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Chinese inflation remains high amid signs of economic slowdown

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Inflation in China moderated in September for the second consecutive month, but still remained stubbornly high amid growing signs of a global slowdown.

China’s consumer price index, the main gauge of inflation, grew 6.1% from a year earlier, down slightly from a 6.2% rise in August.

The index remains far above the 4% annual target set by the central government, making it difficult to loosen monetary policy if China’s economy is pulled into a global decline.

There’s evidence that the world’s second-largest economy may be slowing down.

Trade data released Thursday showed Chinese exports decreased in September over slackening European demand and a strengthening yuan, the country’s currency.

Prices for crude oil and copper fell on news of the data, reflecting jitteriness in China’s ability to import commodities as voraciously as it has in the past.

Meanwhile, thousands of small businesses in China’s coastal provinces are reportedly being squeezed by the country’s credit crunch. China’s State Council said it would support the small firms by increasing loans and offering tax breaks.

But central leaders say reining in inflation remains an overall priority –- dulling expectations that policymakers will loosen credit, drop interest rates or lift buying restrictions in China’s stagnant residential property market.

“For the moment, we remain in policy stasis -– no more tightening, but no real loosening -– while Chinese authorities nervously eye developments in the Eurozone,” said Alistair Thornton, an analyst for IHS Global Insight in Beijing. “It is the Eurozone and U.S. that form the greatest downside risk for China’s outlook.”

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Twitter.com/dhpierson

Photo: Customers look at prices for vegetables at a supermarket in Hefei, China. Credit: Reuters

California winemakers hail South Korean trade agreement

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California grape growers and vintners are excited about ratification by Congress of a free-trade agreement with South Korea.

The treaty calls for the immediate removal of a 15% Korean tariff on California wine and 45% import duty on grape juice concentrate. Korean excise, value-added and other taxes on California wines also will be lowered, making the products more attractive and affordable to Korean consumers.

California accounts for 90% of all U.S. wine exports to South Korea, which totaled 500,000 cases worth $11.2 million last year.

Korea has a significant wine-drinking culture, with import consumption growing 177% in the last decade, said Robert P. "Bobby" Koch, president of the Wine Institute, a trade group based in San Francisco.

California long had been the second biggest exporter of wine to Korea, behind France. However, Chile surpassed the Golden State in 2005 after the South American nation signed a trade agreement with Korea that sharply lowered import duties. The European Union signed its own treaty with Korea, which became effective on July 1, boosting the likelihood of increased wine sales.

The U.S. action Wednesday is expected to make California wines more competitive in the growing Korean market.

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Photo: Foley Winery in Santa Ynez Valley. Credit: David Langford / Associated Press

Wall Street: Stocks down, gold up on mixed data

Wall Street

Gold: Trading now at $1,649 an ounce, up 1.6% from Friday. Dow Jones industrial average: Trading now at 10,829.38, down 0.8% from Friday.

Mixed results. Stocks have been bouncing around this morning on good news about the U.S. economy but worrying signs out of Europe.

Protest prime time. As the Wall Street protests spread across the country to Los Angeles, the 700 arrests this weekend in New York are helping the movement's cause.

Off with their heads. Roseanne Barr calls for a return of the guillotine, for use on bankers.

Inside the Koch empire. Bloomberg has a lengthy investigative take-down of the secretive company run by the Koch brothers, detailing a number of alleged instances in which the firm broke the law.

Merrill vs. Countrywide. Merrill Lynch, the Wall Street firm acquired by Bank of America, is doing okay these days but it is being dragged down by BofA's other recent acquisition, Countrywide, and employees are not happy.

-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo credit: Stan Honda / Getty Images

Stocks plunge again to finish worst quarter since 2008

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The reality of a debt-heavy global economy stuck in low gear hit home in the last three months, driving U.S. stocks to their worst quarterly loss since the 2008 financial crisis.

On Friday, share prices ended mostly lower around the globe, heaping more misery on equity investors battered by growing doubts about the economic outlook. The Dow Jones industrial average slumped 240.60 points, or 2.2%, to close the quarter at 10,913.38.

The 30-stock Dow lost 12.1% in the three months. And that was pretty much the good news: The biggest stocks held up much better than the rest of the market.

The broader Standard & Poor’s 500 index, a benchmark for many 401(k) retirement accounts, fell 2.5% on Friday and 14.3% for the quarter. It was the biggest decline since the index crashed 22.6% in the fourth quarter of 2008.

Market losses generally were worse overseas, particularly in Europe, as the continent’s government-debt crisis raged on. The average European blue-chip stock tumbled 17.4% for the three months. The Hong Kong market plunged 21.5% and Brazilian shares lost 16.2%.

And in another blow to investor confidence, the asset many people had viewed as a haven -- gold -- was pummeled in the final few weeks of the quarter amid a steep decline in commodities in general. The yellow metal slid from nearly $1,900 an ounce in late August to end Friday at $1,620.

As commodities fell further on Friday, U.S. crude oil dropped $2.94 to $79.20 a barrel, a new 52-week low. That should be good for consumers -- unless it's a sign that demand for raw materials is ebbing because of a deeper slowdown in global growth.

The two hiding places that actually lived up to that billing this quarter: cash and high-quality bonds, particularly U.S. government debt.

On Friday, investors jumped back into Treasury bonds as stocks slumped. The 10-year T-note yield fell to 1.90%, down from 2.00% on Thursday and down from 3.16% on June 30.

But with Treasury yields near generational lows, they aren’t offering income-seeking investors much incentive to buy at this point. Wall Street’s remaining cadre of stock bulls argues that equities are cheap. And they may be right -- if the bottom isn’t about to fall out of the economy.

That's setting up for another potentially wild market ride in October. More evidence of economic weakness could trigger a new selling wave. Better economic data, on the other hand, could bring a torrent of cash in from the sidelines, where it's earning zero.

“Once you break either way I think it’s going to be pretty dramatic,” said Bill Strazzullo, market strategist at Bell Curve Trading in Freehold, N.J.

Just what everyone was looking forward to: more insane volatility.

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Photo: One of the signs of protesters who have been camping out near Wall Street this week to rail against corporate interests. Credit: Mario Tama / Getty Images

Stocks pare gains but still post third straight rise on Europe hopes

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U.S. stocks ended broadly higher Tuesday but surrendered a big chunk of their gains by the closing bell amid new rumors out of Europe.

The Dow Jones industrial average rose for a third straight session, finishing up 146.83 points, or 1.3%, to 11,190.69 after rallying as much as 325 points by midday.

Share prices pulled back in the final 90 minutes after London’s Financial Times reported that some Eurozone countries were pressing for Greece’s private bondholders to take bigger haircuts on the debt as part of any new workout plan for insolvent Athens.

That risks throwing yet another wrench into negotiations to keep Greece from melting down and taking the rest of Europe with it.

Stocks and commodities worldwide had rocketed overnight on optimism that European authorities were getting closer to a framework for staving off a deeper financial crisis on the continent. German Chancellor Angela Merkel pledged again to support Greece and preserve the Eurozone, though she faces broad opposition in Germany to a proposed expansion of Europe’s rescue fund for troubled member states. A vote on the fund is set for Thursday in the German parliament.

European stock markets staged sharp rebounds after their drubbing of recent weeks. The German market soared 5.3%, Swedish shares surged 6.2% and the Spanish market jumped 4%.

Commodities rose on hopes that progress in Europe would damp fears about a new global recession. U.S. oil futures rose $4.21 to $84.45 a barrel. Gold rebounded $58.10 to $1,650.60 an ounce.

But Dan McMahon, veteran trader at Raymond James & Associates in New York, warned against reading too much into Tuesday’s rallies, noting that some of the gains stemmed from “short covering” by traders who had been betting that prices would continue to slide in the near term. As stocks and commodities jumped instead, short-sellers faced pressure to jump in and close out their bets.

On Wall Street, traders said some money managers were selling bonds and buying stocks as part of quarter-end portfolio rebalancing strategies: With bonds appreciating while stocks have sunk this quarter, rebalancing requires managers to pare their bond stakes while adding to stocks. The quarter ends Friday.

As bond prices fell the yield on the bellwether 10-year Treasury note rose to 1.98%, up from 1.90% on Monday and the highest since Sept. 16. The yield had plunged to as low as 1.72% on Thursday, a day after the Federal Reserve said it would shift its massive bond portfolio more toward longer-term securities and away from shorter-term issues.

Stock market bulls say the biggest positive about this week’s trading is that the U.S. market has once again held above its summer lows -- suggesting that many investors and traders don’t see the economic outlook justifying another big breakdown in share prices.

Despite the wild volatility of the last few months, the Dow is down just 3.3% year to date. The Standard & Poor’s 500 index, which rose 1.1% on Tuesday to 1,175.38, is off 6.5% year to date.

By contrast, most major stock indexes in Europe, Asia and Latin America have suffered double-digit percentage declines this year. For example, Germany is down 18.6%, Hong Kong is down 21.3% and Brazil is down 22.2%.

It may not feel like much consolation, but "we've been the outperformer this year," Gail Dudack, head of Dudack Research Group in New York, said of U.S. equities.

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Photo: A trader works on the floor of the New York Stock Exchange. Credit: Reuters.

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