Stock Market Update - Monday, September 20, 2010 Outlook Cautious Trending Up

Stock Market Update
Monday, September 20, 2010


Latest News Headlines:

CLOSING US INDEX NUMBERS

Dow Jones..10,753.62...+145.77
S&P 500...1,142.70...+17.11
Nasdaq....2,355.83...+40.22


Stocks Advance On Confidence Boost

U.S. stocks rallied to their highest level in more than four months on Monday as encouraging financial and homebuilder earnings boosted confidence in the economic recovery.

Oil jumps above $75 as S&P 500 hits 4-month peak. Markets continue to recover from the recent slump, led by India, Singapore and South Korea. The Dow Global index (DJWO) broke through resistance at 228, signaling the start of a primary up-trend.

The Dow is testing resistance at the 10,700 level, signaling rising buying pressure. The S&P 500 is testing resistance at 1130; breakout would indicate a primary advance to 1220.

The Dow Theory is close to issuing a buy signal. That's assuming the stock market holds onto its mid-day gains, both the Dow Jones Industrial Average and the S&P 500 index 1,137.

If they do, that will constitute a buy signal according to TheDowTheory.com, edited by Jack Schannep. The crucial levels to watch, on his interpretation, are 10,698.75 for the Industrials and 1,127.59 for the S&P 500.

Richard Russell, editor of Dow Theory Letters, adheres to a more strict interpretation of the Dow Theory, and is therefore not quite ready to say that even a short-term buy signal has been generated. That’s because the Dow Transports as of mid-day trading in New York remain about 1% below their early August high (which came in at 4,516.35).



US FOR SALE SIGN!
Commercial Real-Estate Woes Persist; Prices Down

Pessimism over the U.S. commercial real-estate market continued Monday as Moody's Investors Service reported prices declined 3.1% in July from a month earlier and Standard & Poor's Ratings Services said a near-term comeback for the sector "isn't likely."

Prices of commercial properties, such as office buildings and shopping centers, have stabilized but in July were 43% below their peak in 2007. Rental demand has diminished and credit has tightened since the heyday of several years ago, making it harder for commercial landlords to keep up with interest payments, refinance existing debt or sell property at a profit.

The slump will continue until job creation boosts demand for commercial space--likely at least until 2012, S&P said. Further downgrades of developers, banks with high exposure to commercial real-estate loans and commercial mortgage-backed securities are possible over the next year, it said.

Moody's found the latest price drop unsurprising as it has "noted for several months that markets are likely to remain choppy for some time as property values slowly form a bottom in conjunction with a gradual recovery of the broader economy," said Managing Director Nick Levidy.

An annual regional breakdown Moody's published this month shows prices on properties in the East increased in three of the four categories--office, retail and apartments--over the past year. Industrial property values there dropped 7.6%. the South saw retail property prices plunge 32% while prices in apartment markets in the region increased 1.4% following a 44% drop a year earlier.


US Recession 'longest since WWII'

The "official" US recession lasted only 18 months and was the most prolonged since World War II, a report has concluded. The National Bureau of Economic Research (NBER) said the recovery began in June 2009, with recession having begun in 2007.

Many seriously doubt statements made by the NBER. Just last Friday six US banks closed across four US states. Unemployment numbers continue to rise. Foreclosures are growing in both the commercial and residential markets.

The price of food has gone so high in the US that Food Stamps are now being used by mainstream American's in every state of the US.

Voters on Monday pushed President Barack Obama to address their concerns and questions about what they see as a failing American dream and flailing economy.

"I'm one of your middle-class Americans. And quite frankly I'm exhausted of defending you, defending your administration.

.. I'm deeply disappointed with where we are right now," said a woman at a live, televised town-hall style meeting on CNBC. The woman, who identified herself as a chief financial officer and veteran with two children, said the recession has hurt her family. She then asked, "Is this my new reality?"

Obama said his administration has a series of policies relating to mortgage loans, higher education and credit cards that are aimed at helping alleviate the economic pain the middle class has felt. "I'm waiting, sir. I don't feel it yet," she said.

The question was one of several that displayed the frustration voters, many of whom supported Obama, feel. Some of the questions also suggest Obama is having trouble connecting with down-and-out Americans.


"I was really inspired by you and by your campaign.

.. That inspiration is dying away," said a man who said he took advantage of student loan incentives to get a law degree. He added, "It feels like the American dream is not attainable for a lot of us. Is the American dream dead?"


"Absolutely not," Obama quickly responded, saying the U.S. has the best colleges, the best private sector, and best workers in the world. He added, "There is not a country in the world that would not want to change places with us."


Obama repeated what he has said when asked about the economy: The recession was so deep it will take a long time to correct.

Obama said his administration was considering any and all ideas to help boost economic output and hiring. He reiterated that he wants tax cuts extended for the middle class but not the wealthy.

Obama has used the debate over taxes as highlighting key differences between Republicans and Democrats: Most Democrats want the tax cuts extended for only the middle class, while Republicans also want any extension to include the wealthy.

Obama also faced questions about his views on Wall Street. "When are you going to stop whacking at the Wall street pinata?" asked a man who helps runs the hedge fund SkyBridge Capital and said he went to law school with the president.



US Stocks Climb After Recession Called Over

U.S. stocks climbed Monday, gaining speed after a key nonprofit organization officially called the recession over, giving investors a boost of confidence in the gradual economic recovery.

The Dow Jones Industrial Average gained 111 points, or 1% to 10719. The measure's climb accelerated after the National Bureau of Economic Research, the unofficial arbiter of recessions' start and end dates, said the recession began in December 2007 and ended in June 2009.

The Standard & Poor's 500-share index gained 1.1% to 1138, breaking above the key 1130 level, the top of the index's recent trading range.

The consumer discretionary sector posted the biggest gains, as investors grew more bold in hopes that the economy would avoid a double-dip, or second recession. Lennar jumped 6.8% after the home builder reported a return to profitability in the fiscal third quarter, as its earnings beat analysts' forecast.

Among the Dow's strongest performers, Home Depot gained 1.8%. Later this week, the government will release new housing starts, building permits, existing and new home sales data.

However, the National Association of Home Builders' September housing-market index stayed at 13 for two straight months, lower than the 14 reading economists had expected.

"Certainly the report from the home builders' association was not positive," said Joe Heider, principal at Rehmann. But, he said, "given the fact that home builder Lennar reported such substantial profits, beating forecasts, I think that offset it. The market's in the mood to look for an excuse to go up, not down.

Credit-card companies also strengthened Monday. Discover Financial Services gained 5% after reporting a fiscal third-quarter profit of $260.6 million as improving credit trends allowed the company to free up funds in reserves and cardholders spent more. Leading the Dow, American Express jumped 3.4%.

The Nasdaq Composite surged 1.3% to 2345, buoyed by a fresh wave of deal activity in the fast-consolidating technology industry. International Business Machines agreed to acquire data specialist Netezza in a deal valued at $1.78 billion, as Big Blue expands its analytics business. IBM rose 1%, while Netezza jumped 12%.

L-1 Identity Solutions, which designs identification systems that recognize fingerprints and eye-iris patterns, rose 20% after French aerospace and defense group Safran agreed to buy the company for $1.09 billion, or $12 a share.

Helping to bolster confidence in the global economic recovery, Moody's Investors Service retained its stable outlook on the U.K., saying the country's current triple-A rating should remain safe if the fiscal consolidation plan set forward by the government in June stays on target.

Gold prices continued to hit fresh highs, amid speculation of further quantitative easing ahead of Tuesday's meeting of the Federal Reserve's policy-making committee. Spot gold prices climbed above $1,283 per troy ounce.

The dollar weakened against both the euro and the yen. Demand for Treasurys slid, with the 10-year note down, pushing its yield up to 2.74%. Crude-oil prices rose above $76 a barrel.


US Stocks Open Higher
U.S. stocks climbed modestly on Monday as a stable credit-rating agency outlook on the U.K. boosted confidence in the global economic recovery.

The Dow Jones Industrial Average gained 27 points in early trading, led by a 0.9% rise in AT&T. American Express rose 0.6%, while Home Depot gained 0.7% ahead of housing data expected at 10 a.m.

The Nasdaq Composite rose 0.2% to 2321. The Standard & Poor's 500-share index added 0.2% to 1128. Telecommunications companies pulled ahead early Monday, while materials lagged. The Dow rose 0.2% to 10634.

Helping to bolster confidence in the global economic recovery, Moody's Investors Service retained its stable outlook on the U.K. Monday, saying the country's current Aaa rating should remain safe if the fiscal consolidation plan set forward by the government in June stays on target.

Gold prices continued to hit fresh highs Monday, amid speculation of further quantitative easing ahead of Tuesday's meeting of the U.S. Federal Reserve's policy-making committee. Spot gold prices climbed above $1283 per troy ounce.

M&A Activity
The flurry of deal activity in the fast-consolidating technology industry continued, as International Business Machines agreed to acquire data specialist Netezza in a deal valued at $1.78 billion, as Big Blue expands its analytics business. IBM edged up 0.4%, while Netezza jumped 12%.

L-1 Identity Solutions, which designs identification systems that recognize fingerprints and eye-iris patterns, rose 20% after French aerospace and defense group Safran agreed to buy the company for $1.09 billion, or $12 a share.


Demand for Treasurys was mixed, with the two-year note flat, and the 10-year note up to push its yield down to 2.72%. The U.S. dollar weakened against the yen, but strengthened against the euro. Crude-oil prices rose above $75 a barrel.


US PRECIOUS METALS: Comex Gold Extends Records Above $1,280/Oz
Gold futures Monday continued their climb into record territory amid uncertainty in currency markets and the chance of further stimulative action by the U.S. government.

The most-actively traded gold contract, for December delivery, rose $3.80, or 0.3%, to $1,281.30 an ounce on the Comex division of the New York Mercantile Exchange. In overnight trading the metal hit $1,284.90, a new record high for a most-active contract.

The metal hit record highs last week amid concerns about Europe's sovereign debt. Gold is frequently bought as a refuge asset because it isn't as closely linked to economic cycles as more industrial commodities such as copper and oil. Investors sometimes flock to gold when investors' trust in equities or other assets is shaken.


US Stocks Open Higher
US Stock futures are pointing to a higher close today as investors await the latest read on the housing market. Dow Jones Industrial Average futures are up by 46 points at 10,584.

US The Week Ahead:

A number of economic reports on U.S. housing data for the month of August are expected to show some recovery from a dismal July, although sales are still poor as the industry continues to suffer from weak fundamentals.Earnings reports from a number of food and retail companies next week are expected to highlight sales growth, although weak consumer confidence remains a concern.

United Nations meetings are expected to draw leaders from across the globe.



Canadian Market:

Toronto Stocks Up At Midday; Materials, Energy Groups Lead

The market was higher at midday Monday, as stocks rallied across most sectors after the National Bureau of Economic Research in the U.S. said the recession in that country ended more than a year ago.

The announcement raised hopes that the U.S. would avoid a double-dip recession, which, in turn, prompted Monday's buying activity. The heavily weighted energy and materials groups were among the biggest gainers.

At 11:45 a.m. EDT (1545 GMT), the S&P/TSX Composite Index was up 101.20 points, or 0.83%, at 12265.76. Advances led declines 859 to 488. Trading volume was 271.3 million shares. The S&P/TSX 60 Index was up 4.92 points, or 0.70%, at 712.45.

Toronto Most Actives At 1:15 PM EDT

Mirabela Nickel 21,237,965 1.67 off 0.06
Calmena Energy Services 19,522,300 0.62 up 0.02
Horizons NYMEX Natural Gas Bull 15,467,692 4.00 off 0.34
Platmin Ltd. 11,750,980 0.96 off 0.02
Aura Minerals 7,352,531 3.99 up 0.07
Alexis Minerals 7,219,619 0.19 up 0.01
Kinross Gold 6,744,677 19.38 up 0.45
iShares Cdn S&P/TSX 60 4,631,853 17.89 up 0.08
Argonaut Gold 4,376,631 3.60 up 0.03
Uranium One 4,043,096 3.19 up 0.06


Toronto Indexes, Volume; Noon EDT Composite Up 71.82

S&P/TSX Composite 12236.38 up 71.82 or 0.6%
S&P/TSX 60 Index 710.45 up 2.92 or 0.4%
Financials 177.24 up 0.21 or 0.1%
Materials 389.83 up 5.07 or 1.3%
Energy 277.76 up 1.71 or 0.6%
Industrials 103.63 up 0.59 or 0.6%
IT 27.06 up 0.15 or 0.6%

Volume Monday Friday
11-12 65.1M 54.7M
9:30-12 286.3M 306.5M



Canadian Wholesale Sales Fell
Wholesale sales dropped 0.1% to C$43.89 billion (US$42.55 billion), Statistics Canada reported Monday. Sales in June fell 0.3% to C$43.92. The volume of sales fell 0.3%.

The wholesale sales declines were led by a 3.2% drop in motor vehicle and parts sales to C$7.19 billion. Sales of motor vehicles were down 3.8% to C$5.59 billion, the first decline since April. Declines were also reported for new and used motor vehicle parts and accessories.

Sales of machinery, equipment and supplies rose 1.0% to C$9.07 billion, following a 1.5% decline the previous month. Three of four industries in the subsector reported gains, led by farm, lawn and garden machinery and equipment supplies industry.

Sales of food, beverages and tobacco products rose 2.3% to C$8.65 billion driven by a 2.7% increase in food product sales.

The data show a divergence between Canadian consumers and Canadian business investment, said David Tulk, senior macro strategist at TD Securities in Toronto. On the consumer side, four of seven components showed declines, most strikingly in autos.

The largest wholesale sales decline was in Quebec where sales fell 0.9%, the second consecutive decline, while sales fell 0.2% in Ontario, reflecting weaker sales in the motor vehicles and parts subsector. Sales were up 4.2% in Saskatchewan on agricultural supplies, the first gain following three consecutive declines. Sales were also up in Alberta and New Brunswick.

Wholesale trade inventories rose 0.5% to C$53.13 billion, the fifth increase in six months, including gains in construction, forestry, mining and industrial machinery, equipment and supplies and food products.



South American Markets:

MEXICO:

Mexico's stocks were flat in jittery early trading Monday as investors adjusted prices after a four-day holiday weekend.

The market's IPC index of leading issues was practically unchanged at 33,044 points around 10:10 a.m. EDT. Volume was 48.7 million shares worth 958.2 million pesos ($75.1 million).

Stocks started out lower despite gains in U.S. markets, which a Mexico City equities trader attributed to investors adjusting prices to moves in ADRs as the local market was closed Thursday and Friday for Mexico's Bicentennial Independence Day celebrations.

Cement maker Cemex (CX, CEMEX.MX) shares were down 4% to MXN10.58. The trader said concerns about the strength of the economic recovery, and Cemex's ability to maintain prices in a weak environment were probably hurting the shares.

Local market bellwether America Movil (AMX, AMX.MX) L shares were unchanged at MXN32.05, while retailer Wal-Mart de Mexico (WMMVY, WALMEX.MX) V shares were 0.3% higher at MXN30.10.




BRAZIL:

Brazil Govt Raises 2010 Economic Growth View To 7.2% From 6.5%. Brazil Raises 2010 Spending Limit By BRL1.7B.

Aided by robust tax receipts, Brazil's government will raise its 2010 spending limit by 1.7 billion Brazilian reals ($994 million), the country's Planning Ministry said Monday.

With the increase, the government has so far freed up BRL4.2 billion from a total of BRL29.4 billion in spending frozen early in the year in an effort to assure compliance with its year-end fiscal savings target.

Brazil's government this year has pledged to post an operating surplus equivalent to 3.3% of gross domestic product.

Brazil bought additional US Dollars at second auction.


PERU:

Peruvian mining company Volcan Compania Minera SAA (VOLCABC1.VL) said that it has started to temporarily reduce output at its Cerro de Pasco mining unit.

ARGENTINA:

Argentina 2Q Current Account Surplus $3.1B

Argentina posted a current-account surplus of $3.1 billion in the second quarter of 2010, on the back of a positive trade balance, the national statistics agency, Indec, reported Monday.

The current-account surplus, which is the broadest measure of a country's transactions with the rest of the world, was below the median estimate of $3.5 billion in a Dow Jones Survey of seven economists.

The reading compared to a deficit of $319 million in the first quarter of the year, and a surplus of $4.64 billion posted in the second quarter of 2009.

Argentina's trade surplus stood at $6.01 billion in the quarter, up from $2.64 billion in the Jan-Mar period, but down from $6.761 billion a year ago. Exports rose 24% on the year to $19.096 billion, while imports surged 50% to $13.091 billion as a booming economy offset government efforts to curb imports.

The country's financial account surplus totaled $185 million in the quarter, compared with a deficit of $4.11 billion a year ago.





European Markets:

Spot gold is edging higher in Europe Monday, boosted by continued weakness in the U.S. dollar and rising ever-closer to the $1,300 a troy ounce level targeted by many investors and analysts.



European Union Signals Broad Overhaul Of Key Financial Markets Law

BRUSSELS (Dow Jones)--The European Commission will propose far-reaching changes to its main financial markets law, seeking to impose tighter regulation on the growing amount of securities trading that takes place with little government scrutiny, European Union commissioners said Monday.

"Nobody should be able to escape surveillance," said Michel Barnier, the commissioner in charge of financial regulation, at a conference Monday. "Excessive risk-taking must be eliminated. This requires full transparency vis-a-vis regulators, but also vis-a-vis the public."



Euro Up Vs Dollar, Yen; No Japan Intervention Seen

European stocks are seen mixed on Monday, halting a four-session losing run as resource-related stocks find support in rising metal and oil prices while investors awaited the U.S. Federal Reserve's assessment on the economy on Tuesday.

Financial spreadbetters expected Britain's FTSE 100 .FTSE to open 7 to 13 points higher, Germany's DAX .GDAXI to open 1 to 4 points lower, and France's CAC-40 .FCHI to open 2 to 9 points higher.

European shares retreated on Friday after figures showing U.S. consumer sentiment dropped to its lowest level in more than a year dampened investors' mood, while renewed fears over Europe's banking sector hit shares of financial institutions.


UNITED KINGDOM:

London Stocks Close Above 5600 The First Time Since May

FTSE 100 5602.54 +94.09 +1.71%
FTSE 250 10548.19 +107.21 +1.03%
DJ UK Smaller Companies 875.64 +11.47 +1.33%

London Stocks Close Strong

FTSE 100 closes +1.7% at 5602.5 and above the 5600 level for the first time since May. The index is boosted after Moody's said it retains its stable outlook for the UK. "After months of choppy trading for stock markets, investors look like they believe this rally could well be different as markets are shaking off some of the concerns that stemmed any progress through the summer," Yusuf Heusen at IG Index says.

The rally is supported by a mix of sectors, with cruise operator Carnival the strongest blue-chip gainer ahead of its update, Tuesday. It ends +5.0%. On Tuesday, the update on UK public sector finances comes at 0830 GMT and the FOMC rate announcement at 1815 GMT is eagerly awaited too.

Bank lending to U.K. businesses continued to fall in July, although by less than it did in June, the Bank of England said Monday.

U.K. Prime Minister David Cameron's spokesperson said Monday that the government is "looking hard at the issue of pay" in the public sector as part of its austerity plans.

The widening of the gap between interest rates on new lending to households in the U.K. and the Bank of England's key policy rate since the financial crisis may reflect the need of banks to build more capital, as well as higher borrowing costs, a paper by the central bank released Monday found.

Sempra Energy (SRE) and Royal Bank of Scotland Group PLC (RBS, RBS.LN) said they will sell their joint venture's North American electricity retail business to Asian commodities trading company Noble Group Ltd. (N21.SG) for $317 million.

Royal Bank of Scotland Group PLC (RBS) plans to build out its investment banking business across the Middle East following the sale of its United Arab Emirates retail operations, amid indications of a bounce back in the region's bond market in the fourth quarter that could see sales of up to $10 billion, a top bank executive said.

BP Kills Macondo, But It's Legacy Lives On

BP confirmed late Sunday that the Macondo well that leaked almost five million barrels of oil into the Gulf of Mexico has been permanently sealed. The most immediate worry for BP and its shareholders is how the authorities will apportion blame for the spill. BP's own investigation spread responsibility across all companies involved in the drilling of the well and denied any negligent actions on its part, but several other ongoing official inquiries may be less kind.

U.K. mortgage lending criteria remain tight and weighed on gross lending growth in August as the outlook for the remainder of 2010 is downbeat, surveys from the Council of Mortgage Lenders and the Bank of England show.

A group of shareholders have made a complaint to FTSE 100 miner Eurasian Natural Resources Corporation PLC (ENRC.LN) over the company's decision to buy a copper mine in the Democratic Republic of Congo, The Sunday Times reports, citing investors.




GERMANY:

RECOVERY WILL PROCEED AT SLOWER PACE
Germany's economic recovery will continue through the end of 2010, though growth will slow from the galloping pace of the 2Q, the finance ministry says.

BERLIN (AFP)--German metalworkers will stage warning strikes this week to agitate for sharp wage hikes after a stalemate in negotiations with employers, the IG Metall union said Monday.


IRELAND:

The rising cost of paying interest on its debt is one reason why the Irish government may not be able to cut its budget deficit to 3% of gross domestic product in 2014, the head of Ireland's central bank, Patrick Honohan says.




FRANCE:

European defense giant Safran SA (SAF.FR) Monday snapped up L-1 Identity Solutions Inc. (ID) in a $1.09 billion deal that will create an industry-leading provider of solutions for the fast-growing high-tech homeland security market.




Asian Pacific Markets:
=Japanese markets will remain closed on Monday for a holiday.=

Dollar and commodities steady as markets await Fed

By Alex Richardson

SINGAPORE (Reuters)

The dollar was on the defensive and gold held near a record high on Monday as possible further Federal Reserve moves to increase money supply weighed on the U.S. currency and boosted alternative assets.

Uncertainty about the global economic recovery, fueled by weak U.S. consumer sentiment data on Friday, and a public holiday in Japan also kept many investors sidelined, with oil steady after a drop last week and Asian equities treading water.

Japan intervened to sell yen for the first time in six years last week, partially interrupting a decline in the dollar that began when talk of further quantitative easing -- effectively printing money -- by the U.S. central bank revived last month.

"If the Fed decides to give more hints it is about to embark on more QE, the U.S. dollar slide will probably continue," said John Kyriakopoulos, a currency analyst at National Australia Bank in Sydney.

The Fed is not expected to make any new monetary policy moves on Tuesday, but the post-meeting statement will be closely parsed for signals on the debate about whether further large-scale asset purchases are needed to support the sluggish recovery.

Views differ among Fed officials about whether stubbornly high unemployment merits more aggressive policy intervention.

Recent data appear to indicate the U.S. economy is not sliding back into recession as some market watchers had feared, but investors are wrestling with how to value stocks as the global recovery loses momentum and sales outlooks grow more unclear.

MSCI's broadest index of Asian shares outside Japan was flat (^MIAPJ0000PUS - News), with equity markets gaining modestly in Singapore (^FTSTI - News) and Taiwan (Taiwan:^TWII - News) but losing ground in Hong Kong (HKSE:^HSI - News), South Korea (KSE:^KS11 - News) and Australia (ASX:^AXJO - News).

BETS AGAINST DOLLAR

Market sentiment on the major currencies was summed up by the latest Commodity Futures Trading Commission data. They showed investors had increased bets against the U.S. dollar to the highest level in a month, while sharply cutting back net short positions in the euro and sterling.

On Monday, the dollar was parked at 85.70 yen, having spent Friday in a tight 85.57 to 85.92 range as the risk of further intervention by Tokyo kept investors away.

Gold, which tends to benefit from economic uncertainty as it is viewed by many investors as a safe-haven asset, traded around $1,279 an ounce, not far from the all-time peak of $1,282.75 struck on Friday.

U.S. crude oil futures, which slipped nearly 4 percent last week, gained 34 cents to $74 a barrel, with many traders waiting for the Fed's readout on the U.S. economy.

"If they lower their forecasts as some people are expecting, oil prices would be pushed down because it implies lower demand," said Michelle Kwek, an analyst at Informa Global Markets in Singapore.

Asian stock markets drifted lower in quiet trade early Monday, with investors cautious ahead of the US Federal Reserve's policy meeting and US housing starts data Tuesday.

Asian stock markets were mixed in subdued trading Monday amid a week punctuated by holidays in Japan and other major regional markets.


AUSTRALIA:
Australia's S&P/ASX 200 was down 0.6%.

SOUTH KOREA:
South Korea's Kospi Composite was 0.4% lower.



JAPAN:
=Japanese markets will remain closed on Monday for a holiday.=

China halts top-level ties with Japan over boat dispute
19 September 2010

China has suspended top-level exchanges with Japan in a row over the detention of a Chinese ship captain following a collision near disputed islands. The Chinese state media said ministerial and provincial-level contacts had been suspended, including talks on aviation and coal.

China had warned it would be taking "strong measures" against Japan after a court in Okinawa, southern Japan, said the sailor could be held for a further 10 days. A foreign ministry statement read out on Chinese state television said the decision had "seriously damaged Sino-Japan bilateral exchanges".

"We demand Japan return the Chinese captain unconditionally and immediately. If Japan continues to take the wrong course, China will take strong counter-measures and Japan will have to take all the consequences."

The disputed islands are known as "Senkaku" in Japan and "Diaoyu" in China. Japan currently controls them, but both countries claim ownership. The islands are close to strategically important shipping lanes, they offer rich fishing grounds and are thought to contain oil deposits.


Economy News:

WTO Raises 2010 Trade Growth Forecast To 13.5% Percent

The World Trade Organization on Monday raised its trade growth forecast for 2010 to 13.5 percent from 10 percent, describing the pace as the fastest-ever annual expansion.

"Following faster-than-expected recovery in global trade flows so far in 2010, WTO economists have revised their projection for world trade growth in 2010 upwards to 13.5 percent," said the trade body in a statement. The forecast growth marks a sharp recovery from a 12.2 percent plunge in world trade in 2009, when exports were hurt by the economic slowdown.

"This would be the fastest year-on-year expansion of trade ever recorded in a data series going back to 1950," noted the WTO.


Slowing recovery a policy headache
By Kristina Cooke
Reuters.com
Sunday, Sept. 19, 2010

The sputtering global economy is complicating life for policymakers from Washington to Tokyo. When the financial crisis erupted in 2007, authorities around the world began throwing nearly everything they had at the problem to avoid a re-run of the Great Depression.

Three years later, with the global recovery losing momentum, they find themselves in a tough spot yet again. This time, if things get worse, they won't have as many tricks left in the bag to jump-start their faltering economies. What's more, whatever medicine they prescribe may well come with unpleasant side effects.

For the Federal Reserve, the medicine in question could be more large-scale purchases of U.S. Treasury bonds, though officials are unlikely to unleash that option at their policy-setting meeting on Tuesday.

Officials at the U.S. central bank disagree on many fundamental questions: How dark is the outlook? What should the threshold for further support be? Would pumping more money into the financial system be effective or could it do more harm than good?

"The economy is not falling apart, so easing now could send a signal that folks at the Fed are a little bit panicked," said Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut. "They need to make sure if they do more that the case for it is strong and the case is well-explained."

Further Fed easing could make things even more difficult for other countries, which are resorting to their own tactics to defend their economies.

Japan last week intervened in currency markets for the first time in six years to weaken its yen in a last-ditch bid to improve the competitiveness of its exports in a world of weak demand. A strong yen curbs Japanese exports and weighs on production, making it harder for Tokyo to end the long spell of falling prices that dampens consumer demand and discourages corporate investment.

Although Japanese markets will be closed for holidays on two days next week, another round of foreign exchange intervention could still be forthcoming and will keep markets on edge. Japan's unilateral move to devalue its currency sparked fears other countries might follow suit and deal a crippling blow to the global recovery. It also elicited stinging criticism from other countries.

"We don't like the behavior of the Japanese authorities," the head of the euro zone group of finance ministers, Jean-Claude Juncker, told reporters on Thursday.

European growth has been driven by Germany's export-led economy. Policymakers worry a strengthening euro, which rose nearly 5 percent in three days on Japan's move, could further slow Europe's recovery.

"Everyone seems to want a weaker currency in this environment to drive exports, but clearly not everyone can," said Mark McCormick, a currency strategist at Brown Brothers Harriman in New York.

A range of European data next week on manufacturing, consumer confidence and Germany's business climate is expected to add to evidence of a slowdown. Coupled with revived worries about European debt burdens and the health of euro zone banks, the slowdown spells the potential for more anxiety for financial markets.

The European Central Bank kept rates on hold at a record low 1 percent this month and extended unlimited liquidity to banks until at least early next year, further delaying its exit from emergency lending measures.

Markets will watch any comments from ECB policymakers about the outlook for the economy and policy there. ECB President Jean-Claude Trichet will attend a euro-zone conference in Estonia on Sunday and Monday, while ECB Executive Board member Juergen Stark will speak in Italy on Friday.

The global backdrop will no doubt be on Federal Reserve officials' minds as they mull the costs and benefits of pumping more money into the financial system. Fed Chairman Ben Bernanke said in late August that he would need to see a significant deterioration in U.S. economic conditions before easing monetary policy further. The Fed has already cut interest rates to near zero and bought $1.7 trillion in longer-term bonds.

It is unlikely the threshold for further large-scale purchases has yet been met, given a slightly better tone to recent data. The data "lifts some of the pressure, and when you have a divided committee, if you are not pressured, you move sideways," said Vince Reinhart, a former senior
Fed staffer.

Some Fed officials worry that if any further monetary easing is not effective in spurring the recovery, it would tarnish the U.S. central bank's much-needed credibility. Others worry about the potential for market disruption or sowing the seeds for inflation down the road.

"They will acknowledge the problem in the outlook and look for a compromise that kicks the can down the road," Reinhart said. Some officials, including Dallas Fed President Richard Fisher, argue that the ball is now in the government's court to do more to support the economy.

The House of Representatives will vote on a package of loan incentives and tax breaks for small businesses next week. With the unemployment rate stuck at 9.6 percent, Democrats are eager to show voters they are taking steps to help the economy as the November 2 congressional elections approach. Many of their job-creation efforts have been blocked by Republicans this year.


http://www.reuters.com/article/idUSTRE68I22D20100919?utm_source=feedburnerutm_medium=feedutm_campaign=Feed%3A+reuters%2FbusinessNews+%28News+%2F+US+%2F+Business+News%29


INDIA:

Indian conglomerate Sahara India Pariwar is in talks to acquire beleaguered Metro-Goldwyn-Mayer Inc. for more than $2 billion, said a person familiar with the matter.

Deutsche Bank AG (DB), one of the lenders to Vishal Retail Ltd. (532867.BY), has got the Delhi High Court to stop the loss-making company selling its assets, a person with direct knowledge of the matter said Monday.


Sensex BSESN Rides Over 19,595

The Sensex was valued at just over 18 times estimated 2010-11 earnings as compared to over 21 in October 2007, the first time the Sensex touched 19,000. According to a Bloomberg report, the MSCI Emerging Markets Index is valued at 14.1 times reported profits and 1.9 times net assets, compared with ratios of 14.9 and 1.7 for the MSCI World Index.

According to the same report, emerging markets' share of world equity capitalisation climbed to a record 25 per cent in August, up from 22 per cent a year ago a sign of the flagging recovery in the US and Japan in comparison with the robust growth in emerging markets like India.

A Nomurra report, see table, puts India's price-earnings ratios at among the highest in emerging-markets at 16.9 times projected earnings for 2010, the only market that is valued more expensively is China, which is 18.1. You could call it expensive, of course, or you could call it the growth potential.

Interestingly, Bloomberg adds the only other time when emerging-market stocks were valued at more than developed markets was in the 10-month period ended May 2008, just before the credit crisis. The MSCI emerging-market index has traded at an average discount of 30 per cent to the MSCI World Index in the last 10 years.

FOREX MARKET NEWS:

Euro Up Vs Dollar, Yen
The euro rose a tad against the U.S. dollar and the yen in Asian trade Monday, recovering some ground after falling Friday on renewed concerns over Ireland's fiscal situation.

With Japan's markets closed Monday for the Respect-for-the-Aged Day holiday, the euro drifted higher ahead of Tuesday's U.S. Federal Reserve monetary policy meeting.

Analysts say market participants will be looking for any sign that the Fed is ready to expand its currently limited policy of quantitative easing, which would be negative news for the dollar.

The euro remains under some pressure after the cost to insure Ireland's government debt against default soared Friday to its highest-ever level.

The euro, which has risen 9% against the dollar since June, traded at $1.3069 at 0455 GMT, up from $1.3039 in New York late Friday. Against the yen, it traded at Y112.03, from Y111.89.

The dollar was at Y85.71 at 0455 GMT, down from Y85.81 in New York Friday, but still well above the levels just under Y83 that triggered a Bank of Japan intervention last Wednesday. No sign of intervention was spotted Monday, and such a move may be unlikely in the coming days as Japanese markets will close Thursday for another holiday.

Still, analysts at DBS said the Fed's meeting Tuesday may be key for the yen's outlook, as tumbling expectations of U.S. rate hikes have been a main factor driving the Japanese currency higher. A fresh wave of yen appreciation could draw Japanese authorities back into the market for another round of intervention, they said.

"As far as exchange rate markets are concerned, this week's FOMC meeting... is more about the Japanese yen, than about the U.S. economy," DBS said. "Last week, Japan conducted unilateral interventions for the first time since March 2004 to arrest the unabated appreciation pressures in its currency. The skeptics are hoping for more quantitative measures from the Fed to undermine efforts here."

WORLD CURRENCIES:

EUR/USD	1.3043	-0.0037 (-0.28%)
USD/JPY	85.8000	+0.0200 (0.02%)
GBP/USD	1.5621	-0.0019 (-0.12%)
CAD/USD	0.9701	-0.0037 (-0.38%)
USD/HKD	7.7643	-0.0020 (-0.03%)
USD/CNY	6.7230	-0.0010 (-0.01%)
AUD/USD	0.9377	+0.0022 (0.24%)

Commodities
Crude Oil	74.86	+ 1.63%
Natural Gas	3.83	- 4.92%
Gasoline	1.96	+ 2.09%
Heating Oil	2.15	+ 2.18%
Gold	1282.59	+ 0.60%
Silver	20.90	+ 0.82%
Copper	3.52	+ 0.26%
Quotes delayed 15 min.		» Add to your site

World Markets Snapshot:

Shanghai	2,588.71	-9.98 (-0.38%)
Nikkei 225	9,626.09	+116.59 (1.23%)
Hang Seng Index	21,977.34	+6.48 (0.03%)
TSEC	8,186.96	+28.63 (0.35%)
FTSE 100	5,564.91	+56.46 (1.02%)
DJ EURO STOXX 50	2,769.18	-15.43 (-0.55%)
CAC 40	3,744.39	+22.37 (0.60%)
S&P TSX	12,164.56	0.00 (0.00%)
S&P/ASX 200	4,631.30	-7.60 (-0.16%)
BSE Sensex	19,906.10	+311.35 (1.59%)

US Stock Market Summary for September 17, 2010

Stocks:

U.S. stocks rose slightly to close out a week of almost flat line gains. The market edged up cautiously this week as stocks reached the higher end of a trading range that has kept gains in check. Both commercial and residential real estate lenders, Fannie Mae and Freddie Mac, and the US Commerce Dept. announced defaults at there highest so far. US Unemployment continues to rise.

Treasurys:

Treasurys were higher as the latest U.S. reports on inflation and consumer sentiment raised worries about deflation and the health of the economy. An extra boost for the bond market came from renewed concerns about the euro zone's sovereign-debt problems, fueled by some media reports that Ireland may need to seek external funding to support the nation's banking system. The rally faded in the afternoon session after the reports were denied by both Irish officials and the International Monetary Fund.

Forex:

Foreign exchange markets ended abruptly this week and the reverberations will carry into this week’s trading activity.

The US Dollar is almost at a critical point, as well as the US stock maket. If the dollar has no more room to fall, then equities will fall. If equities break out, then the dollar will fall further.

At this time, US trading partners like Japan, Brazil, Columbia and others are interceding in their respective currencies while the IMF is supporting the Russian Ruble and Chinese Yuan, China’s yuan posted its biggest advance this week in a little more than two-years.

The Euro fell from more than one-month highs against the dollar after fresh concerns surfaced over the euro zone's sovereign-debt crisis. The common currency retreated from its highest level since Aug. 11 at $1.3160 to threaten a drop below $1.30 on the back of reports fiscally stressed Ireland could eventually ask for a lifeline, a charge later deigned by Irish officials and the International Monetary Fund.

Gallup Finds U.S. Unemployment at Highest Level Since May

September 17, 2010
Unemployment, as measured by Gallup without seasonal adjustment, increased to 9.4% in mid-September from 9.3% in August and 8.9% at the end of July. This finding makes it far more unlikely that there will be a significant decline in the U.S. unemployment rate prior to the midterm elections.

Americans More Pessimistic About Emerging From Recession

September 15, 2010

Most Americans see the U.S. economy as stuck in a recession and the majority don't see or expect much improvement any time soon. A majority (54%) now expect the economy to be the same or worse in a year, up sharply from the 35% who expressed similar views a year ago.

U.S. Economic Confidence More Negative Than a Year Ago

September 14, 2010

Consumer perceptions of the economy are headed south. Gallup's Economic Confidence Index, at -34 for the week ending Sept. 12, is not only down slightly from July and August, it is also considerably worse than it was a year ago.

Consumer Spending Across All Income Groups Down in August

September 9, 2010

Americans' self-reported consumer spending averaged $63 per day in August -- $5 less than in July, and down slightly from $65 in August 2009. Both upper-income and middle-/lower-income spending are running at the depressed 2009 "new normal" rate.

US CPI Rises 0.3%, Core Flat

September 17, 2010
U.S. consumer prices rose in August for the second consecutive month, driven by gasoline and food, but underlying inflation was flat last month.

The Labor Department said in a report Friday that the "seasonally-adjusted" consumer price index for August rose by 0.3% from July. Consumer prices also rose by 0.3% in July, after falling by 0.1% in June.

The underlying inflation rate that's more closely watched by the Federal Reserve was unchanged. Core consumer prices, which strip out changes in volatile energy and food prices, posted small gains in the previous three months. This was the first flat core CPI reading in four months on the back of lower rent prices.

US Household Debt and Net Worth Fell

Americans, anxious over a slowing economy, kept avoiding debt in the second quarter, while their financial value receded as stock market wealth fell. In its "Flow of Funds" data, the Federal Reserve on Friday said U.S. household debt tumbled by 2.3%.

Total debt in the U.S. non-financial sectors, however, grew, boosted by a 24.4% jump in federal government debt. State and local government debt fell and business debt inched a mere 0.1% higher.

Gallup.com reports results from these indexes in daily, weekly, and monthly averages and in Gallup.com stories. Complete trend data are always available to view and export in the following charts:

Daily: Employment, Economic Confidence and Job Creation, Consumer Spending
http://www.gallup.com/poll/125639/Gallup-Daily-Workforce.aspx
http://www.gallup.com/poll/122840/Gallup-Daily-Economic-Indexes.aspx
http://www.gallup.com/poll/112723/Gallup-Daily-US-Consumer-Spending.aspx

Monday's US Economic Calendar:

10:00 a.m.
Sep NAHB Housing Market Index (previous 13)