent to 25.3 euro cents. Alpha Bank AE sank 9 percent to 1.11 euros.

Dexia SA, the lender being broken up after running out of short-term funding, plunged 11 percent to 37.2 euro cents. The bank said shareholder equity shrank 84 percent after the nationalization of its Belgian bank unit and declines in the value of government bond holdings.

Mediaset SpA, the broadcaster controlled by Berlusconi, tumbled 12 percent to 2.21 euros after the premier offered to resign once parliament approves stability measures.

Admiral Group sank 26 percent to 887.5 pence for the biggest decline on the Stoxx 600 and the shares’ largest retreat since 2004. The U.K. car insurer that owns the website said full-year pretax profit will be toward the lower end of analysts’ estimates.

Deutsche Post, Europe’s biggest postal service, rallied 3.8 percent to 11.10 euros. The company lifted its full-year forecast as increasing express shipments in Asia and parcel volume from Internet retailing boosted third-quarter earnings. Earnings before interest and taxes in 2011 will exceed 2.4 billion euros, the company said. That compared with an earlier prediction for Ebit at the upper end of a 2.2 billion-euro to 2.4 billion-euro range.

U.S. stocks slumped, driving the Standard & Poor’s 500 Index to its biggest decline since August, amid concern that European leaders may be unable to keep the euro zone intact as Italian yields surged to a record. Investors propelled Italy’s 10-year bond yield to close at a euro-era high of 7.25 percent after the promised exit of Prime Minister Silvio Berlusconi failed to convince them that his country can slash Europe’s second-largest debt burden.

Dow 11,780.94 -389.24 -3.20%, Nasdaq 2,621.65 -105.84 -3.88%, S&P 500 1,229.10 -46.82 -3.67%

Morgan Stanley and Goldman Sachs Group Inc. dropped at least 8.2 percent, following losses in European lenders, after LCH Clearnet SA raised the extra charge it levies on clients for trading Italian government bonds and index-linked securities.

General Motors Co. tumbled 11 percent after abandoning its target for European results. The automaker, which hasn’t turned an annual profit in Europe in more than a decade, fell after rescinding its target for break- even results in the region. Europe operations lost $292 million before interest and taxes in the quarter. GM said it no longer expects to break even on an EBIT basis before restructuring costs in Europe, citing “deteriorating economic conditions.”

Adobe Systems Inc. sank 7.7 percent on plans to cut jobs as it lessens its focus on older products. The company plans to cut 750 jobs as it lessens its focus on older products. The reduction, mostly in North America and Europe, will cost $87 million to $94 million before taxes, the company said. After the costs, net income will be 30 cents to 38 cents a share, compared with a previous forecast of 41 cents to 50 cents.

Energy and raw material producers retreated as the dollar rose, reducing the appeal of commodities. Alcoa Inc. (AA), the largest U.S. aluminum producer, slid 5.4 percent to $10.20. Chevron Corp. fell 4.2 percent to $104.28.

One stock in the S&P 500 rose today, the lowest number since June 2010. Best Buy Co., the world’s largest consumer- electronics, advanced 1.4 percent to $27.22, gaining 2.9 percent in two days.

Market Focus

  • The Bank of Japan decided by a 7-2 majority vote to hold the interest rate at -0.10%
  • Earnings Season in U.S.: Major Reports of the Week
  • U.S. commercial crude oil inventories decreased by 4.7 million barrels from the previous week
  • Australian unemployment rate stable at 5.6% in June
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