Financial Page International

14 January 2012 - Global Markets Review
Good Morning Ladies & Gentlemen,

That's it; I am totally convinced now that the world has indeed gone mad and as if I needed further proof, this week has rolled out some absolute classic examples of mind-boggling stupidity.

 

Before I come to those though, I will remember this, the second week of the year as being the week where Europe talked; and talked; and talked ...... and nothing whatsoever happened ..... until after the markets closed that is!

  

S & P are not so silly you know - they wait until European markets are fully closed and US markets have a few minutes to run before they close for a long weekend, then they nonchalantly drop a little announcement into the mix ...... Les Downgrades!

 

Standard & Poor's Ratings Services stripped France of its prized triple-A long-term credit rating!

 

This is a move that marks the long-awaited blow to France's international standing and knocks Europe's second-largest economy out of the top financial league of the euro zone.

 

S&P announced ratings actions on 16 euro zone sovereigns, which included downgrading Austria to AA+ from triple-A. S&P lowered the ratings on Cyprus, Italy, Portugal and Spain by two notches and those of Malta, Slovakia and Slovenia by one.

 

S&P's decision to downgrade France to AA+ offers stark evidence of the extent to which the region's protracted sovereign-debt crisis has contaminated the heavyweight economies at the core of the currency bloc, casting doubt on whether they can continue to support the struggling nations of the periphery.

 

It has direct consequences, too, for the region's bailout fund, whose own triple-A rating stems from the guarantees of its triple-A graded members.

 

The 'almost-funny' thing was, this announcement came hot on the heels of the ECB's President saying that his strategy was starting to work. I think Mr Draghi has been on the New Year wine if he thinks that!

 

Wine or not, he said this week that the ECB's strategy is 'starting to work' because credit lines are slowly starting to open. So in his view, the key to solving Europe's problems lay in allowing companies and people to borrow more!

 

Yep, what got Europe into the problem in the first place, will in the eyes of Mr Draghi, get them out of it!

 

Come back Mr Trichet, all is forgiven ......

 

As if that thought is not crazy enough, there have been way 'nuttier' events headlining this week.

 

Example one - President Barack Obama formally notified Congress Thursday that that the government needs another $1.2 trillion in borrowing authority.

 

The written certification to raise the debt ceiling to $16.394 trillion starts a 15-day clock for Congress to consider and vote on a joint resolution disapproving of the increase.

 

Under legislation passed 2 August last year after months of wrangling between the administration and Republican lawmakers, the president has authority to veto any disapproval resolution that clears both chambers of Congress.

 

The US House is expected to vote on a resolution of disapproval next Wednesday. The Senate is scheduled to return the following week.

 

The law calls for Obama to notify Congress when the debt came within $100 billion of the current $15.194 trillion limit.

 

While the threshold was reached 30 December when the president was in Hawaii and Congress was on holiday break, Obama agreed to a request from congressional leaders to delay the notification request, ensuring the deadline for congressional action didn't lapse before lawmakers returned to Washington.

 

The deficit in fiscal 2011 was $1.3 trillion and the White House budget office in September forecast it will be $956 billion in the current fiscal year.

 

Lawmakers rejected a proposal Obama made in September to trim the nation's long-term deficit by $3 trillion beyond the $1 trillion that was agreed to as part of the deal to raise the debt ceiling. Obama plans to reprise those plans as part of his 2013 budget, administration officials said Thursday.

 

They include raising taxes on the wealthiest Americans, cuts in Medicare and reductions in so-called mandatory programs such as farm subsidies.

 

The debt ceiling increase is to meet commitments already made by the government. The Treasury Department has been relying on accounting manoeuvres, similar to the ones employed during the year's earlier dispute to ensure that the previous $15.194 trillion limit wasn't breached.

 

Since the budget law was approved, the debt limit has been raised twice, by a total of $900 billion. Under the new request, the limit would rise to $16.394 trillion, which the Treasury Department estimates will fund the government until late 2012.

 

Ladies and Gentlemen, we have President Obama likely to be leaving this year anyway and he wants to extend the debt ceiling by another $1.2 trillion just before he leaves. Now let me ask you this; is it any wonder Tim Geithner visited China this week and never opened his mouth at all about the RMB, Iranian Oil or anything else of note. Let's be direct here, from what vantage point are Tim Geithner and the good old US of A able to say anything to anyone about how to run their economies/finances.

 

$1.2 trillion more ......

 

The world has gone mad Point One.

 

Banks will be allowed go below minimum liquidity levels set by global regulators during financial crises to avoid cash-flow difficulties.

 

"During a period of stress, banks would be expected to use their pool of liquid assets, thereby temporarily falling below the minimum requirement," the Basel Committee on Banking Supervision's governing board said in a statement on its website Thursday, following a meeting in the Swiss city.

 

The aim of the measure, known as a liquidity coverage ratio, is to ensure that lenders hold enough easy-to-sell assets to survive a 30-day credit squeeze. The requirement, one of several measures from the Basel group designed to prevent a repeat of the 2008 financial crisis, is scheduled to enter into force in 2015.

 

Banks have argued that the rule may curtail loans by forcing them to hoard cash and buy government bonds. Bank supervisors say the standard is needed to prevent a repeat of the collapses of Lehman Brothers and Dexia, which were blamed in part on the lenders running out of short- term funding. Global regulators said last year that they would amend the rule to address unintended consequences.

 

Regulators must still clarify which assets banks should be allowed to count towards liquidity buffers and how much funding lenders should expect to lose in a crisis, the group said. Work on the main elements of the liquidity rule should be completed by the end of 2012, it said.

 

The Basel committee will provide further guidance on when lenders will be allowed to breach the minimum rule, and make sure the standard doesn't interfere with central-bank policies, the group said.

 

The liquidity rules were part of a package of measures adopted by global banking regulators in 2010 to strengthen the resilience of banks. The new rules also included tougher capital requirements that more than tripled the core reserves that lenders are required to hold.

 

Separately, the governing board said that the Basel committee will carry out "detailed" peer reviews of whether nations have correctly implemented capital rules for lenders. The assessments will include whether lenders are correctly valuing their assets, it said. The results of the reviews will be published, with the US, Japan and European Union the first to undergo the exams.

 

Some US bankers, including Jamie Dimon, chief executive officer of JPMorgan Chase, the largest US lender, have called for an overhaul of the current risk-weighting plan, which allows banks to use their own models to assess the safety of assets and how much capital they need to hold. Dimon has said that the way the rules are applied could disadvantage US banks.

 

But Ladies & Gentlemen, once again a US company wants to take away outside regulation and replace it with 'its own model' - we all know how that would work don't we!

 

Forcing lenders to hold more capital won't be enough on its own to calm concerns that banks would be vulnerable if a European government defaults on its debt, according to Moody's Investors Service.

 

"Any sustained improvement in bank creditworthiness will require a resolution" of the region's fiscal crisis, Moody's said in its Weekly Credit Outlook Friday. This would in turn "require credible steps towards much closer fiscal integration and increased mutual support among member states," Moody's said.

 

I ask you, how can a committee on banking supervision set a rule in order to ensure a bank's viability in difficult times, then when difficult times come along, bend those rules to suit certain banks?

 

It is no wonder banking stocks rose sharply this week because banks now know that when push comes to shove, rules will be waived or at the very least 'bent' in order to accommodate their business and ultimately their survival.

 

Bodes the question doesn't it - just how far are rules going to be 'manipulated' to ensure that a bank that is 'too big to fail', does not do just that and fail.

 

The world has gone mad, case in point Two.

 

Former Manchester United footballer and film actor Eric Cantona seeks to run for the French Presidency, the Liberation daily reported on Tuesday.

 

According to the newspaper, he has written to France's elected mayors seeking 500 signatures needed to stand in April's presidential election. He would highlight the plight of poor quality housing in the presidential race.

 

Calling himself an "engaged citizen" speaking up for millions of forgotten families, the 45-year-old wrote to the mayors that he felt obliged to speak up "at a time when our country faces difficult choices" and that the current economic uncertainty gave him a sense of responsibility.

 

Referring to both his sporting achievement and his "artistic activities," Cantona told the newspaper that he could have become involved in a variety of causes. "If I've chosen housing, it's because I think it's essential and affects 10 million people."

 

The world has gone a stage further than 'mad' if Eric Cantona is allowed to run for President!

 

Whilst we are in that part of the world, France will lead the way on taxing financial transactions in an effort to spur other countries into joining, President Nicolas Sarkozy said this week.

 

"If France waits for others to tax finance, then finance will never be taxed," Sarkozy said Thursday in a speech in the eastern French city of Mulhouse.

 

A unilateral levy is opposed by France's financial community and its feasibility was questioned the same day by one of Sarkozy's own ministers. It has become a political challenge for the president, who faces elections in a two-round vote in April and May this year and wants to make good on a pledge he made to impose such a tax when France last year held the presidency of both the G-8 and G-20 group of countries.

 

Some of Sarkozy's ministers backed off a little from the plan though.

 

"This tax only makes sense if it is implemented across Europe because if France goes it alone, obviously it will be eventually reversed," Budget Minister Valerie Pecresse said in an interview on France 2 television.

 

The French government, long a proponent of the tax, stepped up its campaign last week. Prime Minister Francois Fillon said Wednesday that France may present a tax bill in February. "Someone has to be the first to jump in the water," he said.

 

Still, concern that imposing the tax unilaterally will prompt markets to penalize France is prompting it to get other countries to sign up. Finance Minister Francois Baroin said the same day that implementing a financial transaction tax at the European level would prevent job losses at banks in France.

 

"France, Germany and the Euro zone will move ahead on this," Baroin said on I-tele. "The question is whether we are first or last." Baroin said he'll discuss the matter with German Finance Minister Wolfgang Schaeuble this weekend.

 

At a joint press conference in Berlin with Sarkozy Wednesday, German Chancellor Angela Merkel threw her weight behind the tax, saying "I'm in favour of thinking about such a tax in the Euro zone." She didn't, however, say Germany would impose such a levy. UK Prime Minister David Cameron has said the tax won't work unless it's applied worldwide.

 

The European Commission in September suggested a tax of 0.1% on equity and bond transactions and 0.01% on derivatives, which it said could raise 55 billion Euros ($71 billion) a year. European Union finance ministers are due to discuss the levy in March.

 

Ernst & Young said in a report that while the tax itself may raise as much as 37 billion Euros in the EU, its net effect could be negative by between 2 billion Euros and 116 billion Euros by decreasing economic activity and reducing revenue from other taxes.

 

The US opposes taxes on transactions, preferring bank levies based on the size of their balance sheets.

 

The French financial world has spoken out against the tax, especially if it's only going to be imposed in France.

 

"A tax that's limited to France would weigh on growth, lead to a loss of competitiveness, and create a heavy handicap for the financing of the French economy," the French Banking Federation said in a statement Thursday.

 

The world has gone Mad, case in point number four - even the French President does not have the support of his own Banking Federation!

 

Staying with Europe, Germany may be on the brink of recession after the sovereign debt crisis caused the economy to contract in the final quarter of 2011.

 

Europe's largest economy shrank "roughly" 0.25% in the fourth quarter from the third, the Federal Statistics Office in Wiesbaden said Thursday in an unofficial estimate. Economists at Berenberg Bank expect gross domestic product to contract again in the current quarter. A recession is defined as two consecutive quarters of declining GDP.

 

"If the Euro crisis does not get worse or is finally brought under control after another wave in early 2012, the German economy can rebound nicely from the summer onwards," said a senior economist with Berenberg in London. "However, we see a 25% chance of the Euro crisis remaining out of control longer, or completely spiralling out of control with a series of sovereign and bank defaults. In such a scenario, Germany would enter a major recession."

 

Growth slowed to 3% in 2011 from 3.7% in 2010, which was the most since German reunification two decades earlier, the statistics office said. The economy last contracted in 2009, when it was in the throes of the global financial crisis. Unemployment at a two-decade low may bolster growth this year by supporting consumer spending.

 

Domestic demand was the main contributor to GDP growth last year, adding 2.1 percentage points, Friday's report showed. Private consumption increased 1.5% in the year, while government spending rose 1.2%. Investment in plant and machinery gained 8.3%.

 

The weaker global economy and waning demand from debt- stricken Euro-area neighbours have eroded German foreign sales, the main pillar of its economic expansion. Net trade contributed 0.8 percentage point to growth last year, with exports up 8.2% and imports gaining 7.2%. In 2010, exports increased 13.7%.

 

German growth will slow to 0.6% this year before recovering to 1.8% in 2013, the Bundesbank predicted on 19 December. The European Central Bank, which has cut interest rates to a record low and flooded the banking system with cash during the debt crisis, last month reduced its 2012 growth forecast for the 17-nation Euro region to just 0.3%.

 

Even before the Euro crisis, people were worried about Europe's pension bomb.

 

State-funded pension obligations in 19 of the European Union nations were about five times higher than their combined gross debt, according to a study commissioned by the European Central Bank. The countries in the report compiled by the Research Centre for Generational Contracts at Freiburg University in 2009 had almost 30 trillion Euros ($39.3 trillion) of projected obligations to their existing populations.

 

Germany accounted for 7.6 trillion Euros and France 6.7 trillion Euros of the liabilities, authors Christoph Mueller, Bernd Raffelhueschen and Olaf Weddige said in the report.

 

A recession threatening the world's second-biggest economic bloc, along with efforts to reduce debt across Europe, is exacerbating the financial risks. Stable or falling birthrates, plus rising life expectancies, are adding to pressures, with the proportion of economic output devoted to spending on retirement benefits projected to rise by a quarter to 14% by 2060, according to the ECB report.

 

Increased retirement ages and lower benefits must be part of any package to hold the 17-nation Euro area together, according to analysts.

 

Europe has the highest proportion of people aged over 60 of any region in the world, and that is forecast to rise to almost 35% by 2050 from 22% in 2009, according to a report from the United Nations. That compares with a global estimate of 22% by 2050, up from 11% in 2009.

 

The number of people aged over 65 in the 34 countries in the Organization for Economic Cooperation and Development is forecast to more than quadruple to 350 million in 2050 from 85 million in 1970. Life expectancy in Europe is increasing at the rate of five hours a day.

 

In so-called developed countries, the average lifespan will reach almost 83 by 2050, up from about 75 in 2009, the UN said.

 

Governments and companies have taken steps to reduce future costs with policy makers having increased retirement ages in countries, including France, Germany, Greece, Italy and the UK

 

Irrespective of whether you're inside or outside the Euro or anything else, raising retirement ages is one of the structural reforms that all of Europe has to do - fact.

 

By 2060, the average French pension benefit will be 48% of the national average wage, compared with 63% now.

 

Pension managers and governments are relying on economic growth to safeguard the promises they make. If the Euro zone grows too slowly to bolster public and private coffers, the retirement plans will absolutely become unaffordable.

 

The amount of money countries are going to spend on social security and long-term care is going to go up. Governments with more generous social-security systems will have difficulty affording them. They will have to recognize these costs will impact their ability to reduce borrowings.

 

State pension obligations in France and Germany are three times the size of their economies, according to data compiled by Mercer. It's more sustainable in France than Germany because of France's higher birthrate.

 

Last year, there were 4.2 people of working age for every pensioner in France. The ratio will fall to 1.9 by 2050, according to a report by Economist magazine in March. In Germany, the proportion will decline to 1.6 from 4.1 in the same period.

 

That is going to put a lot of pressure on Germany's ability to meet their promises. What they are more likely to do is cut back benefits. Governments face a lot of longevity risks.

 

Private pension funds are under pressure too with benchmark Euro-area interest rates at the lowest level since the 13-year- old currency was introduced. Low rates mean pension plans have to hold more assets to back their long-term payout projections.

 

Unless growth returns, fund managers will effectively be forced to take on more risk - not nice, but they will have no option.

 

That creates problems because they all head into sectors that seem a great idea now, and then they blow up, whether it's commodities or equities or whatever - we saw it in 2008 - you're going to intensify the boom-bust cycle.

 

The growing doubts facing the Euro area is another planning hurdle as companies reconsider investment strategies amid concerns that Greece may default on its debt and spark a broader Euro breakup.

 

The implied probability of one country leaving the Euro by the end of 2013 fell to 49% on Tuesday from 51% a week earlier, based on wagers at InTrade.com, an Internet betting market. The probability of one country departing by the end of 2014 is 59%.

 

Pension plans in countries such as Greece or Portugal may benefit from exiting the Euro as higher interest rates that would likely accompany a return to their national currencies would cut the cost of liabilities, while assets invested abroad would almost certainly gain in value.

 

Pension Danmark, Denmark's seventh-largest pension fund by assets, sold all its German government bonds last year, Chief Executive Officer Torben Mogen Pedersen told reporters in Copenhagen Thursday.

 

"Our government debt investments are all in Scandinavian non-Euro countries," Pedersen said. "We think 2012 will be a very hard year for European investors."

 

In Britain, which has refused to join the Euro, occupational pension funds have moved the risk of ensuring adequate retirement income to the employee from the employer in the past decade to curb pension-fund shortfalls.

 

Unfunded public-sector UK pension obligations across 1,500 public bodies totalled 1 trillion Pounds ($1.57 trillion) in March 2010, the Treasury said 29 November in the first set of audited Whole of Government Accounts. That compares with a total of 808 billion Pounds of outstanding UK government bonds and accounts for 90% of all public-sector pension liabilities.

 

Let's be direct here though Ladies & Gentlemen; this does not apply just to people coming from Europe, or Asia or even America - it applies to anyone and everyone under probably the age of 55. If you do not have a private pension by now and you honestly believe that your state pension will not only exist, but actually be worth something when you retire, then I think you need to take a serious look in the mirror and question your own mindset!

 

Almost 40% of our business in 2011 was in setting up private pensions and of course as more and more people 'wake-up' to the global pension deficit problems, this figure I expect will increase further in the years ahead.

 

It's one of life's little 'nuances' really; when people are planning their 2 weeks away in the sun this summer, they spend weeks if not months discussing where they'll go, what they'll do and eventually they book something. They may even think of the following summer too because they want to go to 'two' places and so decide to visit one each year.

 

But why is it, that people who are facing retirement in the future (which we all have to at some point, whether we want to or not) do not seem to grasp that 'retirement' is the longest holiday of your life with ...... everything going out and ...... nothing coming in - yet too many people never bother to plan for it!

 

It may also surprise you to know that over 95% of people that I meet who do not have a private pension, also have not made out a Last Will & Testament and run the risk in the event of their death in their whole estate becoming intestate.

 

This means that all assets are frozen while the state argues with all and sundry, lawyers make massive fees and eventually - sometimes up to 2-3 years after you have passed away - everything gets released to the family/beneficiaries..... but only after the Government and the lawyers have taken their cut.

 

Ladies & Gentlemen, if you are receiving this Newsletter then I'd guess you're of an age where you should know better and do have a private pension and have written out a Last Will & Testament.

 

You've only yourself to blame if it all goes 'Greek' at the end of the day!

 

Off my soap-box and on to those numbers on the boards for the week that was:

US Markets 
How the US did this week .....

 US SummaryUS stocks closed lower Friday as the Dow Jones Industrial Average fell 49 points to 12422, the Standard & Poor's 500-stock index declined 6.4 points to 1289, and the Nasdaq Composite index slipped 14 points to 2711.

 

JPMorgan fell 3.5% to $35.55, as the bank reported fourth-quarter net income of $3.7bn, down from $4.8bn, in the same period in 2010.

 

Low trading volumes hit trading revenues, as investment bank revenues fell 32% from the third quarter of 2011, to $4.9bn.

 

That bodes poorly for investment banking franchises, and Goldman Sachs fell 2.9% to $98.31, while Morgan Stanley was off 2.8% to $16.69.

 

JPMorgan's loans grew by just less than 4% quarter on quarter, driven by a 9% jump in commercial loans, in what Jamie Dimon, chief executive, said was healthy "real business".

 

But large commercial banks, which have rallied strongly this year, retreated somewhat with Bank of America off 3% to $6.59 and Citigroup down 2.7% to $30.74.

 

Despite Friday's sell-off, which was compounded by reports France and Austria were to lose their triple A status, bank stocks had a strong week overall. Morgan Stanley and Goldman Sachs were set to end the week up more than 5%, while Citi and BofA both hit three-month highs during the week.

 

The S&P 500 came within touching distance of 1,300 for the first time since the end of July, as it reached five-month highs on Tuesday, Wednesday and Thursday. Through Wednesday's close the benchmark US index had enjoyed its best start to the year since 2006, and it was still set to end the week up 0.5% at 1,283.86 - a 2% gain for the year.

 

A recent run of positive US economic data were halted, as December retail sales disappointed, but some equity analysts said US markets should continue to "decouple" from European counterparts.

 

Chevron fell 3.2% to $104.56, after the company issued a profit warning, citing falling margins at its Gulf Coast refineries. That sent ExxonMobil shares down 1.1% to $84.09 over the week.

 

The Nasdaq Composite index fared better, climbing 1.1% to 2,702,92 over the week, as China's plans to double solar energy generating capacity in 2012 boosted stocks. SunPower Corp ended the week up 12.4% to $7.51

 

Tiffany fell 9.1% to $59.75 over the week as the luxury department store cut earnings guidance after reporting anaemic holiday same-store sales growth in the US and a decline in sales at its flagship New York store.

 

Asia-Pacific same-store sales rose 12% year on year, but investor reaction suggested emerging market growth may not inoculate luxury brands like Tiffany and Coach against developed market worries.

 

Urban Outfitters ended the week off 9.4% to $25.07, after investors responded to the unexpected resignation of Glen Senk as chief executive, by sending shares down 19% in just one day.

 

Gas-focused energy exploration and production companies suffered as the US natural gas price hit multiyear lows, falling more than 5% on Wednesday, and again on Thursday.

 

Cabot Oil & Gas retreated 16.6% to $67.28 and Range Resources was off 11% to $54.07.

 

Supermarket chain Supervalu fell 13.5% to $7.12 as the company recorded a fourth-quarter loss of $750m for its third fiscal quarter.

 

Analysts had been expecting a profit of a similar magnitude, according to Bloomberg data.

 

The company's margins held steady and Supervalu said that, once one-off costs associated with store closures and employee severance payments were factored out, the business had been profitable.

 

Homebuilders rallied as Lennar declared earnings of $30.3m, only $1.7m down on the same period in 2010.

 

Factoring in house price moves, the company's margin on home sales improved to 19.4%, suggesting some health in the property market.

 

Lennar shares climbed 8.2% to $22.07 and DR Horton was up 7.2% to $13.91.

European Markets 
What has been happening in Europe this week .....

 Europe SummaryThe Eurozone economy plunged back into crisis on Friday as France and Austria were stripped of their triple-A credit ratings and talks to agree a Greek debt writedown hit an impasse.

 

The bloc's third-largest economy, struggling Italy, was also set to be downgraded from A to BBB+ and press reports suggested Spain was next in line.

 

The Euro plunged to a 16-month low against the Dollar on what proved a grim Friday 13th for European Union policy makers, and in particular for France's President Nicolas Sarkozy.

 

In Brussels, EU government sources told AFP Standard and Poor's had warned the bloc that France and Austria would be downgraded by one notch to AA+, while Germany, Luxembourg, Finland and the Netherlands would be spared.

 

S&P had put 15 of the bloc's members on warning that it was reviewing their rankings in the light of the debt crisis. Italian news agency ANSA said Rome's state creditworthiness was to fall to BBB+, seven slots below triple-A.

 

Europe's main stock markets were all slightly down at the close with London's FTSE 100 losing 0.46%, Frankfurt's DAX sliding 0.58% and in Paris the CAC 40 shedding 0.11%.

 

European shares and the Euro had been climbing before reports of the downgrades emerged.

 

GERMANY

 

German stocks retreated, trimming their weekly gains, after reports that several Euro-region countries face imminent credit downgrades by Standard & Poor's.

 

Bayerische Motoren Werke AG and Volkswagen AG led declines in carmakers. ThyssenKrupp AG and Salzgitter AG dropped with metal prices. SAP AG jumped 3.6% after reporting fourth- quarter sales and earnings that beat analysts' estimates.

 

The benchmark DAX Index slid 0.6% to 6,143.08 at the close in Frankfurt, having previously advanced as much as 1.1%. The gauge still posted a fourth weekly advance, rising 1.4%, as the Federal Reserve confirmed the US economy continues to grow and Spain and Italy sold debt at lower yields. The broader HDAX Index also dropped 0.6% Friday.

 

German stocks rose earlier following a report the European Banking Authority will postpone stress tests, while borrowing costs fell at an Italian debt auction. Italy sold 3 billion Euros ($3.8 billion) of bonds maturing in 2014 to yield 4.83%, compared with 5.62% at the previous auction.

 

BMW, the world's biggest maker of luxury cars, dropped 1.6% to 58.45 Euros, while preferred shares of Volkswagen retreated 2.2% to 126 Euros. Carmakers were the worst performers in the benchmark Stoxx Europe 600 Index, losing 1% as a group.

 

ThyssenKrupp and Salzgitter, Germany's biggest steelmakers, lost 1.4% to 19.12 Euros and 2.1% to 42 Euros, respectively. Aluminum, copper, lead, nickel and zinc all retreated on the London Metal Exchange.

 

SAP, the largest maker of business-management software, surged 3.6% to 42.94 Euros. Fourth-quarter revenue from software and related services climbed 12% to 3.72 billion Euros under accounting standards SAP uses for its own forecasts, the Walldorf, Germany-based company said. That compared with the 3.6 billion-Euro average estimate in a Bloomberg survey of analysts. Operating profit gained 10%, also topping projections. month high.

 

Commerzbank jumped 3.4% to 1.42 Euros, the highest level in more than a month, after Handelsblatt reported Germany's second-largest lender plans to raise its capital level without seeking government aid.

 

German 30-year government bonds rose, pushing the yield on the securities down 10 basis points to a Euro-era record 2.338% at mid-afternoon London time, as Dow Jones reported that Standard & Poor's may lower the credit rating of some countries in the region.

 

Germany's five-year note yield also reached a record, dropping 10 basis points to 0.733%.

 

German economic growth slowed in 2011 as the ongoing debt turmoil that almost pushed Eurozone to the brink of collapse last year damped exports.

 

The price adjusted gross domestic product, or GDP, rose 3% in 2011, slower than the 3.7% growth in 2010. This was the second consecutive expansion in national output since the economy suffered a 5.1% contraction in 2009 due to global financial meltdown.

 

Meanwhile, Destatis officials were quoted by reports as saying that the fourth quarter GDP may have dropped by around 0.25%. The 2011 growth estimate matched economists' forecast.

 

The price and calendar-adjusted GDP also recorded an annual rate of growth of 3% last year compared to 3.6% in 2010.

 

The contribution from foreign trade reduced in 2011 compared to the previous year. Export growth eased to 8.2% in 2011 from 13.7% in 2010, while import growth also weakened to 7.2% from 11.7%. Despite the slowdown in exports, net trade contributed 0.8 percentage points to growth.

 

At the same time, domestic demand, particularly household spending, contributed positively to overall output. The growth in consumer spending accelerated to 1.5% in 2011 from 0.6% the year before. Public spending grew 1.2%.

 

The GDP growth also reflected a strong upward momentum in capital formation. Gross fixed capital formation in machinery and equipment grew 8.3% in price-adjusted terms and in construction, it was 5.4% higher than a year earlier.

 

Demand for German debt remains strong amid lingering concerns over the Eurozone sovereign debt crisis, the results of an auction indicated Wednesday.

 

An auction of a new line of 5-year German federal notes Wednesday saw strong demand, just days after the country sold its 6-month treasury bills at negative yield for the first time.

 

Germany sold Eur 3.153 billion of 5-year federal notes, known as Bobls, at an average yield of 0.90%, Bundesbank said. The yield was less than the 1.11% seen in an auction of 2016 notes on December 7.

 

Wednesday's debt sale with a target of Eur 4 billion attracted bids totaling Eur 8.967 billion. The bid-to-cover ratio was 2.8 compared to 2.1 in the December auction.

 

The amount set aside for secondary market operations was Eur 846.70 million, implying a retention rate of 21.17%. The rate was 18.2% in the previous sale. These new notes carrying a coupon rate of 0.75% will mature on February 24, 2017.

 

Investors are increasingly flocking to the perceived safety of German securities, shunning the debt instruments of troubled Eurozone sovereigns. The country sold Eur 3.9 billion of its 6-month treasury bills at a yield of -0.0122% on Monday. The short-term paper was placed at a negative yield for the first time.

 

FRANCE

 

In Paris the CAC40 closed the week at 3,196.49, 0.11% off the pace on the day.

 

S & P downgraded France but it all came too late in the day to affect the market in Paris too much.

 

"It's not good news, but it's not a catastrophe," French Finance Minister Francois Baroin said as he confirmed France's downgrade.

 

"It's not ratings agencies that decide French policy," Baroin added on the France 2 public network after crisis talks with Sarkozy.

 

Germany was left unscathed, and spoke up to defend its neighbour. "France is on the right track," Finance Minister Wolfgang Schaeuble said on the sidelines of an election meeting in northern Germany.

 

The S&P decision, which the ratings agency announced late Friday, could also have a negative impact on the Eurozone's debt bailout fund, which relies on the credibility of the six top-rated nations.

 

Industrial production in France increased unexpectedly in November, data from the statistical office Insee showed Tuesday.

 

Production rose 1.1% month-on-month in November, against economists' expectations for a 0.2% decline. This followed a 0.1% increase in production in October.

 

Annually, output grew 1.1%, compared to forecast for 0.4% fall.

 

In the manufacturing sector, production grew 1.3% from previous month, while economists were looking for a 0.4% drop. Year-on-year, factory production was up 2.2% compared to 0.1% decline forecast.

 

French business confidence improved in December to 96 from 95 in November, survey data from the Bank of France showed Tuesday.

 

Industrial activity rose slightly in December, while the order book balance dropped due to a slight fall in new orders. At the same time, stock of finished products remained stable.

 

The fourth quarter growth is likely to remain stable, unchanged from the previous estimate, the latest survey revealed.

 

Further, the survey showed that business sentiment among service providers remained unchanged at 95 in December.

 

The French trade deficit narrowed to Eur 4.41 billion in November from revised Eur 5.57 billion in October, data from the customs office revealed Monday.

 

Exports rose to Eur 37.43 billion from Eur 36.23 billion a month ago. Imports rose slightly to Eur 41.84 billion from Eur 41.81 billion in the previous month.

 

BELGIUM

 

The Bel 20 in Brussels ended the week at 2,125.34, down 0.57%.

 

Belgium won a reprieve from speeded- up European deficit sanctions after imposing an emergency spending freeze, in a test case of tougher rules meant to help quench the debt crisis.

 

The European Commission said Belgium, Malta and Cyprus bowed to Euro-area pressure to make mid-course corrections that will prevent their 2012 deficits from veering away from targets.

 

The new rules provide "teeth to act when countries fail to bring their deficits under control and reduce their debt," European Union Economic and Monetary Commissioner Olli Rehn said in a statement in Brussels Friday. "I am determined to fully use this new powerful set of tools from Day One."

 

Delhaize, the owner of Food Lion supermarkets, plans to cut about 5,000 positions and expects a 2.4% drop in revenue as it closes stores in the US and Europe.

 

Costs related to the closures will hurt earnings by about 205 million Euros ($261 million) starting in the first quarter, the Brussels-based company said in a statement Friday. Closing 146 outlets and converting 64 others will cut the number of shops by about 4.3% and initially lower revenue by about 500 million Euros, or 2.4%, Delhaize said.

 

Consumers continue to be hurt by high levels of joblessness in the US and Europe. The US unemployment rate, which was 8.5% in December, may continue to curb spending in the world's largest economy, where Delhaize gets most of its revenue.

 

Delhaize lost 17% of market value in the past year compared with a 13% decline for the Stoxx Europe 600 Index.

 

Delhaize expects to record an impairment charge of about 120 million Euros in the fourth quarter of 2011, which is related solely to the US operations.

 

The store closures and conversions will have an "annual positive effect" on operating profit of 35 million Euros to 40 million Euros after completion, said Delhaize.

 

The food retailer will close 113 Food Lion, seven Bloom and six Bottom Dollar Food locations in the US, it said. The remaining 42 Bloom shops as well as 22 Bottom Dollar Food stores will be turned into Food Lion outlets.

 

Twenty stores in southeastern Europe will also be closed. Delhaize gets most of its revenue in the US, where it got 68% of its total 2010 sales of 20.9 billion Euros, according to data compiled by Bloomberg.

 

In its home market of Belgium, the company, in addition to supermarkets, operates a home delivery service and started to offer online shopping, according to its annual report.

 

Belgium's central bank last month reduced its forecast for economic growth in 2012 to 0.5%, in line with the latest prediction by the Organization for Economic Cooperation and Development.

 

In last year's fourth quarter, Delhaize's revenue increased by 7% at identical exchange rates and by 7.6% at actual rates, the company said in its statement. The "difficult global macro-economic environment" hurt sales performance across the group, it said.

 

Delhaize ended 2011 with a sales network of 3,408 stores, according to the statement.

 

European Commissioner for Trade Karel De Gucht is under investigation for the purchase of a house in Italy, Belgian authorities have confirmed.

 

Banks Tuesday turned over De Gucht's records to Belgium's Special Tax Inspectorate (ISI), a section of the Finance Ministry which fights against "serious and organised tax fraud".

 

The investigation focuses on the conditions in which the Belgian EU commissioner purchased a holiday home in Tuscany.

 

The EU commissioner had asked a Belgian court last month to block the release of his records, arguing that a July 2011 law easing bank secrecy rules "went too far". The court also rejected his request to take the matter up to Belgium's constitutional court.

 

De Gucht has since appealed the decision, hoping that the constitutional court will not allow his bank records to be used in the investigation.

 

The law in question was approved by De Gucht's own political party, the Open Flemish Liberals and Democrats, or VLD. The legislation had been passed in part to implement EU rules aiming to reduce bank secrecy and tax evasion.

 

The controversy over the house purchase has been gaining ground over the past weeks and has been regularly reported on in Belgian media. De Gucht has called the tax authorities' treatment of the issue "outrageous".

 

Belgium's justice minister has ordered an inquiry linked to a growing controversy over possible tax fraud among diamond traders in the port city of Antwerp.

 

Justice Minister Annemie Turtelboom called for an investigation into media allegations that members of the prosecutor's office last month lunched at a temple for Indian diamond traders, who in recent years have elbowed into the business once run by members of the Jewish community.

 

The inquiry, which she said would look at the indepedence of the judiciary, follows media suspicions of massive tax fraud in the city.

 

French authorities in September handed deputy prosecutor Peter Van Calster a list of 800 residents of Belgium, including 170 diamond dealers, suspected of placing more than $US1 billion in Switzerland.

 

But the region's general prosecutor, Yves Liegeois, accused him of failing to register the list within three weeks, as required.

 

Last week Liegeois, said by Belgian daily De Morgen to be negotiating a deal with the powerful diamond industry to settle the issue, ordered that Van Calster's office be searched.

 

THE NETHERLANDS

 

In Amsterdam the AEX headed into the weekend on 309.28, down 0.33%.

 

The Netherlands sold a new line of its 3-year bonds on Tuesday.

 

The Dutch State Treasury Agency (DSTA) placed Eur 3.105 billion of 0.75% bonds maturing in April 2015, at an average yield of 0.853%. The agency was planning to raise between Eur 2.5 billion and Eur 3.5 billion.

 

On November 11, the DSTA sold 3-year debt maturing in January 2014 at an average yield of 0.853%. The auction raised Eur 2.095 billion. Meanwhile, the agency placed 3.25% July 2015 bonds at a yield of 1.404% on October 25, raising Eur 1.02 billion from the sale.

 

The Dutch government on January 4 increased the country's borrowing requirement for this year to Eur 101.5 billion from Eur 99.6 billion forecast in December. About Eur 60 billion of the borrowing requirement will be covered by debt issuance, the DSTA said. The country's total capital market issuance in 2011 was Eur 52.9 billion.

 

The agency plans to raise the total outstanding amount of the new 3-year benchmark bond via reopenings to at least Eur 15 billion before the end of the year.

 

Retail sales in the Netherlands increased from last year in November, after falling in the previous month, data released by the Central Bureau of Statistics showed Thursday.

 

Retail sales turnover increased 1.3% on an annual basis in November, recovering from October's 1.6% decrease, which was revised down from 1.7%.

 

Retail sales of food and beverages rose 2.5% annually, while sales of non-food articles decreased 0.8%. There was a 6.5% annual growth in sales at gas stations during the month.

 

In volume terms, retail sales dropped at a slower rate of 1.6% in November than the previous month's revised 4.4% decrease. At the same time, retail prices increased 2.9% year-on-year in November, unchanged from the growth recorded in October.

 

A Dutch court has ordered two ISPs in that country to block their customers' access to The Pirate Bay, a site often used for copyright-infringing activities.

 

On Wednesday, the Hague district court told the ISPs Ziggo and XS4ALL that they have to block the site within 10 days or face a €10,000 (£8,315) fine each day that access remains possible. The action against the ISPs was brought by Brein, the Netherlands' rights-holder group.

 

Following the verdict, it appears that hackers claiming to be part of Anonymous have used a denial-of-service attack to make Brein's own site inaccessible.

 

XS4ALL said the order represented a "fundamental infringement of freedom of information", and vowed to appeal. Brein said it would seek further orders targeting other ISPs as well.

 

"We are stunned by the verdict. This is a black day for the free Internet," XS4ALL director Theo de Vries said. "I see this as a bow to the entertainment industry: the commercial interests of a few large companies are more important than the rights of Dutch citizens."

 

SWITZERLAND

 

Zurich's SMI drew a line under the trading week at 5,996.34, down 0.36%.

 

Switzerland's nominal retail sales are set to log a slight decline in 2012, Credit Suisse said in its annual study "Retail Outlook 2012" on Tuesday.

 

As long as uncertainty about the outcome of the Euro crisis persists and unemployment climbs, retail sales performance will be held back by poor consumer sentiment, the bank's economists noted. Falling retail prices will also counteract a loss of purchasing power.

 

Excluding the effect of inflation, real retail sales will register a moderate growth in 2012, the report said. As seen in 2011, the forecast nominal decline in sales will primarily be due to falling prices.

 

According to the survey conducted by the consultancy firm Fuhrer & Hotz, 38% of those surveyed are expecting sales to stagnate or decline in 2012 versus the previous year, while as many as 51% of respondents anticipate stagnating or declining profits.

 

The franc's strength was one of the reasons why 58% missed their sales targets and 43% their profit targets.

 

Switzerland's unemployment rate increased modestly in December, data from the State Secretariat for Economic Affairs (SECO) revealed Monday.

 

The jobless rate rose to a seasonally adjusted 3.1% in December from 3% in November, in line with economists' forecast. On an unadjusted basis, the rate rose to 3.3% from 3.1% in November compared to economists' expectations for an increase to 3.2%.

 

The number of registered job seekers increased by 8,025 from a month ago to 185,706 in December. At the same time, registered unemployed rose by 9,553 from the prior month.

 

The Swiss government may take as long as four months to appoint a replacement for Philipp Hildebrand as the central bank's council mulls internal and external candidates after his surprise resignation.

 

Asked when the government will be able to announce a new governor to the Swiss National Bank's three-member board, President Eveline Widmer-Schlumpf said in Bern Thursday that it's probably "a matter of a few months, maybe April or May." Thomas Jordan, 48, who was appointed interim president on Jan. 9 is a "very competent personality," she said.

 

Hildebrand, a former hedge-fund manager, announced his resignation on Jan. 9 after failing to prove that his wife acted independently on a currency purchase of $504,000 in August, a month before the SNB imposed its first franc cap in three decades. While the SNB's Bank Council, led by Hansueli Raggenbass, will suggest potential candidates, it's up to the seven-member Cabinet to take a final decision.

 

Philipp Hildebrand, who resigned two days ago as chairman of the Swiss National Bank in the midst of an alleged insider trading storm, is facing up to conflicting accounts of events in a tranche of his private emails released by the bank.

 

The scandal concerns Hildebrand's alleged involvement in his wife's purchase of $500,000 US currency, only weeks before the Swiss National Bank capped the Swiss Franc. His wife later sold the currency back at a higher rate, making a substantial profit. If Hildebrand played any part in the actions, he would have broken the law.

 

Hildebrand has said he never encouraged or authorised such purchases, and only quit because he was unable to unequivocally prove his innocence. But his private financial adviser, Felix Scheuber, wrote in an email last year that Hildebrand had indicated clear approval for Dollar transactions.

 

The emergence of the emails are reported to have played a key part in Hildebrand's departure, though the bank has not confirmed this officially.

 

AUSTRIA

 

The ATX in Vienna rounded out the week on 1,923.64, actually up 0.44% for the session.

 

A day after reaffirming the top sovereign credit rating of Austrian government bonds, a research arm of respected French credit rating agency Fitch issued a report noting the rapidly deteriorating level of confidence investors in the derivatives market are displaying towards that country's debt.

 

"2012 began on an overall quiet note with respect to credit default swap (CDS) spreads, though a closer look reveals regional distinctions emerging," read a press release from Fitch Group research unit Fitch Solutions circulated Wednesday afternoon. The release noted the availability of a new report by the agency on the state of the credit default swap derivatives market.

 

"Spreads on Austria widened 22% due to market concerns on its exposure to Hungary, which CDS came out 11% last week," Diana Allmendinger, who authored the report, said in a statement.

 

CDS spreads widen as investors bid up the price of insurance against default of a country's debt.

 

Austria is one of the last remaining AAA sovereigns within the 17-nation Eurozone. Germany, France, Finland, the Netherlands and tiny Luxembourg round out the list. The fallout that would result if any of those countries lost their golden borrower status would likely go beyond national borders, as the credit rating of the wider European Union depends on that of its members.

 

Investors are concerned Austria will have to bail out some or all of its financial institutions, all of which engaged in high levels of lending to consumers in Austria's Eastern European neighbor, Hungary. Those institutions have suffered massive losses recently as the Hungarian economy and currency have deteriorated, a situation exacerbated by the anti-foreign bank position of Hungary's leading politicians

 

Former OMV Chief Executive Officer Wolfgang Ruttenstorfer had his acquittal of insider trading confirmed by an appeals court in Vienna Friday.

 

Austria's Higher Regional Court upheld that Ruttenstorfer, 61, didn't deliberately use inside information to buy shares of the company a week before a major divestment.

 

Austria benefited the most by the introduction of the Euro, according to an investigation.

 

The German department of internationally operating consulting group McKinsey examined the economic performance of the 17 members of the Eurozone to determine which nation prospered the most. Twelve European Union (EU) states including Austria are the Eurozone's founding members as they introduced the currency in 2002.

 

McKinsey Germany said Tuesday that no other gross domestic product (GDP) grew stronger than the one of Austria from 2002 to 2010 thanks to the effects of the Euro. The company said lower trade costs and other declines of charges helped the small country to a 7.8% GDP increase of 22 billion Euros. Finland also strongly benefited. The Scandinavian country achieved a GDP jump of 6.7% or 12 billion Euros between 2002 and 2010. Germany (plus 6.4%) and the Netherlands (plus 6.2%) take third and fourth place in the study ahead of Italy (plus 2.7%) and Portugal (plus 2.1%).

 

Austrian Airlines (AUA) chief Jaan Albrecht has asked the airline's business partners and lawmakers in Austria for help in combating the crisis.

 

Albrecht said this week he was determined to fly back into the black this year but also made clear that aviation security authorities, Vienna International Airport (VIA or VIE) and other institutions had to consider lowering their charges. "The aviation industry is going through changes. AUA must evolve too," the former Star Alliance boss said, adding that the Viennese carrier could not achieve a profit without help from its partners.

 

Albrecht, who joined Andreas Bierwirth and Peter Malanik at the airline's board in November, said he considered carrying out changes affecting staff contracts. The entreprenEur explained that AUA's personnel costs were as high as in 2009 at the moment despite a workforce level decline of 1,500. Reports have it that employees' incomes would not be upped anymore if the inflation rate were to rise. Pilots could be asked to work longer without being paid more.

 

Austria continues to have the lowest unemployment rate in the European Union (EU).

 

Eurostat said on Saturday that the country - which accessed the EU in 1995 - recorded a jobless rate of four% in November. Luxembourg and the Netherlands reached second place at 4.9% each, according to the research organisation.

 

SWEDEN

 

The OMX in Stockholm completed a hectic trading week on 1,009.00, down 0.64%.

 

The inflation rate was 2.3% in December, down from 2.8% in November. The Swedish Consumer Price Index (CPI) increased by 0.2% from November to December. The CPI for December of 2011 was 314.78 (1980=100).

 

Higher costs for housing (0.3%) accounted for 0.1 percentage point of the increase of the CPI since last month. This was mainly due to higher interest costs for owner occupied housing (3.7%) which contributed to the increase by 0.2 percentage points. The increase was partly offset by lower prices on electricity (-3.0%) which contributed downwards by 0.1 percentage point. Further, higher prices for food and non-alcoholic beverages (0.5%) as well as transportation services (2.1%) contributed to the total increase since last month by 0.1 percentage point each. The price increases were counteracted by lower prices on clothing and footwear (-1.3% ) which contributed downwards by 0.1 percentage point.

 

The inflation rate according to CPIF was 0.5% and according to CPIX 0.3% in December. Both CPIF and CPIX were unchanged from November to December 2011. HICP was unchanged compared with November 2011 and increased by 0.4% since December of 2010.

 

Swedish house prices fell 3% in the fourth quarter from the third quarter, Statistics Sweden said Thursday.

 

Prices fell 2% from the year-earlier period, the agency said.

 

Sweden's industrial production increased from last year in November, data released by Statistics Sweden also showed this week.

 

Industrial output increased a working-day adjusted 0.2% on an annual basis in November, slower than the 2.5% growth economists forecast. Production in the mining and quarrying sector advanced 4.4% year-on-year, while manufacturing output edged up 0.1%.

 

On a monthly basis, industrial production deceased a seasonally adjusted 1.9% during the month. Economists expected output to fall 0.8%.

 

Separately, the agency said Sweden's industrial new orders decreased a working-day adjusted 8.4% year-on-year November. On a monthly basis, new orders decreased a seasonally adjusted 4.8%.

 

Sweden's budget deficit for December totaled SEK 90.8 billion, figures from the National Debt Office showed Tuesday. The deficit was SEK 10.3 billion lower than the estimate of debt office.

 

Interest payments on central government debt were SEK 10.4 billion, which was SEK 1.8 billion higher than forecast. This was primarily due to higher losses.

 

In 2011, government payments resulted in SEK 68 billion. There was a sharp improvement over 2010 when the state budget was basically in balance. The strong economic recovery helped to boost tax revenues in 2011. In addition, the state sold shares in two companies.

 

Interest rates on government debt was SEK 34 billion, which was SEK 11 billion higher than in 2010. This was mainly due to higher interest payments on loans in Swedish kronor and lower premiums at issuance.

 

The national debt was SEK 1,108 billion at the end of 2011, which represents 32% of GDP.

 

DENMARK

 

Copenhagen's OMX closed out the Friday trading session on 401.19, down 0.28%.

 

Danish wind power system company Vestas Thursday said it planned to slash 2,335 positions as part of efforts to cut costs and streamline its business amid lower demand.

 

The measure was expected to reduce fixed costs by over 150 million Euros (178 million Dollars), which would take full effect from the end of 2012, Vestas said in a statement.

 

Chief executive Ditlev Engel said the changes reflected the need to adjust to 'the change the wind market is going through. This is necessary in times like these, when Vestas must be able to absorb very large market fluctuations.'

 

The announcement was made a week after the firm issued a profit warning, in which it stated that its full-year 2011 earnings before interest and tax were expected to be zero.

 

Of the announced job cuts, 1,300 were to affect its homebase in Denmark.

 

Following the job cuts, Vestas said it would have 20,400 employees worldwide, of which about a quarter were employed in Denmark.

 

Vestas said a further 1,600 jobs could be cut in the United States if the so-called production tax credit (PTC) was not extended, resulting in a drop in demand for wind power systems.

 

Denmark's industrial production increased modestly in November, after falling in the previous month, data released by Statistics Denmark showed Thursday.

 

Industrial production edged up a seasonally adjusted 0.2% month-on-year in November, recovering from the previous month's revised 0.1% decrease.

 

On an annual basis, industrial output increased 3.8% in November. In the September-November period, output decreased a seasonally adjusted 1.3% from the preceding three-month period.

 

At the same time, turnover in Danish industries increased 0.6% on a monthly basis in November. New orders received by firms decreased 2.5% sequentially during the month.

 

Denmark's consumer price inflation slowed as expected in December, data from Statistics Denmark showed Tuesday.

 

Annual inflation came in at 2.5%, in line with expectations, but down from 2.6% in November. On a monthly basis, consumer prices remained flat in December.

 

Inflation measured under the EU methodology, which refers to the growth in the harmonized index of consumer prices (HICP), also slowed slightly in December to 2.4% from 2.5% a month ago.

 

Month-on-month, the index stayed stable. Both annual and monthly figures matched consensus forecast.

 

Denmark's retail sales decreased slightly in November, after remaining flat in the previous two months, data released by Statistics Denmark also showed this week.

 

Retail sales decreased a seasonally adjusted 0.5% on a monthly basis in November, after holding flat in the previous two months.

 

Retail sales of food products dropped 1.2% month-on-month, while sales of clothing edged down 0.5%. There was a 0.2% monthly decrease in other consumer goods in November.

 

Year-on-year, retail sales decreased at a slower pace of 1.8% in November than the previous month's 3.7% decrease. In the eleven months ended November, retail sales decreased 1.5% from the corresponding period a year earlier.

 

FINLAND

 

In Helsinki the OMX finished the week at 5,569.31, down 0.82%.

 

Finland's national output growth eased to working-day adjusted 1.1% annually in October from a revised 2.3% in September, Statistics Finland said Tuesday. The trend of total output also shows that the growth rate of the national economy has slowed down.

 

On a monthly comparison, seasonally adjusted output fell by 0.3% in October. It has fallen four times in the last five months.

 

Primary production rose by one% from the prior year. Primary production refers to agriculture, forestry and fishing.

 

Meanwhile, secondary production declined by two%. Secondary production includes manufacturing and construction.

 

Services went up by two% from the previous year's level. Services comprise trade, hotel and restaurant activities, transport and business activities as well as real estate, renting and research services, financial intermediation and insurance, and public services.

 

Finland's industrial production decreased at a slower pace in November, data released by Statistics Finland also showed this week.

 

Industrial production decreased a working-day adjusted 3.5% on an annual basis in November, notably slower than the 5.3% decline seen in the previous month. Production decreased for the third month in a row.

 

Month-on-month, industrial production moved a seasonally adjusted 0.5% in November, recovering from the October's 1.3% decrease. In the January-November period, production edged up a seasonally adjusted 0.7% from the same period a year earlier.

 

Capacity utilization in Finnish factories increased 3 percentage points from a year earlier to 81.4% in November, the agency said.

 

The Finnish forest industry purchased 25% less wood from Finland's forests in 2011.

 

The Finnish Forest Industries Federation (FFIF) member companies purchased 25.3 million metres cubed of wood from Finnish private-owned forests in 2011. Procurement volumes by all purchasers was 34 million cubed.

 

FFIF cautioned that summer storms in 2010 potentially skewed the figures, boosting the purchase volumes in that year.

 

It said the late arrival of frost in the autumn shortened the winter harvesting period by one or two months, while the storms that "ravaged" forests in Finland after Christmas were too late to have any effect on timber sales volumes in December.

 

Three-quarters of all sawlogs came from regeneration felling.

 

The Finnish mobile phone giant Nokia will soon start selling its new Lumia smartphones also in Finland.

    

The company announced Friday (Wednesday) that sales of the Lumia 800 would be launched in this country from the beginning of February, and advance sales begin as of Friday.

 

As the platform for its Lumia handsets Nokia utilises the American software giant Microsoft's Windows Phone operating system.

 

In February 2011, Nokia chose Windows Phone as its primary smartphone platform, because it felt that the preceding Symbian operating system, which was largely developed by Nokia itself, did not satisfactorily answer the requirements of the high-end smartphones.

    

Nokia commenced the selling of the Lumia phones in the largest European countries in November. The aim of the move was to ensure that the phone would be available for consumers in the most relevant European markets before Christmas.

 

On Tuesday Nokia announced at the American annual Consumer Electronics Show in Las Vegas that it has designed a new Lumia 900 handset for the US teleoperator AT&T.

 

The phone will become available in the coming months.

 

The cooperation with AT&T is important to Nokia, because in the United States the majority of consumer handsets are sold by the teleoperators.

 

NORWAY

 

Oslo's OBX pulled the curtains on the trading session Friday at 365.06, down 1.19%.

 

Producer prices in Norway's industrial sector climbed 8.2% year-on-year in December, Statistics Norway said Tuesday.

 

The price increase was mainly caused by higher prices involved in extraction of oil and natural gas, and refined petroleum products. Prices of electricity and basic metals helped curb further rise in the prices.

 

The producer price index increased 0.2% from November to December. A higher price for natural gas was the main cause, while lower prices of oil, refined petroleum products, metals and electricity pulled the index down.

 

Prices in manufacturing as a whole fell 0.1% from a month earlier as a result of price reductions in several key industries. In 2011, overall PPI rose 16.3%, compared with a rise of 18.3% in the previous year.

 

Norwegian inflation eased more than expected in December due to fall in electricity costs, data released this week showed.

 

The consumer price index rose 0.2% year-on-year in December, slower than November's 1.2% gain. Economists were looking for a 0.5% rise.

 

The main cause of the slowdown was the 3.2% monthly decline in electricity prices including grid rent. Electricity costs rose 19.9% compared to the same period the previous year. Prices of fuels and lubricant also showed a small decline from November to December.

 

The year-to-year growth rate in the core CPI was 1% in December, unchanged from November. This was in line with economists' forecast.

 

The CPI increased 0.1% from November to December, while economists expected a 0.2% rise. The monthly increase was caused by higher air fares and taxi charges, the statistical office said.

 

The harmonized index of consumer prices fell 0.1% year-on-year in December after a 1.2% increase in November and a 1.3% rise in October. On a monthly basis, the index was up 0.1%.

 

Norwegian engineering company Aker Solutions has signed a contract with Marathon Oil Norge to supply a subsea production system for the operator's Bøyla project on the Norwegian continental shelf.

 

Contract value is approximately NOK 210 million, and includes engineering, procurement, construction and delivery of four subsea trees, four over-trawlable subsea structures and control systems.

 

The Bøyla field is located south-west of the Alvheim field and will be tied back to the Alvheim FPSO. The water depth is approximately 120 meters.

 

Engineering and manufacturing of the subsea trees will be primarily performed at Aker Solutions' technology centre at Tranby, Norway. Engineering of the over-trawlable structures will be carried out at Aker Solutions headquarters in Fornebu, Norway. The subsea control systems will be delivered out of Aberdeen, UK.

 

Installation and commissioning will be handled by Aker Solutions' service base at Aagotnes, Norway. Final deliveries will be made in Q1 2013.

 

Prosafe, which owns and operates semi-submersible rigs to house offshore oil workers, said on Thursday that 79.8% of its rig fleet was in service in the fourth quarter of 2011.

 

In October, the company reported a third-quarter rig utilisation rate of 91%.

 

Prosafe said its Safe Scandinavia rig was out of service for 21 days in the fourth quarter while mobilising for duty in the Valhall field off Norway. The Safe Concordia was five days off hire so its dynamic positioning system could be modified.

 

SPAIN

 

The IBEX in Madrid drew to a close Friday on 8,450.60, up 0.28%.

 

Spain's banks, saddled with 329,000 foreclosed homes, are still willing to provide mortgages, as long as the borrower wants to buy one of their properties, according to a consumer-rights group. That's no help to homeowners and developers seeking to sell.

 

Members of the group, Organización de Consumidores y Usuarios, or OCU, applied for mortgages at 46 bank branches in Spain in August and September to buy privately-owned homes. In every case, the lender tried to persuade the prospective borrower to purchase one of its own properties instead -- either by offering to finance 100% of the price or by refusing to lend for another home, spokeswoman Ileana Izverniceanu said.

 

"People end up buying from the banks because they have no alternative," Izverniceanu said in an interview at her office in Madrid.

 

The Bank of Spain has encouraged lenders to sell real- estate assets now rather than wait for the market to recover from a four-year decline. By offering mortgages selectively, the banks may prolong the slump by discriminating against other property sellers and keeping prices artificially high, Izverniceanu said.

 

Industrial production dropped a working-day adjusted 7% year-on-year, after falling 4.2% in October, which was revised from 4%, data from the statistical office INE showed. Economists had forecast production to decline 5.4% in November.

 

The latest decline was the worse since October 2009, when production tumbled 9.1%. Industrial output fell for the third month in a row, after stagnating in August.

 

A 16.3% plunge in the manufacture of consumer durables led the decline in overall industrial production. Non-durables output fell 2.8%. Consumer goods production dropped 4.4%.

 

Production of capital goods was down 7.4%, while manufacture of intermediate goods fell 10%. Energy output decreased 5.2%.

 

During the January to November period, industrial production fell 1.3% from a year ago.

 

On an unadjusted basis, industrial production dropped 7% annually in November, following a 4.5% decline in the previous month. Manufacturing recorded a 6.9% slump, while mining and quarrying output declined 15.6%.

 

The persisting weakness in Spain's industrial sector, evidenced by the latest production data, adds to fears that the economy is sliding into a prolonged recession, Raj Badiani, an economist at IHS Global Insight, said in a note Wednesday.

 

The faster-than-expected fall in November industrial production indicates that the economy is mired in deep contraction territory, and provide compelling evidence that the economy suffered a sharp reverse in the final quarter of 2011, the economist pointed out.

 

Citing the deterioration in Spain's industrial sector and intensifying economic woes, IHS Global Insight lowered its growth forecast for Spain and currently estimates the economy to contract 1.2% this year and to recover in 2013 with a modest 0.4% growth. The firm warns that the recession is likely to be deeper and more prolonged than previously estimated.

 

Data from the statistical office Friday showed that the decline in industrial output accelerated to a faster-than-expected 7% year-on-year in November from October's 4.2%. The latest fall, the third in a row, was the fastest since October 2009.

 

The consumer durables sector saw a sharp fall in production, with consumers showing a renewed reluctance to undertake major purchases against the backdrop of the weakening labour market, poor wage growth and the prospect of yet another recession.

 

Spain's property transactions decreased by 8.8% annually in November, data from the statistical office INE revealed Tuesday. The number of property transfers recorded in land registries totaled 134,612 in November, up 11% from October.

 

In the case of registered merchantings of property, the number of transfers was 60,545, representing an annual decrease of 13.1%, and an increase of 17.9% as compared with the previous month.

 

Data showed that 84.8% of the registered merchantings corresponded to urban properties and 15.2% to rustic properties.

 

PORTUGAL

 

Lisbon's PSI General concluded the week Friday at 2,165.29, down 0.78%.

 

The Portuguese government debt agency IGCP plans to hold three auctions on Wednesday next week to sell treasury bills.

 

IGCP plans to 3-month, 6-month and 11-month bills, the agency said Friday in a statement on its website.

 

Portugal Telecom has all its financing needs covered through the end of 2014, the company's CEO Zeinal Bava said on Thursday, promising to stick to planned investment and payouts to shareholders despite a deep recession in Portugal.

 

"Our company is financed through 2014, we are steady and maintain all our commitments to shareholders. We have no intentions of altering investment plans or dividends," he told a conference.

 

PT has promised to pay 0.65 Euros per share in dividends for 2011 and plans to increase the payout by 3-5% a year until 2015.

 

Portugal's annual inflation, measured under the EU methodology, slowed in December, data released by Statistics Portugal showed Wednesday.

 

The harmonized index of consumer prices (HICP) increased 3.5% year-on-year in December, in line with economists' expectations. In November, the inflation rate was 3.8%.

 

On a monthly basis, the HICP edged up 0.1% in December, and matched economists forecast. In November, the HICP recorded a 0.1% decline month-on-month.

 

The consumer price inflation eased to 3.62% in December from 3.95% in November. Month-on-month, consumer prices remained flat during the month, after edging down 0.1% in the previous month.

 

Portugal's trade deficit narrowed to Eur 3.11 billion during September to November, data from Statistics Portugal showed Monday. During the same period of last year, the deficit totaled Eur 5.15 billion.

 

Exports of goods grew 15.1% from the previous year, while imports fell 3.6%.

 

On a yearly basis, exports increased 15.4% in November. Meanwhile, imports decreased 7.3% over the figure recorded in November 2010, due to the fall in Intra-EU trade.

 

ITALY

 

The FTSE Mibtel in Milan closed the week on 15,011.10, down 1.20%.

 

Italy's public spending deficit decreased from last year in the third quarter, data released by statistical office Istat showed Wednesday.

 

Net borrowing fell to 2.7% of gross domestic product (GDP) in the third quarter form 3.5% a year earlier. In the second quarter, the public spending deficit was 3.4% of GDP.

 

Primary balance, which is debt net of interest expense, was positive and and had a 1.7% impact on GDP, the agency said.

 

In the first nine months of the year, total public spending decreased 0.3 percentage points from last year to 4.3% of GDP.

 

Italy faces a "material risk" of being downgraded by Fitch Ratings by the end of the month although the government should be able to raise the funds it needs on debt markets, the agency's head of sovereign ratings said on Thursday.

 

"There is clearly a material risk of a downgrade of Italy by the end of this month," Fitch's David Riley told Reuters in an interview. "We are reviewing the situation. We're looking at the information and developments, so it's not a foregone conclusion ... but there is a significant risk that Italy could be downgraded."

 

He said that while the government could live with currently high borrowing costs for a couple of years, Fitch was not sure how long the economy can cope with high interest rates since those paid by business and consumers track those paid by the state.

 

"We do actually think the Italian government will be able to fund itself but it's going to be expensive," he said.

 

Italy's securities regulator extended a ban on short selling financial shares until Feb. 24, according to an e-mailed statement from Commissione Nazionale per le Società e la Borsa.

 

The restrictions, in place since August, prohibit investors from betting against the shares and equity derivatives of banks and insurance companies, Rome-based Consob said Thursday.

 

The short-selling ban covers securities such as UniCredit, which has plunged 40% in 2012 and slumped to a record low this week. Regulators in France, Spain, Italy and Belgium imposed temporary bans on the bearish bets in August to stabilize markets amid Europe's sovereign-debt crisis.

 

GREECE

 

In Athens, the Athex Composite ended both the session and the week at 644.94, up a whopping 2.02% for the Friday session.

 

Greece's talks with private-sector creditors on a debt write-down plan are entering their final stage, but key areas remain unresolved, representatives of private-sector creditors participating in the talks and Greek officials said Thursday.

 

The talks, which are set to resume Friday, come as fresh data confirmed that Greece remains mired in recession and will overshoot its deficit targets this year, raising new obstacles to a proposed Eur130 billion bailout for the country.

 

Greece's European partners agreed in late October to cover the country's budget deficits over the next three years, but insisted that private creditors share in the pain by writing off half the debt Greece owes them.

 

That debt restructuring would slice roughly Eur100 billion off of Greece's total public debt--now estimated around Eur360 billion--and would save the government roughly Eur5 billion a year in debt-servicing costs.

 

Those talks are now in an advanced phase, with government officials saying the outlines of a final deal could come as early as next week.

 

"We are completely on track. Exploiting the momentum, by the end of the next week we could have the final outline for a deal with the private sector," a senior Greek Finance Ministry official said.

 

"We may have the public formal offer by the beginning of February," he added, speaking after a first day of meetings between Greek Prime Minister Lucas Papademos, Finance Minister Evangelos Venizelos, and Charles Dallara, head of the Institute of International Finance, or IIF.

 

The IIF, a trade body that represents more than 400 of the world's biggest banks, is leading talks with the Greek government on the debt restructuring. Officials expect the agreement on the haircut to involve an exchange of old bonds for new ones with maturities ranging between 20 and 30 years and a coupon of 4% to 5%.

 

But many details still remain unresolved despite a pressing deadline to cut a deal.

 

"Despite the strong efforts and leadership of the Greek government, we are quite concerned about the lack of a clear process to finalize these negotiations," Dallara said.

 

But the debt restructuring--and by extension the amount of money Greece's European partners and the International Monetary Fund will pony up--depends on many of the country's private creditors signing on to the debt write-down.

 

"If the participation [rate] does not reach 100%, greater support from our partners would be necessary," Greek Deputy Finance Minister Philippos Sachinidis said in a radio interview Thursday.

 

That's something that European taxpayers, particularly in Germany, as well as the IMF, may be loath to do. As a result, Athens is seriously considering using so-called collective-action clauses, or CACs, that would force a minority of holdout creditors to take losses, if the agreement is backed by a majority.

 

Other options could include lowering the interest rate on the bailout loans, and allowing Greece to buy back its bonds held by the European Central Bank at discounted prices, a possibility the ECB is likely to resist.

 

But even as the talks on the debt deal continue, fresh data Thursday confirmed that Greece's steadily deepening recession has opened up an even wider hole in the budget deficit last year than expected.

 

With both tax revenues and pension fund contributions lagging behind targets, preliminary data from the finance ministry showed Greece's central government budget deficit for 2011 widened 0.8% compared with the previous year, to Eur21.6 billion.

 

Final budget figures won't be out for another two months, but government officials say the deficit will likely settle above 9.5% of gross domestic product--well above a recently revised 9% ratio and implying Greece most cover more than a Eur1 billion gap.

 

How to close the gap will be one of the issues Greece will address with a delegation of European and IMF officials--known locally as the troika--during talks next week in Athens.

 

"We see the budget deficit coming in around 9.6%-9.8% of GDP. All efforts is to keep it below 10% when the final numbers come out," said a second Greek government official. "It will be above target and we expect the troika to push on more spending cuts."

 

But those cuts are likely to push Greece even deeper into recession--most economists expect the economy contracted by 6% last year--as business bankruptcies and unemployment soar.

 

Despite that, the troika is also demanding steep cuts in labour costs--read: wages--as a way of boosting Greece's competitiveness.

 

On Thursday, data showed Greece's jobless rate continued to climb in October exceeding the 18% mark while private-sector workers called fresh strike action next week ahead of talks with employer groups over those proposed pay cuts.

 

The country's statistics agency Elstat said Greece's unemployment rate rose to 18.2% in October from a rate of 17.5% in September and 18.4% in August. The total number of unemployed people rose to 903,525 in October, compared with 857,656 a month earlier, the agency said.

 

Greece's EU harmonized inflation eased to the lowest in four months in December, data released by the Hellenic Statistical Authority showed Wednesday.

 

The harmonized index of consumer prices (HICP) increased 2.2% on an annual basis in December, slower than the 2.8% growth seen in November. The latest figure was the lowest since August, when the HICP rose 1.4%.

 

Prices of food and non-alcoholic beverages advanced 4.1% year-on-year, while housing costs moved up 8%. There was a 0.6% annual increase in transportation costs during the month, and a 1% decrease in clothing and footwear prices.

 

Month-on-month, the HICP edged down 0.2% in December, reversing the previous month's 0.2% increase.

 

At the same time, the consumer price inflation slowed to 2.4% in December from 2.9% in the previous month. On a monthly basis, consumer prices decreased 0.1%, following November's 0.2% rise.

 

Greece's industrial production fell at a slower pace in November, data from the Hellenic Statistical Authority showed Monday.

 

The industrial production index declined 7.8% year-on-year, after falling 13.5% in October.

 

Month-on-month, production grew 4.1% in November, after a 14.4% slump in the previous month.

The UK Market 
Did it follow the Global trend .....
 UK MarketsCairn Energy outperformed a falling London market Friday, helped by speculation about an asset sale.

 

Hopes that Cairn was making progress in bringing in a partner for its Greenland exploration prospect sent the shares to a two-month high, up 1.3% at 292¼p.

 

Mike Watts, Cairn's deputy chief executive, this week told an industry conference that the group was in talks with one party about a farm-out deal, according to conference host Macquarie. However, the broker did not expect an agreement until Cairn receives full 3D seismic data for the site, likely in the second half of 2012.

 

"With $1.2bn spent to date and all commitments met, we get the sense that the company will bide its time for the right deal," Macquarie told clients.

 

Cairn rose 10.7% this week after the group set out a $3.5bn cash return to shareholders using a tax-efficient B share scheme.

 

An asset sale should lift the shares further, according to Merrill Lynch. "The market has written off Greenland and a potential farm down during 2012 will prove the value of Cairn's acreage," it said.

 

However, analysts also cautioned that the cash return would lead to selling by tracker funds and passive investors. Cairn was likely to lose its place in the FTSE 100 at a March index review and may also fall below the value criteria for inclusion in MSCI indices, meaning 67m shares would need to be sold, JPMorgan Cazenove estimated.

 

The wider market slipped awaiting Standard & Poor's downgrade of Eurozone countries, sending the FTSE 100 down 0.5%, or 25.78 points, to 5,636.64. It was a fourth straight fall for the index, which lost 0.2% for the week.

 

Vodafone dropped 2.5% to 175p on talk that a trading update due February 9 would disappoint. "Vodafone has had two excellent years, with 33% sector outperformance. Near term we see potential weakness due to top line in Europe," said Morgan Stanley. Analysts at Exane BNP Paribas also cut earnings forecasts.

 

Royal Dutch Shell fell for a third straight day, with its B shares down 1% to £23.42. Invensys slumped 19.3% to 183¼p after warning that delays and cost overruns would cut full-year earnings by a quarter. Ocado lost 2.2% to 72¼p in the wake of Thursday's reassuring update and 33% surge.

 

Merrill Lynch, SocGen and Investec all cut earnings forecasts for Shell to reflect upstream maintenance costs and a poor downstream performance. "The fourth quarter seems likely to be significantly under par, and we suspect both major divisions are performing worse than we had expected," said Investec, which moved to a "sell" recommendation. "While much of what we model is industry-wide, Shell's premium rating leaves it vulnerable."

 

The share price drop, said Collins Stewart, "signals to us that management has lost credibility, and with no news expected until May's full-year results, the stock looks like dead money until then. A strategic buyer could weigh in, but without progress on the pension, we see that as only an outside chance in the near term."

 

Repeating long-standing sell advice, Shore Capital said: "Ocado remains an unproven experiment. "While there may have been a sense of relief that Ocado's poor performance did not deteriorate any further at the start of 2012, we do not see this update as a reason to be hanging out the bunting just yet."

 

A Credit Suisse upgrade to "outperform" helped Hays , the recruitment agent, rise 5.1% to 64¾p. Lead indicators for Europe have begun to show some signs of stabilisation and staff agencies typically outperform even before consensus forecasts reach trough levels, Credit Suisse said. "Hays is trading below its historical trough multiples and is now factoring in almost no real cash growth into the future. While we expect that the dividend will need to be cut, we think this is reflected in the share price," it said.

 

Spectris rose 5.1% to £14.82 after the instrumentation maker said trading had remained strong in November and December.

 

F&C Asset Management rallied 3.9% to 64p after HSBC said fears were misplaced that the group would lose all the assets it manages on behalf of Friends Life and Banco Comercial Português.

 

The investment strategy of Resolution, Friends' parent, suggests it would only withdraw £2bn of the £10.5bn F&C manages on its behalf, HSBC said. It also forecast that BCP would pull less than a third of the £15bn of its F&C funds. "We expect a better outcome than the market," said the broker, which upgraded F&C to "overweight".

 

House prices continued to fall across all regions in the UK in December except in London, where prices continued to rise along with sharp increase in supply, reports said Tuesday citing a survey by the Royal Institution of Chartered Surveyors (RICS).

 

The seasonally adjusted house price balance was -16 in December, up from -17 in November. This confounded economists' expectations for a further decline to -19. London was the only region to report an increase in property prices.

 

Demand for property across the country held steady during the month, while supply picked up. Supply of new homes in London rose to its highest level since January 2005, the survey found.

 

RICS' measure of sales per surveyor fell to 15.2 in December from 15.4 in November. Sales expectations for the coming three months also declined, and respondents forecast prices to continue falling over the period.

 

The UK recovery is stalling, but the situation is better than those seen in the worst phase of the last downturn, according to Quarterly Economic Survey (QES) from the British Chambers of Commerce.

 

The survey results suggests that the economy is set to stagnate overall until mid-2012, with one quarter likely in negative territory. But the results do not indicate a recession, data showed Tuesday.

 

John Longworth, Director General of the BCC said that action is needed urgently to tackle short-term stagnation and a lack of business confidence, damaged by the ongoing Eurozone crisis.

 

The quarterly survey found that the manufacturing balance for home deliveries declined by three points and also forward looking orders dipped nine points. Both balances are at the lowest level since the third quarter of 2009.

 

Meanwhile, the balance of home deliveries rose two points in the service sector and the home orders balance dropped six points to -9%, a level seen last in the third quarter of 2009.

 

Balances recording exporting activity by manufacturers recorded declines in the fourth quarter, but improved slightly in services. Moreover, the balance of manufacturers and service service sector firms expanding their workforce declined. Firms in both sectors do not seem optimistic about future recruitment.

 

The U.K's visible trade deficit rose more than expected in November, data from the Office for National Statistics showed Wednesday.

 

The deficit on seasonally adjusted trade in goods amounted to GBP 8.6 billion in November. Economists expected the deficit to rise to GBP 8.4 billion from October's GBP 7.9 billion.

 

Compared to October, exports of goods fell 0.4% and imports dropped 0.2%.

 

The UK's deficit on seasonally adjusted trade in goods and services was GBP 2.6 billion in November, compared with the deficit of GBP 1.9 billion in October.

Asia Pacific Regional Markets 
Did they set the tone or follow the lead .....
Asiapac IndicesJAPAN
 
Japan's Nikkei share average climbed to a one-week high on Friday, rising above the key threshold of its 25-moving average after smooth European debt auctions prompted buying of exporters, while the market remained on edge ahead of US corporate earnings.        

  

Exporters with exposure to Europe were in demand as the Euro gained against the yen after successful Italian and Spanish debt sales eased investor concern of an immediate credit crunch.

 

Canon rose 3.1% and Konica Minolta Holdings gained 1.7%.

 

The Nikkei average rose 1.4% to 8,500.02, closing above its 25-day moving average near 8,475, while the broader Topix advanced 1.1% to 734.60.

 

Trading volume on Tokyo's main board rose to 1.69 billion shares, up from 1.39 billion the previous day, due to settlement of January options contracts in a so-called "SQ" special quotation. The Osaka Securities Exchange said after the close that Nikkei options were settled at 8,470.71.

 

Honda Motors was the biggest gainer on Tokyo's core 30 list, which closed at a four month high. The firm gained 3.4% to 2,553 yen on a legal victory for its US unit after an appeals court threw out a nationwide lawsuit over a brake system used in some of its vehicles.     

 

Rival automakers also outperformed the market, with Toyota gaining 1.6% and Nissan up 2.5% on the Euro's gains.

 

Japan's top oil and gas explorer Inpex added 1.2% after it gave the go-ahead for the $34 billion Ichthys liquefied natural gas export project in Australia, in which it has a 73% stake.

 

Among engineering firms involved in the project JGC climbed 3.9% and Chiyoda gained 3.1%.  

 

Japan's leading index, that indicates the direction of the economy in the months ahead, rose slightly in November, the preliminary estimate from the Cabinet Office showed Wednesday.

 

The indicator rose to 92.9 during the month from 92 in October. The reading was in line with economists' expectations.

 

The coincident index, on the other hand, fell to 90.3 from 91.4 in the previous month. The reading matched expectations. The coincident indicator is used to identify the current state of the economy.

 

The lagging index was almost steady at 82.8 in November compared to 82.7 in October.

 

SOUTH KOREA

 

Seoul shares posted modest gains on Friday as risk-averse sentiment was tempered by strong bond auctions in Europe, but fears remained of ratings downgrades in the Euro zone and signs of obstacles in the US economic recovery.        

 

The Korea Composite Stock Price Index (KOSPI) climbed 0.6% to close at 1,875.68.       

 

Gains were led by bank shares, with Woori Financial Group climbing 3.94% while KB Financial Group rose 2.58%.

 

Lending support were shipbuilders such as Samsung Heavy Industry, which gained 3.82% on what analysts said where hopes of robust offshore plant orders.

 

Bucking the trend, Hyundai Heavy Industries fell 0.86% after chemical maker KCC announced the sale of a $602 million stake in the world's largest shipbuilding company early on Friday.  

 

KCC closed out the session with a 2.17% gain after spiking up as much as 11.5%.            

 

Hyundai Home Shopping Network, an online retailer, rallied 5.69% after acquiring a controlling stake in apparel maker Handsome for 420 billion Won ($362.7 million). Handsome rose 4.44%.     

 

Ssangyong Motors tumbled 5.72% as profit-seekers cashed out after enjoying a breakneck rally prior to Thursday in which shares skyrocketed more than 70%.    

 

Offshore investors snapped up a net 165.4 billion Won worth of shares, while institutional investors added a net 134.8 billion Won worth.       

 

The KOSPI 200 index rose 0.75% while the junior KOSDAQ index closed 0.54% higher.

 

The Bank of Korea held off from raising borrowing costs for a seventh straight month as the weaker Won risks fueling inflation while instability in Europe and North Korea undermines growth prospects.

 

Governor Kim Choong Soo and his board kept the benchmark seven-day repurchase rate unchanged at 3.25%, the central bank said in a statement in Seoul Friday.

 

HONG KONG

 

Hong Kong stocks ended 0.57% higher Friday following strong debt auctions in under-pressure Spain and Italy and encouraging words on the Eurozone from the European Central Bank.

 

The benchmark Hang Seng Index added 109.04 points to 19,204.42 on turnover of HK$53.05 billion ($6.80 billion).

 

The Hang Seng Index has been capped at 19,242, its December high, all week. If that level is breached, the next target on the charts is seen at the benchmark's high on Nov. 14 last year at about 19,640.

 

Profit warnings from several China-related companies weighed on the market. Among them, Midland Holdings dived after warning late on Thursday that it could record a significant decline in net profit for 2011. Adversely affected by the sluggish property market transactions in Hong Kong and in mainland China, it fell 6.1% on the day to the lowest in almost a month in almost four times its 30-day average volume.

 

Belle International Holdings was among the top drags on the Hang Seng Index, slumping 6.9% in more than four times its 30-day average volume after posting fourth-quarter sales figures that were below market expectations. In a note to clients, Barclays Capital analysts maintained a long-term positive view on the company despite expecting near-term pressure on its share price.

 

They said Belle's dominant market position in footwear, new business initiatives and growth drivers from expanding market share in international sportswear would help sustain growth.

 

The Hong Kong government Thursday withdrew the tender for a property project at a railway station and sold another site for less than estimated, underscoring concerns that home prices in the city may fall further.

 

The company set up by the government to manage Bayside, a project at the Tsuen Wan West station, rejected tenders for the site, according to a statement Friday. The site, with allowed gross floor area of 2.2 million square feet, was expected to fetch HK$7.4 billion ($953 million).

 

Home prices in Hong Kong increased 70% between the beginning of 2009 and their 14-year-high in June and have since fallen 3.5% as increased borrowing costs and taxes deterred buyers. The government tightened mortgage lending requirements and restarted scheduled land auctions, which were halted in 2004, to help slow surging prices.

 

Home prices in Hong Kong, the world's most expensive place to buy a home according to Savills, may fall as much as 25% between now and 2013.

 

CHINA

 

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, fell 30.43 points, or 1.3%, to 2,244.58. The CSI 300 Index declined 1.7% to 2,394.33.

 

Railcar makers: CSR, the nation's biggest train maker, lost 1.1% to 4.47 yuan. China CNR, the nation's second-biggest train maker, slipped 2.5% to 4.31 yuan.

 

The railway ministry's purchases of locomotives may fall to 80 billion yuan ($13 billion) this year from a planned 126 billion yuan in 2011 and 107 billion yuan of actual buying in 2010, the China Business News reported Friday, citing an unidentified person close to the ministry.

 

Solar stocks: EGing Photovoltaic Technology tumbled 7.7% to 18.99 yuan after climbing 3.2% Thursday. Shanghai Chaori Solar Energy Science & Technology lost 3.3% to 13.57 yuan after gaining 4.3% Thursday.

 

Any pick-up in demand cannot change over-capacity in the solar industry and companies will be operating in a thin profit margin analysts at China International Capital wrote in a report Friday.

 

Changjiang Securities dropped 3.3% to 7.25 yuan after the brokerage said net income decreased 65% last year.

 

Hisense Electric, China's biggest manufacturer of flat-panel televisions, jumped by the 10% daily limit to 13.49 yuan after it said net income may have more than doubled last year.

 

Shenyin & Wanguo Securities raised its rating on the stock to "buy" on valuations and lifted Hisense's earnings per-share forecast for 2012 by 31% to 2.11 yuan, analysts at the brokerage wrote in a report Friday.

 

Chinese new RMB loans increased more than expected at the end of last year, signaling easing credit conditions even as the central bank prepares to shield the economy from the impact of the global economic slowdown.

 

Chinese banks extended CNY 640.5 billion in new loans in December, up from CNY 562.2 billion in November, data from the People's Bank of China (PBoC) showed Monday. Economists were expecting an increase to CNY 575 billion.

 

The central bank data also showed that M2, a measure of money supply, amounted to CNY 85.16 trillion in December, 13.6% higher than last year. Economists expected the rate of growth in M2 to be 12.9% compared to 12.7% rise in November.

 

TAIWAN

 

The Taiex Index fell 0.1% to 7,181.54 and advanced 0.9% this week. The island will hold presidential elections tomorrow.

 

Tourism-related stocks: Formosa International Hotels gained 3.5% to NT$401. Ambassador Hotel increased 3.8% to NT$33.

 

Chinese and Taiwanese airlines added 375 flights between Jan. 9 and Feb. 6, compared with 183 for the 2011 Lunar New Year, according to data provided by the island's Civil Aeronautics Administration Thursday.

 

Phison Electronics rose 3.8% to NT$191.50. Chairman Pua Khein-Seng said first-quarter orders aren't as weak as expected, Apple Daily reported. Yu Zhi-Chyang, a spokesman, didn't immediately answer calls to his office.

 

Promos Technologies slumped 5.6% to NT$0.34. The company applied to the Ministry of Economic Affairs for help on debt negotiation, according to a statement to the local stock exchange.

 

Taiwan's trade surplus declined in December while exports growth eased alongside a slower fall in imports, data released by the Finance Ministry showed Monday.

 

The trade balance was in a surplus of $2.32 billion during the month, compared to $3.2 billion in November. Economists were expecting an increase in the surplus to $2.74 billion.

 

The country's export growth eased for a second consecutive month to 0.6% annually in December from 1.3% in November. This confounded economists' expectations for a stronger growth in exports of 3.7%.

 

Meanwhile, imports decreased 2.7% year-on-year compared to expectations for a 1% fall. This followed a 10.4% drop in overseas purchases in November.

 

Shipments of electronic products totaled $6.70 billion by trade value in December, down 0.1% over the same month of last year. Still, this commodity constituted 28% of the total exports.

 

Taiwan's shipments to mainland China and Hong Kong combined fell 2.9% from a year earlier, while those to Japan increased 0.6%. Demand from Europe dropped 14.8% over the year, while exports to the U.S increased 0.9%.

 

THE PHILIPPINES

 

The Philippine Stock Exchange Index fell 0.1% to 4,642.52. The measure is bound for a 3.6% gain this week, the steepest advance since the week ended Oct. 28.

 

Philippine Long Distance Telephone, the nation's biggest phone company, declined 1% to 2,766 Pesos, the largest drop since Jan. 6. The stock was downgraded to "neutral" from "overweight" by Luis Hilado, an analyst at HSBC Holdings. The analyst has a 2,740 Peso 12-month share- price target.

 

SM Investments, owner of the largest Philippine department store and grocery chain operators, advanced 1.6% to 620 Pesos, set for the highest close since it began trading on March 2005. Vice Chairwoman Teresita Sy said the company is "upbeat" on fourth-quarter sales of its retail ventures.

 

SM Prime Holdings, the largest Philippine shopping mall operator and a unit of SM Investments, increased 1.1% to 14.46 Pesos, poised for the highest close since it started trading in July 1994.

 

Philippine bonds gained, pushing yields to a three-week low, on speculation the central bank will cut borrowing costs for the first time in two years next week as inflation cools.

 

Bangko Sentral ng Pilipinas will lower its benchmark rate to 4.25% from 4.5% on Jan. 19, according to all six economists in a Bloomberg News survey. The central bank may ease monetary policy this quarter as inflation slows, Governor Amando Tetangco said this week. The monetary authority's overnight borrowing rate was last reduced in July 2009.

 

SINGAPORE

 

Singapore share prices ended 1.8% higher on Friday amid improved sentiment across the region following successful debt auctions in Europe on Thursday.

 

The blue-chip Straits Times Index surged 47.88 points to end at 2,791.54.

 

In the broader market, total volume traded was 1.05 billion shares worth S$1.17 billion.

 

Gainers outnumbered losers 301 to 107.

 

Among the gainers, Neptune Orient Lines rose 5% to S$1.27, Noble Group added 2.3% to end at S$1.13, Olam International closed 1.8% higher at S$2.24 and Golden Agri-Resources gained 2.8% to S$0.740.

 

Banks also ended higher. DBS Group Holdings gained 4.2% to S$12.92, Oversea-Chinese Banking Corp added 2.3% to S$8.16 and United Overseas Bank rose 2.1% to S$16.34.

 

Singapore's total oil-product inventories rose 1.3%.

 

Inventories in Asia's biggest oil-trading center rose 470 thousand barrels to 37,418 thousand barrels in the week ended Thursday, said International Enterprise Singapore, a unit of the trade ministry. The agency didn't give a reason for the increase.

 

The following table provides a weekly comparison of the oil inventories for six weeks. Inventory figures are in thousands of barrels.

 

MALAYSIA

 

At close, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) was 2.49 points down at 1,523.07, after opening 2.3 points higher at 1,525.68.

 

The market traded within a narrow range amid a lack of fresh leads, while investors nibbled at the lower liners and penny stocks, a dealer said.

 

The Finance Index shed 7.07 points to 13,451.67, the Plantation Index decreased 34.13 points to 8,505.98 and the Industrial Index depreciated 11.77 points to 2,809.79.

 

The FBM Emas Index was lower by 4.08 points to 10,512.40 but the FBM 70 Index gained 46.58 points to 11838.52 and the FBM ACE Index inched up 2.55 points to 4,297.92.

 

The FBMT100 Index was 4.94 points higher at 10,319.03. Losers led gainers 397 to 373 while 339 counters were unchanged, 383 untraded and 23 others suspended.  

 

Total turnover climbed to 1.766 billion shares worth RM1.608 billion from Thursday's 1.515 billion shares valued at RM1.579 billion.

 

Volume on the Main Market rose to 878.714 million shares worth RM1.477 billion from 781.474 million shares valued at RM1.44 billion on Thursday.

 

Turnover on the ACE Market declined to 310.218 million shares valued at RM40 million from 337.736 million units worth RM46.321 million previously.

 

Warrants meanwhile increased to 573.314 million units valued at RM88.296 million from 388.246 million units valued at RM84.596 million.  

 

Among volume leaders, Compugates Holdings gained one sen to 7.0 sen, Drbhcom-CF added 6.0 sen to 15 sen and Drbhcom-CI appreciated 3.0 sen to 5.0 sen.

 

As for the heavyweights, Maybank added one sen to RM8.26, Sime Darby declined one sen to RM9.15 and CIMB eased three sen to RM7.26.

 

Consumer products accounted for 112.655 million shares traded on the Main Market, industrial products 201.183 million, construction 34.404 million, trade and services 283.159 million, technology 40.260 million, infrastructure 31.244 million, finance 57.189 million, hotels 298,000, properties 79.584 million, plantations 27.553 million, mining 73,700, REITs 3.408 million and closed/fund 167,500.

 

The ringgit closed higher against the US Dollar Friday on buying support for the local currency from market players, dealers said.

 

At 5pm, the ringgit was quoted at 3.1325/1356 against the greenback from 3.1400/1430 Thursday.

 

Dealers said the ringgit remained on an uptrend following the successful longer-term Italian and Spanish bond auction.

 

The country's good economic performance has also sparked strong interest among investors in the ringgit amid the weaker US Dollar, they added.

 

Malaysia's trade surplus declined more than expected in November, data from the Department of Statistics showed Wednesday.

 

The trade surplus fell to MYR 9.5 billion in November from MYR 13.22 billion in October. Economists expected a drop to MYR 11.9 billion.

 

Exports totaled MYR 56.86 billion, 8% higher than a year ago. The rate of growth was weaker than the expected 12.9%. Imports were valued at MYR 47.38 billion, which was 8.4% higher compared to last year. Economists were looking for 9.4% growth.

 

However, on a month-on-month basis, exports and imports declined by 10.2% and 5.3% respectively.

 

During the first eleven months of the year, exports rose 9% while imports expanded 8.4%, resulting in a trade surplus of MYR 112 billion.

 

THAILAND

 

The Stock Exchange of Thailand main index went down 7.42 points or 0.71% to close at 1,044.81 points at the end of trading session on Friday Afternoon. The trade value was 23.84 billion baht, with 3.74 billion shares traded.

 

The SET50 index ended at 730.40 points, down 5.48 points or 0.74%, with a total trade value of 14.94 billion baht.

 

The SET100 index fell 11.15 points or 0.70% to stand at 1,590.15 points, with a total turnover of 19.56 billion baht.

 

The SETHD index went down 8.22 points or 0.80% to stand at 1,019.42 points, with total trade value of 5.90 billion baht.

 

The MAI index went up 1.28 points or 0.47% to close at 273.99 points, with total transaction value of 442.28 million baht.

 

Consumer confidence in Thailand rose in December, after four straight months of declines, due mainly to spending on flood rehabilitation.

 

The consumer confidence index rose to 73.1 in December from 71.0 in November, a survey by the University of the Thai Chamber of Commerce's Economic and Business Forecasting Center showed Thursday.

 

The index had a reading of 72.4 in October, 81.8 in September and 83.4 in August.

 

A reading below 100 indicates consumers are more pessimistic than optimistic about the economy's prospects, while a reading above 100 indicates they see conditions improving.

 

INDONESIA

 

The Jakarta Composite index rose 0.7% to 3,935.33, its first gain in three days. The measure has risen 1.7% this week, its fifth weekly advance.

 

Bumi Resources, Indonesia's biggest coal producer, gained 2% to 2,525 rupiah, the highest close since 21 September. Nathaniel Rothschild, billionaire founder of coal producer Bumi, said he's mended ties with Indonesia's Bakrie family, Bumi's largest shareholder, after they affirmed a debt repayment schedule for 2012. Bumi Plc owns 29.18% of Bumi Resources.

 

Garuda Indonesia, the national flag carrier, advanced 1.8% to 580 rupiah, the highest close since Feb. 14. Garuda expects sales to rise 21% this year from last year's unaudited total of 27.1 trillion rupiah ($3 billion), Chief Executive Officer Emirsyah Satar told reporters. The company's unaudited 2011 net income was 900 billion rupiah, Satar said. Garuda had net income of 515.5 billion rupiah in 2010.

 

Indika Energy, an coal producer, gained 7% to 2,675 rupiah, the highest close since Oct. 31, after Investor Daily Indonesia reported the company expects to raise $150 million selling back at least 16.6% of PT Petrosea shares to the public by the end of this month.

 

Bank Indonesia left its overnight benchmark interest rate unchanged Thursday at 6% for a second consecutive month despite inflation easing, citing uncertainties on the domestic front that may stoke prices.

 

Analysts say the move gives the central bank time to gauge the impact of earlier rate cuts, noting that inflation may rise later in the year due to possible increases in government-administered prices starting in April and a weaker currency.

 

"The planned fuel subsidy rationing and government's proposal to hike electricity tariffs create some uncertainties on the inflation outlook," Bank Indonesia Governor Darmin Nasution said after the central bank's monthly rate-setting meeting.

 

"Going forward, BI will continue to remain vigilant on risks of a worsening global economy," he added.

 

Mr. Nasution also said gross domestic product growth will likely hit 6.5% in the first quarter-the same pace as in the fourth quarter of 2011-and projected full-year growth at between 6.3% and 6.7%.

 

Bank Indonesia also estimates 2011 GDP growth to have reached its targeted 6.5%, Mr. Nasution said.

 

INDIA

 

Indian shares gained Friday, underpinned by improved risk sentiment that also sent Asian and European bourses higher.

 

The mood was supported by strength in the Rupee, which rose to its highest level in nearly six weeks, at 51.29 against the US Dollar.

 

The Bombay Stock Exchange's Sensitive Index rose 117.11 points, or 0.7%, to end at 16154.62. It traded between 16049.78 and 16257.34 during the day.

 

On the National Stock Exchange, the 50-stock S&P CNX Nifty advanced 34.75 points, or 0.7%, to end at 4866.00.

 

Trading volume in the BSE's cash segment increased to 27.00 billion rupees ($521 million) from Thursday's 25.32 billion rupees. Gainers outnumbered losers 1,897 to 903, while 96 stocks remained unchanged.

 

Metal plays led gains, with the sector index rising 3.2%. Tata Steel surged 7.1% to 415.70 rupees on expectations that demand is likely to increase as debt worries in the key market of Europe ease.

 

Engineering major Larsen & Toubro climbed 3.8% to 1,172.60 rupees, pushing the Capital Goods index 2.9% higher.

 

Bharti Airtel rose 2.6% to 334.55 rupees. Analysts said the rupee's strength will ease the telecom operator's huge foreign-currency debt burden.

 

Among losers, Reliance Industries fell 0.8% to 732.05 rupees while Housing Development Finance Corp. slipped 0.8% to 682.15 rupees.

 

Foreign direct investment or FDI into India in November witnessed an impressive growth of 56% to $2.53 billion, signaling improvement in investor sentiment. The improvement in FDI inflows comes after two months of declining trend, The PTI reported.

 

The country had received $1.62 billion overseas investment in November last year. In September and October, the inflows were down by 16.5% and 50% year-on-year, respectively.

 

The cumulative flows of $22.83 billion for the April-November period have crossed $19.43 billion of inflows received in the full fiscal of 2010-11, according to officials. During the April-November 2010 period, the FDI was up by 62.81% from $14.02 billion a year ago.

 

"At this rate we would be able to cross $30 billion figure by end of the current fiscal," the official said.

 

In 2010-11, FDI into equity had dipped 25% to $19.43 billion from $25.6 billion in 2009-10. In 2008-09, FDI stood at $27.3 billion. Mauritius, Singapore, the US, the UK, the Netherlands, Japan, Germany and the UAE are major sources of FDI for India.

 

Sectors which attracted the maximum funds include services, construction activities, power,computers and hardware, telecom and housing and real estate.

 

AUSTRALIA

 

Australian shares end the week at their highest point in about five weeks after a round of positive debt auctions in Europe spurred gains in commodity-driven stocks.

 

At the close, the benchmark S&P/ASX200 index was up 14.9 points, or 0.4%, at 4,195.9, while the broader All Ordinaries index was up 17 points, also 0.4%, at 4,255.4.

 

Shares closed the week up 2.1% after yields on government debt issues by Spain and Italy fell to their lowest point in months and as the European Central Bank (ECB) held interest rates steady in its first meeting of 2012.

 

Energy, miners and industrials led them higher, with most sectors ending in positive territory. Even the embattled retail sector managed to add 0.1% to end the week up.  

 

But investors pointed to a note of caution ahead of more US earnings out after the close and after US oil giant Chevron reported a significant fall in third-quarter results on declining production.

 

Energy shares were the day's biggest gainers, dragged up by 0.8 by a surge in shares of Linc Energy.

 

Shares in the energy company ended the day up 17.7% on the back of speculation that it had found a buyer for its Teresa coal asset in Australia.

 

Woodside Petroleum ended up 1.5% at% to $32.85 while Santos gained 0.8% to $12.85 after it confirmed it will develop the $490 million Fletcher Finucane oil project in the Carnarvon Basin off Western Australia.

 

Financial stocks remained in focus ahead of the release of earnings results from JP Morgan on Friday night and after a surprise profit downgrade from insurer QBE dragged the Australian market lower on Thursday.

 

Shares in QBE ended down 3.1% at $11.00 after it fell to an eight-year after it warned its earnings could halve following a spate of natural disasters in 2011.

 

All of the big four banks closed higher despite news ANZ could trim hundreds of Australian jobs in the first half of the year as part of an ''aggressive cost reduction program'' to keep the bank afloat.

 

Australia's third-largest bank by market capitalization on Friday left interest rates for its home and business loans on hold after the bank's inaugural monthly rate review meeting - the first time ANZ has announced its rates independently from the Reserve Bank.

 

Commonwealth Bank ended up 0.3% at $50.07, Westpac closed up 0.3% at $20.68, National Australia Bank added one% to $23.80 and ANZ gained 0.5% to $21.20.

 

QBE shares continued to falter, dropping 3.1%, 35 cents, to $11. The fall came after the stock lost 13% Thursday when the insurer shocked investors after warning it expected 2011 earnings to fall by as much as half after hefty catastrophe claims. Analysts' forecasts had been for a rise.

 

Shares in Gindalbie Metals jumped 7.5% after the company released an upbeat quarterly report.

 

QR National rose 3.9%, the highest level since the company listed, after recording its strongest month since the 2011 floods, with Queensland Coal volumes in December increasing by 8.5% on the previous corresponding period.

 

On the ASX 24, the March 2012 share price index futures contract was up 28 points at 4,180, with 18,544 contracts traded.

 

Job vacancies in Australian private sector declined 3.3% year-on-year in November, the Australian Bureau of Statistics said Wednesday.

 

The number of vacancies totaled 164,900 in November. In public sector, job vacancies fell 3.1% annually to 17,200.

 

Overall, there were 182,200 vacancies in Australia in November, which was 3.2% less than in the same month last year.

 

Construction approvals for new residential homes in Australia increased in November by a seasonally adjusted 8.4%, the Australian Bureau of Statistics also announced this week.

 

The increase followed a decrease of 10% the previous month.

 

Compared to November 2010, dwelling approvals were down 18.8%.

 

The seasonally adjusted number of approvals for private sector houses increased 4.8% in November, following a decrease of 6.7% in October, the Bureau said.

 

Approvals for all private sector dwellings were up 4.8%, while approvals for apartments were up 17.2%.

 

The value of total building approvals was down 2.6%. Residential building approvals were down 2.7% in value. Non-residential value was down 2.5%.

 

NEW ZEALAND

 

New Zealand shares rose on a backdrop of broadly stronger global equity markets. Fletcher Building and carpet maker Cavalier paced the advance.

 

The NZX 50 Index rose 7.62 points, or 0.2%, to 3227.46. Within the index, 21 stocks rose, 18 fell and 11 were unchanged. Turnover was $64 million.

 

Cavalier rose 6.4% to $2.50 on volume of just 1,100 shares. The stock has surged 18% this year. Cavalier has antitrust approval to acquire Wool Services International, giving it a monopoly on wool scouring. Opponents have failed to overturn the decision.

 

Fletcher rose 2.1% to $5.93 having sunk to a 2.5-year low of $5.80 on Tuesday.

 

Australia & New Zealand Banking Group rose 0.8% to $27.50. The bank has denied a report by the Finance Sector Union that it plans to cut hundreds of jobs over the next six months to reduce costs.

 

Shares in Pyne Gould rose 2.9% to 35 cents on low volumes as George Kerr's Australasian Equity Partners Fund is poised to win its takeover bid for the company.

 

If Kerr and partner Baker Street Capital are successful in the bid, they'll win control over Pyne Gould's assets including 9.5% of PGG Wrightson, worth about $26 million, some $11 million worth of Heartland shares, wealth manager Perpetual Group with $609 million under management, and Torchlight Group, which invests in distressed assets.

 

Shares in Heartland New Zealand were unchanged at 47 cents and PGG Wrightson stock rose 2.8% to 37 cents.

 

Shares in Port of Tauranga fell 0.5% to $10.15 as the stoush between rival Ports of Auckland and the Maritime Union escalates with the labour union publishing a leaked port document claiming the hub was determined to outsource work before its collective agreement expired at the end of September.

 

Air New Zealand fell 1.1% to 87 cents, near a four-week low, after chief executive Rob Fyfe said the airline faces tough trading conditions this year as the European debt crisis kicks in.

 

Fyfe Thursday told the National Business Review the airline was reviewing capacity on its Hong Kong and Los Angeles long-haul routes.

 

Shares in Telecom were unchanged at $1.98, while carved out network unit Chorus gained 0.6% to $3.17. Contact Energy shares fell 1% to $5.09.

 

Employment confidence among New Zealanders declined to the lowest since mid-2009 in the fourth quarter, a key survey revealed Wednesday.

 

The Westpac McDermott Miller Employment Confidence index fell to 99.6 in the December quarter from 104.2 in the previous period. This is the lowest level of the index since June 2009, when it stood at 96.1.

 

Current employment conditions index fell to 83.8 from 84.3 in the September quarter. The employment expectations index was at 110.1 in the December quarter, down from 117.6 in the previous quarter.

 

New Zealand house prices increased last year, but the outlook for this year largely depends on confidence among businesses and consumers as well as the developments in Europe, government valuer Quotable Value said Tuesday.

 

Property prices at the national level rose 2.4% in 2011 to NZ$398,411. Despite the uptick in values, the property market continued to be characterized by lower than normal sales volumes.

 

Sales numbers in 2011 were more than 20% below the long term average. "While up a few% on the sales volumes of 2008 and 2010, both of those years were the lowest since the early 1980's, so outside of those two years 2011 is the lowest for 20 years," the report said.

 

On the outlook, QV said while business and consumer confidence seems to be on the increase, there is still some concern about the financial situation in Europe, and what may happen to the New Zealand economy if events there take a turn for the worse. This year "is likely to be another interesting year for the property market," it added.

 

New Zealand's Aaa sovereign credit rating with Moody's Investors Service is underpinned by the nation's economic strength and low vulnerability to event risk, the rating agency said Thursday.

 

Moody's said the Government's fiscal and debt positions were very strong, and any threats from the nation's high level of private debt was mitigated by the fact that the majority of those liabilities are held by the nation's Australian-owned banks.

 

Still, New Zealand's total external liabilities equalling 159% of gross domestic product is the nation's biggest vulnerability, and prompted downgrades by rival rating agencies Standard & Poor's and Fitch Ratings at the end of September.

 

"A strong fiscal framework, which has supported the successful track record of fiscal prudence under governments of both major political parties, provides some assurance that the budget balance will return to surplus by the middle of the decade," Moody's said. "The negative net international investment position has been large for many years without substantially affecting the Government's finances."

 

The Government has worked to keep its net debt below 30% of GDP, even as it borrowed a record $20 billion last financial year, and Moody's said it was set to peak below the average ratio of other triple-A rated nations.

 

The rating agency noted New Zealand's rising vulnerability to earthquakes after the temblors in Canterbury caused upwards of an estimated $20 billion in damage.

 

Investors rallied to New Zealand government debt in the first sale on Tuesday, with short-term bills attracting bids worth three times the $1.48 billion sold.      

Global Commodities 
'Food for thought' or 'a Grain of truth' .....
 CommoditiesOil dropped to a three-week low after two European Union officials said an embargo on Iranian crude imports may be postponed for six months.

 

Crude fell 0.4% as officials said that the ban would be delayed to allow nations to find new supply. International Atomic Energy Agency inspectors will go to Tehran to discuss Iran's nuclear program, two diplomats said.

 

Crude oil for February delivery fell 40 cents to $98.70 a barrel on the New York Mercantile Exchange, the lowest settlement since Dec. 21. Oil dropped 2.8% this week and is up 8% from a year earlier.

 

Brent oil for February settlement declined 82 cents, or 0.7%, to end the session at $110.44 a barrel on the London- based ICE Futures Europe exchange. The February contract expires Jan. 16. March futures dropped 70 cents, or 0.6%, to $110.35 a barrel.

 

US natural gas prices suffered their biggest week drop in two-and-a-half years, falling 12.7%, amid forecasts of continuing mild winter weather and booming US production.

 

Higher than normal temperatures in the east and Midwest of America have depressed US natural gas prices over the past few months, when consumption is supposed to be at its strongest.

 

The mild weather has come as US production has been growing rapidly on the back of the shale boom, caused prompted by the development of resources that were previously uncommercial. According to the US Department of Energy, natural gas output in October, the latest month for which data are available, marked a record high.

 

Nymex February natural gas futures traded at $2.66 per million British thermal units on Friday, the lowest level since September 2009.

 

While the downward trend in prices is eventually expected to make it unprofitable to produce natural gas, and lead to production cutbacks, many gas wells also produce higher-value liquids such as petroleum. For some producers, the cost of pumping natural gas is virtually "zero", according to analysts.

 

With stocks expected to remain high even if temperatures suddenly turn colder than normal, many analysts expect prices to fall further. "The market fears a collapse in prices below $2 per mBtu, which cannot be ruled out," noted Barclays Capital.

 

The threat of food inflation, a serious concern for emerging countries last year, is starting to recede as high prices for grains restrain consumption and better crop yields in Europe and Russia replenish stocks.

 

The UN's Food and Agriculture Organisation said on Thursday its food index had fallen last month to its lowest level in more than a year, reflecting reduced inflation across Asia.

 

At the same time, the US reported that its domestic production and stocks of corn, a key commodity for the global food chain, were higher than previously thought, sending prices sharply down.

 

Cattle futures rose as animal supplies dwindled in the US and global beef demand climbed, boosting meat costs for restaurants including Sonic, a hamburger chain.

 

In the US, consumers will pay as much as 5% more for beef this year, more than other food group except seafood, after the meat rose as much as 10% last year, the government has estimated. The cattle herd was the smallest since at least 1973 as of July 1 after a drought in Texas cut supplies. Beef exports surged 25% in the 10 months ended Oct. 31 from a year earlier.

 

Rising global demand and the shrinking herd in the US, the world's largest beef producer, spurred a 12% increase in cattle futures last year, the fifth-biggest gain among components in the Standard & Poor's GSCI Spot Index of 24 raw materials. Retail beef reached an all-time high in November, signaling higher costs for Oklahoma City-based Sonic and Ruth's Hospitality Group, a steakhouse owner.

 

Orange-juice futures rebounded from the biggest two-day slump since 2008 on renewed concern that a US government probe of imports from Brazil will tighten supplies. Futures prices jumped 9.2% in the past two weeks, and on Jan. 10 reached the highest level in almost five years.

 

Orange juice for March delivery rallied 3.6% to settle at $1.846 a pound at 2 p.m. on ICE Futures US in New York, after jumping as much as the exchange's 20-cent limit, or 11%. The gain of 3.9% for the week was the fourth straight advance.

 

Cocoa futures for March delivery fell 2.5% to close at $2,269 a metric ton at 12:01 p.m. on ICE Futures US in New York, the biggest drop for a most-active contract since Dec. 28.

 

Raw-sugar futures for March delivery added 2.4% to 23.84 cents a pound on ICE. The sweetener was up 2.4% for the week.

 

Arabica-coffee futures for March delivery declined 3.7% to close at $2.2525 a pound in New York. The price rose 1.6% this week.

 

Gold fell the most in two weeks, as a rebounding Dollar and slumping equity markets eroded demand for commodities.

 

Gold futures for February delivery fell 1% to settle at $1,630.80 an ounce at 1:47 p.m. on the Comex in New York, the biggest decline since Dec. 29. Prices have still climbed 0.9% this week.

 

Bullion will climb to $1,940 in 12 months, Goldman Sachs said in a report Friday, as it maintained a forecast for commodities to gain 15% as economic growth in the US and China offsets the effect of a European recession.

 

Also on the Comex, silver futures for March delivery fell 2% to $29.522, an ounce in New York.

 

On the New York Mercantile Exchange, platinum futures for April delivery retreated 0.8% to $1,488.80 an ounce. Palladium futures for March delivery fell 1% to $635.05 an ounce.

 

Spot palladium was down 0.2% at $635.22 an ounce.          

 

Production of industrial metals in December likely softened compared to November due to a winter slowdown, real-estate weakness and external headwinds, though full-year volumes are likely at record levels, analysts said Friday.

 

Copper fell for the first time in four days on signs that Europe's debt crisis may be worsening and as stockpiles increased in China, the world's biggest buyer.

 

Copper futures for March delivery fell 0.3% to settle at $3.637 a pound at 1:17 p.m. on the Comex in New York. Prices ended the week up 5.9%, the biggest advance in more than a month.

 

On the London Metal Exchange, copper for delivery in three months dropped 0.1% to $8,000 a metric ton ($3.63 a pound).

 

Aluminum, zinc, nickel, and lead also fell in London, while tin rose.

Global Currencies 
In for a Penny, in for a Pound .....
UK Markets
 The Euro moved sharply lower against other major currencies on Friday ahead of Standard & Poor's, the rating agency, confirming early reports that it was downgrading France from its triple A rating.

 

Late in New York the Euro extended its losses after S&P confirmed it had downgraded a number of Eurozone countries.

 

The single currency gave up gains made the previous day to fall to a 16-month low against the Dollar, hitting a session low of $1.2625, before recovering to $1.2683.

 

Late on Friday, data from the Commodity Futures Trading Commission (CFTC) showed currency speculators increased bets in favour of the US Dollar in the past week and boosted their short Euro position to record levels.

 

The Euro fell about 1% to £0.8274 against the pound and 0.9% to Y97.55 against the yen.

 

The Euro had lost ground earlier on Friday after a fresh auction of Italian government bonds underwhelmed investors, increasing the bearish sentiment on the single currency.

 

Traders said the relatively successful Italian auction - with yields on three-year bonds lower than the last auction at the end of December - attracted less demand than expected and was not as positive for market sentiment as a bond auction in Spain the day before.

 

The Swiss franc reached its strongest level in four months against the Euro, which fell 0.2% to a low of SFr1.2076.

 

Currency analysts said many investors still expected the Euro to weaken further, dismissing gains this week as short covering by speculators who had increased their bets that the Euro would fall sharply against the Dollar.

 

Analysts also noted a shift in the trading pattern of the Euro this week, which has tended to fall while other risk-on currencies such as the Australian Dollar have risen. For much of last year, the Euro rose and fell in line with other currencies that benefit from global growth.

 

The decision on Thursday by the European Central Bank to hold interest rates steady at 1% was not seen as supportive for the Euro, amid expectations that rates would be cut in the near future to help exports.

 

Currencies linked to commodities including the Australian Dollar, New Zealand Dollar and Canadian Dollar fell on Friday as risk aversion intensified, following a week of gains against the US Dollar.

 

The Australian Dollar was down 0.3% at $1.0304, the New Zealand Dollar fell 0.1% to $0.7929 and the Canadian Dollar was 0.6% lower at $0.9762.

 

Asian currencies gained for a second week. India's Rupee rallied the most since October 2009 after factory output beat estimates, while South Korea's Won completed its best week since early December after the central bank left its benchmark interest rate unchanged.

 

The Rupee rose 2.3% for the week to 51.5287 per Dollar in Mumbai, while the Won closed 1.3% stronger at 1,148.40. The Philippine Peso climbed 0.9% to 43.725 and Malaysia's Ringgit appreciated 0.3% to 3.1333.

 

Taiwan's Dollar completed a fourth weekly advance on speculation President Ma Ying-jeou, who has improved economic ties with China since he took office in 2008, will be re-elected in Friday's election. Tsai Ing-wen, chairwoman of the opposition Democratic Progressive Party, is running against Ma of the Kuomintang party.

 

The currency strengthened to NT$30.00 versus the Dollar and touched NT$29.88 on Thursday.

 

Elsewhere, Indonesia's Rupiah rose 0.1% to 9,082 per Dollar, after three weeks of losses, and the Thai Baht declined 0.3% to 31.79. Singapore's Dollar gained 0.4% to S$1.2888.

 

As always, bringing currencies to a close this week here in China, where the RMB rose 0.05% to 6.3066 per Dollar from a week ago. The government said Thursday the inflation rate eased for a fifth month to 4.1% in December. A report on Tuesday next week may show the world's second-largest economy grew at an annual rate of 8.7% last quarter, the least since the second quarter of 2009.

China 
Key news eminating from China this week .....
 China MarketsSovereign wealth fund Korea Investment Corporation said Friday it has acquired a license to invest in Chinese securities, paving the way for the firm to further diversify its portfolio through purchases of Chinese Class A shares and bonds as early as this year.

 

A KIC official said the fund has received its Qualified Foreign Institutional Investor license and is waiting for the Chinese authorities to set its investment quota.

 

An official at the Ministry of Strategy and Finance said the fund may be able to start investing in Chinese securities sometime in 2012, as it typically takes up to six months to get a quota assigned. KIC manages some of South Korea's foreign-exchange reserves, which were injected into the fund by the Bank of Korea and the finance ministry.

 

KIC, the BOK and the Korean National Pension Service all applied for QFII licenses last year, as they seek to diversify their assets and reduce their exposure to the US Dollar. China is moving to allow greater foreign investment in its local capital markets, and attracting longer-term investors such as KIC, the BOK and the NPS-the world's fourth-largest pension fund by assets-would further its goals.

 

Given the growing economic and geopolitical ties between China and South Korea, as well as the recent growth of Chinese investments in Korean securities, China is expected to allow all three Korean institutions to start investing in RMB-denominated bonds and stocks.

 

The NPS said Sunday it had received approval for a QFII license, while a BOK official said its approval process is continuing and declined to comment further.

 

KIC, which managed roughly $41.5 billion in assets as at end-2011, already has some exposure to Chinese assets. QFII license holders are typically assigned a $200 million quota at the start, which would be a small allotment for KIC, but that quota will likely increase over time.

 

************************************

 

China's foreign-exchange reserves dropped for the first time in more than a decade as foreign investment moderated, the trade surplus narrowed and Europe's crisis spurred investors to sell emerging-market assets.

 

The holdings, the world's biggest, fell to $3.18 trillion on 31 December from $3.2 trillion 30 September, People's Bank of China data released in Beijing showed Friday. The quarterly drop was the first since the midst of the Asian financial crisis in the second quarter of 1998, according to data compiled by Bloomberg.

 

The decline underscores forecasts for the central bank to ease monetary policy, and may bolster China's resistance to appreciation in its currency. PBOC Governor Zhou Xiaochuan said in remarks published this month that a global downturn may lead to "large" capital withdrawals this year, highlighting a shift in risk from the influx of speculative funds that China had opposed during the 2009-2010 world economic rebound.

 

China's foreign-exchange holdings reached a record $3.27 trillion in October and then fell in the following two months, the central bank data showed, indicating a decrease of $92.6 billion in November and December.

 

While China doesn't provide details on the distribution of its holdings, the country bought Euros in 2011, with policy makers flagging support for efforts to aid Europe's battle to resolve the sovereign-debt crisis. The Euro fell 3.2% against the Dollar in the last quarter of 2011.

 

The drop in holdings was the first since the throes of the Asian financial crisis in 1998, when nations from South Korea to Thailand saw reserves depleted as investors fled the region. East Asian nations later rebuilt their holdings and restructured their financial systems, helping the region lead the global economic rebound in the past three years.

 

Countries including South Korea, Indonesia and India used some of their reserves to support their currencies in September 2011, when European debt woes deteriorated as Greece teetered toward a potential disorderly default. The MSCI Asia Pacific Index of stocks dropped 16% in the second half of last year, when the Shanghai Composite Index slid 20%.

 

For China, the Europe-led damage to the global recovery has hit the nation's exports, which rose the least in two years in December, adjusted for holiday-period distortions. For 2011, the trade surplus narrowed 14.5% to $155 billion, the third straight annual decline since a record $298 billion in 2008.

 

At the same time, capital outflow likely did contribute to a slide in China's reserves late last year, analysts said. An estimated $34 billion may have moved out in the third quarter, driven by a mix of escalating concern over a hard landing for China's economy, the worsening Euro area crisis and speculation that the RMB may fall against the Dollar.

 

China should use more of its reserves to make direct investments overseas, Zheng Xinli, vice president of the state- backed China Center for International Economic Exchanges, said at a forum in Beijing this week.

 

The nation needs about $1 trillion of its holdings for international payments purposes and should use the remainder to buy assets such as exploration rights for energy and resources, he said. China should also set up processing-trade zones overseas which could spur exports of parts and raw materials, he said.

 

************************************

 

China's inflation cooled for the fifth straight month in December, increasing the odds the government will unveil more measures to shore up growth.

 

Consumer prices rose 4.1% from a year earlier, the National Bureau of Statistics said in Beijing Friday. That compares with the median estimate of 4% in a Bloomberg News survey of 26 economists and 4.2% in November.

 

Thursday's data may give Premier Wen Jiabao more scope to shift his policy focus to bolstering expansion as Europe's debt crisis crimps demand for exports and officials sustain a campaign to cool property prices. Imports and exports grew the least in two years last month, excluding seasonal distortions, and a report next week may show the world's second-largest economy expanded at the slowest pace in 10 quarters in the last three months of 2011.

For the whole of 2011, consumer prices gained 5.4%, exceeding the government's target of 4% set at the beginning of the year. Policy makers haven't yet published an inflation goal for this year. Economists' forecasts released last month ranged from as low as 2% at Standard Chartered to 4.4% at Credit Suisse Group.

 

Inflation may see a one-off rebound this month amid increased consumer spending before the Chinese Lunar New Year holiday and winter disruptions to the food supply. Wholesale prices of 18 vegetables tracked by the Ministry of Commerce continued to climb in the first week of January from the previous seven days, after rising throughout December, according to government data.

 

Easing global commodity prices have helped cool raw material costs in China, the world's largest consumer of iron ore and copper. Producer prices rose 1.7% in December from a year earlier, Friday's report showed. That compares with a median estimate of 1.7% in a Bloomberg survey and a gain of 2.7% the previous month.

 

While controlling inflation is not as urgent a task as it was last year, stabilizing consumer prices is still high on the government's agenda and efforts to rein in excessive gains won't be relaxed, People's Bank of China Governor Zhou Xiaochuan said in interviews with Caixin magazine and the Xinhua News Agency over the past two weeks. More than two thirds of households in a central bank survey last month said prices are too high.

 

Factory workers from lingerie maker Top Form International's Shenzhen plant to Pangang Group Chengdu Steel Vanadium & Titanium in western China have gone on strike for higher pay in the past two months. LG Display, agreed to double year-end bonuses last month in east China's Nanjing plant after more than 2,000 workers took part in a protest.

 

************************************

 

China's import growth fell to a two- year low in December, underscoring a slowdown in the world's fastest-growing major economy that deepens risks for the global outlook.

 

Imports rose 11.8% from a year earlier, less than all 21 estimates survey of economists, a government report showed Friday in Beijing. While the moderation caused the trade surplus to widen to $16.5 billion in the month, officials have said the excess will shrink in 2012 as Europe's crisis curbs demand.

 

Weakening import growth may undermine China's ability to lead the recovery as it did after the 2008 crisis. The nation's expansion may slide to 7.7% this quarter, the slowest pace in three years, according to a UBS AG forecast, and RMB gains may ease as policy makers protect exporters.

 

Exports in December rose 13.4%, in line with the median estimate and the smallest increase since gains resumed two years ago after the financial crisis, excluding holiday distortions. The trade surplus compared with $14.5 billion the previous month and the median estimate of $8.8 billion.

 

China's Vice Commerce Minister Zhong Shan warned Thursday the country's external trade environment may be "grimmer" this year as demand weakens and global competition intensifies, the official Xinhua news agency reported. Exports of labour-intensive goods are slowing "relatively quickly" and China is losing market share in Japan, the European Union and the US, he said.

 

Sportswear producers including Adidas are moving some production to Central America to be nearer the US market and as labour costs in China rise. Adidas, the world's second-biggest sporting goods maker, plans to increase its production in the region fivefold by 2015, the company said last month.

 

For 2011, the trade surplus fell 14.5% to $155 billion, the customs bureau said. That's the third straight annual decline since a record $298 billion in 2008. Full-year exports rose 20.3% to $1.9 trillion and imports climbed 24.9% to $1.7 trillion.

 

************************************

 

Chinese aluminum smelters may idle their annual capacity by one-third, the most in three years, as energy costs soar and prices slump.

 

China may produce almost 20 million metric tons of the lightweight metal and its capacity may be as much as 30 million tons by the end of this year. Monthly output from China, the world's biggest producer, fell 8.3% in November from a record 1.6 million tons in August.

 

Alcoa, Rio Tinto and their global rivals are cutting production after prices dropped 19% last year, curbing profits. Alcoa, the largest US producer that reported its first loss in two years this week, said China may use 70% of its capacity in 2012.

 

China's aluminum industry is becoming less and less competitive because power is going up and many producers are making losses. Chinese smelters may idle 1 million or 2 million tons of capacity this year, adding to 6 million tons of surplus capacity in 2011.

 

Aluminum Corp. of China, or Chalco, the nation's biggest producer of the metal used in aircraft, beverage cans and car parts, is "actively studying the market" and may adjust production when needed, spokeswoman Shen Hui said. China will curtail 1.1 million tons of aluminum output capacity this year, Alcoa Chief Executive Officer Klaus Kleinfeld said Tuesday this week

 

Falling prices may force 3 million tons of global capacity to be closed or mothballed, Oleg Deripaska, CEO of United Rusal, the world's largest producer, said last month. Rusal itself isn't planning to cut output yet, and is monitoring the market closely, the Moscow-based company's press service said Thursday in an e-mail.

 

Alcoa this month said it would halt 12% of its global capacity and Rio, the world's third-biggest producer, said in November it would shut its Lynemouth smelter in England. Norsk Hydro, Europe's third-largest producer, said Jan. 10 it may take some capacity offline at its smelter near Newcastle in Australia.

 

China raised retail power prices by an average 0.03 RMB (0.5 cents) a kilowatt-hour from Dec. 1, squeezing profits at smelters that don't have access to cheaper fuel. That would raise costs by as much as 500 RMB for producing a ton of aluminum, or equivalent to an increase of as much as 5% of total costs.

 

Smelters in China's Henan, Guangxi and Hunan provinces are the worst affected because they are paying the highest power rates. Chalco may cut production at its high-cost units in Henan and Shanxi provinces in the first quarter.

 

China's primary aluminum production gained 9.9% to 16 million tons in the first 11 months last year from a year ago, according to the National Bureau of Statistics.

 

China's economy grew 9.1% in the third quarter from a year earlier, the slowest pace since 2009, on weaker export demand and monetary tightening. Aluminum inventories monitored by the Shanghai Futures Exchange gained for a fifth week last week to 221,624 tons, the highest since July.

 

************************************

 

China on Wednesday revised down its current account surplus for the third quarter slightly to $53.4 billion from the previously estimated $57.8 billion, according to data from the State Administration of Foreign Exchange (SAFE).

 

At the same time, SAFE doubled its estimates for the capital and financial account surplus to $66.2 billion from an initial $33.9 billion. Foreign direct investment was $28.7 billion in the third quarter, the regulator said.

 

According to SAFE, the balance on trading goods amounted to a surplus of $85.3 billion, and there was a $20.3 billion deficit for the trading of services.

 

During the first three quarters of 2011, the country's current account surplus amounted to $141.2 billion, while capital and financial account surplus was at $250.1 billion.

Summary  
The coming week looks like .....
Commodities Indices
 My end of Newsletter summaries are starting to sound a little repetitive, if not boring .... "it's all about Europe next week" .... but quite frankly Ladies & Gentlemen, it is!

 

Of course S & P with their 'after market' downgrades and the fact that the US is closed on Monday do not help matters as it leaves Asian markets and then Europe to muddle through the trading day without any lead from the US - but at the moment, I think Europe are taking their own lead anyway and so it is going to be very interesting to see if we have a potential 'Black Monday' on our hands.

 

US stock investors will return Tuesday to a tug of war between signs of domestic strength and overseas concerns next week as a batch of critical earnings reports look to add credence to the idea the economy is improving, while credit rating downgrades in Europe will keep that region's difficulties in view.

 

Bank stocks will probably once again be a primary focus, as not only will European issues call the group's profit outlook into question, but many key names report results.

 

Next week, when markets will be closed on Monday because of the Martin Luther King holiday, will also see the release of the New York Fed's January manufacturing data, December readings on inflation from both the Producer Price Index and the Consumer Price Index, as well as December housing starts.

 

Earnings reports from numerous bellwethers come out next week - Bank of America, General Electric, Intel, Goldman Sachs and Microsoft are among the names set to report.

 

But even if they all report rosier times ahead, it is impossible to ignore the European 'problem' and I think we might see Greece back to the fore next week as the downgrades overnight will most certainly hammer another nail in the Greek coffin.

 

All things considered, I think next week by definition of those downgrades coming so late in the day Friday, we are going to see one of the most volatile Monday trading sessions for many a year.

 

Asia will take the lead for sure when markets open Monday and already I can see Asian Index futures taking a beating - that is not going to ease off as Monday progresses and once European markets open and the full damage those downgrades do to confidence on European bourses, I think we could see global markets five into a heavy tailspin .... and that is without US markets even at the party!

 

Volatility is inevitable for the week ahead and I've said it before but I'll say it again; strap yourselves in because Monday and the week ahead is going to be a rollercoaster of a ride for sure.

As always, I will keep you posted with major developments as/when they occur in the week ahead.
 
In the meantime, I wish you all a very pleasant weekend.
 
Market Newsletter Written By 


Adrian Page

Managing Director
Financial Page International
 
In This Issue
US Markets
European Markets
The UK Market
Asia Pacific Markets
Global Commodities
Global Currencies
China This Week
Summary
Quick Links
Services
Our Services 
Personal Banking
Useful Tools