Monday, October 31, 2011

Lower markets on increased European debt worries

Dow sank 276 (finishing at its lows), decliners ahead of advancers 4-1 & NAZ fell 52.  Banks led the markets lower with the Financial Index falling 7+ to the 181s.  However it still had gain of 30 in Oct.

The MLP & REIT indices fell 1+, but each had an outstanding month.  Junk bond funds slipped fractionally & also had an excellent month while Treasuries rallied today with falling stock prices.  Oil dropped as the dollar climbed & equities fell, trimming the biggest monthly gain in more than 2 years.  Gold fell today & ended with a rather drab month, hanging in above $1700.



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CLZ11.NYM...Crude Oil Dec 11...93.12 ...Down 0.20  (0.2%)

Live 24 hours gold chart [Kitco Inc.]

European govs are running into initial resistance as they seek to use this week’s Group of 20 summit to turn early praise for their revamped crisis- fighting strategy into financial support.  Talk & action are different.  The G-20 leaders convene Nov 3, a week after euro-area authorities pledged to magnify the capacity of their rescue fund to €1T ($1.4T) & look beyond their borders for help in doing to combat the debt turmoil posing the biggest threat to global growth.  While the help of China & cooperation of the IMF were immediately sought, pledges of hard cash are proving hard to come by.  In an indication Europe may eventually prevail, Brazilian & Russian officials said their govs may be willing to provide assistance.  The talks will cast the G-20 into another round of crisis resolution 3 years after its leaders first gathered to address fallout from the failure of Lehman Brothers.  In a bid to revive that collective spirit, European Commission President Barroso & European Council President Van Rompuy wrote to G-20 govs to stress “a continued need for joint action by all G-20 partners in a spirit of common responsibility and common purpose.”  They will work on results which may be a long way off.

EU seeking cash faces resistance before G-20 Bloomberg

Thai ‘Credibility’ at Stake as Factories Soak in Flood Plain

Photo:   Bloomberg

Thousands of Thai companies with factories have been swamped by record floods.  They are calling on the gov to help ensure it never happens again as waters slowly recede north of Bangkok.  More than 9B cubic meters of water released this month from dams filled to capacity have swept down a river basin the size of Florida, inundating 7 industrial parks that helped transform Thailand from an agriculture-based economy to a manufacturing hub since the first one was built 4 decades ago.  The worst floods since 1942 have shuttered 10K factories, put 660K jobs at risk & caused damage of 140B baht ($4.6B), according to gov figures.  Factory owners are concerned the disaster may repeat itself as water defenses fail to keep pace with the development of roads, housing estates & business complexes in Bangkok & its vicinity, which accounts for about half of Thailand's industrial output.  Flooding affects electronics parts (such as disk drives) used in computers & auto parts, especially for major Japanese companies.  The flooding is not getting enough attention, but could affect many companies around the world.

Thailand’s ‘Credibility’ At Stake as Foreign Firms Demand Flood Protection

 Loews Q3 net income more than quadrupled, but the results missed expectations as investment income fell & catastrophe losses increased.  Loews, CNA Financial (CNA) & Diamond Offshore Drilling (DO), EPS was 40¢, ahead of 9¢ last year but below 66¢ forecast.  Adjusted to exclude one-time items in both periods, net income was higher in Q3 last year than this year.  The decline was attributed to lower investment income & bigger natural catastrophe losses at CNA.  Revenue fell 7% to $3.44B.  Insurance premium revenue rose 5% to $1.7B from $1.65B.  Net investment income dropped 49% to $333M from $654M & investment losses were  $27M compared with a $62M in investment gains last year.  The stock fell 1.58 (4%).

Loews 3Q net income jumps, adjusted results fall AP

Loews Corporation (L)

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Even with today's decline, Dow managed a 10% gain, or 1.1K, in Oct, hardly chump change.  This qualifies as one of its best months ever.  But selling at the close is not what the bulls want to see.  In addition, adjustments by fund managers to square their books at the end of the month, make it difficult to understand what really happened in the markets.  Confidence is high on European leaders using magic to fix the European debt mess.  This week, the G-20 meeting will show how much resolve lies behind their words.  The VIX, volatility index, shot up 4+ to almost 29, remaining elevated going into the new month.   Nervousness is riding high after an excellent month for the markets.

Dow Industrials (INDU)

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