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Thread: Follow the latest news @ Empire Global

  1. #61
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    Post Japan keeps up warnings on yen after U.S. debt deal

    (Reuters) - Japan tried to keep yen bulls on guard on Wednesday, with finance minister repeating his warning that he was closely watching markets after the currency shot near record highs early this week.

    The yen held broadly steady against the dollar as recent repeated jawboning from Japanese authorities kept markets wary of intervention to weaken the currency while a deal to raise the U.S. debt limit eased the pressure on the U.S. currency.

    Finance Minister Yoshihiko Noda said he welcomed the congressional approval of the deal and would monitor market reaction to the agreement that averted a catastrophic default but did not remove the risk of credit downgrades.

    "I would like to closely watch how markets assess (the U.S. agreement on debt)," Finance Minister Yoshihiko Noda told reporters. He declined to comment on whether Tokyo would intervene in the currency market.

    Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa may discuss steps to address the strong yen when they meet at a regular gathering of cabinet ministers to discuss risks to the economy, to be held around noon.

    Noda and Economics Minister Kaoru Yosano will also be present at the meeting, which Shirakawa will attend as an observer.

    Moody's Investors Service said it had confirmed the United States' top AAA rating but assigned it a negative outlook after lawmakers passed a deal to raise the U.S. borrowing limit and reduce the deficit.

    The yen hovered around 77.25 to the dollar, after it soared on Monday within a hair's breadth of March's record high at 76.25 to the dollar.

    Despite the debt agreement, the dollar was unable to make much headway, weighed down by worries about the health of the U.S. economy following a batch of dour data.

    Markets also wait for possible action by ratings agency Standard & Poor's, which has yet to give its opinion of the debt deal hammered out in Washington that many predict will include a cut in its top rating for the world's biggest economy.

    Japan has been priming the markets for currency intervention since the yen tested its record high, signaling it may try to tame the currency with a combination of yen-selling and monetary easing.

    Noda has made plain that the yen was too strong for Tokyo's taste and has said he was in discussions with the Bank of Japan and international partners about the yen's strength.

    Japanese officials fear that the currency's near 5 percent surge in the past month will harm the economy, which skid into its second recession in three years following the March earthquake and tsunami.

    The Bank of Japan will probably ease its monetary policy if the finance ministry decided to intervene and sell yen, sources familiar with the central bank's thinking have told Reuters. The central bank is due to review its policy on August 4-5.

    As renewed concerns about a slowing global economy rattled financial markets, Japan's Nikkei stock average fell for a second day on Wednesday, providing an additional headache to Japanese policy makers.

    Japan last intervened in concert with the Group of Seven in March when expectations of fund repatriation after the earthquake pushed the yen to a record high.

    This time, most market players believe Japan would have to go it alone since the yen's gains are more about dollar weakness than anything else. Tokyo last acted solo in September 2010, when it sold 2.1 trillion yen.

  2. #62
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    Post SNB cuts rates as safe-haven Swiss franc soars

    (Reuters) - The Swiss National Bank announced a shock cut in interest rates and threatened more action to cap a soaring Swiss franc, but was seen fighting a losing battle as investors seek respite from debt crises elsewhere.

    The SNB said on Wednesday it would cut its target rate to "as close to zero as possible" from an already rock-bottom 0.25 percent, and said it would very significantly increase the supply of francs to the money market over the next few days.

    It said it would not tolerate the effective tightening of monetary conditions imposed by what it called a "massively overvalued" franc which was threatening economic growth and increasing downside risks to price stability.

    "The SNB is keeping a close watch on developments on the foreign exchange market and will take further measures against the strength of the Swiss franc if necessary," the bank said.

    The euro shot up in response, gaining 2.5 percent on the day versus its Swiss counterpart after hitting a new record low before the SNB news. The dollar also rose sharply. But analysts said that trend could prove temporary.

    "These measures will probably not bring a halt to the Swiss franc's appreciation," said Neil Mellor, currency strategist at Bank of New York Mellon. "It will be a hard fought battle for the SNB and at most this will slow the pace of appreciation."

    With low-debt Switzerland seen as a safe haven from an escalating euro zone debt crisis and fears of a U.S. rating downgrade, the franc has surged 18 percent against the euro and 22 percent against the dollar in recent months.

    The SNB is the first central bank to cut rates since the global economic outlook deteriorated with expectations for higher rates from the European Central Bank and U.S. Federal Reserve pushed back since signs emerged of a new slowdown.

    "It's a very difficult situation for them with the ongoing issues in the periphery in Europe. The Swiss franc is a sort of default option here," said Henrik Gullberg of Deutsche Bank.

    "That is unlikely to go away as long as we have these issues in Europe.


    Swiss exporters have called on both the SNB and the government to take action against its steep rise although the bank has also been criticized for the heavy losses it incurred in its post-crisis interventions in 2009 and 2010.

    Nick Hayek, chief executive of watch maker Swatch, who has been one of the most outspoken about the impact of the strong franc, welcomed the SNB move. "This is wonderful. Speculators should brace themselves," he told Reuters.

    In contrast to a fall on most European markets, the Swiss blue-chip index was up 0.6 percent after the SNB news.

    The SNB said in a statement the global economic outlook had worsened since its last monetary policy meeting in June, while the sharp rise in the franc meant the outlook for the Swiss economy had "deteriorated substantially."

    The euro was up 2.5 percent to 1.1116 at 0918 GMT after hitting a record low of 1.0794 on trading platform EBS before the SNB comments. The dollar rose to 0.7764 franc from around 0.7630.

    After the Swiss franc rose about 12 percent against the euro in July alone, economists began to warn that a recession could be looming in Switzerland with forward-looking indicators such as the KOF economic barometer pointing to a slowdown.

    The strong franc has also begun to hit the manufacturing sector, data for July showed on Tuesday.

    Analysts said the SNB could resume the foreign exchange interventions it stopped in June 2010, even though its previous attempts were seen by many as an expensive failure.

    "Maybe the threat of intervention will force people to look for other potential safe havens," said Lloyds Banking Group currency strategist Adrian Schmidt.

    The SNB announced last week it suffered a 9.9 billion Swiss franc ($12.8 billion) first-half loss on its foreign exchange holdings due to the surging franc, increasing criticism of Chairman Philipp Hildebrand and making interventions politically more difficult.

    Christoph Blocher, a leading figure in the right-wing Swiss People's Party, who has already called on Hildebrand to quit, launched a new attack on Sunday, saying the SNB boss behaved like a speculator and was not qualified for the job.

    Before the big franc jump, Swiss interest rate futures had priced in the possibility of a first post-crisis rate hike for September, but Wednesday's news pushed back expectations for a rise in the rate target to 0.5 percent to June 2013.

    To increase liquidity to the franc money market, the SNB also said it would expand banks' sight deposits at the SNB and would no longer renew repos and SNB bills that fall due and will repurchase outstanding SNB bills.

  3. #63
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    Post Tech bounces as S&P 500 erases losses

    (Reuters) - Stocks bounced from earlier losses on Wednesday, looking to break a seven-day run of declines as technology shares gained ground .

    Earlier in the day, pessimism about the U.S. economic outlook took the S&P 500 to a new low for the year and led to predictions of an extended down leg in the market. The Nasdaq briefly turned negative for the year.

    "A lot of us are saying the market had reached a bit of an oversold area," said Rich Ilczyszyn, senior market strategist with MF Global in Chicago.

    Technology shares led the bounce, with the S&P technology index .GSPT up 0.7 percent.

    Traders also said buyers came into the market after comments from former Federal Reserve Vice Chairman Donald Kohn, who told the Wall Street Journal the Fed could consider a new round of stimulus to help the economy.

    Driving the early losses was data showing the U.S. services sector fell in July to its lowest level since February 2010, while new U.S. factory orders fell in June, pulled down by weak demand for transportation equipment.

    The news followed weaker-than-expected manufacturing data earlier this week, creating more angst about a pullback in the recovery.

    "If anything (the stock market move) is probably just a short cover," said David Lutz, managing director of trading at Stifel Nicolaus Capital Markets, Baltimore. He said many traders were possibly searching for bargains after days of losses.

    The Dow Jones industrial average markets/index?symbol=us%21dji">.DJI was down 25.47 points, or 0.21 percent, at 11,841.15. The Standard & Poor's 500 Index .SPX was up 0.57 point, or 0.05 percent, at 1,254.62. The Nasdaq Composite Index .IXIC was up 12.46 points, or 0.47 percent, at 2,681.70.

  4. #64
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    Post Japan acts to tame yen, follows Swiss move on franc

    (Reuters) - Japan sold one trillion yen ($12.6 billion) and its central bank eased monetary policy on Thursday, joining Switzerland in efforts to tame currencies buoyed by safe-haven demand from investors fretting about the health of the global economy.

    The intervention in Asia and London pushed the yen well beyond 79.50 yen to the dollar, a two week low, from around 77.10 and Japan's Economy Minister Kaoru Yosano said policymakers were likely to meet either at Group of Seven or Group of Twenty level to discuss currencies.

    Tokyo's action followed days of official warnings that the yen had risen so much that it threatened to derail Japan's recovery from the destruction wrought by the March 11 magnitude 9.0 earthquake, a deadly tsunami and an ensuing nuclear crisis.

    Finance Minister Yoshihiko Noda said Japan had consulted its international partners, but intervened on its own to stem what it considered speculative and disorderly currency moves.

    Hours later, the Bank of Japan took its own action, boosting by half to 15 trillion yen the amount of financial assets it aims to buy under a scheme established in October 2010 to shore up market confidence and support the economy.

    "The central bank seems to be working in sync with the finance ministry, and that is different from past times when they eased policy. It's a message that they are willing to act to stop the yen from appreciating further," said Koichi Ono, senior strategist at Daiwa Securities Capital Markets.

    Analysts doubted though that even a combination of yen selling and monetary easing could stem a global shift away from the dollar and other riskier assets if Tokyo were to continue acting on its own.

    "The yen's advance reflects the difficult economic and fiscal situation of both the U.S. and the euro zone, so even if Japan intervenes in the market, it won't be able to combat the yen's rise in the long run on its own," said Takashi Kamiya, chief economist at T&D Asset Management Co.

    A show of coordinated action was important for Prime Minister Naoto Kan and his government, reeling from record low popularity ratings and struggling with the aftermath of Japan's worst disaster in generations and the world's gravest nuclear crisis since Chernobyl 25 years ago.

    "Japan is just in the process of recovering from a natural disaster, so these currency moves are certain to have a negative impact on the economy and financial markets," Noda told reporters in justifying the intervention.

    Traders said Japan had sold more than one trillion yen in intervention so far on Thursday, a day after the Swiss central bank surprised markets by cutting interest rates to try to weaken the Swiss franc.

    Investors have seen the Swiss franc and the yen as a safer refuge among G10 currencies from a deepening euro debt crisis and speculation that the U.S. economy could be slipping into recession.

    Analysts said the Swiss rate cut may have spurred Japan into action even as the yen traded below its record high of 76.25 per dollar hit shortly after the March quake.

    "Yesterday's monetary easing by Switzerland provided the push because if Japan didn't respond this would push the yen still higher," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.

    "A response needed to be taken quickly to head off any further yen strengthening."

    The moves by Switzerland and Japan could now put pressure on the European Central Bank, which reviews policy on Thursday, to resume bond buying or other measures, since the euro zone crisis is a major factor behind the rise in the franc and yen.


    The Bank of Japan, which cut short its scheduled two-day meeting that started on Thursday, left its benchmark rate unchanged at 0-0.1 percent.

    With rates pegged near zero, the central bank has been using the size of the asset buying pool as the main gauge of its policy stance.

    The release of extra funds in addition to cash spent on foreign currencies, which the central bank looks certain to leave unabsorbed, is seen as a way of making the intervention more effective by boosting yen supply.

    Until recently the central bank has sounded confident that it had done enough to support the economy and that Japan would exit recession later this year with the help of reconstruction spending and recovering exports.

    But the yen's nearly 5 percent climb over the past month cast doubt on such a scenario and both the government and the central bank have been under growing pressure from Japanese exporters, including Toyota Motor Co, to tame the currency.

    Noda declined to comment on the size of the intervention or

    say what currencies Japan bought or sold. He would also not say whether Tokyo planned returning to the market, although traders said authorities continued sporadic intervention, including in London. Some said it could eventually add up to a similar amount as 2.1 trillion Tokyo sold in its last solo intervention in September 2010.

    Thursday's action has knocked the Japanese currency down around 2.5 yen so far, compared with around 2.8 yen in intervention in September 2010 and in March, when Tokyo acted together with its G7 partners.

    The ECB meets to review policy on Thursday with investors hoping President Jean-Claude Trichet will signal a more aggressive approach to fighting the euro zone crisis, for example by hinting at further buying of government bonds in the market.

    It may seem ironic that Japan, saddled with public debt twice the size of its $5 trillion economy and struggling with the aftermath of its worst natural disaster in generations, would appeal to risk-shy investors.

    However, with the euro area mired in its own debt crisis, Japan's deep financial markets make it one of few viable options, market analysts say.
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    Post Euro markets steady ahead of Spain auction, ECB

    (Reuters) - Euro zone sovereign bond markets steadied Thursday ahead of a crucial European Central Bank policy-setting meeting that investors hope will signal a more aggressive approach to fighting the currency area's debt crisis.

    Yields of Italian and Spanish 10-year bonds fell in early trading before an auction in which Spain planned to sell up to 3.5 billion euros ($5 billion) of government paper after crisis telephone consultations with European Union authorities.

    Japanese authorities acted to bring down the strong yen, joining Switzerland in efforts to tame currencies buoyed by safe-haven demand from investors fretting about the health of the global economy and the euro zone's debt woes.

    All eyes were on the ECB, with the chief European economist of credit ratings agency Standard & Poor's urging it to re-activate its bond-buying program to stabilize battered euro zone sovereigns.

    "Markets are still moving so we need someone to intervene," S&P's Jean-Michel Six said. "The only effective fireman capable of rushing out of the fire station at top speed is the European Central Bank, which has played an admirable role since the start of the crisis to calm markets.

    He told France-Inter radio that until a contagion-fighting plan adopted by euro zone leaders last month came into effect, which requires parliamentary approval in some countries, the ECB had to play an interim role.

    The controversial ECB program has been dormant for four months and there is strong opposition to reviving it among guardians of central banking orthodoxy in Germany who argue it compromises the core mission of fighting inflation.

    The ECB bought 76 billion euros of sovereign bonds, believed to be only Greek, Irish and Portuguese, to stabilize markets last year but critics said the Securities Market Program had only limited, short-term impact and did not prevent any of those countries from requiring EU/IMF bailouts.

    Spanish Economy Minister Elena Salgado, speaking on Wednesday night after a crisis meeting on the economy with Prime Minister Jose Luis Rodriguez Zapatero, said the bond sale would take place as scheduled despite a surge in Spanish and Italian bond yields to 14-year highs in the past several days.

    "We think the tensions will last a few more days, but the bond auction will go ahead Thursday," Salgado said.

    The yield on Spain's 10-year bonds climbed as high as 6.50 percent Wednesday because of investor doubts about Madrid's ability to continue financing its debt over the long term, before drifting back to close at 6.27 percent. It fell a further 21 basis points against benchmark German Bunds in early Thursday trading.

    Italy's 10-year yield fell back below the psychologically important 6.0 percent threshold, with some traders saying they expected the ECB could act, either with a longer term repo or secondary market bond-buying.


    Analysts say that if yields go much higher and stay there, markets could force Spain, the euro zone's fourth biggest economy, to follow Greece, Ireland and Portugal in seeking an international bailout.

    "Hearing Zapatero had canceled his holidays showed the situation was desperate. The 7 percent (yield) mark is a psychological barrier and is just not sustainable because it's far too costly to finance at these levels," said Jo Tomkins, analyst at consultancy 4Cast.

    Euro zone leaders agreed at a summit last month to give the bloc's bailout fund sweeping new powers to help indebted states and intervene in the bond market, but the changes are unlikely to be passed by national parliaments until late September at the earliest.

    If the ECB does not revive the program, central bank president Jean-Claude Trichet may at least indicate willingness to use it if the crisis worsens, some analysts believe.

    The ECB, which has raised official interest rates twice this year, may also signal it will put any further tightening on hold because of slowing economic growth in the euro zone and globally, even though inflation is well above target.

    Japan sold one trillion yen ($12.6 billion) and its central bank eased monetary policy Thursday to try to push down the yen against the dollar and euro.

    Economy Minister Kaoru Yosano said policymakers of major economies needed to discuss currencies at either Group of Seven or Group of 20 level -- the first official call for multilateral action since twin crises over U.S. and euro zone debt became acute last month.

    Official sources in several G7 countries said Wednesday they were not aware of any move so far to involve the G7 or G20, but that France, which holds the chair of both groups this year, might consult those forums if the turmoil persists.

    In Italy, the euro zone's third biggest economy, Prime Minister Silvio Berlusconi promised Wednesday to step up economic reforms and called for a broad-based effort in the country to fight the market turmoil.

    "The government and parliament will act, I hope, with a large political and social consensus to fight every threat to our financial stability. Today more than ever, we need to act all together," said Berlusconi, in a speech which did not give substantial new details on policy.

    Berlusconi is due to meet employers' groups and unions on Thursday to try to thrash out a plan to stimulate the economy. But the head of the largest union, the left-wing CGIL, responded coolly to his speech.

    Susanna Camusso said it lacked concrete proposals, and that negotiations were already "getting off on the wrong foot." The leader of the opposition Democratic party, Pierluigi Bersani, said Berlusconi should resign.

    In addition to Italy and Spain, some investors are becoming jittery about the finances of France, the euro zone's second biggest economy. The spread of 10-year French government bonds above German Bunds hit a euro lifetime high of 0.81 percentage point Wednesday.

    This is problematic partly because any lasting solution to the euro zone's crisis may have to involve a drastic expansion of its 440 billion euro bailout fund. That would put a greater financial burden on France, a big contributor to the fund, and could push up its yields further.

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    Post GM profit nearly doubles on stronger pricing

    (Reuters) - General Motors Co's quarterly profit nearly doubled, beating expectations, as the top U.S. automaker took a larger share of sales globally and raised prices on its vehicles.

    Coming out of bankruptcy, GM Chief Executive Dan Akerson and other executives said the company had stripped out enough costs to recession-proof the business so it could thrive even in a weak auto market. The industry's sales slump in the second quarter and the risk of a double-dip recession could provide the first major test for that claim.

    GM Chief Financial Officer Dan Ammann called the quarter a "good building block" for the company.

    GM is pushing heavily into smaller, more fuel-efficient cars like the popular Chevrolet Cruze, but a good portion of its profit still relies heavily on sales of more profitable trucks in the U.S. market.

    Net income in the second quarter rose to $2.52 billion, or $1.54 per share, from $1.33 billion, or 85 cents per share, a year earlier.

    Analysts polled by Thomson Reuters I/B/E/S had expected $1.20 per share on average.

    Revenue rose 19 percent to $39.4 billion, above the $36.74 billion analysts had expected during a quarter in which U.S. auto sales hit a soft patch.

    GM shares rose 2 percent in premarket trading.

    The results represent the second full quarter since GM's initial public stock offering last November and a restructuring intended to keep the largest U.S. automaker profitable through the industry's punishing boom-and-bust cycles.

    GM emerged from bankruptcy in 2009 after a $52 billion taxpayer-funded bailout orchestrated by the Obama administration. The U.S. Treasury still owns 32 percent of GM's common shares.

    The company boosted its second-quarter earnings before interest and taxes by $1 billion by pushing through higher prices on its vehicles globally.

    However, those gains came as its Japanese rivals, led by Toyota Motor Corp, struggled with fewer vehicles to sell due to the earthquake in Japan in March.

    Analysts worry that if the U.S. recovery hits a pothole in the second half, GM could be forced to raise incentives on its vehicles to lure shoppers. GM's first-quarter results were marred by heavy incentives, but the automaker dialed back those deals.

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    Post Italy prosecutors seize Moody's, S&P documents

    Aug 4 (Reuters) - Italian prosecutors have seized documents at the offices of rating agencies Moody's and Standard & Poor's in a probe over suspected "anomalous" fluctuations in Italian share prices, a prosecutor said on Thursday.

    The measure is aimed at "verifying whether these agencies respect regulations as they carry out their work," Carlo Maria Capistro, who heads the prosecutors' office in the southern town of Trani which is leading the probe, told Reuters.

    The documents were seized at the Milan offices of the two agencies on Wednesday, he said, adding that prosecutors had also asked Italian market regulator Consob to provide documents relating to their registration in Italy.

    S&P in Italy said in a statement it believed the probe was "groundless."

    "We strongly defend our work, our reputation and that of our analysts," it said.

    Moody's said it "takes its responsibilities surrounding the dissemination of market sensitive information very seriously and is cooperating with the authorities."

    The Trani prosecutors have opened two probes -- one for each rating agency -- after a complaint by two consumer groups over the impact of their reports about Italy on Milan stock prices.

    The first complaint was filed against Moody's after it published a report in May 2010 about the risk of contagion for Italian banks from the Greek crisis.

    A second complaint filed in May this year targeted Standard & Poor's after it threatened to downgrade Italy's credit rating because of its huge public debt.

    The prosecutors are also investigating whether any crimes were committed during a sell-off in Italian assets on July 8 and July 11 as fears spread that the euro zone's third largest economy is being sucked into the widening debt crisis.

    One of the consumer groups behind the complaints said the probe was aimed at finding out whether the market's sharp drop was due to a "precise scheme by hedge funds and other unidentified players that could be linked to the negative comments about Italian public finances by the rating agencies."

    Consob last month summoned Moody's and S&P for meetings and urged them not to release their statements during market hours.

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    Post Japan signals readiness to intervene again; market jittery

    (Reuters) - Japan's finance minister said he was closely watching yen moves on Friday, signaling a readiness to continue selling the currency after intervention on Thursday that likely totaled a record amount around 4.5 trillion yen ($56 billion).

    Japanese authorities intervened on Thursday and the central bank eased monetary policy to reduce pressure on the export-reliant economy after the yen surged close to a record high with investors buying it as a refuge from the fiscal and economic woes in Europe and the United States.

    "There's no change to our basic stance that we want to monitor markets closely," Finance Minister Yoshihiko Noda said on Friday.

    "It's better to wait for a little while before judging the impact of intervention," he told a news conference.

    Markets remained jittery.

    The Japanese currency plunged nearly a full yen against the dollar at one point on Friday, spurring market talk that Japan had intervened again. It quickly bounced back, so traders said it was unlikely to have been the result of intervention. A Finance Ministry official declined to comment.

    Earlier, a comment by Noda that he wanted to spend more time determining the effect of Tokyo's action briefly pushed the yen up against the dollar as market players interpreted it as a sign Tokyo may hold off intervention in the near future.

    "Of course, we have to watch currencies, but the Dow (industrial average) fell a lot, so today I also want to watch the stock market."

    Thursday's intervention briefly pushed the dollar above 80 yen. It fell back to trade around 78.45 yen.

    Money market data released by the Bank of Japan late on Friday showed that Japan's yen-selling intervention the previous day may have totaled a record amount around 4.46-4.66 trillion yen.

    World stocks plunged to new lows for the year on Thursday with a sell-off in markets accelerating sharply as investors fretted about the outlook for the global economy and piled into safe-haven bonds. The overnight sell-off pushed the Nikkei share average .N225 down sharply on Friday.

    Noda offered no sign that financial officials from the Group of Seven or Group of 20 leading economies are considering discussing the global slowdown and market instability, or whether Tokyo may be initiating such discussions.

    "I agree that these subjects should be discussed. We have the G20 meeting in September. I am sure these subjects will come up at a lot of international meetings," Noda said.

    "Each problem is important, but how to prioritize these issues is something to discuss from here on," Noda said in response to questions on whether G20 needed to discuss currencies, the sovereign debt crisis and the U.S. economy.

    Japanese officials have not been clear about whether they obtained consent from G7 counterparts to conduct solo intervention.

    Asked about the cool reception of officials in Europe and the United States to Japan's intervention, Noda said: "We are communicating, but I won't comment on each country's stance."

    Economics Minister Kaoru Yosano warned markets on Friday that they should not assume that Tokyo is done with stepping into the market, while stressing again the need for Japan, Europe and the United States to adopt common policies to contain the pessimism about the global economy. ($1 = 79.020 Japanese Yen)

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    Post Advisers steer clients to safer havens in stormy market

    (Reuters) - Where can investors hide when even gold and cash look dicey?

    Some financial advisers were answering phone calls from panicky clients Thursday as stocks dropped 500 points, gold lost its safe-haven glitter and money markets got the jitters.

    Michael Kay, a financial adviser at Financial Focus in Livingston, New Jersey, talked a client off the proverbial ledge in the morning as the market resumed its sharp downward trajectory. The client wanted to liquidate his portfolio and invest in gold.

    Kay's advice? "If you think it's the end of the world, buy Progresso soup in pop-top cans because it's more valuable than gold. You can't eat gold."

    So what should investors be doing as the markets zig and zag?

    Alan Haft, a financial adviser in Newport Beach, California, is getting defensive. He has moved about $15 million of his client's portfolios into cash-like investments since early July. He's put much of that cash to work in the Vanguard Short-Term Treasury Fund.

    "People are skittish, but the U.S. Treasury is still the safest place when you compare what is out there," Haft says.

    Like the von Trapp family in the "Sound of Music," Haft sees Switzerland as a safe haven. He's parking money in Swiss fixed annuities, which are highly liquid but can only be purchased through an intermediary.

    "The Swiss Franc has been rocking; many of my investors love the off-shore nature of it," Haft says. He also likes the CurrencyShares Swiss Franc ETF.

    In the past few weeks, Haft says he also put $5 million into the WellsFargo Advantage Short-Term Muni Fund because the duration is "super-low" which means interest-rate risk is minimal.

    "The whole thing about rising interest rates is that on one hand the economy is not getting any better (which means rates should stay low). But on the other hand with deficit stuff, rates should climb, so it's a quandary," Haft says.


    Despite all of the turmoil in Italy and Greece, Bradley Bofford, a financial adviser at Financial Principles in Fairfield, New Jersey, says he has not received any client calls about the safety of money market instruments. But his firm has been reaching out to some clients with accounts that exceed the $250,000 FDIC limit. For these high-end clients, he recommends a Certificate of Deposit Account Registry Service, also known as CDARS.

    CDARS (CDARS - The Certificate of Deposit Account Registry Service) work like super-sized CDs but offer insurance coverage up to $50 million. They rose in popularity during the 2008 financial crisis. Money is spread around in chunks across a network of "well-capitalized" banks, with maturities of four weeks to five years. The trade-off is a lower yields than traditional CDs.

    According to, the average one-year certificate of deposit is yielding 0.91 percent. One-year CDARS, by comparison, pay 0.26 percent, Bofford says.


    There are two main camps among advisers: the do-nothing crowd and the do-more crowd.

    Over the last three weeks, financial adviser Rich Brooks says he has not had a single client conversation that didn't involve talking about market volatility.

    So maybe that's why no one called during Thursday's big drop since it was not a huge surprise, says Brooks, who is vice president for investment management at Blankenship & Foster, which has $320 million under management for 225 clients in Solana Beach, California.

    "The current sell-off hasn't really shaken our clients. If we were sitting here today asking why Congress didn't come to a budget deal, then maybe. But we've been working hard to prepare them for the headwinds," Brooks says.

    Among the 'do-more' crowd is Pat Dorsey, Morningstar's former director of equity research and now vice chairman of Sanibel Captiva Trust Company, which has $500 million under management.

    "My sense is that the best opportunities are going to be European multinationals…which get the bulk of revenue from outside Europe, like Siemens, Nestle or Novartis. It's not like Japanese consumers are going to stop eating chocolate," he says. "If you're willing to step up to the plate a little bit, there are interesting ways to take advantage of this volatility."


    Another make-a-move adviser is Tim Courtney, chief investment officer at Burns Advisory Group, with offices in Oklahoma and Connecticut. At a price-to-earnings ratio of 13.98, the S&P 500 is cheaper today on a trailing 12-month basis than it has been in the past 20 years. What's more, in 1990 you could buy a 10-year U.S. Treasury note that yielded 8.6 percent -- a full six percentage points higher than what you can get today.

    Courtney says there's no question stocks offer a great relative value at these levels despite the continued downturn. (And he'd like to know where investors that are pulling out after a 10 percent drop are going to put their money, or when they plan to get back in.) If you can look past the next week or month, stocks are "super attractive," he says.

    William Suplee IV, a financial adviser at Structured Asset Management in Paoli, Pennsylvania, says 20 percent of his clients are worried about their portfolios right now. But a whopping 70 percent are sitting tight, "having lived through this several times previously."

    And the rest - well, they are using this dip as a buying opportunity," he says. Their secret? "Strong stomachs," he says.

  10. #70
    Member EmpireGlobalfx's Avatar
    Join Date
    Jun 2011
    New Zealand

    Post Wall St rebounds after sell-off, Berlusconi budget announcement

    (Reuters) - U.S. stocks rose in volatile trade on Friday as investors saw a buying opportunity following the sharp sell-off that took the S&P 500 down 10 percent over the last 10 sessions.

    The stock market extended its rebound after Italian Prime Minister Silvio Berlusconi said his country will introduce a constitutional principle of a balanced budget, adding that: "We will accelerate measures" in an austerity program, with the "aim of a balanced budget in 2013."

    Helping the market, sources said the European Central Bank was ready to buy Italian and Spanish bonds if Berlusconi commits to bringing forward specific reforms.

    "You are making or have made a tradeable low and are going to get a throwback rally," said Jeffrey Saut, Raymond James Financial chief investment strategist, in St. Petersburg, Florida.

    At Thursday's close, the S&P 500 was down about 10 percent for the last 10 trading sessions.

    Stocks had been lower for much of the day as worries about slower global growth remained firmly intact despite stronger-than-expected U.S. jobs data.

    Intense recent selling -- taking both the Dow and the S&P 500 down 4 percent and the Nasdaq down 5 percent on Thursday -- reflects frustration with politicians' inability to address pressing concerns over high public debt in Europe and the United States as growth in the world's large industrial economies shows signs of stalling.

    Slower growth in manufacturing and services in the United States also have renewed concern about another U.S. recession.

    Among the day's best-performing sectors were defensive ones: consumer staples and health care. The S&P consumer staples index was up 2 percent.

    The Dow Jones industrial average was up 132.33 points, or 1.16 percent, at 11,516.01. The Standard & Poor's 500 Index was up 11.07 points, or 0.92 percent, at 1,211.14. The Nasdaq Composite Index was up 4.86 points, or 0.19 percent, at 2,561.25.

    U.S. non-farm payrolls data showed a gain of 117,000 jobs in July compared with a forecast for an increase of 85,000, while the country's unemployment rate dipped to 9.1 percent last month from 9.2 percent in June, the Labor Department reported.

    Also affecting stocks was talk of a possible S&P downgrade of U.S. debt after the close.

    The recent steep sell-off has put all three major indexes in negative territory for the year.

    Credit Suisse on Friday reduced its year-end view on the S&P 500 to 1,350 from 1,450, citing weaker-than-expected growth.

    Other strategists saw the bearish mood as more temporary.

    "If this is a market reaction to a crisis, then a bounce should be under way soon. Since WWII, there are only three instances where U.S. stocks fell 10 percent in 10 days outside of recessions," according to JPMorgan Chase strategist Thomas Lee, in a research note.

    Reflecting the market's volatility, the CBOE Volatility Index or VIX whipped between positive and negative in early afternoon trading. It was last up 0.2 percent at 31.71, after earlier touching an intraday high at 39.25, its highest level since May 2010.

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