EU paints grim near future for Spanish economy | Germany feels brunt of eurozone crisis as manufacturing orders drop | Index of manufacturing, services points to deepening eurozone woes
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November 7, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition

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Composite index suggests Japan on cusp of recession
A strong currency and a lagging export situation exacerbated by the island dispute with China have placed Japan on the verge of recession, as suggested by a composite index of 11 key indicators. The Cabinet Office now assesses the index reading as a "turning point," indicating the economy might have peaked months ago. However, columnist Mure Dickie writes that the fears that Japan will tip into recession are overblown. The Wall Street Journal (tiered subscription model) (11/6), Financial Times (tiered subscription model) (11/6)
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EU paints grim near future for Spanish economy
Spain may soon be forced to seek eurozone aid if the European Commission's latest forecast for the Spanish economy is correct. A contraction of 1.5% is predicted for 2013, worse than the 0.5% pullback foreseen by the government, and growth in 2014 is pegged at 0.5%, again falling short of Madrid's prediction of 1.2%. Fox Business (11/6)
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Germany feels brunt of eurozone crisis as manufacturing orders drop
German manufacturing orders were down a much sharper-than-expected 3.3% in September from the month before, with orders from the eurozone off a steep 9.6%. Domestic orders were down as well, and the Economics Ministry predicted that "industrial production could weaken further in the coming months." Jones Newswires (11/6)
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Index of manufacturing, services points to deepening eurozone woes
A Markit Economics composite index measuring eurozone output in manufacturing and services slid further last month, suggesting the bloc is in a worsening recession. "The eurozone downturn appears, if anything, to be deepening rather than easing. It already looks highly probable that the eurozone is headed for further economic contraction in the fourth quarter," said Howard Archer, an economist at IHS Global Insight in London. Bloomberg Businessweek (11/6)
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Greek consumer gloom thickens on eve of crucial vote
As the Greek parliament prepares for a crucial vote on another big package of austerity and labor law changes, a new reading of consumer sentiment showed further decline. The Foundation for Economic and Industrial Research index fell to 75.8 points in October, its lowest level since June. "Households discount a further squeeze in their incomes while the fear of unemployment is rising. Those who still feel relatively secure financially remain quite pessimistic on the country's outlook," the foundation said. Reuters (11/6)
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U.K. manufacturing barely gains in September
U.K. factory production edged up only 0.1% in September, less than forecast. The slight gain suggests the country's robust third-quarter emergence from recession might be losing momentum. Bloomberg Businessweek (11/6)
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Asian, European nations fret over global economy at Laos summit
Asian and European leaders meeting in Laos expressed caution over global economic uncertainties but confidence that the eurozone situation would eventually be resolved. Meanwhile, delegates to the Group of 20 meeting in Mexico called on emerging nations to provide stimulus and lamented sharp and disruptive changes in exchange rates. Channel NewsAsia/Agence France-Presse (11/6), The Yomiuri Shimbun (Japan)/Jiji Press (Japan) (11/6)
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Market Activities
Stock on both sides of the Atlantic scored gains Tuesday as Americans voted in the presidential election. The Stoxx Europe 600 advanced 0.56% to 274.74, and the S&P 500 added 0.79% to 1,428.39. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (11/7), Bloomberg Businessweek (11/6), CNNMoney (11/6)
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Asian shares are mixed on U.S. election eve
Asian shares were mixed in light volume Tuesday as investors awaited U.S. election results. The Nikkei was down 0.36% to 8,975.15, the Hang Seng edged 0.28% lower to 21,944.43, the Kospi rose 1.05% to 1,928.17, and the S&P/ASX added 0.19% to 4,493.20. Bloomberg Businessweek (11/6)
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Economic Trends & Outlook
Australian central bank elects not to budge on interest rates
The Reserve Bank of Australia left interest rates unchanged Tuesday, thwarting the predictions of economists who believed the bank might opt to get ahead of an expected economic downturn. "The RBA wants to keep some bullets in the gun. If they cut too aggressively and things start to deteriorate, then you have the same situation as you have [overseas], where central banks have cut rates so much that monetary policy has become a blunt instrument," observed Thomas Averill, managing director of Rochford Capital. The Sydney Morning Herald (Australia) (11/6)
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China sees U.S. election as no factor in yuan-dollar exchange rate
China's currency is unlikely to be moved by the U.S. election outcome this week, with the yuan currently near equilibrium against the U.S. dollar, said He Jianxiong, director-general of the international department of the People's Bank of China. "The U.S. election won't have much impact on the yuan level. China has a full power in making its own policy," He said. Bloomberg (11/5)
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India manufacturing likely to grow slowly in current quarter
India's high interest rates coupled with inflation are expected to put a damper on growth in key manufacturing sectors in the current quarter. A survey by the industry body Ficci across several sectors revealed expectations of a modest recovery over the next few months. The Economic Times (India)/Press Trust of India (11/6)
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End of consumer electronics cycle may hit Taiwan hard
With the predominance of consumer electronics among Taiwan's exports, the nation might be facing a slowdown after a crest in the sector marked by Apple's latest suite of devices. Separately, the Taiwan Institute of Economic Research tempered its forecast for GDP growth next year, in part due to expected sluggish growth in manufacturing. The Wall Street Journal (tiered subscription model) (11/6), The Taipei Times (Taiwan) (11/6)
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Foreign-fund net inflow to Taiwan reaches US$790 million in October
October's net inflow of foreign equity funds into Taiwan came to US$790 million, according to Taiwan's Financial Supervisory Commission. Separately, Barclays Capital predicted Taiwan's central bank might allow the nation's currency to climb gradually against the U.S. dollar in a bid to stifle inflationary pressures over the next year. China Economic News Service (Taiwan) (11/6), The Taipei Times (Taiwan) (11/7)
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Capital Markets & Financial Products
Quietly, China stages major financial reform
Nearly unnoticed, China has implemented highly significant financial reform over the past few months, bringing it more into line with common Western practices. Financial Times (tiered subscription model) (11/6)
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CDS premium on South Korean bonds marks a 53-month low
After soaring to 699 basis points at the depth of the global financial crisis in 2008, South Korea's credit default swap premium on five-year sovereign bonds has dropped steadily, reaching a 53-month low of 65 basis points. The low premium points to high confidence in the nation's economy. (South Korea) (11/6)
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Resource assets are increasingly favored by Asian state institutions
Investments in energy, resources and cropland are increasingly among the targets for Asian state institutions, says Steve Gross, Hong Kong-based managing director at Macquarie Infrastructure and Real Assets. As one of the world's quickest-growing sources of capital, however, these institutions are facing a scarcity of such long-term, inflation-hedging assets. (11/6)
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Editor:  Sean McMahon
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