* The Labor Department releases import-export prices for
September. Economists predicted a 0.3 percent drop in import
prices and a 0.2 percent increase in export prices. In August,
import prices fell 0.4 percent and export prices were up 0.5
percent.* Top toymaker Mattel reports results for the third
quarter. Investors will look for signs of its ability to sustain
margins in the face of high product and labor costs, and its
view of sales in the holiday season.* At 1355 GMT, Thomson Michigan
Surveys of Consumers release preliminary October consumer
sentiment index. Economists expected a reading of 60.2, compared
with 59.4 in the final September report.* Beverage and snack food maker PepsiCo is close to
setting up a joint venture with German dairy company Theo Muller
Group in an effort to break into the fast-growing yogurt
business, the Wall Street Journal reported, citing people
briefed on the matter.* The Commerce Department issues at 1400 GMT Business
Inventories for August. Economists in a Reuters survey expected
a rise of 0.4 percent, a repeat of the July increase.* Apple’s latest iPhone went on sale on Friday.* At 1430 GMT, Economic Cycle Research Institute releases
its weekly index of economic activity for Oct. 7. In the prior
week the index read 121.2.* Google’s results trounced Wall Street
expectations with the help of strong advertising sales and deft
cost controls, driving its shares roughly 6 percent higher on
Thursday.* The euro zone debt crisis will dominate a summit of G20
finance chiefs and central bank heads in Paris, with a downgrade
of Spain’s credit rating highlighting the risk of a much larger
economy than Greece coming under threat.* Standard and Poor’s cut Spain’s credit rating on Friday,
sending the euro lower and underlining the challenges facing
Europe’s big powers as they prepare to meet G20 counterparts
over the euro-zone debt crisis.* China’s consumer inflation dipped to 6.1 percent in
September, retreating further from three-year highs, although
stubborn food price pressures will deter the central bank from
loosening its policy reins anytime soon.* Fitch downgraded Swiss bank UBS on Thursday and
said it was also reviewing ratings for Barclays , BNP
Paribas , Credit Suisse Group AG , Deutsche
Bank , Societe Generale , Bank of America
Corp , Morgan Stanley and Goldman Sachs .* European shares rose on Friday morning after Google’s
results helped ease worries about the growth outlook for
technology companies. The pan-European FTSEurofirst 300
index of top shares was up 0.6 percent.* The Dow and S&P 500 slipped on Thursday after JPMorgan’s
earnings and China’s soft trade data revived worries about the
impact of slower growth on profits.* The Dow Jones industrial average fell 40.72 points,
or 0.4 percent, to end at 11,478.13. The Standard & Poor’s 500
Index shed 3.59 points, or 0.3 percent, to 1,203.66. But
the Nasdaq Composite Index gained 15.51 points, or 0.0
percent, to close at 2,620.24.
For many investment funds and money money managers, the fate of 2011 is now truly binary. The confluence of two key events â the Oct 23 EU summit in Brussels and G20 summit in Cannes on Nov 3-4 â will now define the rest of the financial year worldwide.
If â as now seems possible â the European Union, backed by their G20 allies, finally unveil a package of credible measures to stabilise the euro zone sovereign debt and banking crisis, then there could be a whopping year-end rally in global equities, emerging markets high yield debt and even commodities. A policy accident and credit-fueled disaster will have been averted and the looming threat of double-dip global recession or even years of depression may recede again to allow businesses and households breathe again.
Of course, itâs entirely possible the summits fail to deliver amid ever more national and ideological posturing and wrangling and the drawing of phony âred linesâ. At which point, money will go to ground again and markets could easily tank ahead of Christmas to mark a bleak mid-winter of doom and gloom, further sharp rises in unemployment and business retrenchment.
So far in the infant Q4, the tilt has been more hopeful. Just as the market mood hit its darkest all year, the Sarkozy-Merkel/Franco-German alliance appeared to wise up and admit a need to bite the bullet. This triggered significant market rallies everywhere. World stocks bounced up to 10 percent and European bank stocks alone snapped back 15%. DexiaÂs near collapse may have been the final straw to convince Germany to go the extra mile and France to acknowledge German grievances for the sake of a Sarkozy-led G20 deal. With French Presidential elections next year and France currently chairing G20, Sarkozy may want his own Gordon Brown Âsave the world moment from April 2009 (although it didnât do GB much good at 2010 UK general election).
But, for investors, the parallels with the London G20 summit of April 2009 are obvious. Stock markets began recovering amonth earlier  in March of that year on signs of a significant series of global financial agreements on bank support, coordinated fiscal stimuli and IMF recapitalisation to underwrite early signs of a recovery in business activity that Spring. That stock market recovery, goosed by a series of money printing from the US and UK, lasted for two years.
For some funds, markets are currently just priced for Âmuddle through on the policy front, with all the attendant volatility, Âevent risks and double-dip risks. Like in 2009, valuations look relatively cheap barring full-scale systemic shocks. Therefore, most now reckon an EU/G20 deal involving a credibly deep Greek haircut of circa 50-60%, an adequate European bank recapitalisation facility via the EFSF/EBA etc and the prospect of ringfencing the rest of the euro zone with a medium-term joint euro bond plan could unleash signifcant buying over the six weeks to Christmas. Itâs been a tough year for funds. Neither traditional institutional funds nor more nimble hedge funds have done terribly well and rally of 6 percent or less in world equity, junk bonds and commodities by January would take those indices out of the red for year.  Â
And, just like 2009, if youâre looking for some underlying tailwind from the economy, then U.S. and European numbers continue to defy disastrous signals from business and household surveys. For example, a big 1.4% jump in euro zone industrial production in August (which marked the heart of the current wave of the crisis) stands in stark contrast to manufacturing PMI for the same month pointing to contracting activity. And that production surge was led by Italy, Portugal and Ireland. Also, for those who still look at shipping prices for a lead on trade activity, the Baltic Freight index (which dropped by two thirds at the end of last year) has surged about 70 percent since early August. ThatÂs clearly not pricing for a Chinese hard landing or global trade collapse.
So, next week is sandwiched between the Paris G20 finance ministers gathering this weekend and euro zone finmins next Friday before the big EU summit the following Sunday. And all this will be against the backdrop of a deluge of US Q3 earnings (Apple, Intel,  IBM, Microsoft, GE, Honeywell, Citi, Goldman Sachs, Bank of America Merrill Lynch, Morgan Stanley etc)  giving markets a reality check on how the mega multinational companies have been performing through all the macro policy hullabaloo. Chinese Q3 GDP and Sept production data Tuesday will also be critical for those fretting about the risk of a hard landings there. UK inflation data, BoE minutes and a set-piece Mervyn King speech will hold a mirror to the recent decision on QE2 in Britain. A major Bernanke speech, German and US business sentiment, Brazil and Turkey rate decisions complete the picture.
Kudrin was ordered by Medvedev to resign last month after
refusing to serve in a government that Medvedev is expected to
head under a job swap in the ruling ‘tandem’ that is set to
return Putin to the presidency next year.Shuvalov, who as first deputy prime minister has a broad
economic remit and oversees Russia’s talks on joining the World
Trade Organisation, has already taken over the responsibilities
held by Kudrin as deputy prime minister.Kudrin, who earned a strong reputation on financial markets
for defending fiscal discipline during his 11-year tenure, had
objected to Medvedev’s calls to boost defence spending, saying
they posed a risk to the stability of public finances.Putin said last week, however, that Kudrin “remains a part
of my team”, a hint he might hire him for an influential Kremlin
job after his expected return to the presidency. Some analysts
have speculated he could become central bank chief.
* Ukraine politics worries investorsBy Carolyn CohnLONDON, Oct 12 (Reuters) - Emerging stocks hit three-week
highs for a second successive day on Wednesday and sovereign
debt spreads tightened, helped by a jump in Chinese stocks and a
more positive outlook on the euro zone debt crisis.Markets have been in thrall to each step in the euro zone’s
attempts to resolve its debt woes, and recent optimism has taken
riskier emerging assets higher.Slovakia’s parliament brought down the government on Tuesday
by rejecting a plan to expand the euro zone’s rescue fund, but
the outgoing government said it hoped to pass the measure by the
end of the week with opposition support.The next focus is the release of the European Union’s bank
recapitalisation plan, due later on Wednesday.Chinese shares got a large boost, taking the emerging equity
index higher, on talk of sovereign wealth fund support for the
banking sector.The positive mood is also feeding into emerging European
currencies.”The market had positioned itself for much more emerging
market FX weakness on anticipation that real money accounts
would begin to unwind long currency bondholdings on the fear
factor,” said Roderick Ngotho, CEEMEA FX strategist at RBS.”Our expectation is that some of these hedges will come off.
That’s a technical correction which has potential to have some
legs. All the currencies seem to be getting some upside.”The MSCI emerging equities index rose more than 1
percent to a three-week high and has staged a comeback of over
11 percent since Oct 4.Chinese stocks jumped 3 percent from 2-1/2 year
lows, helped after Central Huijin, the domestic investment arm
of the country’s sovereign wealth fund, upped its stakes in the
“Big Four” Chinese banks on Monday.The Thomson Reuters emerging Europe index
gained 1.5 percent and emerging sovereign debt spreads
tightened by 12 basis points to 371 bps over U.S. Treasuries,
their narrowest since Sept 21.Hungarian stocks rose almost 2 percent to their
highest in over a month, Russian stocks gained more than
3 percent to 12-day highs and Turkish stocks hit
eight-day highs.Most emerging European currencies were also firmer, with the
rouble rising more than 1 percent to three-week highs
against the dollar as Brent crude futures hurdled $111 a
barrel, above the $108 level factored into Russia’s 2008 budget.
The rand also gained more than 1 percent to two-week
highs.In a reminder of the stark mood of the previous three
months, however, an HSBC index showed emerging economies grew at
their slowest pace in more than two years in the July-September
quarter, as manufacturing output turned negative after expanding
for nine straight quarters.The Kenyan shilling snapped a two-day slide to record
lows as tea exporters sold large quantities of dollars. The
central bank also said it was in the repo market to mop up 10
billion shillings ($94.21 million).African frontier currencies have been sliding on domestic
demand for dollars amid global risk aversion and rising food and
fuel prices, but the Nigerian naira was also being
supported on Wednesday by a 275 bp interest rate hike this week.UKRAINE POLITICSThe cost of insuring Ukraine’s debt in the five-year credit
default swap market was at elevated levels of 970 bps, close to
Feb 2010 highs, according to Markit.The United States, Russia and the EU reacted sharply to the
Ukrainian court sentencing on Tuesday of former prime minister
Yulia Tymoshenko to seven years in prison for abuse of office in
relation to a 2009 gas deal with Russia that she brokered.”We do not expect this to disbalance power in Ukraine by a
large margin,” BNP Paribas analysts wrote in a client note.”Nonetheless, the increased tensions do not bode well for
Ukraine in the short term in light of its existing shortfalls
with regards to the IMF programme.”Ukraine was due to receive about $6 billion from the IMF
this year to boost central bank reserves, but the Fund halted
disbursements after the government delayed unpopular reforms
such as raising household gas prices.An IMF mission is due to visit Kiev later this month.
