NEWS,30.09.2012

Wall Street: Spain, central bankers, US jobs

Wall Street will open October with a busy week, highlighted by low expectations for global manufacturing data and the US jobs report. Any positive surprises may help lift the market.Spain is the wild card. And if it's played well, then the bulls might dance.The S&P 500 finished its third positive quarter in the last four on Friday, despite suffering its largest weekly percentage decline since June. For the past three months, the S&P 500 gained 5.9% - its best third quarter since 2010. In contrast, the index was down 1.3% for the week.The benchmark S&P 500 earlier this month reached its highest level since late 2007. Yet uncertainty remains over whether stocks can hold their gains against the headwinds of a struggling economy. That explains, in part, the retreat over the last several days.The S&P 500 hit a high of 1474.51 in mid-September before pulling back by a bit more than 2%. A run at 1500 seems possible, but the flurry of economic and world events ahead probably will prevent a major advance in the coming week.Bulls are betting that last week's Spanish budget proposals will be a preamble to a bailout request by Mariano Rajoy's government. The move would be seen as a first step to get the finances of the euro zone's fourth-largest economy in order and would clear some of the market uncertainty regarding the euro zone crisis.Monetary policy is also on the list of market catalysts this week. Federal Reserve Chairman Ben Bernanke is scheduled to speak today and the minutes of the latest FOMC meeting are set for release on Thursday. The week's agenda includes meetings of the European Central Bank, the Bank of England and the Bank of Japan.Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin, said he believes "we could see a rebound" this week "if we get some of the stars aligning and have Spain ask for a bailout, the ECB announcing favourable terms for that bailout, and if we see the Bank of Japan announce further monetary intervention."If Spain and the ECB don't deliver, we could set ourselves up for a further lateral move in the markets," Jacobsen added. "A negative would be if Rajoy flat-out denies that they need a bailout."The ECB and BOJ are set to meet on Thursday, with the Bank of Japan's meeting extending until Friday.Factories, jobs and the US election Chinese factory and business conditions data will kick off a numbers-heavy calendar for markets. Manufacturing PMI, due on Monday, is expected to show a second straight month of contraction.A snapshot of US manufacturing activity will be provided today when the Institute for Supply Management releases its September index. The September ISM reading is expected to show another month of contraction, but at a slightly slower pace than in August. On Wednesday, the ISM will release its US services-sector Purchasing Managers' Index, which could show a slight deceleration in the pace of growth in the non-manufacturing sector."We have Chinese economic data over the weekend, and we'll see how markets react on Monday," said Wasif Latif, vice president of equity investments at San Antonio, Texas-based USAA Investment Management."It seems like the market is bracing for bad numbers, meaning if they're not as bad, it could be market-positive," Latif said.Non-farm payrolls for September, due on Friday, are forecast to gain 115,000, while the US unemployment rate is seen ticking up 0.1% from August to 8.2% in September.The jobs data will come on the heels of the first of three US presidential debates, scheduled for Wednesday night.With just one month to go before election day on November 6, Wall Street will watch the economic data more closely than it usually does. In a year when the incumbent president is campaigning for a second term, the country's economic numbers tend to become more positive as election day approaches.The US stock market also tends to gain in years when incumbents are re-elected, according to the Stock Trader's Almanac.For the year, the Dow Jones industrial average is up 10%, while the Standard & Poor's 500 Index is up 14.6% and the Nasdaq Composite Index is up 19.6%.Recent poll numbers point to a strengthening lead by President Barack Obama, but a weak payrolls reading could give some hope to Republican challenger Mitt Romney."If Romney doesn't turn the ship with a very strong (debate) performance, the president is going to win," said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.He said the trend in the polls has taken away some of the market uncertainty regarding the presidential election. He added that an ECB- or Spain-related headline out of Europe on Thursday could overcome almost anything that would happen Wednesday night during the debate."I think the market is coming to terms with the fact the president is ahead, and unless something significant changes, (he) will prevail.

France's Hollande faces protests over EU fiscal pact

Thousands have marched through Paris to protest against a European fiscal pact, the first major display of public anger to face President Francois Hollande since his May election.The march organised by the Left Front coalition drew trade unionists, far-left sympathisers and other opponents of the EU accord, two days before lawmakers start to debate a draft law of the budget pact in the lower house of parliament.The budget discipline pact, which Hollande supports, is expected to pass in both houses of parliament thanks to support from Socialist lawmakers helped by advocates of fiscal discipline in the centre-right opposition.But the vote has exposed rifts in Hollande's ruling coalition, with far-left allies and Greens planning to vote against it in a challenge to the increasingly unpopular Socialist leader's authority.If Hollande has to rely on opponents to pass the pact, the vote could deepen the rift in his alliance and embolden left-wing allies seeking a change of course from strict adherence to European deficit targets."To him (Hollande), this vote was a formality that simply needed to be rushed through," said Jean-Luc Melenchon, a fiery leftist orator who ranked fourth in an April presidential vote."Now he will understand this is not the case, that in France and in the rest of Europe there is an organised opposition to this pact and to all austerity policies."Wearing his signature red scarf, Melenchon marched at the head of protesters among giant banners bearing slogans such as "Francois Hollande, We Don't Want Your Treaty" and "In Greece and in France, Let's Fight Against Finance".It was the latest in a series of protests across southern Europe this week as tens of thousands took to streets in Spain, Italy, Greece and Portugal to voice their anger over hardship imposed by austerity policies.For Hollande, the outcry from many people who voted him into power highlights the difficulty of pleasing a largely left-wing support base even as he shuns painful cuts to welfare programmes.A 2013 budget unveiled on Friday shaves 30 billion euros off the public deficit, largely through tax increases on big businesses and the wealthy. But it avoids the type of painful austerity measures imposed elsewhere in Europe.Efforts to preserve the generous public safety net have done little to preserve Hollande's approval rating, which has plummeted since his election, hitting a low of 43 percent in one poll last week."This treaty will considerably worsen the situation in the European Union and in France," said one protester, Pierre Khalfa. "We can already see that austerity policies in Europe are leading to recession, so we need to start a movement against these policies, which will lead our country into a wall."Left Front organisers said some 40,000 people joined the Paris protest. Police declined to provide an estimate.

Economic protests in Spain, Portugal

Tens of thousands of Spaniards and Portuguese rallied in the streets of their countries' capitals on Saturday to protest enduring deep economic pain from austerity measure, and the demonstration in Madrid turned violent after Spaniards enraged over a long-lasting recession and sky-high unemployment clashed with riot police for the third time in less than a week near Parliament.The latest violence came after thousands of Spaniards who had marched close to the Parliament building in downtown Madrid protested peacefully for hours. Police with batons later moved in just before midnight to clear out those who remained late because no permission had been obtained from authorities to hold the demonstration.Some protesters responded by throwing bottles and rocks. An Associated Press photographer saw police severely beat one protester who was taken away in an ambulance.Spain's state TV said early on Sunday that two people were hurt and 12 detained near the barricades erected in downtown Madrid to shield the Parliament building. Television images showed police charging protesters and hitting them with their batons, but the violence did not appear as severe as a protest on Tuesday when 38 people were arrested and 64 injured.Earlier, the boisterous crowds let off ear-splitting whistles and yelled "Fire them, fire them!" referring to the conservative government of Prime Minister Mariano Rajoy, and venting their anger against tax hikes, government spending cuts and the highest unemployment rate among the 17 nations that use the euro currency.Freezing salariesOn Friday, Rajoy's administration presented a 2013 draft budget that will cut overall spending by $51.7bn, freezing the salaries of public workers, cutting spending for unemployment benefits and even reducing spending for Spain's royal family next year by 4%.Pablo Rodriguez, a 24-year-old student doing a master's in agricultural development in Denmark, said the austerity measures and bad economy mean most of his friends in Spain are unemployed or doing work they didn't train for.He doubts he will put his education to use in Spain until he is 35 or 40, if ever, will probably get job abroad and stay."I would love to work here, but there is nothing for me here," Rodriguez said. "By the time the economy improves it will be too late. I will be settled somewhere else with a family. One of the disasters in Spain is they spent so much to educate me and so many others and they will lose us."Madrid authorities put the number of protesters at 4 500 though demonstrators said the crowd was larger. In neighbouring Portugal, tens of thousands took to the streets of Lisbon on Saturday afternoon to peacefully protest against even deeper austerity cutbacks than Spain has imposed.Retired banker Antonio Trinidade said the budget cuts Portugal is locked into in return for the nation's $101bn bailout are making the country's economy the worst he has seen in his lifetime. His pension has been cut, and he said countless young Portuguese are increasingly heading abroad because they can't make a living at home.Robbing the people"The government and the troika controlling what we do because of the bailout just want to cut more and more and rob from us," Trinidade said, referring to the troika of creditors -the European Commission, the European Central Bank and the International Monetary Fund. "The young don't have any future, and the country is on the edge of an abyss. I'm getting toward the end of my life, but these people in their 20s or 30s don't have jobs, or a future."In Spain, Rajoy has an absolute majority and has pushed through waves of austerity measures over the last nine months - trying to prevent Spain from being forced into the same kind of bailouts taken by Portugal, Ireland and Greece. But the country has an unemployment rate of nearly 25%, and the jobless rate is more than 50% for those under age 25.Investors worried about Spain's economic viability have forced up the interest rate they are willing to pay to buy Spanish bonds.Finance Minister Cristobal Montoro said on Saturday that the budget cuts for next year were necessary to ease market tensions and try to bring down high interest rates Spain must pay to get investors to buy its bonds.