Bull Market to Continue Rest of Year: Byron Wien

he bull market in stocks will continue the rest of the year despite the outsized gains already in the first quarter as more equity “disbelievers” are converted, the economy improves and more companies follow Apple’s lead in paying a dividend, well-known Wall Street strategist Byron Wien says.

“I actually thought the S&P 500 [.SPX 1413.38 -5.66 (-0.4%) ] could reach 1500 based on the generally achieved (but not last year) multiple of 15 times and operating earnings of $100,” wrote Blackstone’s Wien in a strategy note to clients Tuesday, which reviewed his classic “Ten Surprises” outlook for the year. “Estimates have been trimmed somewhat, but, at this point, I still think 1500 is likely.”

“Over the past three months the pessimistic mood has changed to optimism,” continues Wien, formerly the long-time chief investment strategist at Morgan Stanley. “Ordinarily, optimistic sentiment readings presage a market correction, but there are so many investors looking for an opportunity to increase their exposure that even a minor downdraft gets cut short by a flood of buyers. This could continue for a while.”

S&P 500 Index (.SPX) 1413.38 -5.66 (-0.4%%) INDEX

So far this year, the S&P 500 is up 12 percent to above 1400, Wien’s original 2012 forecast for the U.S. benchmark. Federal Reserve officials made note Tuesday of the strengthening economy in minutes releasedfrom the central bank’s March meeting. Read more

China To Be Largest Economy Before 2030: World Bank

China must relax its grip on industry and move towards a free-market economy, the World Bank said on Monday in a report that forecast the country would become the world's largest economy before 2030.

AP

Judging China to be near an inflection point in its economic growth, the World Bank called on Beijing and its incoming leaders to overhaul the structure of the world's No. 2 economy to keep income and productivity rising in years ahead.

"As China's leaders know, the country's current growth model is unsustainable," World Bank President Robert Zoellick said in Beijing at the launch of the "China 2030 Report".

"This is not the time just for muddling through. It's time to get ahead of events and to adapt to major changes in the world and national economies."

An executive summary of the 400-plus page report, made public by Zoellick, had six broad recommendations for Beijing: strengthen a market-based economy, foster innovation, go "green", provide social security for all, improve the fiscal system and seek mutually beneficial relations with the world.

Among other specific recommendations, it urged Beijing to commercialize banks and allow interest rates to be set by the financial market, develop its private sector, protect farmers' rights and cut local governments' dependence on land revenues.

The outcome of these changes would produce a China that is more socially stable and equal in wealth distribution, relies less on exports and investment for economic growth, and more on domestic consumption that can be sustained, the Bank said.

"The reforms that launched China on its current growth trajectory were inspired by Deng Xiaoping who played an important role in building consensus for a fundamental shift in the country's strategy," the report said.

"China has reached another turning point in its development path when a second strategic, and no less fundamental, shift is called for."

G20 Inches Toward $2 Trillion in Rescue Funds for Europe

Germany is easing its opposition to a bigger European bailout fund, officials said, smoothing the way for the world's leading economies to secure nearly $2 trillion in firepower to prevent further fallout from the euro-zone's sovereign debt crisis.

Getty Images

Finance leaders from the Group of 20, meeting in Mexico City this weekend, are trying to build up massive international resources by the end of April to convince financial markets they can prevent the euro-zone's deep problems from inflicting more damage on a still-fragile world recovery.

It would mark their boldest efforts since 2008 when the G20 mustered $1 trillion to rescue the world economy from the credit crisis, which blew up in the United States and caused the worst recession since the 1930s.

They are demanding that Europe build up its war chest first and then other G20 countries would contribute extra money to the International Monetary Fund.

As Europe's richest economy, Germany's support for a larger European fund is critical.

A senior G20 official said Berlin was prepared to discuss boosting the firewall in March, but it saw no reason to increase the bailout fund for now because the situation in financial markets has been improving.

The plan is to merge Europe's temporary and permanent bailout funds, the European Financial Stability Fund and the European Stability Mechanism , to create one 750 billion-euro ($1 trillion) fund. Increased IMF resources would back that up.

"Everyone in the euro zone and even in European Union is reasonably happy with combining the ESM and the EFSF, even Germany, but it is too early to say if this will be decided at the EU summit at the beginning of March," said Margrethe Vestager, economy minister of current EU president Denmark.

Merging the funds would mark a softening of Berlin's stance. It has warned that a bigger fund would remove pressure on deeply indebted countries to enact the tough fiscal measures and economic reforms needed to bring their budgets under control.

G20 finance chiefs are piling the pressure on Germany as they try to line up the roughly $2 trillion in resources by the time they next meet in April and draw a line under the two-year-old euro-zone crisis. Read more

Is the Smart Money Heading for the Sidelines?

Retail investors have begun to take the driver's seat in Wall Street's aggressive rally, an indication both that the surge could have some life yet and that it's likely nearing an end.

Mutual funds — the vehicles through which most mom-and-pop investors play the stock market — had lost funds for nine consecutive months heading into February.

But over the past several weeks the tide has turned.

Stock funds have seen inflows in three of the past four weeks, with another $1.04 billion coming in for the week ending Feb. 15, according to the most recent data from the Investment Company Institute. Unless there is a major shift in allocation, February is shaping up as a solidly positive month for stock fund inflows.

Trouble is, the last time retail investors didn't take more out of their funds than they put in was last April, which saw inflows of about $6 billion.

That move coincided with the end of a stock market rally that looked much like the current one — a big surge higher as the year began that preceded an ugly six-month skid that made sell-in-May-and-go-away the trade of the year in 2011.

What's more, institutional investors — often referred to as part of the "smart money" in the market because of their insider position — have been slowly heading for the exits.

After pulling about $100 million from zero-yielding money market funds in 2011, the folks with the deep pockets are heading back toward the sidelines. Institutional deposits have increased by $9 million in February — a relatively miniscule amount, to be sure, compared to a total of $1.74 trillion on hand, but a number that's been steadily rising.

Finally, corporate insiders are taking an increasingly cautious approach as well.

They've dumped $4.2 billion in stock this month, about double January's level and — here's that warning sign again — the most since May 2011 as last year's rally fizzled, according to TrimTabs.

Company stock buybacks, meanwhile, are at a healthy $2.1 billion daily level, but are mainly concentrated among a few big purchasers. The number of daily buyback announcements is at its lowest level since the October to November period of 2009. Read more

Finally, a Greek Deal: What Next for Markets?

he second Greek bailout deal was finally clinched in the early hours of Tuesday morning.

LdF | Vetta | Getty Images

European markets and the euro were initially expected to rally after the market open – but a troika report leaked to the Financial Times could exacerbate fears in the market that Greece may not be able to hit its bailout targets and drive markets down again.

“Short term you’re still in the vagaries of what politicians do day-to-day. This is still a sentiment-driven market,” Ian Harnett, European Strategist, Absolute Strategy Research, told CNBC.“The big message has got to be that the European governments want to keep the euro together and that will lead to a weaker euro.”

A weaker euro [EUR=X 1.3242 -0.0003 (-0.02%) ] could help countries in the single currency bloc in the medium term.

“The key for us is fundamental monetary policy. The exchange rate has to do the work,” Harnett said.

The euro is expected to move upwards on the news in the short term. “A break of 1.3350 in EUR/USD looks necessary to trigger the next round of stops, which could then see a move into the high 1.30s,” currency strategists at Lloyds wrote in a research note.

The lack of the opportunity for devaluation, which was used to help solve the Asian crisis of late 1990s, will limit opportunities for growth, Jonathan Tepper, Partner at Variant Perception, told CNBC.

The “internal devaluation” provided by austerity measures such as wage cuts will not provide the necessary medicine, he believes. While Latvia and Ireland have achieved some relative success using these methods, he argues that their rising emigration levels shows that they have not been entirely successful.

“The idea that somehow Greece and Portugal will be able to restore competitiveness or that the imbalances between the core and periphery will be able to solve themselves is slightly ridiculous,” he said. Read more

Forex Industry Quietly Prepares for Euro Break-Up

Before the euro's launch in January 1999, the Bank of England issued a 110-page plan — everything from settlement timetables to roadworks on the big day — to ensure a smooth introduction of the common currency in the world's largest financial center.

The plan was among quarterly reports, complete with euro-themed cartoons by the BoE's resident artist, issued by the bank from 1996 to 2002 to iron out bumps as euro zone members abandoned their old currencies.

Britain stayed out.

Fast forward to 2012 and banks and brokerages in London are quietly preparing for a more unpredictable but potentially more destabilizing event — thepossible break-up of the euro [EUR=X 1.2705 -0.0081 (-0.63%) ].

This time they do not have the luxury of such detailed and leisurely preparations as they seek to minimize the volatility and disruption to their business that could follow if a country left the euro zone or the whole bloc broke up.

Such moves would not only trigger deep economic and credit risks, the unprepared could face the nightmare of having to quote and trade euro-replacement currencies in the $4 trillion a day FX market.

Many of the industry's big FX banks, clearing houses and trading platforms say they are looking at ways to ensure their systems can quickly deal with any change in the composition in the euro, the world's most traded currency after the dollar.

Some institutions say they have been preparing for a possible break-up since mid-2010, when Greek default fears flared. Read more

'No Way' Europe Will Hold Itself Together: CIO

The European debt crisis has revealed that the euro zone is in a final phase and cannot be saved as a single entity, David Murrin, chief investment officer at Emergent Asset Management, told CNBC.

"Europe is in a terminal phase of its life. There is no way I can see a glomeration being a successful way of smaller entities into bigger entities without growth. There will be fractures. (There is) no way Europe is ever going to hold it together," Murrin said.

He added that the management of the crisis by European leaders had now become desperate.

"It's fascinating watching the European politicians desperately trying to hold the system together, which is bankrupt financially and in terms of its mechanisms for encouraging growth economies that move forward. Now they have to make pacts with each other, their desperation is very apparent," he said.

However, he said that Germany—which is in an incredibly strong position now—will never let anything lower its standard of living, but the "end phase" for Europe had already begun.

"We're right in the end phase right now. The general appreciation of these constant political meetings which produce absolutely nothing is that there is no substance behind the proposals with European leaders," Murrin said. Read more

Ten days of secret planning to rescue markets

Ten days of secret planning to rescue markets
December 02, 2011

Bank of England governor Mervyn King presents the Financial Stability Report in London December 1, 2011. — Reuters pic
LONDON, Dec 2 — Britain orchestrated this week’s bold move by central banks to stave off a cash crunch in global markets, helping drive a plan that began to take shape around 10 days ago.
For months, central bankers have tracked with growing concern how the deleveraging among European banks, hurt by the tumbling value of euro-zone debt, was hurting global funding as banks sold off assets and brought cash back home.

Indeed, some central banks had urged the Federal Reserve for some months to put in place cheaper dollar funding, but the Fed had resisted, said a source with direct knowledge of this week’s deal.

Last week, conditions grew particularly acute after a German bond auction failed to attract enough buyers. The Federal Reserve and the European Central Bank started serious discussions around the middle of last week, banking officials in Europe and the United States told Reuters.

Bank of England Governor Mervyn King said he called the meetings that led to the decision by six of the world’s major central banks to cut dollar funding rates to keep money flowing through the world’s financial arteries.

“It was the result of conversations which I initiated as chairman of what used to be known as the G10 governors, now the economic consultative committee, among a limited number of central banks,” he told a news conference in London yesterday. Read More

Moody’s Signals Possible Cut for Europe Banks

Banks in 15 European nations, including the largest lenders in France,Italy and Spain, may have their subordinated debt ratings cut by Moody’s Investors Service Inc. to reflect the potential removal of government support.

All subordinated, junior-subordinated and Tier 3 debt ratings of 87 banks in countries where the subordinated debt incorporates an assumption of government support were placed on review for downgrade, the ratings company said in a statement today. The subordinated debt may be cut on average by two levels, with the rest lowered by one grade, Moody’s said.

Lenders in Spain, Italy, Austria and France have the most ratings to be reviewed as governments in Europe face limited financial flexibility and consider reducing support to creditors, the rating company said. Moody’s has said that a “rapid escalation” of Europe’s sovereign debt crisis threatens the entire region. U.S. President Barack Obamarenewed pressure on European leaders to prevent a dismantling of the euro. More

American Airlines Parent AMR Files for Bankruptcy

AMR, the parent company of American Airlines, filed for voluntary Chapter 11 bankruptcy protection in a New York court on Tuesday.

AP

The company [AMR 1.62 0.01 (+0.62%) ]listed assets of about $24.72 billion, while it has liabilities of $29.55 billion. more

Further consolidation for KL stocks in near term

Mah Sing, MRCB, UEM Land and Dialog should see stronger buying interest on dips for medium-term gains, says a head of research.

Blue chips extended their slump for a fourth week in volatile trade as investors shunned the local stock market due to worries over further downside volatility in global markets. The lower-than-expected US third quarter GDP growth of two per cent, contraction in China factory output, disappointing German bond auction and resistance from Germany on the issuance of euro-bonds to contain the debt crisis all combined to dampen sentiment last week.

As a consequence, the blue-chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) slumped 22.85 points, or 1.57 per cent last week to 1,431.55, with about 70 per cent of the losses coming from Maybank (-30 sen), Genting Bhd (-58 sen), MISC (-65 sen) and Petronas Chemicals (-26 sen). Average daily traded volume and value declined to 1.45 billion shares and RM1.1 billion from 2.18 billion shares and RM1.45 billion in the previous week. Trading momentum on the ACE Market and in penny stocks dwindled further as they fell into correction mode.

External concerns dictated the FBM KLCI's direction last week and this trend will last. Issues stemming from Europe continue to evolve and do not show any signs of dissipating anytime soon. There are no easy solutions either with even the bigger and stronger European countries trying to walk a tight rope, worried that any wrong moves will affect them as well. Germany's failure to secure takers for all its bonds in an auction last week underscored reducing risk appetite among investors if the return from the corresponding investment does not match its risk profile. So, it is not surprising to see Germans being adamant in not wanting a joint eurobond as it is tantamount to the largest economy in Europe carrying the burden of guarantee on its shoulders.

Read more: Further consolidation for KL stocks in near term http://www.btimes.com.my/Current_News/BTIMES/articles/marketoutlooknov28/Article/index_html#ixzz1ez04Vgo2

KL stocks expected to head south

Share prices on Bursa Malaysia are expected to be lower next week with the market barometer, FTSE Bursa Malaysia KLCI (FBM KLCI), likely to hover around the 1,400-level due to deteriorating outlook in global markets.

Affin Investment Bank head of retail research, Dr Nazri Khan, said more downside risk remained in view of the lack of confidence in the market on fears of the impact from the escalating debt crisis in Europe.

"More investors are unlocking European assets because they expect tough capital requirement for European business with rising funding cost," he said.

He said the local bourse now was oversold and counters looked cheap.

"However, there is no short-term profit. People are looking for markets to calm down and for the debt crisis in Europe to end. However, this will take time," he said.

Nazri said currently, there were no new leads to boost the local market and external factors would still dominate sentiment.

During the week just-ended, the local bourse was mostly lower reflecting weaknesses in regional markets dominated by fears of escalating debt crisis in Europe and the still fragile US economy.


Read more: KL stocks expected to head south http://www.btimes.com.my/Current_News/BTIMES/articles/20111126112036/Article/index_html#ixzz1emwlWioZ

Moody's Warns On French Rating Outlook

A rise in interest rates on French government debt and weaker growth prospects could be negative for the outlook on France's credit rating, Moody's warned in a report on Monday, adding to pressure on European debt markets.

Zap Art | The Image Bank | Getty Images

Worries that France has the weakest economic fundamentals among the euro's six AAA-rated countries have drawn the euro zone's second largest economy into the firing line in the debt crisis this month.

The rating agency said the deteriorating market climate was a threat to the country's credit outlook, though not at this stage to its actual rating.

"Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications," Senior Credit Officer Alexander Kockerbeck said in Moody's Weekly Credit Outlook dated Nov.21.

"As we noted in recent publications, the deterioration in debt metrics and the potential for further liabilities to emerge are exerting pressure on France's creditworthiness and the stable outlook (though not at this stage the level) of the government's Aaa debt rating," the Moody's note read.

The yield differential between French and German 10-year government bonds rose above 200 basis points last week, a new euro-era high. Read more

Euro Zone Strikes Deal on 2nd Greek Package, EFSF

Euro zone leaders struck a deal with private banks and insurers on Thursday for them to accept a 50 percent loss on holdings of Greek government bonds as part of a plan to lower Greece's debt burden and try to contain the two-year-old euro zone crisis.

M. Lorden | Taxi | Getty Images

In an agreement reached after more than eight hours of sometimes harsh negotiations, the private sector said it would voluntarily accept a nominal 50 percent cut in its investments to reduce Greece's debt burden by 100 billion euros, cutting its debts to 120 percent of GDP by 2020, from 160 percent now.

At the same time, the euro zone will offer "credit enhancements" or sweeteners to the private sector totaling 30 billion euros. The aim is to complete negotiations on the package by the end of the year, so that Greece has a full, second financial aid program in place before 2012.

The value of that package, EU sources said, would be 130 billion euros — up from 109 billion euros when a deal was last struck in July, an agreement that subsequently unraveled.

"The summit allowed us to adopt the components of a global response, of an ambitious response, of a credible response to the crisis that is sweeping across the euro zone," French President Nicolas Sarkozy told reporters afterwards. Read more

Asian Stocks Decline as Spain Downgrade Deepens Global Recovery Doubts

Asian stocks fell, ending a six-day winning streak for a regional benchmark index, after Standard & Poor’s cut Spain’s credit rating, fueling concern Europe’s debt crisis will continue to weigh on Asian economies and corporate earnings.

The MSCI Asia Pacific Index dropped 0.3 percent to 117.38 as of 9:09 a.m. in Tokyo, snapping a 9.7 percent advance over the previous six days. The gauge climbed four days this week after German Chancellor Angela Merkel and French President Nicolas Sarkozy pledged at the weekend to deliver a plan to recapitalize banks and address Greece’s debt crisis. Read more

Spain Credit Rating Downgraded One Notch by S&P

Ratings agency Standard and Poor's downgraded the long-term credit rating of Spain by one notch to "AA-" from "AA" with a negative outlook, due to weak growth, tightening fiscal conditions and high private sector debt.

Grant Faint | The Image Bank | Getty Image

"Despite signs of resilience in economic performance during 2011, we see heightened risks to Spain's growth prospects due to high unemployment, tighter financial conditions, the still high level of private sector debt, and the likely economic slowdown in Spain's main trading partners," S&P said in a statement.

It added it expected continuing deterioration in financial system asset quality while the incomplete state of labor-market reform will contribute to structurally high unemployment that will be drag on economic recovery.

US Facing 'Dangerous' Threat From Euro Debt: Greenspan

The U.S. economy and stock market face severe consequences from the European financial crisis, which will not resolve itself without major debt restructuring, former Federal Reserve Chairman Alan Greenspan said.

CNBC

"I think it's very dangerous," Greenspan said in a CNBC interview. "Everyone's got their fingers crossed."

As global policy makers struggle to find a solution to the daunting problems Greece and other nations face with sovereign debt , the primary debate in the U.S. is how much contagion there will be for the domestic economy.

For Greenspan, there is no question: The threat from Europe is real and it is substantial.

While U.S. banks don't have a comparatively high level of exposure to the sovereign debt itself, he said the domestic financial system is nevertheless reliant on the stability of its European counterparts.

The stock market, meanwhile, has been heavily influenced on the daily news reports coming out of Europe and the plethora of proposed solutions that emerge. Read more

Moody's slashes Italy credit rating

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

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

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

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

Greek Default 'Inevitable': Former Government Minister

As strikes threatened to bring struggling Greece to a standstill Wednesday, pessimism about the future of the euro zone--in its current form, at least--continued to plague the Continent.

Mike Kemp | Getty Images

Speculation that the Mediterranean country would have to default on its debt repayments has grown in recent days, after the government there announced that it will not meet deficit reduction targets for 2011.

If Greece were to default, it would hit the balance sheets of many European banks, and potentially even lead to the end of the euro[EUR=X 1.3304 -0.0043 (-0.32%) ] itself.

Petros Doukas, a former Greek deputy finance minister, told CNBC Wednesday that default is "inevitable" and called for an "organized" and "orderly" haircut on the debt to try and stop a run on the banks in the event of a default.

"The capacity of the Greek people to pay taxes is really at the limit," he said. "People like me are paying taxes out of their savings and by selling off assets, not by generating new income."

Greece needs to reduce its deficits and start selling off state-backed assets in order to meet the terms of a second bailout by the International Monetary Fund (IMF) and the European Central Bank, agreed upon in July. However, the Greek protestors are chafing at government-imposed austerity measures. Read more

Global Stocks in Bear Market, And US Is Probably Next

Global stocks officially entered a bear market this week as the benchmarkMSCI World Index fell more than 20 percent from its most recent high in May. Investors say the U.S. is next.

Darrell Gulin | Stone | Getty Images

The selloff—which pushed markets from China to Portugal into bear territory—came as fears of a Greek default escalated and economic data around the globe hinted at a worldwide recession.

“You can make an easy argument that theDow Jones Industrial Average [.DJIA 10771.48 37.65 (+0.35%) ] will play catch up by 10 percent to other developed nations,” said Dan Nathan, an options and equities trader who runs Riskreversal.com. “Sixteen of the Dow 30 get more than 25 percent of their revenues from Europe. Something has to give because if 2008 taught us anything, it is that developed economies do not de-couple.”

The Dow hit its bull market high on April 29, closing at 12,810.54. The benchmark Friday is about 17 percent off from that high after its worst week in almost two years. Read more