European stocks up on Fed hopes but Asia slides (AP)

By GABRIELE STEINHAUSER, AP Business Writer Gabriele Steinhauser, Ap Business Writer – 2 hrs 17 mins ago

BRUSSELS – European stocks held on to small gains Wednesday, shrugging off a credit downgrade of Japan that weighed on Asian markets, as investors hoped that the Federal Reserve will this week announce more stimulus for the U.S. economy.

Markets are expected to fluctuate ahead of Friday's speech by Fed Chairman Ben Bernanke at an economics conference in Jackson Hole, Wyo.

Hopes that Bernanke will signal new action to kick start the struggling U.S. economy helped lift most major markets Monday and Tuesday, in spite of disappointing indicators on both sides of the Atlantic, and appeared to persevere in morning trading in Europe.

Britain's FTSE 100 rose 0.4 percent to 5,148. Germany's DAX was 1.1 percent higher at 5,590 and France's CAC-40 rose 1 percent to 3,114.

Wall Street, however, appeared to be headed lower, after recording big gains Tuesday. Dow Jones industrial futures and S&P 500 futures were down 0.8 percent at 11,075 and 1,152 respectively.

That followed losses on most major Asian markets, as well as declining oil prices, underlining investors' reluctance to commit to assets that could quickly lose value if the global economy heads for another downturn.

"If Bernanke does not pull a rabbit out of the hat at Jackson Hole on Friday risk trades could look vulnerable once again," warned analysts at Credit Agricole.

Fresh data out of the eurozone indicated that businesses are already preparing for potential troubles.

Germany's closely watched Ifo index of business optimism for fell more than expected in another negative signal about Europe's largest economy. The index fell to 108.7 for August from 112.9 in July. Market analysts had expected a smaller drop to 111.0.

"August's drop in Ifo business confidence adds to the growing evidence that the German economic recovery has faltered," analysts at Capital Economics wrote in a note, adding that a slowdown for the eurozone's growth engine is set to hurt other members of the currency union that are still fighting to pull themselves out of crisis.

In Asia, Japan's Nikkei 225 index fell 1.1 percent to close at 8,639.61 after opening higher early Wednesday.

Sentiment was dented after Moody's Investors Service downgraded Japan's credit rating to Aa3 from Aa2, citing weak growth prospects for the world's No. 3 economy, massive government debt and constant political uncertainty. The new rating is three notches below Moody's top Aaa rating.

The downgrade, which puts Moody's rating in line with other major credit rating agencies, is the latest blow for Japan after its economy remained mired in recession in the second quarter due to tumbling factory production and exports following the March 11 earthquake and tsunami.

South Korea's Kospi dropped 1.2 percent to 1,754.78. Hong Kong's Hang Seng tumbled 2.1 percent to 19,466.79.

Australia's S&P/ASX 200 fell 0.1 percent to 4,167.60 after spending much of the session in positive territory. Markets in Singapore, Taiwan and Indonesia also fell.

Mainland Chinese shares were mixed with the benchmark Shanghai Composite Index falling 0.5 percent to 2,541.09 while the Shenzhen Composite Index edged 0.1 percent higher to 1,144.74.

In commodities markets, benchmark oil for October delivery was down 16 cents to $85.28 a barrel in electronic trading on the New York Mercantile Exchange. In London, Brent crude for October delivery fell 27 cents to $109.04 on the ICE Futures exchange.

The euro rose, meanwhile, to $1.444 from $1.442 in late trading Tuesday in New York. The dollar fell to 76.54 yen from 76.66 yen.

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Pamela Sampson in Bangkok contributed to this story.

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Japan Stocks Rise First Day in Five as U.S. Economic Data Boosts Exporters - Bloomberg

Canon stocks rise. Photographer: Toshiyuki Aizawa/Bloomberg

Aug. 11 (Bloomberg) -- Robert Howe, chief executive officer of hedge fund manager Geomatrix (HK) Ltd., talks about his investment strategy for Asian stocks. Howe also discusses Federal Reserve monetary policy and Europe's sovereign debt crisis. He speaks with Rishaad Salamat, Susan Li and Phillip Yin on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

Aug. 10 (Bloomberg) -- Erwin Sanft, head of China and Hong Kong research at BNP Paribas SA, talks about global stocks and economies. Sanft, who also discusses Federal Reserve monetary policy and China's currency policy, speaks in Hong Kong with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Japanese stocks rose for the first time in five days as exporters climbed on speculation the U.S. Federal Reserve will announce additional measures to shore up the recovery in the world’s biggest economy.

Canon Inc. (7751), a camera maker that gets about a quarter of its sales in the Americas, gained 3 percent. Nintendo Co., a gamemaker that has lost 45 percent this year, jumped on speculation the shares have been oversold. Inpex Corp., Japan’s No. 1 energy explorer, gained 2.9 percent after oil prices rose.

The Nikkei 225 (NKY) Stock Average rose 1.2 percent to 8,733.01 at the 3 p.m. close of trading in Tokyo. The gauge snapped its longest losing streak since March amid optimism Fed Chairman Ben S. Bernanke will announce a plan to stimulate the economy when he speaks on Aug. 26 at a meeting of central bankers in Jackson Hole, Wyoming. At last year’s meeting, Bernanke sparked a rally in equities by signaling the Fed would buy more bonds -- a strategy known as QE2 -- to help prop up asset prices.

Bernanke “may signal some kind of measure that’s positive for stocks, even if he doesn’t go as far as QE3,” said Masatsugu Okeya, a fund manager at Chiba-Gin Asset Management Co. “The market has already priced in most of the negative news during the recent decline.”

The Topix index rose 1 percent to 750.39 after yesterday falling to the lowest level since March 2009. The gauge has lost about 12 percent this month amid concern U.S. growth is sputtering and Europe’s debt crisis will damage the banking system, damping demand in two of Japan’s biggest export markets. The decline has cut the price of shares on the index to 0.89 times book value, the lowest since March 2009.

“Stocks are likely to be bought as valuations and technical patterns indicate they’ve been oversold,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. “Risk aversion came to a halt in the U.S. and European markets yesterday.”

Futures on the Standard & Poor’s 500 Index climbed 1.2 percent today. The index closed little changed yesterday in New York, paring gains in the last 15 minutes of trading as Goldman Sachs Group Inc. plunged on a report that Chief Executive Officer Lloyd Blankfein hired a defense attorney.

Japanese exporters to the U.S. advanced. Canon, the world’s biggest camera-maker, rose 3 percent to 3,600 yen. Toyota Motor Corp. (7203), which counts North America as its biggest market, climbed 2.3 percent to 2,763 yen. The automaker also rose after saying it would collaborate with Ford Motor Co. to develop a hybrid system for pickup trucks.

Nintendo gained 8.4 percent to 13,100 yen. The world’s biggest gamemaker rebounded after the share’s 50-day moving average fell to the lowest level since January 2006.

“Nintendo’s bounce is representative of the technical rebound in the market as a whole,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “There’s a sense that investors are done unloading shares after one piece of bad news after another.”

Utilities rose after Finance Minister Yoshihiko Noda, a candidate to replace Japan’s Prime Minister Naoto Kan, said the country may not be able to do without nuclear power. Kansai Electric Power, the country’s second-largest utility, gained 2.8 percent to 1,409 yen. Chubu Electric Power Co., the third biggest, advanced 1.9 percent to 1,487 yen.

Although Japan should reduce its dependence on nuclear power, the country needs to “‘carefully examine’’ whether it’s possible to meet its energy needs without it, Noda said today in Tokyo. Kan, who said he will step down as early as Aug. 26 if key legislation is passed, has said atomic power should be phased out following the worst nuclear disaster since Chernobyl.

Japan’s power companies increased spending on fuels by 1 trillion yen ($13 billion) in the three months ended June 30, as they increased thermal generation to offset closures of nuclear plants, national broadcaster NHK reported this month.

Energy companies advanced after crude prices gained for a second day as investors bet on increased demand in the U.S., the world’s biggest consumer of the fuel. Inpex Corp (1605) gained 2.9 to 469,500 yen. Smaller Japan Drilling Co. rose 2.1 percent to 2,602 yen.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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Euro Declines as Stocks Pare Gains; Yen Tumbles on Concern Japan Will Act - Bloomberg

The euro fell against the majority of its most-traded counterparts, erasing earlier advances, as stocks fluctuated, reducing demand for higher-yielding assets.

The yen slid from almost its postwar record high versus the dollar after Japanese Finance Minister Yoshihiko Noda said he’s ready to take decisive action to stem its strength. The dollar fell earlier amid bets Federal Reserve Chairman Ben S. Bernanke will signal at an Aug. 26 conference in Jackson Hole, Wyoming, the Fed will take further steps to boost the U.S. economy.

“Everyone is focusing on equities and taking their cues from that,” said Andrew Cox, a New-York based currency strategist at Citigroup Inc. “The euro has traded in a very tight range, and we don’t see a catalyst for that to change, at least before Friday.”

Europe’s 17-nation currency slipped 0.2 percent to $1.4374 at 3:05 p.m. in New York, from $1.4397 on Aug. 19. It earlier appreciated as much as 0.3 percent. The yen fell 0.3 percent to 76.74 per dollar, after reaching a post-World War II high of 75.95 Aug. 19. The Japanese currency declined 0.1 percent to 110.31 per euro.

Switzerland’s franc fell versus most major counterparts on speculation the country’s central bank will take move further to curb its gains. New Zealand’s dollar and Sweden’s krona gained against the euro, yen and franc.

The Standard & Poor’s 500 Index was up 0.2 percent after rising as much as 2 percent and falling 0.2 percent.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major trade partners, rose 0.1 percent to 74.072, from 74.009 on Aug. 19.

Bernanke’s scheduled appearance at the Kansas City Fed’s annual economic conference in Jackson Hole comes as U.S. manufacturing weakens, consumer confidence tumbles and the unemployment rate holds above 9 percent.

At last year’s event, he foreshadowed a second round of asset purchases under quantitative easing to improve the economy. The central bank bought $600 billion in Treasuries from November through June.

“Most of the focus today and probably this week is on what Bernanke will and won’t say on Friday,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. “Bernanke is likely to point to all the tools they have in their toolbox. If he does that, it might prove negative for the U.S. dollar.”

The euro also declined as German Chancellor Angela Merkel reiterated her opposition to issuing euro-area bonds as a way to help solve Europe’s sovereign debt crisis, saying yesterday she won’t let financial markets dictate policy.

Investor calls for euro bonds intensified last week as concern about the debt crisis and a slowing global economy drove down European stocks. The Stoxx Europe 600 dropped to 223.13 on Aug. 19, the least since July 2009.

The premium European banks pay to borrow in dollars through the swaps market increased in a sign lenders may be facing mounting pressure to raise funds in the U.S. currency. It last decreased on Aug. 15.

The cost of converting euro-based payments into dollars, as measured by the one-year cross-currency basis swap, fell one basis point, or 0.01 percentage point, to 49.5 basis points below the euro interbank offered rate, or Euribor, indicating a higher premium to buy the greenback. Basis swaps allow investors to borrow in one currency and simultaneously lend in another.

Japan’s Noda told reporters in Tokyo today he’s become “more concerned about the worsening of the yen’s one-sided movements.” The government will take “bold actions if necessary and won’t rule out any possible options,” he said.

Japan last intervened in the currency market, selling yen in an effort to halt its climb, on Aug. 4. That drove the currency down as much as 4.1 percent against the greenback. It has since appreciated 2.8 percent.

“We’ve had further comments by Noda and other Japanese officials indicating a lack of comfort with yen strength,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $26 trillion in assets under administration. “Renewed jawboning has contributed to yen weakness.”

The franc weakened amid speculation the Swiss National Bank will introduce new measures to damp demand for the nation’s currency. The SNB cut borrowing costs to zero earlier this month, increased bank sight deposits almost sevenfold and left the door open for additional measures.

The franc declined 0.5 percent to 1.1355 per euro and was 0.6 percent weaker at 79.01 centimes per dollar.

Most Swiss support intervention by their central bank to curb gains in the franc, the newspaper SonntagsZeitung reported yesterday. The newspaper also said, without naming sources, the Swiss Cabinet expects the SNB to set an exchange-rate target of at least 1.2 francs per euro.

SNB spokesman Walter Meier declined to comment on whether the central bank had intervened.

The franc advanced 10 percent developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen rose 4.9 percent and the dollar is down 2.1 percent.

The franc and yen tend to strengthen during periods of financial turmoil because their export-reliant economies don’t need foreign capital to balance current accounts, the broadest measure of trade.

New Zealand’s dollar strengthened 0.9 percent to 82.58 U.S. cents, and the Swedish krona appreciated 0.4 percent to 6.3630 per U.S. dollar.

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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Stocks rise for third day after acquisition flurry (AP)

NEW YORK – The Dow Jones industrial average notched a three-day win streak Monday for the first time in six weeks. A $19 billion corporate buying spree and encouraging economic news from Japan sent the Dow up 213 points and erased its losses from last week.

The return of what's called "Merger Monday" on Wall Street made investors more optimistic about the future. So did a report that Japan's economy shrank less than feared after the earthquake and tsunami there on March 11. That helped ease worries that the U.S. economy may slide into another recession.

The Dow rose 213.88 points, or 1.9 percent to 11,482.90. It has gained 763 points since Thursday. That's the best three-day point gain since it rose 927 in November 2008, during the depths of the financial crisis. The Dow is also up 7.1 percent over the three days, the biggest percentage gain since it rose 9.5 percent the first three days of the bull market in March 2009.

The Standard & Poor's 500 index rose 25.68, or 2.2 percent, to 1,204.49. The Nasdaq composite index rose 47.22, or 1.9 percent, to 2,555.20.

Markets may have stabilized the last three days, but financial analysts warned investors not to assume that stocks have fully settled down after last week's swings. The Dow rose or fell by at least 400 points in four straight days for the first time. The first downgrade of the U.S. credit rating triggered the volatility. It was worsened by concerns that Europe's debt problems are worsening and that the U.S. economy is weakening.

"You might have these moments of quiet, but the debt crisis in Europe did not go away," said John Hailer, chief executive for the U.S. and Asia of Natixis Global Asset Management. "Our issues with the debt, with what our tax policy is going to be going forward, our unemployment did not go away."

"We are probably going to have to look at some very different levels of volatility than what a lot of investors grew up with over the last 25 to 30 years," he said.

A period of relative stability has been common in past volatile markets. In 2008, stocks plunged between mid-September and mid-November. From mid-November until the beginning of January 2009, the Dow was in a lull of sorts. It ratcheted up and down, mostly in the high 8,000 range. But in early January 2009, it began to plunge again and finally hit bottom at 6,547 on March 9.

Despite its three-day gain, the Dow remains down 9.8 percent since its most recent high on July 21 and down 10.4 percent since its 2011 high set on April 29.

More swings could come this week. Leaders of France and Germany meet Tuesday to discuss Europe's debt problems. Spain and other countries have borrowed so much that they may need help to repay their bills. Investors on Tuesday will get an update on how Spain's economy did during the second quarter.

Corporate deals dominated the news, as companies followed a years-long practice of announcing acquisitions on a Monday. The biggest was Google Inc.'s $12.5 billion cash purchase of wireless phone maker Motorola Mobility Holdings Inc. It is also the biggest acquisition in Google's history. No. 2 was its $3.2 billion purchase of DoubleClick in 2008. Motorola Mobility's stock jumped percent 55.8 percent. Google fell 1.2 percent.

Among other deals: Time Warner Cable Inc. said it will pay $3 billion in cash for Insight Communications Co., which has more than 750,000 cable customers in the Midwest. Agribusiness conglomerate Cargill said it will buy animal nutrition company Provimi of the Netherlands for $2.16 billion. And in the energy industry, offshore driller Transocean Ltd. said it will buy Aker Drilling of Norway for $1.43 billion in cash.

Companies across the United States have accumulated a record amount of cash since the recession ended. They have increased their cash reserves every quarter for more than two years. Those in the S&P 500 index had a total of $963.3 billion at the end of March, according to the most recent data from Standard & Poor's.

Investors have been waiting for companies to use some of that cash on acquisitions, dividend increases and stock buybacks. Many market strategists believe that companies are more confident about the future if they're willing to buy other businesses. So a series of acquisition announcements tends to send stocks higher.

The growing cash hoard has been the result of strong profits. Companies have kept costs low by being slow to hire. Revenue, meanwhile, is growing, particularly from overseas customers. For the 460 companies in the S&P 500 that have reported second-quarter results, earnings were up 12 percent from a year ago.

It was the busiest day for acquisitions since July 11, when Express Scripts said it would buy Medco Health Solutions for $29.1 billion in a combination of the country's largest pharmacy benefits managers. The total value of deals targeting U.S. companies has climbed to $771 billion this year, according to Dealogic. That's up 55 percent from $498 billion at the same point last year.

Some companies are looking to pare back. Bank of America Corp. said it will sell its Canadian credit-card business to TD Bank Group. The bank will also get out of the credit card business in Britain and Ireland. The deals follow others that Bank of America made to move out of foreign credit cards, and they should help the company improve its balance sheet

Bank of America rose 7.9 percent, part of a rally for the financial industry. Financial stocks in the S&P 500 rose 3.2 percent as a group.

Energy stocks in the index rose 3.4 percent after crude oil climbed $2.50 per barrel to settle at $87.88.

Asian and European markets rose earlier after Japan said its economy shrank at just a 1.3 percent annual rate from April through June. That was less than half the drop that economists expected following the earthquake, tsunami and nuclear crisis that struck the country in March.

Still, investors have more reason to worry about the weak U.S. economy.

Manufacturers in New York told the Federal Reserve they're increasingly pessimistic about growth. Manufacturing has been one of the strongest parts of the economy since the recession ended in 2009, but growth began to slow in March. Manufacturing nationwide barely grew in July.

Cosmetics company Estee Lauder Cos. fell 6.5 percent after it forecast earnings for the upcoming year that were below Wall Street's expectations. It also said its net income rose 72 percent last quarter on strong sales growth to China, Russia and the Middle East.

Lowe's Cos., the second-largest home improvement retailer, rose 0.9 percent after it said its net income was roughly flat last quarter on a 1 percent rise in revenue.

More than 10 stocks rose for every one that fell on the New York Stock Exchange. Trading volume at 4.5 billion shares was below the 9 billion it reached last Monday and Tuesday. Volume was close to its average over the last year of 4.3 billion shares.

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Stocks recover as calm descends, Google's big deal (AP)

MILAN – Global stocks continued their rebound Monday on hopes that the recent sharp volatility in the markets has run its course following a run of stronger than anticipated economic data and after Google announced a $12.5 billion deal.

Though concerns remain over the state of the global economy and Europe's debt crisis, many investors think the recent sell-off has been overdone and are snapping up potential bargains.

"Some stability appears to be returning to markets .... but businesses remain wary that the U.S. government isn't doing enough to arrest its massive budget deficit and that European governments aren't doing enough to avert financial contagion from infecting the banking system," said Sal Guatieri, an analyst at BMO Capital Markets.

The calmer mood has been helped by last Friday's better than expected U.S. retail sales figures for July and news earlier that Japan contracted by an annualized rate of 1.3 percent in the second quarter of the year after the impact of a devastating earthquake and tsunami. The consensus in the markets was that Japan's economy would have shrunk by at least double that rate.

Sentiment in the markets was also boosted by the news that Google Inc. is buying cell phone maker Motorola Mobility Holdings Inc. for $12.5 billion in cash. It's by far Google's biggest acquisition and a sign the online search leader is serious about expanding beyond its core Internet business and setting the agenda in the fast-growing mobile market.

"After the last fortnight, it is a breath of fresh air to be talking about something other than sovereign debt issues," said Will Hedden, sales trader at IG Index.

In Europe, London's FTSE 100 closed up 0.6 percent at 5,350.58, while Germany's DAX rose 0.4 percent to 6,022.24. The CAC-40 in France ended 0.8 percent higher at 3,239.06.

In the U.S., the Dow Jones industrial average was up 0.9 percent at 11,372 while the broader Standard & Poor's 500 index rose 1.1 percent to 1,192.

Europe's debt crisis will likely return to the forefront of investors' thoughts Tuesday, when French leader Nicolas Sarkozy and German Chancellor Angela Merkel meet, and second-quarter eurozone growth figures are published.

"The Franco-German summit on Tuesday in Paris will be a major focus for financial markets this week, especially coming so shortly after what has been a very tumultuous week for France in financial markets," said Jan Dubsky, euro area economist at the Royal Bank of Scotland.

The meeting is a day after the European Central Bank revealed that it spent euro22 billion ($32 billion) last week buying government bonds. Analysts think a large chunk of the money splashed out was spent driving down the bond interest yields of Spain and Italy, who had seen their borrowing costs ratchet up sharply in the preceding weeks.

The ECB's purchases were the biggest weekly amount the bank has made under the emergency measure, exceeding the euro16.5 billion it laid out when it started buying Greek government debt in May, 2010.

The improving appetite for risk, evidenced by the more benign stock market conditions, was evident in currency markets too, with the euro up 1.1 percent at $1.4439.

And notably, the Swiss franc continued to fall on speculation that the Swiss National Bank will peg the currency to the euro. Swiss officials have hinted that further action could be taken, after liquidity measures, to correct the currency's "massive overvaluation" in recent trading. By late afternoon, the euro was 0.8 percent higher on the day at 1.1281 francs, having traded even higher earlier in the session.

In Asia, stock markets rose Monday as data showed the economy of earthquake-battered Japan shrank less than expected.

Japan's Nikkei 225 index closed up 1.4 percent at 9,086.41 while Hong Kong's Hang Seng index shot up 3.3 percent to 20,260.10.

Mainland Chinese shares gained for a fifth trading day on expectations the government announce new measures to support growth. The Shanghai Composite Index added 1.3 percent to 2,626.77 and the Shenzhen Composite Index rose 1.4 percent to 1,175.41.

In the oil markets, prices recovered alongside equities. The main New York contract was up $1.69 at $87.07 a barrel.

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Pamela Sampson contributed from Bangkok.

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