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Greece to face inspectors, Merkel hints at bailout

(Reuters) - EU and IMF inspectors will return to Greece on Thursday to decide whether Athens has done enough to secure a new batch of aid vital to avoid bankruptcy, while Germany suggested a new bailout may have to be renegotiated.

Facing a wave of strikes and protests, Greece's Socialist government is accelerating budget measures to meet the terms of an International Monetary Fund and European Union rescue deal so it can receive a new loan next month.

The "troika" team of inspectors, which had threatened to cut off aid if Athens did not move faster, will hold talks on a plan to deepen budget cuts and raise taxes which has driven protesters back onto the streets for the first time since June.

"I can confirm the Eurogroup (of euro zone ministers) will hold an additional meeting as soon as possible, still in October, to discuss the situation of Greece and consider the disbursement of the next tranche," a European Commission spokesman said in Brussels, announcing the troika's return.

German Chancellor Angela Merkel suggested that parts of a planned new 109-billion-euro ($148.6 billion) rescue for the debt-laden country could be reopened, depending on the outcome of the troika's audit.

"We have to wait and see what the troika ... finds and what it will tell us (whether) we will have to renegotiate or not," she told Greek state television NET, without elaborating.

Several hundred activists affiliated with the Greek Communists converged on the finance ministry on Wednesday waving a banner saying "We won't pay!." They burned bills for a new one-off income tax introduced this summer, while Athens and other parts of the country were hit by transport strikes.

If deemed adequate by the inspectors, the new austerity drive will secure an 8-billion-euro loan Greece needs to pay bills and salaries in October and bring it closer to moving on to a second bailout agreed in July.

As a condition of the visit and to resolve the row with the lenders, the Greek government had promised to send a written assurance outlining its new plan to meet its bailout targets. Its contents have not been made public.

"Instead of coming and going, the troika should spend a month with a pensioner, a family-man and then tell us whether these measures are human," said 50-year-old aviation worker, Costas Papalambros, a father of two.

"The next tranche will just be an aspirin, it won't cure the patient. What we need is growth and I don't see it happening They need to change policies," he told Reuters.

Even Deputy Prime Minister Theodoros Pangalos, who said he faced selling real estate to pay a new property tax, admitted Greeks' pain threshold was being tested.

"I think that the tax-paying limits of Greek society have been exhausted. I would say they have been exhausted for some time now," he told Mega TV. "But I think that we should act on the other side of the problem which is spending."

Germany has repeatedly said negotiations about the details of the second rescue deal can begin only when the troika says Greece has qualified to receive the tranche expected in October, the sixth under a first bailout agreed in 2010.

At the same time, leaders from around the world have urged euro zone capitals to end a tortuous debate and create a safety net big enough to prevent Greece's problems from spreading to other euro members and triggering a fresh global downturn.

DEBT SWAP DEBATE DEEPENS

The second bailout aims to ease Greece's debt burden by imposing a 21 percent loss on private Greek bondholders.

After intensifying debate among economists and policymakers that only a 50 percent loss would make the country's debt viable, more investors have signed up to the bond exchange plan, Greek financial daily Naftemporiki reported.

Citing an unidentified finance ministry official, it said Greece's weeks-long struggle to lure private bondholders into the rescue plan had ended with it reaching the 90 percent participation target.

The finance ministry declined to comment on the report.

There is no agreement yet among euro zone governments on whether a renegotiation is needed, including more pain for Greece's bank creditors, or on a U.S.-sponsored plan to leverage the bloc's rescue fund to give it more firepower.

Germany's Bundestag (lower house) will vote on Thursday on widening the scope of the European Financial Stability Facility bailout fund, as agreed by the EU leaders on July 21.

Merkel faces a revolt within her conservative camp and may have to rely on support from the opposition Social Democrats and Greens to get the measure approved, damaging her authority.

STRIKES GRIP GREECE

Late on Tuesday, police dispersed about 1,000 anti-austerity protesters with tear gas in Athens' Syntagma Square, the epicentre of anti-austerity protests.

Taxi drivers, bus and tram operators staged strikes on Wednesday, causing long traffic jams leading into the ancient city center and forcing luggage-hauling tourists scrambling to find rides to the airport.

Other trades ranging from craftsmen, printers and tax officials also staged stoppages and activists planned marches on

parliament and the port of Piraeus later in the day.

"I've been trying to find a job for a year now and it's impossible," said Maria Kappa, a graduate of the School of Philosophy in Athens. "I don't see the rich people hurt by this austerity, it's always the poor who have to pay."

Lawmakers opened the way to the troika visit on Tuesday by passing a property tax bill. That piles the pressure on Greeks suffering from several waves of belt-tightening and deepens an economic downturn heading into its fourth year.

Prime Minister George Papandreou's 154 Socialist deputies forced the measure through in the 300-seat parliament.

In the accelerated strategy, the government will cut the 730,000 public workforce by a fifth, reduce the public wage bill by 20 percent, as well as lower overall pensions by 4 percent in addition to a 10 percent cut already agreed in previous plans.

It will also now extend the new real estate tax until 2014, two years longer than originally planned, after the troika judged Greece's estimate that it would raise 2 billion euros a year to be too high.

 

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Asian stocks fall on euro crisis fears

(Reuters) - Asian shares and commodities fell on Thursday on growing worries that Europe's intractable debt problems will plunge the world into a second global financial crisis.

Copper fell 3 percent, gold slipped toward $1,600 an ounce to stand more than $300 below its record high earlier this month, and commodities-related stocks such as global miner Rio Tinto were dumped on worries that demand will weaken as the international economy slows.

The past week has seen a broad sell-off of commodities, equities and emerging markets bonds and a rally in the dollar that has been reminiscent of the rout surrounding the collapse of Lehman Brothers investment bank three years ago.

"It seems periods of optimism are getting shorter and the pessimism is getting longer," said David Land, analyst at CMC Markets in Sydney.

"This is being driven by the clear realization that while there are many plans as to how to deal with the Euro situation, the reality of getting agreement will be that much harder."

Tokyo's Nikkei share average fell 1 percent, while MSCI's broadest index of Asia Pacific shares outside Japan dropped 0.8 percent, with its materials sub-index shedding more than 2 percent.

S&P 500 index futures were mildly negative, after Wall Street's broad benchmark dropped 2.1 percent on Wednesday.

"The market situation is still tough, with worries about global growth," said Fujio Ando, senior managing director at Chibagin Asset Management in Tokyo.

GERMAN VOTE

The latest source of nervousness was a vote in Germany's parliament at 0900 GMT on Thursday to approve new powers for the euro zone's 440 billion euro ($598 billion) rescue fund.

While opposition votes will ensure the bill passes, a big rebellion within Chancellor Angela Merkel's own center-right coalition could weaken her politically and cloud future policy making at a time when financial markets and other nations are urging euro zone leaders to act boldly and decisively.

The euro was a little firmer around $1.3555, while the dollar rose 0.2 percent against a basket of currencies.

"You would suspect weakness until Germany votes, given that it is the big guy that has to fund it," said Gavin Stacey, head of Australia and New Zealand research at Barclays Capital.

"The euro is most likely to continue its trend deterioration until it gets really bad, forcing a resolution to come."

Commodities continued to slide, with copper, which is highly sensitive to expectations for global growth, falling 3 percent to $7,036.75 a tonne.

U.S. crude oil futures fell 0.6 percent to $80.70 a barrel and Brent crude lost 0.4 percent to $103.37.

Gold, which has seen a shift from a negative to a positive correlation with riskier assets over the past week or so as investors seeking safety have turned their back on the metal in favor of the dollar and U.S. Treasuries, fell 0.2 percent to around $1,605 an ounce.

Japanese government bonds were in demand for their safe haven appeal, with the benchmark 10-year yield falling 1 basis point to 0.995 percent following similar moves in Treasuries, where the 10-year yield dipped back below 2 percent on Wednesday.

 

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Worst quarter for UK, German, French stocks in 9 years


(Reuters) - Shares in major European economies suffered their biggest quarterly loss in nine years, hit by concerns the global economy was slipping into recession and the euro zone debt crisis was deepening with Greece facing possible default.

The steep sell-off this quarter, wiping $1.2 trillion off European share values, was sparked by an intensification in the euro zone sovereign debt crisis and concerns the United States could be heading for a recession.

U.S. and German government bonds, however, were in demand as investors sought shelter in safe-haven assets.

Karen Olney of UBS said European stock valuations may be cheap but investors would remain cautious until euro zone politicians can come up with a decisive plan to finally put to rest the bloc's debt crisis, now threatening Italy and Spain, its third and fourth largest economies.

"Politicians tend to react better when the markets are falling than rising. If we don't get a solution imminently, we could have another leg down," said Olney, head of European thematic research at UBS.

"In a rising market, they are not going to come up with a grand slam plan. If the markets are suffering again, they may be pushed to come up with a solution that we need. This is why some people consider Europe difficult to invest in, almost uninvestable at the moment."

Among the worst to suffer in the recent sell-off was Germany's DAX finance/markets/index?symbol=de%21daxx">.GDAXI which had outperformed all other European markets in the first half of the year.

The German blue-chip index, home to conglomerate Siemens (SIEGn.DE) and automakers Daimler (DAIGn.DE) and BMW (BMWG.DE), lost 25.4 percent in July-September, its worst quarterly performance since the third quarter of 2002.

SHORTING BAN

France's CAC 40 .FCHI, and Spain's IBEX 35 .IBEX also posted their biggest three-month fall since the third quarter of 2002, despite their regulators, along with those from Italy and Belgium, banning short selling of financial stocks starting on August 12.

The CAC 40 fell 25.1 percent in July-September, with French bank Societe Generale (SOGN.PA) losing 51 percent over the same period -- its biggest quarterly loss ever.

The IBEX 35 index, meanwhile, was off 17.5 percent, while Italy's FTSE MIB .FTMIB was down 26.5 percent.

Britain's FTSE 100 .FTSE was down 13.7 percent, faring better than other major European markets but still posting its worst three-month performance in nine years.

That compared with a 17.1 percent fall over the same period for the pan-regional STOXX Europe 600 .STOXX index, which was its biggest quarterly loss since the fourth quarter of 2008 after the global economy was sent into a tailspin following the collapse of Lehman Brothers.

In terms of valuations, the DAX and the CAC 40 carried a 12-month forward price-to-earnings ratio of 8 and 7.7 respectively, slightly cheaper than the FTSE 100's 8.8 and the U.S. S&P 500's .SPX 10.9, data from Thomson Reuters Datastream showed.

"You don't get a sustainable rally until either the growth outlook improves or you get substantial progress on the sovereign debt crisis. In the absence of either of those things, investors should remain cautious and defensive positioned," said Ronan Carr, European equity strategist at Morgan Stanley.

Morgan Stanley was "overweight" telecoms .SXKP and healthcare .SXDP, and "underweight" banks .SX7P and industrials .SXNP.

However, RBS analysts said both the DAX and the FTSE 100 looked hard done by, based on their index composition, with German auto stocks and UK oil stocks among the most attractive on a relative value basis.

 

[EmpireGlobalfx]

Brent down in biggest quarterly drop since Q2 2010

(Reuters) - Oil prices slumped on Friday on renewed global economic worries, pushing back Brent more than 10 percent this month for its biggest quarterly decline in five quarters.

U.S. crude futures fared even worse, posting their weakest quarterly performance since the financial crisis of 2008 as a wobbly economy sparked more demand worries.

Crude futures fell with a broad array of commodities, led by copper, which with U.S. equities tumbled to its worst quarter since 2008. <.

In London, ICE crude for November delivery settled at $102.76 a barrel, dropping $1.19, or 1.14 percent, after touching a session low of $101.78.

For the quarter, Brent crude fell $9.72, or 8.64 percent, the biggest percentage loss since the second quarter of 2010. For the month, front-month Brent dropped $12.09, or 10.53 percent, the biggest monthly decline since May 2010.

U.S. November crude settled at $79.20 a barrel, falling $2.94, after dropping to an intraday low of $78.77.

For the quarter, U.S. crude fell $16.22, or 17 percent, the biggest percentage loss since the fourth quarter of 2008. For the month, it dropped $9.61, or 10.82 percent, the biggest monthly decline since May 2010.

Brent's premium against U.S. crude rose back to $23.56, after dropping to $21.81 on Thursday.

CHINA DATA ADDS TO CLOUDY OUTLOOK

The day's sell-off began after data showed that China's manufacturing sector contracted for a third consecutive month in September, adding to doubts about Europe's ability to solve its debt crisis.

That drove investors to sell riskier assets such as equities and commodities. Trading was volatile on quarter-end booksquaring, traders said.

The dollar rose while the euro sank, curbing risk sentiment across many commodities markets. <USD/> .DXY

A gloomy economic outlook and weak demand in the United States have dragged markets down this quarter, while the expected return of oil exports from Libya, cut off by the civil war, added a bearish spin this month.

"Declines in the stock market and the euro prompted much of today's weakness amidst reduced risk appetite," said Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois.

Trading in Brent was more hectic than U.S. crude, reaching 701,000 contracts as of 3:45 p.m. EDT (1945 GMT), which was 33 percent above its 30-day average.

U.S. crude volume hit nearly 599,000 contracts, down 5.3 percent from its 30-day average.

OPEC, LIBYA ADDING TO GLOBAL SUPPLIES

Supply from all 12 members of the Organization of the Petroleum Exporting Countries is forecast to average 30.25 million barrels a day this month, up from 30.15 million in August, according to a Reuters survey. <OPEC/O>

Libya's output has begun to recover after falling to almost nothing in the civil war, the survey found. The country exported one small crude cargo on September 25 and is reported to be sending some oil to refineries.

"If the current positive reports from Libya are confirmed, then domestic production could reach 1.3 million barrels per day by the end of next year," JP Morgan said in a note.

"On an annual average, this would lead to exports of around 0.6 mbd of light sweet crude, which together with rising Iraqi and non-OPEC output could lift supply by around 1.9 million bpd above today's levels."

 

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Kodak denies bankruptcy plan but shares plummet

(Reuters) Eastman Kodak Co shares lost more than half their value on Friday as the company hired a law firm well-known for bankruptcy cases, triggering speculation that the photography pioneer could file for bankruptcy.

Kodak, which delivered the first consumer camera in 1888, denied it had a bankruptcy plan, saying it was committed to meeting its obligations and is still looking for ways to "monetize" its patent portfolio.

Once synonymous with photography, Kodak has struggled with the move to digital cameras and failed to turn a profit since 2007. It has been exploring a sale of its digital imaging patents, worth an estimated $2 billion, and hired investment bank Lazard in July to explore options.

Rochester, New York-based Kodak said it has "no intention of filing for bankruptcy," after its shares plunged as much as 68 percent to 54 cents before recovering slightly to close down 53.8 percent at 78 cents on the New York Stock Exchange.

The company's market value plummeted to roughly $210 million on Friday, down from a lofty height of $31 billion in February 1997, as shown by regulatory filings. The cost to insure Kodak's debt with credit default swaps (CDS) surged on Friday as investors priced in greater bankruptcy risk.

Kodak had already scared markets on Monday when it tapped a credit line but refused to divulge its cash position. The stock dived to a 38-year low that day.

Then investors took fright again Friday after Bloomberg reported that potential buyers for its patent portfolio were cautious about going ahead with a bid as they could risk having Kodak creditors sue them after a bankruptcy filing.

Mark Kaufman, an analyst at Rafferty Capital Markets, said that Kodak urgently needed to seal a patent deal.

"I don't believe bankruptcy is inevitable. This is a pretty valuable portfolio, they should get a good price," he said. "They need to get this (sale) out of the way. They need to sell this portfolio, raise some type of cash."

The company said in July that it hired Lazard to advise on strategic options for its patents -- increasingly seen as lucrative assets. Bankrupt Canadian company Nortel fetched $4.5 billion in a patent sale in June, also run by Lazard. Google Inc agreed in August to buy Motorola Mobility for $12.5 billion primarily for its patent portfolio.

One expert -- Robert Miller, a professor at Villanova University School of Law -- said filing for bankruptcy may actually end up boosting the value of a patent sale.

Even if the company holds a robust, public auction outside of bankruptcy, the headache of litigation still looms if Kodak goes bankrupt later, said Miller.

Selling the assets as part of a bankruptcy court-supervised auction would solve that concern, Miller said.

Kodak confirmed that it has hired Jones Day but did not explain why, beyond saying it was "not unusual for a company in transformation to explore all options."

Investors for the company have been up in arms about everything from its share price decline to its management.

One shareholder had asked the company's board on Thursday to start a sales process while others sharply criticized Chief Executive Antonio Perez.

The company's board is not considering replacing Perez at this time, according to a story in the Wall Street Journal, which cited two people familiar with the matter.

Kodak CDS costs rose to 70 percent Friday from 61 percent Thursday, data provider Markit said. That means it would cost $7.0 million in upfront payments, plus $500,000 a year to insure $10 million debt if Kodak debt for five years.

"This is pretty expensive insurance at this point and the reason it's so expensive is that people believe there's a high likelihood of default," said Markit analyst Otis Casey.

 

[EmpireGlobalfx]

Qatar Holdings to invest $1 billion in European Goldfields


(Reuters) - Qatar's sovereign wealth fund will invest $1 billion in European Goldfields (EGUq.L) (EGU.TO) including $600 million to finance operations in Greece, where the London-based firm has a permit to mine gold, the fund's head said on Saturday.

It was the second major investment in Greece by the Gulf state in two months. Qatar struck a deal in August to provide funding for a merger of two of the recession-hit country's largest banks.

Greece, which is in dire need of private investment as its worst recession in four decades is seen extending into next year, has long sought to convince the wealthy emirate to invest in its private and public companies.

Qatar Holdings will buy a 10 percent stake in European Goldfields from Greek building firm Ellaktor (HELr.AT) and has a call option to buy another 5 percent, CEO Ahmad al-Sayed said after a meeting between Greek and Qatari officials in Athens.

"In total, we will invest in the company about $1 billion," Sayed told reporters.

Sayed also said Qatar was "examining different opportunities in the country."

Greece granted European Goldfields a long-awaited permit in July that allows it to mine for gold in the north of the country, a move set to turn the London-based firm into the European Union's largest primary gold producer.

The European Goldfields deal was announced after Qatar's Emir Sheikh Hamad bin Khalifa al-Thani met Prime Minister George Papandreou in Athens on Saturday.

"Qatar's investments show trust in the Greek economy," Papandreou told a news conference after the meeting.

Qatar's investment in Greek banks in August will give it about 17 percent of the lender that will be created by the merger of Alpha Bank (ACBr.AT) and Eurobank (EFGr.AT).

Paramount, a company controlled by Qatar, will own the stake after taking part in a 1.25 billion euro rights offer and fully taking up a 500 million euro convertible bond issue.

 

[EmpireGlobalfx]

Nikkei drops 2.3 percent on European debt fears

(Reuters) - The Nikkei average dropped 2.3 percent on Monday, as fears of slowing global growth and the spreading impact of Europe's credit woes encouraged investors to pull funds out of risk assets.

Bank shares slipped after news that Greece will miss a deficit target set just months ago in a massive bailout package. Government draft budget figures released on Sunday showed that drastic steps taken to avert bankruptcy may not be enough.

"The October-December quarter begins today, so there is hope for domestic fund buying, but right now the market's focus is Greece's problems and how Europeans will address the situation, as well as U.S. data this week that will show us more about the economy," said Fujio Ando, senior managing director at Chibagin Asset Management.

The Bank of Japan's tankan survey released before the market open showed business sentiment turned positive in the third quarter as companies restored supply chains hit by the March earthquake, even as a strong yen and the euro zone debt crisis clouded the outlook.

"The results show that the domestic economy is holding up even with the strong yen, and the biggest concerns are external, not internal, such as the impact of Europe's debt problems on global growth," said Yutaka Shiraki, senior strategist at Mitsubishi UFJ Morgan Stanley Securities.

The Nikkei markets/index?symbol=jp%21n225">.N225 fell 2.3 percent to 8,503.88 by the midday break. The benchmark gained 1.6 percent last week but lost 2.8 percent for the month and 11.4 percent for the quarter, turning in its worst quarterly performance since June 2010.

The broader Topix index finance/markets/index?symbol=jp%21ixj">.TOPX declined 2.7 percent on Monday to 740.46.

EUROPEAN EXPOSURE

U.S. investment bank Morgan Stanley (MS.N) plummeted on Friday on concerns about its exposure to European banks, leading financial shares lower, and that weighed on their counterparts in Japan.

Mitsubishi UFJ Financial Group (8306.T) fell 4 percent to 340 yen and Sumitomo Mitsui Financial Group (8316.T) slipped 3.9 percent to 2,120 yen.

Major Japanese producers of electric cables and wires extended their slide into Monday, led by Sumitomo Electric (5802.T), which was down 9.7 percent at 828 yen on more than twice its average 30-day volume, after Furukawa Electric (5801.T) agreed on Friday to a $200 million fine to settle investigations into price-fixing in the United States.

Analysts said Sumitomo and Fujikura (5803.T), which are also under investigation by U.S. authorities, risk similar fines. Furukawa declined 6.6 percent to 199 yen while Fujikura was 4.3 percent lower at 246 yen.

Shares of Mitsui OSK Lines (9104.T) slumped to their lowest since March 2003 after the shipping company slashed its first-half earnings outlook to a net loss of 17 billion yen ($221 million) from a profit of 1 billion yen. Rival Kawasaki Kisen (9107.T) fell 4.3 percent and Nippon Yusen (9101.T) dropped 5.2 percent.

Softbank Corp (9984.T) rose 3.3 percent to 2,367 yen and was the heaviest-traded issue by turnover, after Jack Ma, CEO of China's e-commerce leader Alibaba, said he was keen on buying Yahoo Inc (YHOO.O). Softbank owns about 30 percent of Alibaba Group, and holds 42 percent in Yahoo Japan (4689.T), which is owned 35 percent by Yahoo.

Promise Co (8574.T), a Japanese consumer lender, remained untraded as buy orders outnumbered sell offers after the company said on Friday that SMFG would launch a tender offer to buy the outstanding shares of Promise it does not already own for 780 yen each.

Promise shares closed at 659 yen on Friday, 18 percent below the tender offer price. They were bid at 759 yen on Monday.

Aiful (8515.T), a consumer lender affiliated with Mitsubishi UFJ Financial, rose 3.5 percent to 117 yen, while Acom (8572.T), a lender which had sought rescheduling of debt repayments, rose 6.5 percent to 1,598 yen.

Volume was moderate, with 790 million shares traded on the Tokyo Stock Exchange's main board, suggesting the daily total could fall short of last Friday's 2 billion shares.