Asian Markets Drop on Open With Commodities and Banks Leading the Way

Were due for a small pull back no?

April 7 (Bloomberg) — Asian stocks fell for the first time in five days, led by mining and bank shares, on lower commodity prices and concern loan losses will swell at financial companies.

Rio Tinto Group, the world’s third-largest mining company, slumped 9.2 percent in Sydney on speculation of a share sale. Mizuho Financial Group Inc., which invested $1.2 billion in Merrill Lynch & Co., sank 2 percent, after Mike Mayo, an analyst at Calyon Securities, said U.S. banks’ loan losses may exceed Great Depression levels. Telstra Corp., Australia’s largest phone company, rose 2.2 percent on a government plan to build a high-speed Internet network.

The MSCI Asia Pacific Index lost 0.3 percent to 86.83 at 9:09 a.m. in Tokyo, following a four-day, 7.6 percent advance that took valuations to the highest since Nov. 30, 2007. Through yesterday, the gauge surged 23 percent from a more than five- year low reached on March 9, amid speculation governments worldwide will succeed in efforts to revive growth.

“The rally got a bit ahead of itself,” said Hugh Dive, who helps manage about $3 billion a Investors Mutual Ltd. in Sydney. “When you ask companies if they can see any light at the end of the tunnel, the answer is still no.”

Japan’s Nikkei 225 Stock Average slipped 0.6 percent to 8,805.64. Australia’s S&P/ASX 200 Index fell 1.2 percent. All markets open for trading declined.

Futures on the Standard & Poor’s 500 Index dropped 0.1 percent. The gauge slid 0.8 percent yesterday, led by financial companies. Mayo recommended selling U.S. bank shares, saying that government actions “might not help as much as expected.”

Rio Tinto Group, the world’s third-largest mining company, tumbled 9.2 percent to A$53.67, extending yesterday’s 2.2 percent drop. The company has made plans for an $8 billion share sale in case its accord for an investment in Aluminum Corp. of China falls through, the Sunday Times reported this week without citing anyone.

Rising Valuation

BHP Billiton Ltd., the world’s biggest mining company, slumped 3.2 percent to A$32.90. Crude oil for May delivery dropped 2.8 percent to settle at $51.05 a barrel in New York yesterday, while copper slumped 2.1 percent for the first drop in five days. Gold slid 2.7 percent.

The stock rally in the past month had lifted the average valuation of companies on the MSCI Asia Pacific Index yesterday to 18 times reported profit, the highest since Nov. 30, 2007, data compiled by Bloomberg show.

Finance stocks, which accounted for 36 percent of the drop today, are the worst performers of 10 industry groups on the MSCI Asia Pacific Index in the past year as losses from the credit crisis swelled to $1.29 trillion.

Mizuho dropped 2 percent to 200 yen. National Australia Bank Ltd. fell 2.6 percent to A$22.99.

Telstra rose 2.2 percent to A$3.28 after the Australian government said it will join with private partners to spend A$43 billion ($30.5 billion) over the next 8 years to build a high- speed Internet network.

Mr Doom & Gloom is looking up

April 7 (Bloomberg) — Global stocks may drop as much as 10 percent in a “correction” following gains in the last four weeks, before rebounding after July, investor Marc Faber said.

The Standard & Poor’s 500 Index may decline to around 750 before further gains in July, Faber, 63, said in a Bloomberg Television interview in Singapore. That’s a drop of 10 percent from yesterday’s close. Stocks in the U.S. and other global markets are unlikely to fall below their October and November lows, he added.

“After the rally since March 6, we need some kind of correction, maybe around 5 to 10 percent, and after that we can maybe rally more into July,” said Faber, the publisher of the Gloom, Boom & Doom report. “The economic news, while it won’t be good, the rate of getting worse will slow down.”

Faber on March 9 advised investors to buy U.S. stocks, saying government actions will boost equities. The S&P 500 has since rallied 25 percent from a 12-year low through last week, the steepest rally since 1938, as rising home sales and durable- goods orders signal a bottoming in the U.S. economy. Gains may be halted by unemployment, consumer debt and concern banks will be forced to write down more loans.

Faber told investors to abandon U.S. stocks a week before 1987’s so-called Black Monday crash and said in August 2007 that U.S. shares were entering a bear market. The S&P 500 peaked at 1,565.15 in October of that year before retreating as much as 57 percent.

Commodities, Banks

Faber said he had bought some commodity producers in November and is now less favorable on these companies with some stocks more than doubling. He has also bought some bank stocks and predicted that Citigroup Inc. shares could “easily rebound” to around $5 a share from $2.72 currently.

“The rebound potential for financials is quite high,” Faber said.

In Asia, stocks offer “much better value” than U.S. shares, and investors should seize the opportunity to buy the region’s equities on “every setback,” he added.

“If you buy Asian equities in the next three months, over the next five to 10 years, for sure you will make money,” Faber said.

Faber is less favorable on bonds, saying they are entering a “long-term bear market” that can last for the next 15 years to 20 years.

Also CRD #’s will be collected on extensions

WASHINGTON (Reuters) – U.S. securities regulators will consider about 4 proposals to restrict short selling, a type of investing blamed for accelerating the severe downturn in financial services stocks.

Proposals the SEC will consider at its Wednesday meeting include the restoration of the “uptick rule,” which allowed short sales — a bet that a stock’s price will fall — only when the last sale price was higher than the previous price, the chief of the Securities and Exchange Commission said on Monday.

“We are going to put forward about four different proposals, and one of them does include the original (uptick rule),” SEC Chairwoman Mary Schapiro told reporters on the sidelines of the Council of Institutional Investors conference. “There are different modified versions because the markets have changed a lot, even since 2007.”

Schapiro said other proposals on the table include a so-called “bid test” and a “circuit breaker.”

Schapiro did not provide details on how the bid test or circuit breaker could work and did not elaborate on the fourth proposal.

One source familiar with the matter said the SEC bid test proposal would only allow shorting at a price above the highest available bid. The source wished to remain anonymous because the proposals are still being drafted.

The proposal for the updated version of the uptick rule would apply to all stocks, said the source who wished to remain anonymous because the proposals are still being drafted.

The SEC also is crafting two circuit breaker proposals: One would temporarily halt short sales of a stock if the stock has already fallen by a certain percentage, the source said.

The other would trigger the application of an uptick rule or bid test after the price of a stock experienced a decline by a certain percentage, such as 10 percent, the source said. This version of the circuit breaker is similar to a suggestion put forth by the operators of the top U.S. exchanges, the New York Stock Exchange, the Nasdaq Stock Market and BATS exchange.

SEC staff are still drafting proposals, the source and a second source familiar with the proposal said. The second source cautioned that the current draft could go through several more adjustments before Wednesday’s meeting.

In a short sale, an investor borrows stock and sells it in the hope that its price will fall. If the price does drop, the seller profits by buying the stock back at the lower price and returning the borrowed shares.

In 2007 the SEC abolished the uptick rule after studies concluded that advances in trading strategies had rendered it ineffective.

At the time, the SEC’s action did not trigger cries from investors and lawmakers. However, as stocks of big investment and commercial banks sank over the past year, some members of Congress started pressuring the SEC to restore the rule.

Some short sellers have questioned the need for the reinstatement of the rule, saying they are being unfairly targeted.

Two bills to reinstate the uptick rule have been introduced in the U.S. House of Representatives and a similar bill has been introduced in the U.S. Senate.

“Abusive short selling has gone unaddressed for too long and simply must end if the SEC is to restore investor confidence in the markets,” six Senators including Democrats Carl Levin and Edward Kaufman and Republican Arlen Specter, said in a recent letter to Schapiro.

“In the absence of a strong message from the SEC, we believe Congress will need to consider legislation that directs the SEC to do so,” the Senators said in a letter dated April 1.

Billionaire investor George Soros said on Monday that he favored a reintroduction of some kind of rule to restrict short selling. “You do need to provide some protection against effectively the bear raids,” Soros told Reuters Financial Television in an interview.

A final rule will not be adopted at this week’s SEC meeting. The agency will still need to solicit public comment on its proposals and hold another meeting to decide on final short sale restrictions as part of its normal rulemaking process.

When asked if she favored restoring the uptick rule, Schapiro said she was anxious to read the comments.

Earlier in a speech to institutional investors, Schapiro said the SEC would convene a roundtable later to discuss the proposals and potentially some broader issues on short selling.

Ensuing slowdown

Where is the market headed ?
What do you believe ?	Guy Adami 900 S&P David Tice 3500-5000 DOW The Wine Movie Sideways
	Current Results

Doug Short has created a nice snapshot of 140 years of market history. It’s a logarithmic chart, so it shows the impact of percentage rather than absolute price moves, and prices have been adjusted for inflation. Note that the chart is price-only: It does not include the impact of dividends.

Key points:

* Bull and bear markets have always been with us (duh)
* The market spends about half the time above trend and half below trend (duh)
* The market has been above trend for about 20 years (ruh roh)
* The trough-to-peak 18-year bull market that peaked in 2000 (+666%) was the biggest in history by a mile (ruh roh)
* In the 5-year bull market in the middle of the Great Depression (1932-1937), the S&P jumped 266% (five years is a long time–don’t want to miss that)
* 20 years after the 1929 peak, the S&P traded at half its 1929 value (ruh roh)

Soon the world will learn there is no more money left

Toxic debts racked up by banks and insurers could spiral to $4 trillion (£2.7 trillion), new forecasts from the International Monetary Fund (IMF) are set to suggest.

The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.

Banks and insurers, which so far have owned up to $1.29 trillion in toxic assets, are facing increasing losses as the deepening recession takes a toll, adding to the debts racked up from sub-prime mortgages. The IMF’s new forecast, which could be revised again before the end of the month, will come as a blow to governments that have already pumped billions into the banking system.

Paul Ashworth, senior US economist at Capital Economics, said: “The first losses were asset writedowns based on sub-prime mortgages and associated instruments. But now, banks are selling ‘plain vanilla’ losses from mortgages, commercial loans and credit cards. For this reason, the housing market will play a crucial part in how big the bad debt toll is over the next year or two.”

In its January report, the IMF said: “Degradation is also occurring in the loan books of banks, reflecting the weakening outlook for the economy. Going forward, banks will need even more capital as expected losses continue to mount.” At the same time, there is a clear shift in congressional attitudes in the United States about simply pumping money into the system, Mr Ashworth said. The British Government is also under pressure to repair its tattered finances. Injecting more money into the banks could further undermine its fiscal position.

The IMF’s jump will come as little surprise to economists who have suggested that the bad debts will be much higher than anticipated. Nouriel Roubini, chairman of RGE Monitor, expects bad debts from US-originated assets to reach $3.6 billion by the middle of next year. This figure is expected to rise when bad debts from assets elsewhere are calculated, he said.