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  1. #141
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    Post Worst quarter for UK, German, French stocks in 9 years

    (Reuters) - Shares in major European economies suffered their biggest quarterly loss in nine years, hit by concerns the global economy was slipping into recession and the euro zone debt crisis was deepening with Greece facing possible default.

    The steep sell-off this quarter, wiping $1.2 trillion off European share values, was sparked by an intensification in the euro zone sovereign debt crisis and concerns the United States could be heading for a recession.

    U.S. and German government bonds, however, were in demand as investors sought shelter in safe-haven assets.

    Karen Olney of UBS said European stock valuations may be cheap but investors would remain cautious until euro zone politicians can come up with a decisive plan to finally put to rest the bloc's debt crisis, now threatening Italy and Spain, its third and fourth largest economies.

    "Politicians tend to react better when the markets are falling than rising. If we don't get a solution imminently, we could have another leg down," said Olney, head of European thematic research at UBS.

    "In a rising market, they are not going to come up with a grand slam plan. If the markets are suffering again, they may be pushed to come up with a solution that we need. This is why some people consider Europe difficult to invest in, almost uninvestable at the moment."

    Among the worst to suffer in the recent sell-off was Germany's DAX finance/markets/index?symbol=de%21daxx">.GDAXI which had outperformed all other European markets in the first half of the year.

    The German blue-chip index, home to conglomerate Siemens (SIEGn.DE) and automakers Daimler (DAIGn.DE) and BMW (BMWG.DE), lost 25.4 percent in July-September, its worst quarterly performance since the third quarter of 2002.


    France's CAC 40 .FCHI, and Spain's IBEX 35 .IBEX also posted their biggest three-month fall since the third quarter of 2002, despite their regulators, along with those from Italy and Belgium, banning short selling of financial stocks starting on August 12.

    The CAC 40 fell 25.1 percent in July-September, with French bank Societe Generale (SOGN.PA) losing 51 percent over the same period -- its biggest quarterly loss ever.

    The IBEX 35 index, meanwhile, was off 17.5 percent, while Italy's FTSE MIB .FTMIB was down 26.5 percent.

    Britain's FTSE 100 .FTSE was down 13.7 percent, faring better than other major European markets but still posting its worst three-month performance in nine years.

    That compared with a 17.1 percent fall over the same period for the pan-regional STOXX Europe 600 .STOXX index, which was its biggest quarterly loss since the fourth quarter of 2008 after the global economy was sent into a tailspin following the collapse of Lehman Brothers.

    In terms of valuations, the DAX and the CAC 40 carried a 12-month forward price-to-earnings ratio of 8 and 7.7 respectively, slightly cheaper than the FTSE 100's 8.8 and the U.S. S&P 500's .SPX 10.9, data from Thomson Reuters Datastream showed.

    "You don't get a sustainable rally until either the growth outlook improves or you get substantial progress on the sovereign debt crisis. In the absence of either of those things, investors should remain cautious and defensive positioned," said Ronan Carr, European equity strategist at Morgan Stanley.

    Morgan Stanley was "overweight" telecoms .SXKP and healthcare .SXDP, and "underweight" banks .SX7P and industrials .SXNP.

    However, RBS analysts said both the DAX and the FTSE 100 looked hard done by, based on their index composition, with German auto stocks and UK oil stocks among the most attractive on a relative value basis.

  2. #142
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    Post Brent down in biggest quarterly drop since Q2 2010

    (Reuters) - Oil prices slumped on Friday on renewed global economic worries, pushing back Brent more than 10 percent this month for its biggest quarterly decline in five quarters.

    U.S. crude futures fared even worse, posting their weakest quarterly performance since the financial crisis of 2008 as a wobbly economy sparked more demand worries.

    Crude futures fell with a broad array of commodities, led by copper, which with U.S. equities tumbled to its worst quarter since 2008. <.

    In London, ICE crude for November delivery settled at $102.76 a barrel, dropping $1.19, or 1.14 percent, after touching a session low of $101.78.

    For the quarter, Brent crude fell $9.72, or 8.64 percent, the biggest percentage loss since the second quarter of 2010. For the month, front-month Brent dropped $12.09, or 10.53 percent, the biggest monthly decline since May 2010.

    U.S. November crude settled at $79.20 a barrel, falling $2.94, after dropping to an intraday low of $78.77.

    For the quarter, U.S. crude fell $16.22, or 17 percent, the biggest percentage loss since the fourth quarter of 2008. For the month, it dropped $9.61, or 10.82 percent, the biggest monthly decline since May 2010.

    Brent's premium against U.S. crude rose back to $23.56, after dropping to $21.81 on Thursday.


    The day's sell-off began after data showed that China's manufacturing sector contracted for a third consecutive month in September, adding to doubts about Europe's ability to solve its debt crisis.

    That drove investors to sell riskier assets such as equities and commodities. Trading was volatile on quarter-end booksquaring, traders said.

    The dollar rose while the euro sank, curbing risk sentiment across many commodities markets. <USD/> .DXY

    A gloomy economic outlook and weak demand in the United States have dragged markets down this quarter, while the expected return of oil exports from Libya, cut off by the civil war, added a bearish spin this month.

    "Declines in the stock market and the euro prompted much of today's weakness amidst reduced risk appetite," said Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois.

    Trading in Brent was more hectic than U.S. crude, reaching 701,000 contracts as of 3:45 p.m. EDT (1945 GMT), which was 33 percent above its 30-day average.

    U.S. crude volume hit nearly 599,000 contracts, down 5.3 percent from its 30-day average.


    Supply from all 12 members of the Organization of the Petroleum Exporting Countries is forecast to average 30.25 million barrels a day this month, up from 30.15 million in August, according to a Reuters survey. <OPEC/O>

    Libya's output has begun to recover after falling to almost nothing in the civil war, the survey found. The country exported one small crude cargo on September 25 and is reported to be sending some oil to refineries.

    "If the current positive reports from Libya are confirmed, then domestic production could reach 1.3 million barrels per day by the end of next year," JP Morgan said in a note.

    "On an annual average, this would lead to exports of around 0.6 mbd of light sweet crude, which together with rising Iraqi and non-OPEC output could lift supply by around 1.9 million bpd above today's levels."

  3. #143
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    Post Kodak denies bankruptcy plan but shares plummet

    (Reuters) Eastman Kodak Co shares lost more than half their value on Friday as the company hired a law firm well-known for bankruptcy cases, triggering speculation that the photography pioneer could file for bankruptcy.

    Kodak, which delivered the first consumer camera in 1888, denied it had a bankruptcy plan, saying it was committed to meeting its obligations and is still looking for ways to "monetize" its patent portfolio.

    Once synonymous with photography, Kodak has struggled with the move to digital cameras and failed to turn a profit since 2007. It has been exploring a sale of its digital imaging patents, worth an estimated $2 billion, and hired investment bank Lazard in July to explore options.

    Rochester, New York-based Kodak said it has "no intention of filing for bankruptcy," after its shares plunged as much as 68 percent to 54 cents before recovering slightly to close down 53.8 percent at 78 cents on the New York Stock Exchange.

    The company's market value plummeted to roughly $210 million on Friday, down from a lofty height of $31 billion in February 1997, as shown by regulatory filings. The cost to insure Kodak's debt with credit default swaps (CDS) surged on Friday as investors priced in greater bankruptcy risk.

    Kodak had already scared markets on Monday when it tapped a credit line but refused to divulge its cash position. The stock dived to a 38-year low that day.

    Then investors took fright again Friday after Bloomberg reported that potential buyers for its patent portfolio were cautious about going ahead with a bid as they could risk having Kodak creditors sue them after a bankruptcy filing.

    Mark Kaufman, an analyst at Rafferty Capital Markets, said that Kodak urgently needed to seal a patent deal.

    "I don't believe bankruptcy is inevitable. This is a pretty valuable portfolio, they should get a good price," he said. "They need to get this (sale) out of the way. They need to sell this portfolio, raise some type of cash."

    The company said in July that it hired Lazard to advise on strategic options for its patents -- increasingly seen as lucrative assets. Bankrupt Canadian company Nortel fetched $4.5 billion in a patent sale in June, also run by Lazard. Google Inc agreed in August to buy Motorola Mobility for $12.5 billion primarily for its patent portfolio.

    One expert -- Robert Miller, a professor at Villanova University School of Law -- said filing for bankruptcy may actually end up boosting the value of a patent sale.

    Even if the company holds a robust, public auction outside of bankruptcy, the headache of litigation still looms if Kodak goes bankrupt later, said Miller.

    Selling the assets as part of a bankruptcy court-supervised auction would solve that concern, Miller said.

    Kodak confirmed that it has hired Jones Day but did not explain why, beyond saying it was "not unusual for a company in transformation to explore all options."

    Investors for the company have been up in arms about everything from its share price decline to its management.

    One shareholder had asked the company's board on Thursday to start a sales process while others sharply criticized Chief Executive Antonio Perez.

    The company's board is not considering replacing Perez at this time, according to a story in the Wall Street Journal, which cited two people familiar with the matter.

    Kodak CDS costs rose to 70 percent Friday from 61 percent Thursday, data provider Markit said. That means it would cost $7.0 million in upfront payments, plus $500,000 a year to insure $10 million debt if Kodak debt for five years.

    "This is pretty expensive insurance at this point and the reason it's so expensive is that people believe there's a high likelihood of default," said Markit analyst Otis Casey.

  4. #144
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    Post Qatar Holdings to invest $1 billion in European Goldfields

    (Reuters) - Qatar's sovereign wealth fund will invest $1 billion in European Goldfields (EGUq.L) (EGU.TO) including $600 million to finance operations in Greece, where the London-based firm has a permit to mine gold, the fund's head said on Saturday.

    It was the second major investment in Greece by the Gulf state in two months. Qatar struck a deal in August to provide funding for a merger of two of the recession-hit country's largest banks.

    Greece, which is in dire need of private investment as its worst recession in four decades is seen extending into next year, has long sought to convince the wealthy emirate to invest in its private and public companies.

    Qatar Holdings will buy a 10 percent stake in European Goldfields from Greek building firm Ellaktor (HELr.AT) and has a call option to buy another 5 percent, CEO Ahmad al-Sayed said after a meeting between Greek and Qatari officials in Athens.

    "In total, we will invest in the company about $1 billion," Sayed told reporters.

    Sayed also said Qatar was "examining different opportunities in the country."

    Greece granted European Goldfields a long-awaited permit in July that allows it to mine for gold in the north of the country, a move set to turn the London-based firm into the European Union's largest primary gold producer.

    The European Goldfields deal was announced after Qatar's Emir Sheikh Hamad bin Khalifa al-Thani met Prime Minister George Papandreou in Athens on Saturday.

    "Qatar's investments show trust in the Greek economy," Papandreou told a news conference after the meeting.

    Qatar's investment in Greek banks in August will give it about 17 percent of the lender that will be created by the merger of Alpha Bank (ACBr.AT) and Eurobank (EFGr.AT).

    Paramount, a company controlled by Qatar, will own the stake after taking part in a 1.25 billion euro rights offer and fully taking up a 500 million euro convertible bond issue.

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    Post Nikkei drops 2.3 percent on European debt fears

    (Reuters) - The Nikkei average dropped 2.3 percent on Monday, as fears of slowing global growth and the spreading impact of Europe's credit woes encouraged investors to pull funds out of risk assets.

    Bank shares slipped after news that Greece will miss a deficit target set just months ago in a massive bailout package. Government draft budget figures released on Sunday showed that drastic steps taken to avert bankruptcy may not be enough.

    "The October-December quarter begins today, so there is hope for domestic fund buying, but right now the market's focus is Greece's problems and how Europeans will address the situation, as well as U.S. data this week that will show us more about the economy," said Fujio Ando, senior managing director at Chibagin Asset Management.

    The Bank of Japan's tankan survey released before the market open showed business sentiment turned positive in the third quarter as companies restored supply chains hit by the March earthquake, even as a strong yen and the euro zone debt crisis clouded the outlook.

    "The results show that the domestic economy is holding up even with the strong yen, and the biggest concerns are external, not internal, such as the impact of Europe's debt problems on global growth," said Yutaka Shiraki, senior strategist at Mitsubishi UFJ Morgan Stanley Securities.

    The Nikkei markets/index?symbol=jp%21n225">.N225 fell 2.3 percent to 8,503.88 by the midday break. The benchmark gained 1.6 percent last week but lost 2.8 percent for the month and 11.4 percent for the quarter, turning in its worst quarterly performance since June 2010.

    The broader Topix index finance/markets/index?symbol=jp%21ixj">.TOPX declined 2.7 percent on Monday to 740.46.


    U.S. investment bank Morgan Stanley (MS.N) plummeted on Friday on concerns about its exposure to European banks, leading financial shares lower, and that weighed on their counterparts in Japan.

    Mitsubishi UFJ Financial Group (8306.T) fell 4 percent to 340 yen and Sumitomo Mitsui Financial Group (8316.T) slipped 3.9 percent to 2,120 yen.

    Major Japanese producers of electric cables and wires extended their slide into Monday, led by Sumitomo Electric (5802.T), which was down 9.7 percent at 828 yen on more than twice its average 30-day volume, after Furukawa Electric (5801.T) agreed on Friday to a $200 million fine to settle investigations into price-fixing in the United States.

    Analysts said Sumitomo and Fujikura (5803.T), which are also under investigation by U.S. authorities, risk similar fines. Furukawa declined 6.6 percent to 199 yen while Fujikura was 4.3 percent lower at 246 yen.

    Shares of Mitsui OSK Lines (9104.T) slumped to their lowest since March 2003 after the shipping company slashed its first-half earnings outlook to a net loss of 17 billion yen ($221 million) from a profit of 1 billion yen. Rival Kawasaki Kisen (9107.T) fell 4.3 percent and Nippon Yusen (9101.T) dropped 5.2 percent.

    Softbank Corp (9984.T) rose 3.3 percent to 2,367 yen and was the heaviest-traded issue by turnover, after Jack Ma, CEO of China's e-commerce leader Alibaba, said he was keen on buying Yahoo Inc (YHOO.O). Softbank owns about 30 percent of Alibaba Group, and holds 42 percent in Yahoo Japan (4689.T), which is owned 35 percent by Yahoo.

    Promise Co (8574.T), a Japanese consumer lender, remained untraded as buy orders outnumbered sell offers after the company said on Friday that SMFG would launch a tender offer to buy the outstanding shares of Promise it does not already own for 780 yen each.

    Promise shares closed at 659 yen on Friday, 18 percent below the tender offer price. They were bid at 759 yen on Monday.

    Aiful (8515.T), a consumer lender affiliated with Mitsubishi UFJ Financial, rose 3.5 percent to 117 yen, while Acom (8572.T), a lender which had sought rescheduling of debt repayments, rose 6.5 percent to 1,598 yen.

    Volume was moderate, with 790 million shares traded on the Tokyo Stock Exchange's main board, suggesting the daily total could fall short of last Friday's 2 billion shares.

  6. #146
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    Post Euro hits 8-mth low as Greek woes deepen

    (Reuters) - The euro sank to an eight-month low against the dollar on Monday and is poised to fall further after the Greek government said the debt-ridden country will miss a deficit target set just months ago in a massive bailout package.

    Traders and analysts said that with Europe divided over the best cure for the debt crisis and with the possibility of a Greek default looming larger than ever, the euro was likely to grind lower in the coming days.

    "A Greek default is a sort of Pandora box no one wants to open. While some markets seem to have priced in such possibility, it looks like euro has still some way to go should it happen," said Teppei Ino, a currency analyst at the Bank of Tokyo-Mitsubishi UFJ.

    The euro dived as deep as $1.3323, from $1.3418 in New York on Friday, before nudging back up to $1.3344. The single currency lost 7 percent in September, its largest monthly drop since November 2010.

    It also fell to a one-week low against the yen at 102.98, moving a notch closer to a decade low at 101.95 yen.

    If Greece defaults on its debt, Ino said he thought the euro could initially fall to $1.32 and would then quickly move toward $1.30.

    Underscoring jitters over European financial institutions, reports emerged that ministers from France and Belgium would meet to shore up the balance sheet of troubled financial services group Dexia.

    Making matters worse, Germany's finance minister ruled out a higher contribution to the euro zone's rescue fund beyond an already approved 211 billion euros ($281.3 billion), while a key German coalition member of parliament said "Greece is bankrupt."

    For now, technical support for the single European currency lies at January lows around $1.3250-80 and then in the $1.3250-00 zone, formed by trend channels, internal wave targets and Fibonacci projection objectives.

    This support area combined with the strong resistance on the dollar index at 78.75-90, formed by a cluster of highs and lows on the daily charts, has the capacity to provoke a correction to the euro's decline from $1.4939.

    Greece will miss a deficit target despite severe austerity measures, although inspectors from the IMF, EU and European Central Bank --the troika--are widely expected to release the next aid package.

    While all eyes will be on the inspectors' forecasts for 2012-2014, Greek bond holders may have to take even larger haircuts, according to some reports. [ID:nL5E7KU270]

    Euro zone finance ministers are expected to discuss various plans about Greece and the rescue fund later on Monday.

    Dexia, which received a combined 6 billion euro bailout from Belgium and France at the height of the financial crisis in 2008, has been badly hit by its huge exposure to Greece as well as the freeze in the inter-bank lending markets.


    The dollar index hit an eight month high, edging up 0.5 percent to 78.888.

    The greenback also gained a little on the yen, adding 0.1 percent to 77.10 yen after breaking above its 55-day moving average at 77.17 for the first time since its spike after intervention on August 4. Stop losses loom around 77.30 yen, traders said.

    Although the dollar failed to maintain early gains above 77.17, a close above the mark could improve sentiment toward the pair, especially as seasonal selling before end-Sept book-closings by Japanese exporters has run its course.

    Tokyo dealers also reported macro funds building dollar-long positions and analysts said that if the current crisis deepened, this time the yen could weaken versus the dollar, unlike the global financial crisis in 2008.

    "Contrary to what happened during the global financial crisis in 2008, this time the yen carry trade has not been as active," said Junya Tanase, chief strategist at JPMorgan Chase in Tokyo, adding that the dollar may strengthen to 78-79 yen over the next two weeks, although other yen crosses were likely to soften.

    PMI numbers from China and the export numbers from Korea suggest global demand has not eased as quickly as some investors had feared in recent weeks, but this failed to make much of an impact on financial markets.

    The Australian and New Zealand dollars were off to a rocky start on Monday with the Aussie at $0.9665.

    European manufacturing PMI will be released on Monday and another deterioration below the key 50 level could see the euro sink further. It is also a big week for U.S. data with ISM Manufacturing on Monday and non-farm payrolls on Friday.

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    Post Gold rises for third day after Greece rocks markets

    (Reuters) - Gold headed for its largest one-day rise in nearly a month on Monday and silver climbed almost 5 percent after Greece warned it will miss deficit targets set to avoid bankruptcy, unleashing a sell-off in equities and commodities.

    European stocks slid nearly 2 percent .STOXX, while U.S. crude futures fell 2.1 percent and palladium dropped 3.3 percent to hit one-year lows after Greece said it will miss the deficit targets set in July.

    Gold has assumed a more habitual trading pattern of rising in times of uncertainty after staging its largest monthly drop since the credit crunch of 2008 in September as the escalating Greek crisis prompted investors to seek safety in the dollar.

    Spot gold was up 2 percent at $1,655.19 an ounce at 1350 GMT. U.S. gold futures for December delivery were up 2.2 percent to $1,657.40 an ounce.

    "The environment for gold is still kind of perfect," said Ronald Stoeferle, gold analyst at Erste Group. "We have negative real interest rates more or less all over the world, there's extreme systemic risk, and there is a very fundamental need for a safe-haven currency."

    Gold's status as a haven has not been damaged by last month's sharp correction, he added.

    "We're still up (16.5 percent) in 2011. Compared to the equity markets, that's a pretty nice outperformance," he said. "Corrections like this are healthy for the long-term uptrend."

    On the currency markets, the euro slipped to within sight of an eight-month low against the dollar as mounting concerns of a Greek default deepened investor worries about the health of the euro zone's banking sector.

    Financial markets are awaiting a spate of events this week, including key U.S. non-farm payrolls data on Friday and the European Central Bank's interest rates decision on Thursday.

    The ECB is expected to leave benchmark euro zone rates on hold this week and signal a shift in its interest rate-rise cycle after a raft of weak economic data and a deterioration in funding conditions for some of the bloc's indebted nations.

    Also on the slate, Federal Reserve chairman Ben Bernanke is scheduled to testify on the economic outlook to the Joint Economic Committee on Tuesday.

    The head of the U.S. central bank put markets on notice last week, signaling that despite already having spent trillions of dollars to stimulate growth, the Fed would do more if inflation falls too far and the threat of deflation grows.


    The gold price fell nearly 11 percent in dollar terms in September, its largest one-month fall since October 2008. On a quarterly basis, however, the third three months of 2011 marked gold's strongest performance since the last quarter of 2010.

    Gold's 20 percent fall from September's record high at $1,920.30 an ounce has tempted physical consumers of the metal back into the market, even though speculators cut their investment the precious metal in favor of owning U.S. dollars.

    The latest data from the Commodity Futures Trading Commission on holdings of gold futures shows speculators cut their position to its lowest since the second quarter of 2009, highlighting the move from hard assets to U.S. dollars.

    "After the recent washout, gold positioning is far from extended and this is quite a bullish signal for price strength ahead," said UBS in a note. "The 'clean' nature of current spec positions, along with physical and long-term demand, is creating a very healthy foundation for gold to climb from."

    Markets are closed in number two gold consumer China for a public holiday. But demand from other key gold-buying regions has picked up in the last couple of weeks, pushing Asian premiums to their highest since the start of the year.

    In the world's third largest consumer, Turkey, gold imports hit 18.23 tonnes in September, their highest in three years, data from the Istanbul Gold Exchange showed.

    Silver was up 2.7 percent at $30.68 an ounce, having earlier risen as high as $31.38. It fell by nearly 28 percent in September, its biggest one-month drop since the early 1980s.

    Echoing weakness in other industrial commodities, platinum fell 1.9 percent to $1,495.74 an ounce, while palladium dropped 3.4 percent to near one-year lows at $589.25.

  8. #148
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    Post GLOBAL MARKETS-World stocks, euro slide on Greece default fears

    * US stocks fall more than 1 pct as financials weigh

    * Euro drops to 8-1/2 month low versus dollar

    * Bank shares down in Europe on fears of Greece default

    NEW YORK, Oct 3 (Reuters) - World stocks fell on Monday and the euro slid to an 8-1/2 month low versus the dollar as growing fears of a Greek default stoked appetite for safe-haven U.S. Treasury bonds.

    Better-than-expected U.S. economic data initially cushioned a fall in U.S. stocks as Wall Street indexes briefly turned positive after the release of a key manufacturing activity index. But they fell more than 1 percent in the afternoon as financials weighed.

    Bank shares were also battered in Europe as investors feared the impact of a Greek default on holders of the country's bonds, such as Franco Belgian financial group Dexia (DEXI.BR), whose stock slumped more than 10 percent.

    Greece admitted it will miss its deficit target of 7.6 percent this year, making a Greek debt default look more likely. In a draft budget sent to parliament on Monday, the government forecast a deficit of 8.5 percent of gross domestic product for 2011.

    "This news isn't surprising, but if Greece continues to have problems, that could really drag Europe into recession, and possibly the U.S. as well," said Randall Warren, chief investment officer of Warren Financial Service in Exton, Pennsylvania.

    European policymakers appeared no nearer to agreeing on a definitive solution to the crisis. Officials meeting on Monday were discussing ways to leverage the bloc's rescue fund and pressure Greece to implement agreed structural reforms. For details, see [ID:nL5E7L20LD].

    "Ultimately, Greece would need to see its debt written down by more and with that you need probably some kind of shoring up of the banking sector," said Alec Letchfield, chief investment officer at HSBC Asset Management.

    U.S. stocks extended losses in the afternoon as the KBW bank index .BKX fell 2.4 percent. On Friday, stocks closed their worst quarter since 2008.

    The Dow Jones industrial average .DJI lost 184.02 points, or 1.69 percent, at 10,729.36. The Standard & Poor's 500 Index .SPX was down 22.41 points, or 1.98 percent, at 1,109.01. The Nasdaq Composite Index .IXIC was down 53.89 points, or 2.23 percent, at 2,361.51.

    The MSCI All-Country World index .MIWD00000PUS was 2 percent lower, near a 14-month low set in September. The FTSEurofirst 300 .FTEU3 of top European shares ended 1.2 percent lower.

    The October-December period is, traditionally, the best quarter for equities. Reuters data shows that since 1971, world stocks have on average risen 3.7 percent in the fourth quarter.

    Dexia closed 10.16 percent lower after credit agency Moody's announced a rating review for possible downgrade on concerns about liquidity. French daily Les Echos said on Friday that Belgian and French finance ministers would meet to discuss ways of shoring up the firm's balance sheet.

    U.S. crude oil CLc1 fell 1.5 percent to $77.99 a barrel.

    The euro EUR=EBS fell as low as $1.32372 EUR=EBS on trading platform EBS, a fresh 8-1/2-month low. It was last down 0.9 percent at $1.3261.

    Against the safe-haven yen, the euro was down 0.9 percent at 102.194 yen EURJPY=EBS on EBS, not far from its decade low of 101.946 struck in September.

    "Euro zone bank issues remain a big issue and we expect the euro's downside to continue," said George Saravelos, G10 FX strategist at Deutsche Bank.

    The benchmark 10-year U.S. Treasury note US10YT=RR was up 33/32 in price, causing its yield to fall to 1.802 percent. Treasuries prices were also supported by the Federal Reserve's first bond purchase for Operation Twist, its latest bond program aimed at helping the U.S. economy.

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    Post Moody's slashes Italy credit rating

    (Reuters) - Moody's lowered its rating on Italy's bonds by three notches on Tuesday, saying it saw a "material increase" in funding risks for euro zone countries with high levels of debt and warning that further downgrades were possible.

    The agency downgraded Italy to A2 from Aa2, a lower rating than it holds on Estonia and on a par with Malta and kept a negative outlook on the rating.

    The euro pared gains against the dollar and Japanese yen immediately following the announcement which comes after Moody's rival Standard and Poor's cut its rating on Italy by one notch to A/A-1 on September 19.

    The cuts underline growing investor concern about the euro zone's third largest economy, which is now firmly at the center of the debt crisis and dependent on help from the European Central Bank to keep its borrowing costs under control.

    "The negative outlook reflects ongoing economic and financial risks in Italy and in the euro area," Moody's said in a statement.

    "The uncertain market environment and the risk of further deterioration in investor sentiment could constrain the country's access to the public debt markets," it said.

    It added that Italy's rating could "transition to substantially lower rating levels" if there were long term uncertainty over the availability of external sources of liquidity support.

    Italy's mix of chronically low growth, a public debt mountain amounting to 120 percent of gross domestic product and a struggling government coalition has caused mounting alarm in financial markets.

    Moody's decision came as little surprise after the agency said on September 17 that it would finish a review for possible downgrade of its rating on Italy within a month.

    But it highlights the growing vulnerability of the euro zone, which is already struggling to contain the crisis in the far smaller Greek economy and which would be overwhelmed by a crisis of a similar scale in Italy.

    "It's not that unexpected but it doesn't help the situation at all," said Robbert Van Batenburg, Head of Equity Research at Louis Capital in New York.

    "They have already traded as if there was somewhat of a downgrade in the works, so it will probably force Italian policymakers to embark on more austerity programs. It will put another fiscal strait-jacket on them."


    Moody's said the likelihood of a default by Italy was "remote" but it said the overall shift in sentiment on the euro area funding market implied a greater vulnerability to a loss of market access at affordable rates.

    Italy's relatively modest budget deficit, conservative financial system and high level of private savings had kept it on the sidelines of the euro zone crisis while countries like Greece and Ireland were sucked down.

    "Italy is being punished not because its finances suddenly deteriorated, but because investors have become more sensitive to its long-standing weaknesses," said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.

    He said markets appeared to be focusing on the weakened center-right government's lack of progress in stimulating the stagnant economy, which many analysts expect to stall or even slip into recession next year.

    "The bond markets are more concerned about Italy's ability to grow than its commitment to reducing a fiscal deficit that is already one of the smallest in the euro zone," he said.

    Prime Minister Silvio Berlusconi shrugged off the downgrade immediately, saying the Moody's announcement had been expected and the government was committed to its public finance target, which sees the budget being balanced by 2013.

    The government last month pushed through a 60 billion euro austerity package -- bringing forward its original balanced budget target by one year -- in return for support for its battered government bonds from the ECB.

    Berlusconi's center-right coalition has been deeply divided over policy and personal issues and further distracted by an array of scandals surrounding the prime minister.

    Opposition leaders have called repeatedly for the government to resign over its handling of the economy and there is widespread speculation that Berlusconi could be forced out of office before his term expires in 2013.

    Italy's borrowing costs have soared over the past three months and have only been kept under control by the ECB support but in recent weeks they have begin to climb back to potentially dangerous levels.

    An auction of long term bonds last month saw yields on 10 year BTPs rise to 5.86 percent, their highest level since the introduction of the euro more than a decade ago.

    The center-right government has been under heavy pressure over its handling of the escalating crisis and recently cut its growth forecasts through 2013.

    It is now expecting the economy to expand by just 0.6 percent next year, down from a previous projection of 1.3 percent.

  10. #150
    Member EmpireGlobalfx's Avatar
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    Jun 2011
    New Zealand

    Post Buyers rush in as Wall Street toys with bear market

    (Reuters) - Investors rushed in to buy technology and other beaten-down sectors as the S&P 500 dipped in and out of a bear market on Tuesday, and a late rally drove the index to its largest gain in more than a week.

    Markets once again turned on news out of Europe.

    Reports that European finance ministers agreed to prepare action to safeguard their banks, following the first lender bailout as a result of the crisis, were cited as giving stocks a boost heading into the close.

    Others pinned the comeback on technical levels and on bargain hunting after the broad S&P 500 briefly fell more than 20 percent from its 2011 closing high set four months ago.

    "To me, it looked mostly technical. It looked like the capitulation on the sell side," said Keith Springer, president of Springer Financial Advisors in Sacramento, California.

    He said the reports out of Europe just added to the buying frenzy that had started earlier.

    "You could see it (the market) starting to turn anyway and that gave people an excuse" to buy, he said.

    Chip makers and large-cap technology companies led the way even after Apple Inc fell 0.6 percent to $372.50 as the unveiling of its latest iPhone didn't live up to the hype. Apple shares had earlier fallen more than 5 percent.

    Volume increased late in the day - with nearly 15 percent of the day's composite trading taking place in the last half hour of the session. The Dow industrials rose 345 points in the last hour of trading.

    The Dow Jones industrial average gained 153.41 points, or 1.44 percent, to 10,808.71. The S&P 500 gained 24.72 points, or 2.25 percent, to 1,123.95. The Nasdaq Composite gained 68.99 points, or 2.95 percent, to close at 2,404.82.

    Despite the large gains, it is still not clear whether the latest reports mean there is progress in Europe's effort to keep its sovereign debt crisis from spreading out of Greece and into the banking system.

    The European finance ministers put their heads together for a plan to shore up their banks after collapsing confidence in municipal lender Dexia forced France and Belgium to rush to its aid.

    The Dexia bailout came as euro-zone finance ministers delayed a vital aid payment to debt-stricken Greece, which could run out of cash shortly.

    Investors fear that a Greek default will force banks to write down billions of dollars from their books and kick-start another credit crisis like the one that brought lending to a halt three years ago and generated a recession.

    The U.S. bank sector index, down nearly 30 percent since the 2011 market high hit on April 29, posted strong gains. The index finished the session up 4.1 percent.

    Morgan Stanley shares gained 12.3 percent to $14.01 but are still off 48.5 percent this year. Shares of Bank of America rose 4.2 percent Tuesday to $5.76.

    About 13.1 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq -- more than 60 percent above the daily average so far this year of 8 billion shares.

    Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 3 to 2, while on the Nasdaq, about three stocks rose for every one that fell.

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