Atlas Shrugged!? (Saut)

Monday, June 11th, 2012

“Atlas Shrugged?!”

by Jeffrey Saut, Chief Investment Strategist, Raymond James

June 11, 2012

Stephen Moore wrote a Wall Street Journal article entitled, “Atlas Shrugged: From Fiction to Fact in 52 Years.” For those of us familiar with Ayn Rand’s classic book (Atlas Shrugged), recent events eerily mirror her writings about the economic carnage caused by big government running amok. As Mr. Moore wrote:

For the uninitiated, the moral of the story is simply this: Politicians invariably respond to crises – that in most cases they themselves created – by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs … and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

In the book, these relentless wealth redistributionists and their programs are disparaged as ‘the looters and their laws.’ Every new act of government futility and stupidity carries with it a benevolent-sounding title. These include the ‘Anti-Greed Act’ to redistribute income and the ‘Equalization of Opportunity Act’ to prevent people from starting more than one business (to give other people a chance). My personal favorite, the ‘Anti Dog-Eat-Dog Act,’ aims to restrict cut-throat competition between firms and thus slow the wave of business bankruptcies.

President Ronald Reagan was the first to suggest that the nine most terrifying words in the English language are, “I’m from the government and I’m here to help.” President Reagan also stated, “Government is not the solution to our problem; government is the problem.” Even President Clinton promised smaller government, but that promise ended on November 4, 2008 as voters elected President Barack Obama, ushering in an era of expanded government that Ayn Rand warned of 52 years ago (as a sidebar, we suggest watching this two-minute blurb from Milton Friedman – http://pajamasmedia.com/instapundit/69117/). Yet, last week may have marked a historic shift in the country’s ideological direction after Governor Scott Walker’s resounding win in Wisconsin’s recall vote.

Now I am not a Tea Party person, but since the historic mid-term elections I have argued the Tea Party surfaced what Adam Smith wrote about in the book “The Wealth of Nations.” To wit – the political corruption that prevents prosperity – and that is exactly what we’ve got, the best Congress (the House and Senate) money can buy. Yet, that seems to be changing punctuated by last week’s Wisconsin vote. However, the footings of the sea change began two years ago with the mid-term election where the majority of those elected were not professional politicians but rather came from the private sector. Moreover, if you talk to those newbies they will tell you they don’t really want to be in Washington, but they think the country is off course and they want to try and reverse that course. I think this is a trend toward more practical leaders that will offer simple and pragmatic solutions to our country’s ills rather than recondite laws like the aforementioned “Anti-Greed Act;” and, I think that is bullish for the stock market.

Last week the stock market thought so too as the S&P 500 (SPX/1325.66) posted its best weekly gain of the year. The weekly win left the SPX higher by 3.73% and back above its 200-day moving average (DMA), which is now at 1288.41. Of course, my email box subsequently lit up with the question, “Was last Monday’s intraday low of 1266.74 similar to the ‘undercut low’ you told us to ‘buy’ on October 4th of last year?” Early last week I really didn’t know the answer to that question because after recommending recommitting some of the cash raised in the February – April timeframe over the past few weeks, the breakdown below my key pivot point of 1290 (basis the SPX) caused me to suspend the judicious recommitment of cash until the near-term direction of the market became clearer. To be sure, in this business it’s better to lose “face” and save “skin!” By the end of the week the break below 1290 was indeed looking more and more like an “undercut low.” Recall, it was Merrill Lynch’s veteran strategist Bob Farrell who often spoke of “undercut lows” as being one of the better bottoming formations. For example, when the major averages trade below a previously well advertised stock market “low,” causing participants to panic and “sell” and then the markets “turn up” and rally, such sequences often mark tradable “lows.” This week should tell us if that is what happened last week.

Studying the market’s metrics, since the May 1st rally high (SPX 1415.32) there have been two 90% Downside Days (90% of total points and volume traded was on the downside) culminating with June 1st’s 90% Downside Day. Those two Downside Days probably exhausted the sellers, at least on a short-term basis. Consequently, what was needed was some upside demand and the stock market took a step in that direction last Wednesday with a Dow Wow of 287 points that turned out to be a 90% Upside Day. The rebound carried the senior index back above my 1290 pivot point and therefore placed it in a position to build on last week’s rally. Additionally, there is a full charge of energy in my daily internal energy model. Hence, if the SPX can surmount the overhead resistance around its recent reaction high of 1335, and stay above that level, the market should be able to move higher.

In terms of sectors, Financials (+4.71%), Materials (+4.38%), and Technology (+4.28%) saw the biggest bounces for the week, while Consumer Staples (+2.56%) rallied the least. The rally left Utilities and Telecom Services the most overbought sectors and Energy as the only remaining oversold sector. Outside of the country, Italy and Russia were better by more than 7%; and for those focused on Spain’s sovereign debt yields, maybe you should consider the fact that Spain’s equity market was up 10.41% last week. China was the worst performer as participants feared economic slowing as telegraphed by China’s interest rate cut and the lowering of gasoline prices.

Speaking to lower fuel prices, last week our airline analysts lowered their fuel assumptions for 2013 by 19% and raised their ratings on several companies. Alaska Air (ALK/$34.73) was upgraded to an Outperform with the comments from our analysts that Alaska Air has a best in class cost structure, balance sheet, and attractive valuation. Allegiant (ALGT/$65.70) was moved to a Strong Buy given its leverage to lower fuel prices and strong earnings momentum driven by a 16-seat expansion project, Hawaii service, and carry-on bag fee. The change in our fuel price assumptions produces a very large change in earnings because jet fuel and related taxes and fees on average accounts for about 38% of total airline expenses. Moreover, the impact on earnings is obviously far greater for airlines with lower margins. As an example, our analysts boosted their earnings estimates for U.S. Airways (LCC/$12.15/Outperform) by 25% this year and 46% next year. Interestingly, LCC has been showing up on our proprietary screening models for months with positive implications. Other names that have positive implications and are rated favorably by our fundamental analysts include: Allstate (ALL/$34.31/$Strong Buy); Davita (DVA/ $85.60/Outperform); Dollar Tree (DLTR/$106.72/Strong Buy); Brinker (EAT/$30.90/Strong Buy); Family Dollar (FDO/$69.58/Outperform); and JB Hunt (JBHT/$55.39/Outperform).

The call for this week: Over the weekend the eurozone agreed to lend Spain up to €100 ($126 billion) to shore up its teetering banks. That decision prompted this from my friend David Kotok, captain of Cumberland Advisors:

The fact is the absence of banking collapses is good news. That is correct. Good news! We establish that good news by what we DO NOT see on TV. We do not see banks collapsing and failing to pay depositors. This means we may not witness the euro system collapsing and failing. Bank runs and deposit failures are symptoms of liquidity constraints. Liquidity is not to be confused with solvency. A prime example: Greece is certainly insolvent. It cannot pay its debt or its governmental bills. Nevertheless, Greece’s banks still have liquidity because of Emergency Liquidity Assistance (ELA) funding. [Because] ELA exists the euro system agents know that they cannot permit euro system banks to fail to pay their depositors. Therefore, our conclusion is that liquidity issues will be addressed in the euro zone. The Spanish banking chapter is unfolding before our eyes. Markets have been pricing in a fear of systemic failure on the liquidity side. Market bears will be disappointed, because the liquidity failure is not going to happen. The next test is coming on June 17, with French and Greek elections.

Now we know why Spain’s equity markets rallied over 10% last week. As for our markets, in last week’s verbal strategy comments I said that am treating last Monday’s intraday low as a daily and intermediate term low. I still feel that way.

Copyright © Raymond James

Tags: Ayn Rand, Barack Obama, Business Bankruptcies, Chief Investment Strategist, Dog Eat Dog, Downward Spiral, jeffrey saut, Looters, Nine Most Terrifying Words, Opportunity Act, President Reagan, President Ronald Reagan, Problem Government, Productive Sectors, Ronald Reagan, Saut, Sectors Of The Economy, Stephen Moore, Street Journal Article, Throat Competition, Wall Street Journal
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“Ich bin ein Berliner” (Saut)

Tuesday, November 8th, 2011

“Ich bin ein Berliner”
November 07, 2011

by Jeffrey Saut, Chief Investment Strategist, Raymond James

“Ich bin ein Berliner” was a German phrase used by President John F. Kennedy in his famous Berlin speech where he was emphasizing the U.S. support for West Germany after the Soviet-supported East Germany erected the Berlin Wall as a barrier to prevent movement between East and West Berlin. Last week at the G20, like John Kennedy, President Barack Obama tried to emphasize America’s support for a German bailout plan to prevent a Greek tragedy. The tragedy’s trajectory rose sharply on Tuesday when Greek Prime Minister George Papandreou announced there would be a referendum to decide if the new austerity measures for a second bailout (the first was on July 21, 2011) would be acceptable to the Greek people. That news shocked the world’s equity markets, which was reflected by the Dow’s Dive of some 297 points. I was seeing portfolio managers at the time and told them that in my opinion Papandreou’s prose was telegraphing a Greek withdrawal from the EU. A withdrawal because the Prime Minister knew the Greek people would never vote for such measures and because the vote most likely would not be held until next year. Further, Papandreou knew that given the uncertainty of an austerity vote the IMF would probably hold back its already scheduled disbursement of funds. To be sure, the IMF’s funding conditions require a clear horizon for 12 months, so Greece’s €8-billion tranche, which would come from the IMF, probably would have never showed up.

A Greek withdrawal from the Euro-zone would also be quite messy. Firstly, leaving the euro and returning to the drachma should cause a sharp devaluation in the drachma’s value vis-à-vis other currencies. A good example of this is the monetary breakup of the Austro-Hungarian Monetary Union in 1919. Secondly, the switching of currencies requires changing domestic laws to allow wages and incomes to be paid in the new currency. As well, domestic debt has to be recalibrated for the new currency. Thirdly, Greece’s government would be unable to borrow from the financial markets and thus forced to cut its budget deficit to zero. As The Wall Street Journal notes:

“[Greece’s] debt burden – the weight of government debt as a proportion of economic output – would soar. The economy would shrink as the new national currency depreciated against the euro, but most of the government bonds would still be euro-denominated. If that weren’t enough, many economists argue that the economic benefits of a sharp currency depreciation could quickly be dissipated by wage inflation.”

Then there are things like preparing for capital flight, bank holidays to slow withdrawals, reprogramming cash registers/vending machines/etc., making new notes and coins, well you get the idea. Indeed, it’s all Greek to me … pass the ouzo!

Comes Thursday, however, Papandreou drops his controversial referendum proposal as he faced a “no confidence” vote on Friday. Interestingly, he survived that vote, but surprisingly the DJIA (11983.24) didn’t follow on to Thursday’s Triumph (+208.43). And that, dear reader, raises the question – is the stock market merely reacting to the on/off news from Greece and the EU? – or, has the October rally been more about the better than expected economic news in the U.S.? Our sense is the rally from the “undercut low” of October 4, 2011 has been driven by better than estimated economic reports. Verily, the economy has been doing better than most expected. For example, the recent real GDP report showed an uptick to 2.5%. But, the real GDP, less the change in private inventories, increased by 3.6% (seasonally adjusted annual rate) during 3Q11 versus +1.6% in 2Q11. This suggests companies chose to meet the stronger demand by selling inventories rather than increasing output. This only reinforces our belief that corporate America will have to build inventories, which should add ~1% to this quarter’s GDP report. Then there was the strength in producers’ durable equipment, which jumped 17.4% during 3Q11. Hereto, this plays to our argument that spending on capital equipment (capex) should torque up into year-end, spurred by the ability to expense capex. The fear here is that the 100% expensing feature is slated to expire on December 31, 2011 unless it is extended.

As stated in last Monday’s missive, about three-quarters of October’s economic releases have been coming in better than expected. Unfortunately, that skein was broken last week with seven of the 18 economic releases better than estimates, eight weaker, and three in line. And maybe that, rather than Greece, was the reason for the early week two-day train wreck of down 573.15 points for the senior index. The downside two-step registered back-to-back 90% Downside Days whereby both the declining volume, and the number of downside points, equal or exceed 90% of the total volume and total points traded. Typically, such back-to-back Downside Days tend to temporarily exhaust the sellers, which was the case last week as Wednesday and Thursday’s sessions recorded back-to-back 80% Upside Days. For the past few weeks we have been suggesting some kind of pause/pullback was due, commenting that the McClellan Oscillator was about as overbought as it ever gets. Ditto the percentage of stocks in the S&P 500 (SPX/1253.23) that were above their respective 50-day moving averages (only 4% in early October versus 93.6% as of last Monday morning); and the fact that according to our “day count” sequence, with October 27th being session 17 in the typical 17 – 25 Buying Stampede, the straight up rally was long of tooth.

As for earnings season, earnings continue to track above expectations as with 432 companies in the S&P 500 reporting, earnings are better by 22.2%, with a 12.2% increase in revenues, year over year. The question then arises, “Why are fundamental analysts lowering their forward estimates?” Indeed, there have been noticeable declines in estimates for eight of the S&P’s ten macro sectors. The two sectors where estimates have not been lowered are Healthcare and Utilities. Nevertheless, it has indeed been a great earnings season and we expect more of the same into the Christmas selling season. To that point, there is a high correlation between strength in the stock market and a good Christmas “sell through.” Accordingly, we expect a decent Christmas and suggest investors consider select retailers as investments. As the keen-sighted folks at the Bespoke Investment Group opine:

“In order provide a more detailed look at the performance of retail related groups’ pre and post Thanksgiving, in the table we show the annual returns of the S&P 500, the S&P 500 Retailing group, as well as the various subgroups in the Retail sector from the start of November through Thanksgiving. From 2000 through 2010, the S&P 500 has averaged a gain of 0.9% from 11/1 through Thanksgiving with positive returns nearly three quarters of the time. Retailers, on the other hand, have done even better. From 2000 through 2010, the S&P 500 Retailing group has seen an average gain of 1.6% with positive returns nearly two-thirds of the time. Looking at individual sub-groups shows that Internet retailers (beginning in 2002) have seen the best returns in November with an average gain of 4.8%. After online sales, the next best groups are Apparel (3.1%) and Restaurants (2.8%). If you are looking to generate alpha, both of these groups have outperformed the S&P 500 73% of the time since 2000.”

Some Strong Buy-rated names for Raymond James’ universe of stocks playing to this theme are: Bed Bath & Beyond (BBBY/$62.03); Big Lots (BIG/$41.32); Family Dollar Stores (FDO/$58.97); O’Reilly Automotive (ORLY/$76.90); Red Robin Gourmet Burgers (RRGB/$26.57); Select Comfort (SCSS/$20.77); and Wal-Mart Stores (WMT/$57.50).

The call for this week: Last Monday I wrote, “To us, the real question is – will the SPX get a pullback to the often mentioned pivot point of 1217, or will any pullback be short and shallow? Well, by our work the equity markets still have a lot of internal energy to power their way higher, so our sense is the SPX will keep pushing higher in the months ahead with only shallow pullbacks and sideways pauses along the way.” While falling from 1284.59 to 1218.28 the first two days of last week hardly qualifies as “shallow,” I do find it interesting that on the numerological date of 11/1/11 the S&P 500 closed near the aforementioned pivot point of 1217 and then rallied. Accordingly, we would view a decisive close below that 1217 pivot point as a negative, suggesting a decline back into the 1100s. A more likely outcome, however, is for the SPX to spend some time consolidating before resuming its advance.

P.S. – I am actually here all week …

Click here to enlarge

Copyright © Raymond James

Tags: Austerity Measures, Bailout Plan, Barack Obama, Berlin Speech, Berlin Wall, Bin Ein Berliner, Bonds, Chief Investment Strategist, Clear Horizon, Drachma, Euro Zone, George Papandreou, German Phrase, Greek Prime Minister, Greek Tragedy, Ich Bin Ein Berliner, jeffrey saut, Monetary Union, Portfolio Managers, President John F Kennedy, West Berlin
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“Got Jobs?!” (Saut)

Tuesday, October 25th, 2011

“Got Jobs?!”

by Jeffrey Saut, Chief Investment Strategist, Raymond James

October 24, 2011

“President Barack Obama has a jobs plan, in case anyone has been off the planet for the past month. House Republicans now have a jobs plan. Each of the presidential candidates has some kind of employment blueprint. Members of Congress have a bipartisan jobs plan: to keep their seats. Even Washington lobbyists have one, which is to ensure that the grotesque 72,536-page tax code doesn’t sacrifice a single line of print. After all, without it they might have to return to the dreary practice of law. Everyone, it seems, has a jobs plan so why not your humble correspondent? I’ve had plenty to say about Obama’s plan, so it’s only appropriate to offer some concrete ideas of my own. By calling it a jobs plan, the president and Congress re-enforce the notion that they hold the closely guarded secret of job creation. Most reasonable people understand that the president doesn’t create jobs, unless he’s in the market for a White House chef, a dog walker for Bo or a horticulturalist for the Rose Garden. And yet, the name implies just that. Employment is the outcome of economic growth. Focus on creating an environment for the economy to flourish, and the jobs will come.”

… Caroline Baum (Bloomberg)

I love Bloomberg’s Caroline Baum and have read her insightful prose for years. In this particular article she is talking about an economic plan that fosters growth. To be sure, economic growth is the only out of the situation we have painted ourselves into. To that point there was an article in the WSJ on 8/10/11 titled, “A New Strategy for Economic Growth.” In said article quips like these appeared:

“Policy makers should cease the barrage of ad hoc, short-term policy initiatives. Is increased federal spending across government agencies a grand strategy? . . . The debt-limit debate caused policy makers to recognize what citizens already knew: We must put our fiscal house in order. Cutting spending is essential. But we will never cut our way to prosperity. So, what should be the economic grand strategy? In a word: growth. . . . Absent strong growth, any projected improvements in the country’s fiscal position won’t materialize.”

Speaking to growth, while the economic reports over the past few weeks are not particularly strong, they have been better than expected. Earnings too are coming in better than estimated, for as of last Thursday the 93 S&P 500 (SPX/1238.25) companies that had reported showed earnings that were up by 23.4% with revenues better by 9.2%. We think that “beat” trend will continue, making it increasingly uncomfortable for the underinvested crowd. Indeed, professional money is profoundly underinvested. For example, a few months ago I made my annual sojourn to Europe to speak with institutional accounts. In seeing more than 100 portfolio managers (PMs) I could not find one that had more than a 15% weighting in U.S. equities despite the fact those PMs’ performance benchmark, the MSCI World Index, has a ~43% weighting in U.S. stocks. Yet, it is not just the Europeans that are light U.S. stocks. Here in our country endowment funds are under 10% weighted in U.S. equities. Ladies and gentlemen, there is no way an endowment fund can achieve its annual mandated return of between 6% – 9% with ~2.2%-yielding 10-year Treasury Notes! Accordingly, even a marginal shift in asset allocations to out of bonds and into stocks could cause stocks to trade higher than most expect. Verily, with an improving U.S. economy, Asian monetary conditions gradually easing, and an evolving solution for Europe, the chances of a Santa Claus rally have risen.

Nowhere was that more evident than last week with the SPX not only confirming the renewed uptrend we spoke of when the SPX closed above our pivot point of 1217, but it also traveled above the August intraday reaction highs clustered around 1230. To the underinvested types, last week’s action was a nightmare. The trick for this week will be for the SPX to remain above the 1217 level and attempt to distance itself further from that pivot point. While there is always the risk of an upside breakout failure, if prices can hold above last week’s breakout levels, the credibility of said breakout should gain more traction. Interestingly, on a weekly basis, the equity markets have a full load of internal energy to extend the now 13-session rally, which has lifted the SPX some 15% from our October 4th “buy ‘em” call, as the October 1978 and October 1979 analogues continue to play. Manifestly, the recent rally can now be termed a “Buying Stampede,” suggesting it could run for the full 17 – 25 sessions. Recall, Buying Stampedes typically run 17 – 25 sessions, with only one- to three-session pauses, or pullbacks, before they exhaust themselves. While it is true some have lasted for 25 – 30 sessions, it is pretty rare for one to extend more than 30 sessions. In fact, the longest stampede previously chronicled in my notes of more than 40 years lasted for 43 days, that is up until the September 2010 to June 2011 upside skein following the announcement of quantitative easing 2.

Whether this stampede turns out to be that strong will likely depend on the economy, our changing political environment, and Europe. On those fronts, however, I remain cautiously optimistic, believing there is a change afoot inside the D.C. Beltway whereby business people are being elected, fostering the hope of simple, market-based solutions to our Nation’s ills. And, over the last three weeks the stock market appears to be sensing this as well with winning sectors continuing to be Energy, Financials, Consumer Discretionary, and Materials. Such sector rotation suggests the stock market believes things are getting better as well.

Meanwhile, over the past two weeks the SPX has rallied more than 10%, yet investors have “pulled” some $11 billion from equity mutual funds. That’s the highest two-week total since early August when the stock market was in a free-fall. Such mutual fund redemptions are symptomatic of past stock market bottoms, which reinforces our belief that the October 4th intraday low of 1074.77 should mark the low for the year. Regrettably, we also think the May 2nd intraday high of 1370.58 will stand as the high for the year since there has been so much technical damage. Given those parameters how should investors, and traders, position themselves into year-end? Well, traders should have raised stop-loss points on their remaining “long” trading positions because of the short-term overbought condition. That said, overbought markets can stay overbought for longer than most expect. Investors, on the other hand, should continue to accumulate favorable stocks during periods of weakness. One screen investors should consider are companies that have recently beaten earnings estimates, beaten revenue estimates, and have raised forward earnings guidance. Our friends at the invaluable Bespoke Investment Group have published such a list and noted, “Typically less than 5% of stocks during any given earnings season will report triple plays, which makes them extremely rare.” Names in that group that have reported such metrics and are followed by Raymond James’ fundamental analysts include: Abbott Labs (ABT/$53.86/Outperform); Chubb Corporation (CB/$68.71/Outperform); Intel (INTC/$24.03/Outperform); Select Comfort (SCSS/$21.57/Strong Buy); and Tractor Supply (TSCO/$73.46/Strong Buy).

The call for this week: Chinese numerology, and Feng Shui, for 2011 suggests this year we are going to experience four unusual dates: 1/1/11, 1/11/11, 11/1/11, 11/11/11 and that’s not all. Take the last two digits of the year you were born, and the age you will be this year, and the result will add up to 111 for everyone! This is the year of MONEY. Also, in this year, October will have 5 Sundays, 5 Mondays, and 5 Saturdays. This happens only once every 823 years. These particular years are known as Moneybag Years. The proverb goes that if you send this quip to eight good friends, money will appear in the next four days. Those who don’t continue the chain won’t receive any money. It’s a mystery, but it’s worth a try. We certainly hope the balance of the year will be fruitful for investors; and we continue to invest and trade accordingly.

P.S. – I am traveling the rest of the week so there will probably be no verbal strategy comments until next Monday.

Copyright © Raymond James

Tags: Barack Obama, Bloomberg, Bonds, Caroline Baum, Chief Investment Strategist, Concrete Ideas, Debt Limit, Economic Plan, Federal Spending, Grand Strategy, Growth Focus, Horticulturalist, Humble Correspondent, Insightful Prose, jeffrey saut, Limit Debate, Members Of Congress, Policy Initiatives, Rose Garden, Washington Lobbyists, Wsj
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News That Matters (September 9, 2011)

Friday, September 9th, 2011

Ft.com

Regulators are nearing a settlement with Fannie Mae and Freddie Mac after a three-year investigation into whether the mortgage finance giants adequately disclosed their exposure to risky subprime loans,http://ftalphaville.ft.com/thecut/2011/09/09/673336/fannie-and-freddie-close-to-deal-with-regulators/

The US Federal Reserve “will certainly do all that it can to help restore high rates of growth and employment”, said its chairman Ben Bernanke in a speech in Minneapolis on Thursday, a small change in his rhetoric that suggests a good chance of further Fed action at an extended monetary policy meeting later this month, the FT reports. http://ftalphaville.ft.com/thecut/2011/09/09/673321/bernanke-hints-at-further-fed-action-2/

While strain in the short-term funding markets, where banks borrow money on a day-to-day basis, have grabbed the headlines, it is a slow withdrawal of longer-term funding that could turn out to be the bigger concern for Europe’s banks – and the wider economy, http://ftalphaville.ft.com/thecut/2011/09/09/673276/european-banks-face-long-term-funding-problems/

China’s attempts to cool persistent price increases appear to be taking effect as the pace of inflation slowed in August from a three-year high in July, the FT reports. The country’s consumer price index, rose 6.2 per cent in August from a year earlier, compared with a 6.5 per cent rise in July, according to figures released on Friday by China’s National Bureau of Statistics. Consumer prices rose 0.3 per cent in August from the previous month, compared with a 0.5 per cent increase in July, marking the second consecutive moderation in the month-on-month reading. The Chinese government and most economists had predicted that inflation would peak by August and the slowdown is largely in line with expectations. http://ftalphaville.ft.com/thecut/2011/09/09/673236/chinese-inflation-falls-in-august-to-6-2/

Barack Obama sought to resuscitate his flagging presidency and the US economy with a larger-than-expected $450bn jobs plan that emphasises tax cuts in a bid to win over Republican opposition, the FT reports. http://ftalphaville.ft.com/thecut/2011/09/09/673221/obama-outlines-450bn-growth-push/

Bank of America officials are discussing cutting as many as 40,000 staff over several years, the WSJ says, citing people familiar with talks about the bank’s restructuring plans. The sources say chief executive Brian Moynihan is expected to make an announcement at a conference on Monday. However the report cautioned the numbers could change; http://ftalphaville.ft.com/thecut/2011/09/09/673211/bofa-may-cut-40000-jobs/

Britain and China took fresh steps to improve their economic relationship on Thursday, agreeing to boost Chinese infrastructure investment in the UK and London’s role as an offshore trading centre for the renminbi, http://ftalphaville.ft.com/thecut/2011/09/08/673151/stocks-drop-following-bernanke-speech/

Oil traders are buying protection against a 2008-style price collapse with options that gain value if US crude plummets by year end, the FT reports. Exchange data reveal a surge of interest in options that convey the right to sell oil at $50 a barrel by December, http://ftalphaville.ft.com/thecut/2011/09/08/672586/oil-traders-buy-protection-against-price-collapse/

US intelligence has received information about “specific and credible” threats of a terrorist act planned for 10th anniversary of the September 11 terrorist attacks, White House officials confirmed on Thursday evening. The information came from overseas and related to a car bomb in New York or Washington, the US media reported. However, the White House also said that the information was “unconfirmed”. http://www.ft.com/intl/cms/s/0/d0f6393e-da27-11e0-90b2-00144feabdc0.html#axzz1XKlN2XFx

The correlation between the movement of big US stocks is at the highest level since Black Monday in 1987, with price moves increasingly driven by the ebb and flow of investors’ fears over the economic environment. Stocks, in theory, should move in individual directions based on company fundamentals. But markets of late have been characterised by mass selling alternating with waves of buying, as investors upgrade or downgrade the risk of the US slipping into recession, or a financial crisis sparked by a European sovereign default. http://www.ft.com/intl/cms/s/0/7fd33db8-d982-11e0-b16a-00144feabdc0.html#axzz1XKlN2XFx

While Switzerland this week in effect pegged the franc to the euro, a debate is intensifying in Hong Kong over whether to sever the city’s 27-year-old peg to the US dollar. The mechanism that links the Hong Kong and US dollars at a rate of HK$7.80 to US$1 has served the city well since its introduction in 1983. It has survived the hand-over of sovereignty from Britain to China, the Asian financial crisis and repeated attacks from speculators. http://www.ft.com/intl/cms/s/0/aabfedc2-da14-11e0-b199-00144feabdc0.html#axzz1XKlN2XFx

WSJ.com

Japan’s Nikkei Stock Average shed 0.5%, as investors remained non-committal after data showing the economy contracted more severely than previously reported in the April-June period after the March 11 natural disasters, as it was in line with expectations. Australia’s S&P/ASX 200 rose 0.5% and South Korea’s Kospi Composite lost 1.4%. Hong Kong’s Hang Seng Index added 0.2%, while China’s Shanghai Composite edged up 0.1%. Dow Jones Industrial Average futures were up 39 points in screen trade. http://online.wsj.com/article/SB10001424053111903285704576559451025655360.html?mod=WSJASIA_hpp_LEFTTopWhatNews

The Japanese economy contracted more severely than previously reported in the April-June period, data released Friday showed, with firms cutting back on capital spending at a faster pace in the wake of the March 11 earthquake and tsunami. The revised gross domestic product shrank at a price-adjusted annual pace of 2.1% in April-June from the previous quarter, the Cabinet Office said, compared with a preliminary 1.3% contraction announced three weeks ago. The figure matched expectations from a survey of economists by Dow Jones Newswires and the Nikkei.http://online.wsj.com/article/SB10001424053111903285704576559380092114762.html?mod=WSJASIA_hpp_LEFTTopWhatNews

The European Central Bank opened the door to interest-rate cuts if needed to bolster a weakening economic recovery—a dramatic U-turn from its decision to raise interest rates just two months ago. Economic risks have “intensified” to the downside with “enormous” uncertainty, ECB President Jean-Claude Trichet told reporters after the central bank held its main policy rate at 1.5%. He called the ECB’s reassessment of the economic outlook “significant,” and highlighted weakening global growth, declines in equity markets and strains in euro-zone government bond markets as trouble spots.http://online.wsj.com/article/SB10001424053111904836104576558241910980966.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Fast-growing emerging economies in Asia are facing an unsettling combination of slowing growth and persistent inflation, complicating decisions for central banks who seem content for now to take a wait-and-see approach. With the global economy cooling, central banks in South Korea, Philippines, Indonesia and Malaysia opted Thursday to leave benchmark interest rates steady, despite signs that price pressures aren’t yet easing. These countries face a classic monetary-policy challenge of trying to fight inflation at a time when growth is slowing and the chances for an outright recession in the developed world have increased.‬ http://online.wsj.com/article/SB10001424053111903285704576557492765115376.html?mod=WSJASIA_hpp_LEFTTopWhatNews

The Organization for Economic Cooperation and Development Thursday slashed its growth forecasts for this year, painting a gloomy picture of the outlook in the world’s richest economies and putting pressure on central banks to intervene if there is continuing weakness or signs of recession. The Paris-based organization doesn’t expect a recession of the magnitude seen in 2008 and 2009, but protracted contractions in some countries would knock confidence, which in turn risks derailing medium term growth. http://online.wsj.com/article/SB10001424053111904836104576558010597968124.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Greece’s Socialist government is scrambling to cut public spending after receiving stark ultimatums from euro-zone governments that further rescue money will be withheld if Athens doesn’t deliver on promises to reduce its budget deficit. The government now is looking at unprecedented public-sector layoffs and cuts in civil-service perks, steps that could reshape Greek political culture by upending decades of cozy ties between the ruling Socialist party and a core constituency. http://online.wsj.com/article/SB10001424053111903285704576556162077324344.html?mod=WSJ_hp_us_mostpop_read

Norwegian and Canadian officials on Thursday criticized Switzerland’s move this week to cap the rise of its currency, as the impact reverberated in currency markets world-wide. The Norwegian krone soared against the euro after the Swiss National Bank said Tuesday that it would use “unlimited” spending to prevent the euro from falling below 1.20 francs. The move sent investors flooding into other currencies belonging to economies viewed as fiscally sound, with Norway among the top destinations.  Norwegian central bank Gov. Oystein Olsen warned investors that a strengthening krone would stifle Norway’s economy by hurting exports. A swift policy response—likely lower interest rates—is in the offing if the krone keeps rising, Mr. Olsen said. http://online.wsj.com/article/SB10001424053111904836104576558982460348312.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

President Barack Obama called on Congress Thursday to pass a $447 billion package of spending initiatives and tax cuts to boost economic growth, in what might be the White House’s last chance to revive its political fortunes before the 2012 campaign kicks into high gear. More than half of Mr. Obama’s plan consists of payroll-tax cuts for employees and employers—an idea the White House hopes will appeal enough to Republican lawmakers—and is the policy that could have the best chance to pass. Among other measures, the president also called for more than $62 billion in spending to extend unemployment insurance benefits through 2012 and fund programs to alleviate long-term joblessness. He also proposed $140 billion in infrastructure spending and aid to states.http://online.wsj.com/article/SB10001424053111904103404576559062901863074.html?mod=WSJAsia_hpp_LEFTTopStories

Reuters.com

Spot gold eased 0.36 percent to $1,861.46 an ounce by 0013 GMT, well below a lifetime high around $1,920 hit this week. Lingering debt crisis in Europe and volatile currencies have sent gold prices to a series of record highs this year. U.S. gold GCcv1 added $5.2 an ounce to $1,862.7 an ounce. http://www.reuters.com/article/2011/09/09/markets-precious-idUSL3E7K901220110909

Federal Reserve Chairman Ben Bernanke on Thursday said the U.S. central bank would spare no effort to boost weak growth, but to the dismay of investors stopped short of a full plunge into further monetary support. “The Federal Reserve will do all it can to help restore high rates of growth and employment in a context of price stability,” Bernanke told the Economic Club of Minnesota. In what could be taken as a bid to quell concerns among some of his colleagues that further easing could spark inflation, Bernanke said a rise in consumer prices this year would likely to be transitory.http://www.reuters.com/article/2011/09/08/us-usa-fed-idUSTRE7870W120110908

The U.S. economy may be stumbling, but it is still standing. That was the message from two economic reports that pointed to a weak labor market but also a better performance on trade that should boost third-quarter gross domestic product. Still, Federal Reserve Chairman Ben Bernanke, highlighting an elevated jobless rate and sluggish underlying growth, hinted the central bank may ease monetary policy further at its September meeting. http://www.reuters.com/article/2011/09/08/us-usa-economy-idUSTRE77U25D20110908

G7 finance chiefs meet on Friday under heavy pressure to take action to revive flagging economic growth in rich nations and to calm the biggest confidence crisis in markets since the 2007-09 credit crunch. Host country France has called for a coordinated response from the Group of Seven industrialized nations after mounting anxiety over Europe’s debt crisis and the fragility of its banks caused a big fall in  world stockmarkets in recent weeks. Differences between the economic problems facing the United States, Britain and eurzone states are complicating the task though, meaning one-size-fits-all solutions, like moderating government budget cutbacks or unleasing more monetary stimulus, will not work. http://www.reuters.com/article/2011/09/09/us-g-idUSTRE7880S620110909

Bloomberg.com

Rising food prices that defy easing global inflation may challenge policy makers in countries including China to control costs without hurting economic growth, panelists at a forum said yesterday.  A growing middle class seeking higher-protein foods is contributing to increased demand and prices, Abby Joseph Cohen, partner and senior U.S. investment strategist at Goldman Sachs (GS) said at the Bloomberg Global Inflation Conference in New York hosted by Bloomberg Link. http://www.bloomberg.com/news/2011-09-08/food-price-gains-defy-policy-makers-bid-to-ease-inflation-panelists-say.html

Almost 13 years after its demise, the deutsche mark retains enough potency to haunt Jean-Claude Trichet’s final days as European Central Bank president.  Trichet, 68, lost his cool yesterday with a reporter who asked whether Germany should abandon the euro and return to the mark as Europe’s debt crisis roils markets and spooks voters.  “I would like very much to hear the congratulations for an institution which has delivered price stability in Germany for almost 13 years,” Trichet said in Frankfurt in an uncharacteristically raised voice. “It’s not by chance we have delivered price stability,” he said. “We do our job, it’s not an easy job.” http://www.bloomberg.com/news/2011-09-08/trichet-loses-his-cool-at-prospect-of-deutsche-mark-s-revival-in-germany.html

CNBC.com

The race to the bottom in picking economic growth figures this year seems to have stopped nearly as quickly as it started.  No, that doesn’t mean that economists suddenly believe US gross domestic product will hit the pace it normally would see two years after the end of a recession.  But Wall Street’s biggest names have backed off earlier doom-and-gloom predictions of near-zero growth and now believe the economy at least has a better chance of avoiding an outright recession The impetus for the optimism: Thursday’s trade balance report which showed that the US deficit unexpectedly slid to $44.8 billion in July from $51.6 billion in June, primarily on the strength of a 3.6 percent surge in exports. http://www.cnbc.com/id/44442250

Nytimes.com

Taking a bleak view of Saab Automobile’s prospects for recovery, a Swedish court on Thursday rejected the troubled carmaker’s application for protection from creditors. The decision sharply narrows its room for maneuvering and pushes it a step closer to financial collapse. Saab employees have not been paid for August, and the company’s unions had been considering legal action that could have forced the company into liquidation when the bid for protection from creditors was announced on Wednesday. Saab’s unions had given guarded support to bankruptcy protection, partly because the government would have been asked to guarantee workers’ salaries. But with its prospects dwindling, unions may feel they have no choice but to press on with their legal action. http://dealbook.nytimes.com/2011/09/08/court-denies-saab-protection-from-creditors/?ref=global

USAtoday.com

Fixed mortgage rates fell this week to the lowest levels in six decades. But few Americans can take advantage of the rates to refinance or buy a home. The average rate for a 30-year fixed mortgage fell to 4.12%, from 4.22%, Freddie Mac said Thursday. That’s the lowest level on records dating back to 1971. Freddie Mac says the last time rates were cheaper was 1951, when most home loans lasted just 20 or 25 years. The average rate on a 15-year fixed mortgage, a popular refinancing option, fell to 3.33% from 3.39%. That’s the lowest on records dating to 1991 and likely the lowest ever, according to economists.http://www.usatoday.com/money/economy/housing/story/2011-09-08/Mortgage-rates-fall-to-lowest-level-since-1950s-few-qualify/50319086/1

BBC.co.uk

German exports fell by 1.8% in July, much more than expected, official figures have shown. The month-on-month fall compares with a 1.2% decline in June. Economists had only expected exports to contract by 0.1% in July. At the same time, Germany’s imports fell 0.3% in July, again surprising analysts who had expected a 0.2% rise. Separate data showed France’s exports rose 0.3% in July, while its imports also increased, adding a sharp 2.9%. http://www.bbc.co.uk/news/business-14833474

Spanish home sales fell 41% in April to June from a year earlier, official figures have shown. This was a bigger fall than the 30% drop in the first quarter of 2011. The declines follow after Spain ended tax deductions for property purchases on 1 January. These had been introduced after the 2008 housing market crash. The fall in sales also reflects the continuing weakness in the Spanish economy. A new tax cut on the purchase of new homes was introduced last month http://www.bbc.co.uk/news/business-14835957

Telegraph.co.uk

The Bank of England has kept interest rate unchanged at a record low of 0.5pc and resisted calls for more quantitative easing to boost economic growth. Thursday’s decision by the nine-member Monetary Policy Committee on Thursday was in with forcasts.  However, the minutes for the meeting due in around two weeks time is expected to reveal discussions on more economic stimulus – or money printing – as evidence grows that the economy is faltering. http://www.telegraph.co.uk/finance/economics/8749608/BoE-keeps-rates-unchanged-holds-off-on-more-stimulus.html

Germany and Holland have threatened to block rescue payments to Greece unless the country complies to the letter with bail-out terms, raising the spectre of default and a chain-reaction through southern Europe. German finance minister Wolfgang Schauble said there will be no more money until Grecce “actually does” what it agreed to do. “I understand that there is resistance among the Greek population to austerity measures. But in the end it is up to Greece whether it can fulfil the conditions necessary for membership of the common currency. We offer no discounts,” he told Deutschlandfunk.http://www.telegraph.co.uk/finance/financialcrisis/8751180/Germany-pushes-Greece-to-the-brink-in-dangerous-brinkmanship.html

Britain is at “significant risk” of a double-dip recession said the Organisation for Economic Development and Co-operation, as it slashed its growth forecasts in a gloomy assessment of the wider G7 economy. The OECD predicted in its ‘interim assessment report’ that the UK economy would come to a virtual halt in the second half of 2011, with growth of just 0.1pc in the third and fourth quarters. That was a significant downgrade from the 0.4pc quarter-on-quarter growth it was forecasting in May. http://www.telegraph.co.uk/finance/financialcrisis/8749436/OECD-warns-of-double-dip-threat-in-UK-and-cuts-forecasts.html

One in three UK households ‘never worked’ in Liverpool. Almost one in three households in Liverpool, Nottingham and Glasgow has no-one in work – the highest concentration in the UK for the second year running, official figures show. In Liverpool, 31.9pc of houses last year were without anyone who has ever had a paid job. The figure fell from 32.1pc the previous year, but it is still the worst in the country. Glasgow had 31.1pc of workless households, down form 30.7pc the year before. But Nottingham’s “never-worked” rate increased slightly to 31.6pc. http://www.telegraph.co.uk/finance/jobs/8749282/One-in-three-UK-households-never-worked-in-Liverpool.html

Independent.co.uk

Britain faces a very real chance that the lights could go out in the next five to 10 years, as its ailing energy infrastructure struggles to attract the massive investment needed to ensure a reliable electricity supply, according to a warning by the CBI. Companies named the potential absence of a secure, affordable energy supply as their biggest concern in a damning report published today by the employers’ organisation and KPMG. The report also finds that the UK’s road and rail systems are falling further behind the EU average, while 58 per cent of respondents said that, overall, the country’s infrastructure is more expensive, less reliable and inferior to that of the Continent. http://www.independent.co.uk/news/business/news/lack-of-infrastructure-investment-could-leave-britain-in-the-dark-2351518.html

Smh.com.au

Crude prices were up in Asian trade, boosted by data showing a drop in US oil stocks, analysts said. New York’s main contract, West Texas Intermediate (WTI) light sweet crude for delivery in October, gained 23 cents to $US89.28 per barrel. Brent North Sea crude for October delivery rose 21 cents to $US114.76. US crude oil inventories fell by four million barrels last week, according to weekly data published Thursday by the Department of Energy. http://www.smh.com.au/business/markets/oil-up-in-asia-as-us-crude-inventory-falls-20110909-1k0gf.html#ixzz1XQjEH7Nf

Theglobeandmail.com

Greece ruled out quitting the euro on Thursday, shrugging off warnings by its biggest creditor Germany and yet another set of bad economic figures showing it is struggling under the weight of EU/IMF-imposed austerity. Anger at Greece’s failure to meet fiscal targets that are a condition for its international bailout is nearing breaking point in Berlin and other European capitals, with senior German politicians now talking openly about the possibility of Athens exiting the euro zone. http://www.theglobeandmail.com/report-on-business/international-news/greece-rules-out-euro-zone-exit/article2157654/

Xinhuanet.com

China’s Producer Price Index (PPI), a major measure of wholesale-level inflation, rose 7.3 percent year-on-year in August, the National Bureau of Statistics said Friday. August’s PPI growth was lower than July’s 7.5 percent increase, the NBS said in a statement on its website. During the first eight months of this year, the country’s PPI climbed 7.1 percent from the same period last year.http://news.xinhuanet.com/english2010/china/2011-09/09/c_131121423.htm

Brazil’s inflation has peaked, the country’s Monetary Policy Committee (Copom) said Thursday, apparently in response to doubts about its decision to slash interest rates last week. Inflation will start to drop in September, and the inflation rate in 2012 will further go lower, said Copom in a report. Given those aspects, the committee cut Brazil’s annual basic interest rate by 0.5 percentage points to 12 percent last week, and said there was room for further cuts in the future, according to the report. http://news.xinhuanet.com/english2010/business/2011-09/09/c_131123059.htm

South Korea’s producer prices grew at a faster pace last month than a month earlier due to higher food and energy prices, the central bank said Friday. The producer price index (PPI), a barometer of future consumer price inflation, jumped 6.6 percent in August from a year earlier, slightly faster than a 6.5 percent on-year gain in July, the Bank of Korea (BOK) said in a statement. The August growth was the highest in five months, keeping an on- year rise for the 21th straight month. From a month earlier, producer prices rose 0.3 percent last month, slightly down from a 0.4 percent on-month advance a month before. http://news.xinhuanet.com/english2010/business/2011-09/09/c_131122249.htm

U.S. consumer credit increased at an annual rate of 5.9 percent in July, the tenth consecutive monthly growth, offering some relief to a string of weak economic data in recent weeks, the Federal Reserve reported on Thursday. The U.S. central bank said that total borrowing in July rose to 2454.5 billion U.S. dollars from the revised figure of 2442.5 billion dollars in June. The Fed said demand for revolving credit, the category that includes credit cards, dropped 5.2 percent in July after rising 3. 9 percent in June. http://news.xinhuanet.com/english2010/business/2011-09/09/c_131119438.htm

France’s central bank Banque de France (BdF) on Thursday revised down growth rate forecast during the third quarter of the year to 0.1 percent from an initial estimation of 0.2 percent. According to the bank’s economic monthly report, “industrial activity rose very slightly in August” with the capacity utilisation rate reported an “ongoing decline” at 78.7 percent. In short term, the bank’s “forecasts point to stability in industrial production.” In August, services showed a tepid performance despite a buoyant activities in computer and information services. But, the BdF expected the sector’s improvement over the coming months. http://news.xinhuanet.com/english2010/business/2011-09/09/c_131119373.htm

Thehindu.com

Food inflation eased to single digit at 9.55 per cent for the week ended August 27 from 10.05 a week ago but provided hardly any relief to the common man as all items, except wheat and pulses, continued to rule at higher levels.  As per the WPI (Wholesale Price Index) data released here on Thursday, while pulses and wheat saw a decline in prices by 1.56 per cent and 1.04 per cent, respectively, on yearly basis, all other food items turned dearer. Prices of onions surged by 42.03 per cent and potatoes by 13.38 per cent on an annual while vegetables, as a whole, were 22.42 per cent dearer.http://www.thehindu.com/business/Economy/article2435339.ece

Union Commerce and Industry Minister Anand Sharma on Thursday said that India would meet its commitment of reducing tariff lines under sensitive list by 20 per cent for all by next month under the South Asian Free Trade Area (SAFTA) agreement signed by South Asian Association for Regional Cooperation (SAARC) member countries. “The time has come to take a call on reduction of barriers to trade. SAFTA is moving forward on the path of economic integration and India should give full support so that the region realises its full potential,” http://www.thehindu.com/business/Industry/article2436543.ece

A sharp jump in refunds eroded the Centre’s net direct tax collections by 3.4 percent during April-August 2011. However, gross tax collections for the first five months of the current fiscal grew 25.89 percent, higher than the 24 percent growth seen in the first quarter.  The improved performance mainly came through higher corporate taxes that grew about 30 percent during April-August this year.  The overall refund payout of the tax department jumped 156.04 percent in April-August to Rs 57,622 crore (Rs 22,505 crore). Net direct tax collections declined 3.4 percent to Rs 96,738 crore (Rs 100,113 crore). http://www.thehindubusinessline.com/industry-and-economy/article2436435.ece

Economictimes.com

India is unlikely to yield to a fresh effort by the developed countries to push for greater concessions by the larger emerging economies to salvage the World Trade Organisation’s Doha Round of global trade talks. WTO Director General Pascal Lamy told ET that some developing countries now expect the larger emerging economies, including India, to compete on a level playing field. “The question is whether emerging countries are rich, developing countries or poor, developed countries, which will determine the future course of events,” he said. http://economictimes.indiatimes.com/news/economy/foreign-trade/india-to-resist-fresh-pressure-from-developed-nations-at-wto/articleshow/9918528.cms

Yonhapnews.co.kr

South Korea plans to expand its economic cooperation with South Asian countries in a bid to capitalize on one of the fast-emerging markets in the world, the finance ministry said Friday. The move comes amid growing demand for export market diversification as the world’s major economies such as the United States and European Union remain fragile, posing a threat to South Korea’s trade-reliant economy.http://english.yonhapnews.co.kr/business/2011/09/09/55/0502000000AEN20110909003500320F.HTML

Fin24.com

South Africa’s manufacturing output fell by a more than expected 6.0% year-on-year (y/y) in volume terms in July, compared with a revised 0.8% increase in June, Statistics South Africa said on Thursday. Economists in a Reuters poll saw a contraction of 0.6% y/y in July’s factory output.  Compared to June, production in volume terms also contracted by a seasonally adjusted 6.0% in July. It was down 3.5% in the three months to July, compared with the previous three months. http://www.fin24.com/Economy/Factory-output-slows-down-20110908

Thetrader.se

You might want to check out Dalio’s Secret Rules after reading the below. Dalio and Renaissance are the Winners this year. Link to Dalio’s Rules. From FinAlternatives; Amidst August’s hedge fund carnage, some managers were able to produce some impressive returns. Perhaps not surprisingly, some that did are among the biggest and most successful in the industry. http://www.thetrader.se/2011/09/08/and-the-winner-are-mr-dalio-and-renaissance/

Remember when the World did care about Oil, Opec and Saudi Arabia? Well it is time for an OPEC meeting on Sep 9th. Some insight by Stratfor on OPEC and Saudi Arabia. On Sept. 9, OPEC will be holding one of its regular summits to decide what to do about their oil output quotas – raise them, lower them or keep them the same. The decision will be made with an eye towards Libya. When Libya descended into civil war a few months ago, it took about 1.8 million barrels per day of high-quality low-sulfur crude offline. There are many among the OPEC talks who are concerned what will happen in the aftermath of the fall of the Gadhafi government. If the replacement government, whatever that happens to look like, is able to bring oil back online quickly, oil prices could go into a tailspin, they fear.http://www.thetrader.se/2011/09/08/opec-meeting-overshadowed-by-saudi-arabia/

While doing some analytics last week I realized that there is a pure (not statistical) arbitrage situation in VXX options. By the time I noticed it was too small of an edge to try to trade manually so I did not do anything, and since this is something that is very unlikely to happen again I’ll disclose all the details that came up in my analysis. All data obtained fromNanex(nXCore) – a very high quality datafeed. This feed has all messages from exchanges, although to create the charts below I took 1 second snapshots. When VXX split in Nov 2010 OCC decided to leave the “old” unadjusted strikes, so one can trade both after-split VXX and before-split VXX which has quarter of its value. On August 30th some options were trading out of line with the others, I guess because some market-maker did not properly adjust volatility skews that day. Because options are so far OTM early exercise is not a consideration, and the mispricing is a pure arbitrage. http://www.thetrader.se/2011/09/08/volatility-arbitrage-still-exist/

Tags: Barack Obama, Ben Bernanke, Brazil, Bureau Of Statistics, Canadian, Chinese Government, Consumer Price Index, Crude Oil, European Banks, Fannie Mae, Fannie Mae And Freddie Mac, Finance Giants, Freddie Mac, Ft Reports, Gold, Good Chance, India, Infrastructure, Monetary Policy, Mortgage Finance, National Bureau Of Statistics, News That Matters, Outlook, Price Increases, September 9, Slowdown, Subprime Loans
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News That Matters (September 6, 2011)

Tuesday, September 6th, 2011

FT.com
Investment vehicle NBNK is discussing the takeover of National Australia Bank’s UK assets, the Telegraph reports, in a deal that will kick-start the formation of a new banking group that could challenge Britain’s largest lenders. http://ftalphaville.ft.com/thecut/2011/09/06/669726/nbnk-looks-to-strengthen-lloyds-bid/

Big US banks in talks with state prosecutors to settle claims of improper mortgage practices have been offered a deal that is proposed to limit part of their legal liability in return for a multibillion dollar payment. The FT says talks aim to settle allegations that banks including Bank of America, http://ftalphaville.ft.com/thecut/2011/09/06/669681/us-banks-in-robosigning-settlement-talks/

Eurozone bank sector tensions have increased the volume of euros parked overnight at the European Central Bank to levels not seen for more than a year, the FT reports. Some €151.1bn was left by banks in the ECB’s deposit facility over last weekend, http://ftalphaville.ft.com/thecut/2011/09/06/669596/banks-park-record-volume-of-euros-at-ecb/

George Osborne needs to “step up a gear” and deliver a game-changing growth plan if he is to have a chance of reviving a flagging British economy in 2012, the CBI warned as it downgraded its forecasts for next year after a tumultuous August. http://ftalphaville.ft.com/thecut/2011/09/06/669526/cbi-presses-osborne-on-growth/

President Barack Obama used a Labor Day rally to call again for more infrastructure spending and a payroll tax cut ahead of Thursday’s nationally televised jobs speech, reports Reuters. “We’ve got more than 1 million unemployed construction workers ready to get dirty right now. http://ftalphaville.ft.com/thecut/2011/09/05/669511/obama-previews-big-jobs-speech/

Indian authorities have arrested a top mining baron as part of a crackdown on illegal iron ore extraction, in the latest move to stamp out political corruption in the country, reports the FT. Janardhan Reddy,http://ftalphaville.ft.com/thecut/2011/09/05/669426/indian-tycoon-held-in-illegal-mining-swoop/

Libyan oil production will not return to pre-war levels until late next year at the earliest, with many of the country’s oil facilities having suffered heavy damage and looting during the conflict, according to the newly appointed chairman of the country’s National Oil Company. Offering the most detailed assessment yet of the outlook for Libya’s oil output in an interview with the Financial Times, Nuri Berruiensaid it would be late 2012 or early 2013 before the country was again producing the 1.6m barrels per day it had before this year’s uprising agains Muammer Gaddafi . http://www.ft.com/intl/cms/s/0/c382946a-d7b5-11e0-a06b-00144feabdc0.html#axzz1X96Le14n

A Chinese official confirmed on Monday that Colonel Gaddafi’s regime sent representatives to China to discuss buying weapons from arms companies long after the imposition of UN sanctions but said the Chinese government was unaware of the visit at the time. Jiang Yu, the official, also stressed that no contracts were signed and no arms shipments were made. The revelations were first reported by the Globe and Mail of Toronto. http://www.ft.com/intl/cms/s/0/77a3e566-d7bb-11e0-a06b-00144feabdc0.html#axzz1X96Le14n

WSJ.com
Asian shares fell on Tuesday, while the euro slid to a one-month low against the U.S. dollar as euro-zone sovereign debt concerns and global growth worries continued to drive investors from riskier assets. Japan’s Nikkei Stock Average shed 1.2%, Australia’s S&P/ASX 200 fell 1.2%, South Korea’s Kospi Composite lost 0.6% and New Zealand’s NZX-50 gave up 0.5%. Dow Jones Industrial Average futures were sharply down 246 points in screen trade. http://online.wsj.com/article/SB10001424053111904537404576553373055634128.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Australia’s central bank left its cash rate target unchanged at 4.75% Tuesday, as expected by economists. Interest rates have now been on hold for almost a year, with the Reserve Bank of Australia balancing inflation concerns against an increasingly fragile world environment and signs of slowing in some industries locally. A high Australian dollar has also taken pressure off the central bank to tighten interest rates beyond its current “mildly restrictive” stance. The RBA raised interest rates seven times between October 2009 and November 2010, giving Australians some of the highest interest rates in the developed world. http://online.wsj.com/article/SB10001424053111904537404576553621174335878.html?mod=WSJASIA_hpp_LEFTTopWhatNews

International financial markets tumbled as a darkening global economic outlook and deepening fissures in Europe over its debt crisis fueled fears the world economy could slip into a period of prolonged malaise.The Stoxx Europe 600 index fell 4.1% Monday, with banks hard hit. The euro slid below $1.42, its lowest in a month. The declines followed a slide in Asia, where stock indexes in China and Japan dropped by about 2% Monday. On Tuesday morning Asian markets again moved lower, with Japan shares falling 1.2% by late morning. During early Asian trading the 10-year U.S. Treasury yields hit ashttp://online.wsj.com/article/SB10001424053111904537404576552871868770308.html?mod=WSJ_hp_LEFTTopStories

Italy’s industry minister has dismissed widespread calls for Rome to speed up its timetable for passing budget-tightening measures, rebutting criticism that the Italian government’s austerity package isn’t tough enough to dig the country out of the euro-zone debt crisis. http://online.wsj.com/article/SB10001424053111904537404576552383582883442.html?mod=WSJEurope_hpp_LEFTTopStories

South Korea’s revised second-quarter gross domestic product growth grew a revised, seasonally adjusted 0.9% from the previous quarter, confirming that Asia’s fourth-largest economy is slowing amid growing concerns about the possibility of the world economy falling into a double-dip slump. The revised growth rate is slightly faster than the 0.8% rate estimated by the Bank of Korea in July, but slower than the 1.3% on-quarter expansion in the first quarter. http://online.wsj.com/article/SB10001424053111904537404576553332497846662.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

U.K. retailers are braced for more downbeat news as summer earnings are expected to show continued weak consumer demand, especially for hard-hit electrical retailers, with the sector still nursing the wounds of the August riots and economic and market turmoil.  Analysts expect no respite until December. Meanwhile, consumer confidence continues to fall and the threat of a return to recession looms large. Polling firm GfK NOP Wednesday said its main measure of consumer confidence fell to minus 31 in August, equalling the low it hit in April. In July, the index stood at minus 30. http://online.wsj.com/article/SB10001424053111904900904576552333414548232.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Swiss bankers and politicians on Monday tried to deflect growing pressure from U.S. authorities on Switzerland to reveal additional client data in a continuing tax dispute between the two countries. Concerns arose over the weekend that the banks may have to hand over more client data by Tuesday, as details of a letter from U.S. Deputy Attorney General James Cole asking for more account information from potential U.S. tax dodgers became public, triggering a sharp response http://online.wsj.com/article/SB10001424053111904537404576552132246760552.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Deutsche Bank AG Chief Executive Josef Ackermann warned that prospects for the financial sector are constrained by the mounting debt burden of sovereign and private debtors and that Germany’s largest bank might need to shed jobs if the negative market trend from August continues. Mr. Ackermann conceded that European banks don’t face a “rosy” future in their home markets unless they can gain market share. Deutsche Bank has made an attempt at this by taking over retail bank Deutsche Postbank and other units. http://online.wsj.com/article/SB10001424053111904537404576552110978260194.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Reuters.com
Spot gold hovered around $1,900 an ounce on Tuesday, as renewed fears over the euro zone’s debt crisis and concerns about stalled global growth drove investors to seek safety in bullion. Spot gold was flat at $1,900.64 an ounce by 0257 GMT, after hitting an intra-day high of $1,903.09 earlier, about $8 off the record of $1,911.46 set on August 23. U.S. gold gained 1.4 percent to $1,903.80. Spot gold is expected to touch $1,916 before it starts a moderate retracement, said Reuters market analyst Wang Tao. http://www.reuters.com/article/2011/09/06/us-markets-precious-idUSTRE78401J20110906

Oil fell more than 2 percent for a third successive day of losses on Monday, tumbling in tandem with other risk assets as European bank and debt jitters and doubts over global growth haunted traders. ICE Brent futures for October fell $2.25 to $109.92 a barrel by 3:30 EDT, nearing the 200-day moving average support line at $109.26. U.S. crude futures dropped $2.85 to $83.61 a barrel, putting the closely watched Brent/WTI spread at what would be a record close of $26.31. Volume was predictably thin, with Brent crude at only about 40 percent of its average and U.S. trading at 10 percent.http://www.reuters.com/article/2011/09/05/us-markets-oil-idUSTRE77838320110905

China’s economic growth may ease to below 9 percent in 2012, partly due to a weak global economy, a senior Chinese foreign exchange official said on Tuesday, backing market expectations that the world’s No. 2 economy is set for a mild easing. But even as the economy cools, Huang Guobo, the chief economist at China’s currency regulator, the State Administration of Foreign Exchange, told a forum that inflation is still a policy focus for Beijing in coming months. “The Chinese economy is facing serious challenges despite strong growth,” Huang said. http://www.reuters.com/article/2011/09/06/us-china-economy-safe-idUSTRE7850F020110906

Australian banks will need to meet new global capital rules ahead of the internationally agreed timetable under proposals made on Tuesday, although the move is unlikely to force any of them to raise any new equity immediately. The new Basel III rules, aimed at preventing another global banking crisis, require lenders to hold more capital aside in the form of equity, reserves and retained earnings in case of a sharp economic downturn. http://www.reuters.com/article/2011/09/06/us-australia-banks-idUSTRE78501D20110906

Bloomberg.com
German Chancellor Angela Merkel told members of her Christian Democrats that Greece will not receive aid payments due this month unless it meets conditions of the rescue, two party officials said. The remarks, made at a meeting of ruling party lawmakers in Berlin late yesterday, were repeated by Finance Minister Wolfgang Schaeuble and reiterate existing policy, one of the officials said, speaking on condition of anonymity because the talks were in private. http://www.bloomberg.com/news/2011-09-05/merkel-said-to-tell-cdu-members-that-greece-must-meet-conditions-for-aid.html

Hurricane Katia “strengthened considerably” to a category 4, the second-highest level, as it churned over the Atlantic, the National Hurricane Center said. Katia had maximum sustained winds of 135 miles (215 kilometers) per hour, according to an advisory at 11 p.m. New York time yesterday. The system was about 450 miles south of Bermuda traveling northwest at 10 mph. http://www.bloomberg.com/news/2011-09-06/hurricane-katia-strengthens-to-category-4-travels-in-northwest-direction.html

The number of chief executive officers cutting profit forecasts fell 38 percent below average last month, even as the slowing economy pushed valuations to the lowest level at the start of September since 1985. A total of 138 companies reduced earnings forecasts in August, compared with the average of 221 for the same month since 2000, according to data compiled by Bloomberg. At the same time, the Standard & Poor’s 500 Index slumped 5.7 percent, pushing its price-earnings ratio to 13.3, the data show. Futures on the S&P 500 that expire this month fell as much as 2.8 percent today.http://www.bloomberg.com/news/2011-09-06/ceos-cutting-forecasts-fall-38-with-s-p-cheapest-in-september-since-1985.htmlCnbc.com

CNBC.com
The current liquidity support measures being used by the European Union to stem the region’s banking and sovereign debt crisis won’t be enough, World Bank President Robert Zoellick told CNBC in an interview on Tuesday. “They’ve tried to pump money into it, they’ve tried in the past month… the ECB bought a lot of bonds. But, I think dealing with these problems through liquidity measures will not be sufficient,” Zoellick said during a visit to Singapore. http://www.cnbc.com/id/44403874

Republican presidential hopeful Mitt Romney will propose a jobs plan to cut corporate taxes, reduce federal regulations and get tough against China on trade. In a column set to appear in Tuesday’s USA TODAY newspaper, the former Massachusetts governor said his plan would consist of 59 proposals, including 10 that he would introduce on his first day in office. http://www.cnbc.com/id/44402688

The austerity measures implemented by British finance minister George Osborne risk pushing the UK economy into recession, Bill Gross, the manager of PIMCO, said in an interview with the Times newspaper. Gross, who manages the world’s biggest bond fund, told the newspaper that a “mid-course correction” of the fiscal plans would lift the economy and should not damage the country’s standing with bond investors. http://www.cnbc.com/id/44225214

NYTimes.com
The German constitutional court could, but probably won’t, throw the euro into chaos when it issues a key ruling Wednesday on Germany’s participation in the rescue mechanism for fiscally troubled euro members. But, analysts say, the judges are likely to impose restrictions on the German government that could make decision making in the zone even more cumbersome than it already is.http://www.nytimes.com/2011/09/06/business/global/german-court-ruling-could-complicate-euro-zone-decisions.html?_r=1&ref=global

Foxbusiness.com
Australia’s current-account deficit narrowed by 3.69 billion Australian dollars ($3.87 billion), or 33%, to A$7.41 billion in the April-June quarter, the Australian Bureau of Statistics reported Tuesday. Exports increased 8% to A$5.83 billion, while imports increased 4% to A$2.98 billion, the ABS said. In seasonally adjusted terms, the net deficit rose 19% to A$10.22 billion in the quarter. This is expected to detract 0.5 percentage points from April-June gross domestic product growth, the ABS said. http://www.foxbusiness.com/2011/09/05/australias-current-account-deficit-narrows/#ixzz1X9A3fRuj

The World Trade Organization’s top court on Monday upheld a prior ruling that the United States has the right to impose additional duties on imports of Chinese tires, U.S. Trade Representative Ron Kirk said in a statement. The WTO decision involves a dispute that began after the U.S. imposed 35% duties in September 2009 after the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers Union complained rising Chinese imports were damaging U.S. producers. The WTO verdict is a “tremendous victory for the United States as well as for American workers and manufacturers,” Kirk said in the release. http://www.foxbusiness.com/2011/09/05/wto-rules-against-china-over-us-tire-tariffs/#ixzz1X9A8ote8

BBC.co.uk
A number of European banks would not survive a cut in the value of their sovereign debt investments, the chief executive of Deutsche Bank has warned. Speaking at a gathering of bank bosses in Frankfurt, Josef Ackermann said he was “stating the obvious”. His comments come as Greece is asking private investors to swap their current Greek bonds for others that pay less interest over a longer term.http://www.bbc.co.uk/news/business-14786589

Europe will not slide back into recession, and the euro remains “strong and resilient”, the president of the European Commission has said.Jose Manuel Barroso added that the Commission and national governments were “doing all it takes” to tackle the debt problems in the eurozone area. His comments came after rating agency Standard & Poor’s (S&P) said last week that the risk of a double dip recession in the eurozone had grown. http://www.bbc.co.uk/news/business-14784180

Telegraph.co.uk
Forty-nine billion pounds was wiped off the value of the UK’s leading shares on Monday following renewed fears over the health of the British economy and concerns over the fate of British banks being sued by US regulators.  The FTSE 100 tumbled 3.6pc – 189.45 points – to close at 5,102.58 after investor confidence was knocked by an unexpectedly sharp fall in services sector growth in August. The Markit/CIPS services purchasing managers’ index fell to 51.1 in August from 55.4 in July, the biggest drop since the foot and mouth crisis a decade ago. Economists were alarmed by the scale of the fall, which had been far larger than expected and triggered fears that the UK is now on course for a double-dip recession. http://www.telegraph.co.uk/finance/financialcrisis/8742841/FTSE-100-sees-49bn-wiped-off-shares-on-euro-fears-and-bank-lawsuit.html

Alarm bells were sounded over prospects for the British economy after growth in Britain’s dominant services sector slowed last month at its fastest pace since the 2001 foot and mouth crisis. The decline in growth increased the likelihood of further stimulus from the Bank of England, economists said. Activity was much weaker than economists had expected, falling to 51.1 in August from 55.4 in July on the Markit/CIPS services purchasing managers’ Index (PMI). It was the second-biggest fall on record, and confounded forecasts for a gentler drop to 54, although it remained above the crucial 50-mark that divides growth from contraction. http://www.telegraph.co.uk/finance/economics/8742519/Services-growth-slows-at-fastest-pace-since-2001.html

Guardian.co.uk
Bank bosses fighting proposals to force them to ringfence their high street operations from higher-risk investment banking businesses have been handed fresh ammunition today with a warning that the suggested split could wipe 0.3% off gross domestic product at a time when economic growth looks increasingly fragile. http://www.guardian.co.uk/business/2011/sep/05/item-club-ringfencing-gdp

Smh.com.au
In leaving its cash rate unchanged at 4.75 per cent today, the Reserve Bank effectively conceded that the next move in rates will be determined by events outside its and Australia’s control. The signs are however that it will cut rates if it gets the room to do so. In its statement announcing that its key rate had been left unchanged for a ninth consecutive month, the Reserve cited a litany of worries. http://www.smh.com.au/business/rates-out-of-rbas-control-20110906-1jvfa.html#ixzz1X9BvSDIJ

Economic data released today poured cold water on expectations tomorrow’s national accounts will reveal a big bounce in economic activity in the june quarter. In short, the seasonally adjusted real-terms figures showed government spending fell and imports grew faster than exports.The 0.4 per cent fall in government spending – mainly the result of falls in capital investment – will trim a tenth of a percentage point from growth. http://www.smh.com.au/business/big-gdp-rise-looks-less-likely-20110906-1jvb2.html#ixzz1X9C14lYi

A global recession is more likely than not as the US and European economies are at “stall” speed, Singapore’s finance minister says. Tharman Shanmugaratnam told a conference that the world has now “entered a phase where there is a self reinforcing cycle” of a loss of consumer confidence, which is leading companies to hold back on investing. “Asia will not be immune to a global slowdown. We are already at stall speed in US and Europe, which means we are now more likely than not to see a recession,” Mr Tharman said. http://www.smh.com.au/business/world-business/global-recession-likely-singapore-says-20110906-1jv8e.html#ixzz1X9C5o7Fm

Russia’s central bank has urged the country’s finance houses to sell stocks and diversify their portfolios in preparation for another European market implosion in the months to come. The bank said it had conducted a stress test showing the country’s banks losing 351 billion rubles ($11.3 billion) from a 20 per cent decline on the main European exchanges – a figure equivalent to more than six months of industry profits. “The main foreign markets threat is not coming from the US and its low (debt) rating, but from the European market,” said Sergei Moiseyev of the central bank’s financial stability department.http://www.smh.com.au/business/world-business/russian-central-bank-warns-of-european-crisis-fallout-20110906-1jurx.html#ixzz1X9CClqRp

Theglobeandmail.com
Will a cut follow the pause? The question of how long Mark Carney will wait before he raises interest rates has shifted to include the possibility he could reduce borrowing costs in the face of a global slowdown. As warning signs for the recovery flash red, Mr. Carney is expected to keep Canadian interest rates on hold this week and could indicate that his year-long pause will continue for several months. http://www.theglobeandmail.com/report-on-business/carney-rate-pause-expected-but-cut-could-follow/article2154036/

Straitstimes.com
European Commission chief Jose Manuel Barroso said he is confident the euro will survive and that the European Union will emerge stronger from the current economic crisis. Speaking as European markets tumbled on renewed fears over the risk of recession and euro zone debt, Mr Barroso expressed confidence that the fiscal consolidation and structural reform efforts underway would work.http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_709928.html

The head of the World Bank on Monday urged China to rebalance its export-driven economy and said taming rising inflation remained the most important challenge for the country in the short term.  Robert Zoellick said the world’s second-largest economy would have to focus more on domestic demand, and warned that the coming months would be a ‘sensitive time’ for many of the major developed economies.http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_709687.html

Xinhuanet.com
South Korean economy is facing high inflation at home and growing external uncertainties from abroad, the finance ministry said Tuesday. “Amid high inflation at home, the economy is faced with downside risks of the global economy and expanding volatilities in the financial markets at home and abroad,” the Ministry of Strategy and Finance said in a so-called Green Book, a monthly report assessing the nation’s economic conditions. “Our economy saw employment continue to improve, but consumer price inflation rose sharply to the 5 percent range with some economic indicators faltering,” the report said. http://news.xinhuanet.com/english2010/business/2011-09/06/c_131102567.htm

Food banks like this one distributed 823,000 free meals to New Yorkers in 2010, up 30 percent from the previous year. Almost a fifth of New York residents are living below the federal poverty level, according to a 2009 study by the U.S. Census Bureau. A 2010 survey by the NYC Hunger Experience concluded that one out of three residents reduced their food intake during the recession to get by financially. http://news.xinhuanet.com/english2010/business/2011-09/06/c_131100867.htm

Retail trade volume in the eurozone rose by 0.2 percent in July compared with the previous month, the European Union’s (EU) statistical bureau Eurostat said on Monday. In July, food, drinks and tobacco dropped by 0.4 percent, while the non-food sector increased by 0.5 percent in the 17-member bloc. Year-on-year, the retail sales index declined by 0.2 percent in the euro area, according to Eurostat.  Revised figures showed retail sales in the eurozone in June rose by 0.7 percent month-on-month and dropped by 0.7 percent year-on-year. http://news.xinhuanet.com/english2010/business/2011-09/05/c_131100620.htm

Cs.com.cn
The fiscal policy would strengthen the goal of anti-inflation to ease the inflation affecting the domestic consumers, especially those mid & low income families, Bai Jingming, the deputy director of the Research Institute For Fiscal Science with the Ministry of Finance, said in a forum recently. Bai Jingming said, China`s fiscal policy tries to ease the inflation affecting the common people through subsidy. The policymakers might enlarge the subsidy scope in the later days. http://www.cs.com.cn/english/ei/201109/t20110905_3044255.html

Thehindu.com
The large-scale illegal mining in Karnataka, which is spilling over to Andhra Pradesh, has started taking its toll, with the first arrests by the CBI of Mr Gali Janardhana Reddy, a mining baron and former Tourism Minister of Karnataka, and Mr B.V. Srinivasa Reddy, Managing Director of Obulapuram Mining Corporation (OMC).  In an early morning swoop on the palatial ‘Kuteera’, residence of Mr Reddy in Bellary town, about 350 km from Bangalore, a 12-member team of the CBI (Central Bureau of Investigation) took into custody Mr Janardhana Reddy. They also questioned his wife Aruna Lakshmi.http://www.thehindubusinessline.com/industry-and-economy/economy/article2425828.ece?homepage=true

Monsoon is now running in ‘surplus’ mode, having precipitated two per cent more than the normal for the season until now. Peninsular and central India has notched up nine per cent surplus while the northwest has run up five per cent in what has been a roller-coaster ride thus far.  EAST IN DEFICIT. East and northeast is slowly falling back into deficit, assessed latest at 16 per cent. The rains have been biased to the west, central and northwest, which is normally a pattern identified with La Nina conditions in the Pacific. West Rajasthan (+44 per cent) and east Rajasthan (+32 per cent) are leading the surplus charts in the northwest, with no other subdivision in the region reaching anywhere near. http://www.thehindubusinessline.com/industry-and-economy/agri-biz/article2427147.ece?homepage=true

Keeping India’s credit outlook unaltered, global rating agency Moody’s on Monday projected the country’s GDP (gross domestic product) growth for the current fiscal at 7.5-8 per cent and cited high domestic interest rates coupled with the current global uncertainties as the near-term factors that could affect its economic expansion. Pegging India’s overall growth for 2011-12 at the same level as estimated by the Reserve Bank of India, Moody’s noted in its annual sovereign credit update on India that the ‘cyclical slowdown’ was unlikely to alter its credit outlook. http://www.thehindu.com/business/Economy/article2427338.ece

The slowdown in the U.S. economy has not seen any immediate pull back on existing projects. Investments into the existing projects are continuing, claims Phaneesh Murthy, Chief Executive Officer of iGATE Patni. Nevertheless, he expects customers to start monitoring more closely investments into newer projects. “My concern is that if the current slowdown persists for another quarter, customers could get into budgeting discussions in a negative environment. If that happens, the IT budgets for 2012 could be impacted and that does not augur well for 2012 for the Indian IT industry,” he said.http://www.thehindu.com/business/companies/article2426557.ece

Economictimes.com
The country’s textiles and clothing exports are expected to touch USD 32.35 billion in the 2011-12 fiscal, Parliament was informed today. “An exports target of USD 32.35 billion has been prescribed for the textiles and clothing sector for 2011-12. During 2010-11, the textiles sector achieved an export figure of USD 26.8 billion,” Textiles Minister Anand Sharma said in a written reply to the Lok Sabha here.http://economictimes.indiatimes.com/news/economy/foreign-trade/textiles-clothing-exports-to-touch-32-35-billion-in-fy12-textiles-minister-anand-sharma/articleshow/9872074.cms

Fin24.com
Nigeria’s central bank plans to diversify its $33bn in foreign exchange reserves away from the dollar by switching a tenth of the stockpile into yuan, underlining the momentum behind China’s drive to internationalise its currency.  “We are looking at anything to start with from 5% to 10% of our reserves,” central bank governor Lamido Sanusi said on Monday. The central bank has already said that it is considering reducing its reliance on the dollar, which economists say accounts for the bulk of its $32.96bn in reserves. The bank does not publish the currency composition of its assets.http://www.fin24.com/Economy/Nigeria-to-put-reserves-into-yuan-20110905

Tehrantimes.com
To prevent a freeze of its foreign reserves Iran withdrew its deposits from foreign banks and allocated 13 billion dollars of that reserves to buying gold and now that value of that gold has tripled.  Bahmani said the central bank bought gold at a price of $656 per ounce and now the price of each ounce of gold has jumped to 1870 dollars and this shows that value of the gold that Iran bought has increased about three times. The central banker also added that value of Iran’s foreign exchange reserves has increased 6.5 billion dollars as the central bank changed some its reserves from dollar to other currencies.http://tehrantimes.com/index.php/economy-and-business/2255-value-of-irans-gold-reserves-triples-cbi-

Khaleejtimes.com
The struggling decade-old Doha Development Round of free-trade talks must not be allowed to collapse, India’s trade minister said on Monday.  The call came as failure threatens the negotiations on expanding the global free trade system by cutting subsidies and barriers for farm produce and reducing import tariffs on industrial goods and services. “We must not allow this round to collapse,” Anand Sharma told a trade gathering also attended by World Trade Organization (WTO) chief Pascal Lamy. http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/internationalbusiness/2011/September/internationalbusiness_September11.xml&section=internationalbusiness

Thetrader.se
From one of the most intelligent minds and the father of Black Swans. Taleb on banks, moral hazard, and bonuses. Don’t forget he is probably rather short the market…. For the American economy – and for many other developed economies – the elephant in the room is the amount of money paid to bankers over the last five years. For banks that have filings with the US Securities and Exchange Commission, the sum stands at an astounding $2.2 trillion. Extrapolating over the coming decade, the numbers would approach $5 trillion, an amount vastly larger than what both President Barack Obama’s administration and his Republican opponents seem willing to cut from further government deficits. http://www.thetrader.se/2011/09/06/the-great-bank-robbery/

Probably one of the better papers on the European situation and the possible solutions, that was presented on The Trader some time ago. With renewed dynamics in the region, a report well worth reading. We see three plausible scenarios in the coming months: http://www.thetrader.se/2011/09/05/europe-on-the-brink-2/

Sell in May…? Once again, we had the usual “this time is different” arguments at the time. Back in May (3 months ago), people couldn’t think clearly, as QE2 was giving Investors a blurry picture. Many were talking of the resilient Economy, and “this time IS different”. But, boy, were they wrong. It is NEVER different. From ING research back in May; http://www.thetrader.se/2011/09/05/sell-in-may-this-time-is-different/

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News That Matters (August 8, 2011)

Monday, August 8th, 2011

FT.com
US Treasury Secretary Timothy Geithner will stay on in the role, despite considering stepping down after the government debt ceiling limit was raised. Mr Geithner confirmed on Sunday that he will remain at his post at President Barack Obama’s request. ”I believe in this president,” http://ftalphaville.ft.com/thecut/2011/08/08/645791/geithner-to-stay-on-as-treasury-secretary/

At least six more Swiss and one Liechtenstein private bank have attracted the attention of US prosecutors investigating whether Swiss bankers helped rich Americans evade tax, the FT reports. The revelations http://ftalphaville.ft.com/thecut/2011/08/08/645746/us-extends-swiss-banking-investigation/

The ECB and G7 gave clear signals on Sunday night and Monday morning that they would intervene in the markets for Italian and Spanish bonds and foreign exchange respectively in an effort to soothe markets http://ftalphaville.ft.com/thecut/2011/08/08/645731/ecb-and-g7-move-to-reassure-markets/

RBS has posted pre-tax loss of $1.1bn as impairments on Greek bonds and Irish mortgages surged, sending its shares to a two-year low in early trade during London markets, Reuters reports. Its investment banking unit saw revenues fall 35 per cent, http://ftalphaville.ft.com/thecut/2011/08/05/644471/rbs-hit-by-big-loss-on-greece-and-ireland/

WSJ.com
Asian markets saw their initial losses deepen in midday trading Monday as investors grew skeptical following the historic downgrade of U.S. debt and moves to shore up European debt over the weekend. Gold also rose to a new nominal record near $1,700 an ounce. But 10-year U.S. Treasury yields fell in midday Asian trading despite worries that the downgrade would trim investor appetite for U.S. debt. By midday, Japan’s Nikkei Stock Average had fallen 2.1%, while Hong Kong’s Hang Seng Index was down 4.1%. Australia’s S&P/ASX 200 shed 2% to a fresh two-year low, and China’s Shanghai Composite fell 3.7%. http://online.wsj.com/article/SB10001424053111904007304576493940024485346.html?mod=WSJ_hp_LEFTTopStories

The first-ever credit downgrade of the U.S. left Wall Street and Washington struggling to come to grips with a new world order.With the U.S. stripped by Standard & Poor’s of its triple-A credit rating, big banks brought in people to staff trading desks over the weekend, and Obama administration officials put a full-court press on skittish investors. Treasury Secretary Timothy Geithner—who agreed to stay through the 2012 election—told NBC News that “S&P has shown really terrible judgment.” http://online.wsj.com/article/SB10001424053111904007304576494691613814326.html?mod=WSJ_Home_largeHeadline

Japan’s current account surplus extended its post-March 11 disaster slide in June as auto, electronics and other manufacturers continued to feel the sting from the devastating earthquake and tsunami, though faster-than-expected progress in rebuilding supply chains is helping the export-driven economy get back on its feet.  The surplus in the current account fell 50.2% to ¥526.9 billion ($6.72 billion) from a year earlier, the fourth straight drop after the disaster, the Ministry of Finance said Monday. But the surplus is on track to rebound, analysts say, as the strong yen and sovereign debt concerns in Europe and the U.S. remain http://online.wsj.com/article/SB10001424053111904140604576495040744530926.html?mo d=WSJEUROPE_hpp_LEFTTopWhatNews

The European Central Bank signaled it would purchase government bonds of Italy and Spain on a large scale, in the most dramatic and controversial escalation of its nearly two-year effort to stem Europe’s unfolding debt crisis. ECB intervention to prop up Italy and Spain is a watershed in Europe’s handling of the financial crisis. The central bank has so far insisted that the main responsibility for action lies with national governments. A decision to buy Italian and Spanish bonds is tantamount to conceding that the euro’s member states are unable or unwilling to respond effectively, turning the ECB into the lead firefighter—and the euro zone’s lender of last resort. That could reshape the future of Europe’s monetary union. http://online.wsj.com/article/SB10001424053111904007304576494323043684518.html?mod=WSJ_hp_LEFTTopStories

Mortgage markets in the U.S., which remain on government life support, could be rattled by the downgrade of the U.S. credit rating, potentially raising borrowing costs for consumers. Given the “sufficiently perilous” state of the U.S. mortgage market, a downgrade “can do nothing but harm the market,” says Karen Shaw Petrou, managing partner of Federal Financial Analytics, a research firm in Washington. “The question is how much?” http://online.wsj.com/article/SB10001424053111904140604576494572068990408.html?mod=WSJ_hp_LEFTTopStories

More than 90 U.S. senators signed a letter to President Barack Obama pressing him to sanction Iran’s central bank, with some threatening legislation to force the move, an outcome that would represent a stark escalation in tensions between the two countries. Such a measure, if effectively implemented, could potentially freeze Iran out of the global financial system and make it nearly impossible for Tehran to clear billions of dollars in oil sales every month, said current and former U.S. officials. http://online.wsj.com/article/SB10001424053111904480904576494463569720404.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Indian software exporter HCL Technologies Ltd. said the historic downgrade of U.S. debt over the weekend may lead to a slowdown in decision-making on technology spending by clients in the world’s largest outsourcing market. Though the downgrade may lead to a slowdown in business in the immediate term, the rating change itself can’t be the sole cause for a dramatic shift in outsourcing, Shami Khorana, president, HCL Americas, said in an interview late Sunday. http://online.wsj.com/article/SB10001424053111904007304576495202794672640.html?mod=WSJASIA_hpp_LEFTTopWhatNews

The U.S. corn crop is in trouble, with a blistering heat wave threatening to stunt growth and leave consumers with higher food bills and food producers with lower profits. The scale of the problem will come into focus on Thursday, when the U.S. Department of Agriculture gives the first crop supply-and-demand projections of the year to include field survey s—rather than just an analysis of statistical trends. The early signs are far from promising, which has helped to propel corn prices back above $7 a bushel, a shift that will likely ripple through farmers, food producers and retailers.http://online.wsj.com/article/SB10001424053111903885604576488421727997158.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Marketwatch.com
Long-end U.S. Treasury prices extended modest losses in Asian trade Monday, lifting yields on the securities after Standard & Poor’s cut U.S. credit ratings by a notch below AAA and the European Central Bank said it will buy bonds to calm contagion fears over euro-zone debt. Yields on the benchmark 10-year notes inched up to 2.576% during Asian trading hours on Monday, extending gains for the first day in seven on Friday. The return on 30-year bonds rose to 3.8884%. Some short-end Treasurys saw their prices rise, however, with yields on the two-year at 0.2798%, down from 0.28% on Friday. http://online.wsj.com/article/SB10001424053111903885604576488421727997158.html?mod= WSJEUROPE_hpp_LEFTTopWhatNews

Reuters.com
Former Federal Reserve Chairman Alan Greenspan on Sunday downplayed the risk of a double-dip recession in the United States, saying its domestic economy was in better shape compared to its European peers. A double-dip recession “depends on Europe, not the United States,” Greenspan told NBC television’s “Meet the Press.” “The United States was actually doing relatively well — sluggish, but going forward — until Italy ran into trouble.” The U.S. econ omy stumbled badly in the first half of 2011 and came dangerously close to contracting in the January-March period, raising fears that the economy was sliding back into recession. http://www.reuters.com/article/2011/08/07/us-usa-economy-greenspan-idUSTRE7761XF20110807

Federal Reserve Chairman Ben Bernanke, an expert on the Great Depression, once promised that the central bank would never repeat its 1937 mistake of rushing to tighten monetary policy too soon and prolonging an economic slump. He has been true to his word, keeping interest rates near zero since late 2008 and more than tripling the size of the Fed’s balance sheet to $2.85 trillion. But cutbacks in government spending may end up having a similarly chilling effect on the economy, and there is little Bernanke can do to counter that. Back in 1937, the U.S. economy had been growing rapidly for three years, thanks in large part to government programs aimed at ending the deep recession that began in 1 929. http://www.reuters.com/article/2011/08/07/us-global-economy-weekahead-idUSTRE77628V20110807

Bloomberg.com
Gold climbed above $1,700 an ounce for the first time after Standard & Poor’s cut the top U.S. credit rating, fueling a slump in equities and the dollar amid concern that the global economy is slowing.  Gold futures for December delivery jumped 3.1 percent to a record $1,702.70 an ounce on the Comex in New York and traded at $1,701.90 at 2:07 p.m. in Melbourne. Silver futures climbed as much as 5.7 percent. Spot gold soared 2.2 percent to $1,700.22 an ounce, also a record. http://www.bloomberg.com/news/2011-08-08/gold-advances-to-record-as-u-s-credit-rating-cut-boosts-demand-for-haven.html

India will be able to sustain its economic growth and the nation’s financial markets can weather “negative sentiments” spreading across the world, Finance Minister Pranab Mukherjee said. “Our growth story is intact and the fundamentals are strong,” Mukherjee told businessmen at an event in New Delhi on Aug. 6. “Our markets have the capacity to withstand the negative sentiments affecting the external world.” http://www.bl oomberg.com/news/2011-08-06/india-s-economy-can-withstand-global-negative-sentiments-mukherjee-says.html

Bill Gross, manager of the world’s biggest bond mutual fund, said Standard & Poor’s showed “spine” by cutting the U.S. debt rating, contradicting Warren Buffett and Legg Mason Inc.’s Bill Miller, who said the rating company erred. “I think S&P has demonstrated some spine; they finally got it right,” Gross said in a Bloomberg Television interview with Tom Keene yesterday. The U.S. has “enormous problems,” he said, referring to the country’s mounting debt. http://www.bloomberg.com/news/2011-08-08/gross-praises-s-p-s-spine-as-buffett-says-rating-company-erred.html

Standard & Poor’s downgrade of the U.S. debt rating curbed demand for the greenback.  The U.S. should avoid letting the dollar weaken or taking fresh monetary steps that may worsen the currency’s depreciation, the Xinhua News Agency said yesterday in a commentary, after S&P cut America’s top credit rating by one level to AA+ on Aug. 5. The People’s Bank of China set its daily fixing 0.23 percent stronger at a record 6.4305 per dollar, the biggest advance since November 2010. The currency is allowed to trade up to 0.5 percent on either side of the official rate.http://www.bloomberg.com/news/2011-08-08/yuan-jumps-most-since-april-on-u-s-rating-downgrade-pboc-s-record-fixing.html

South Australia Premier Mike Rann, the nation’s longest serving Labor party leader, said he plans to leave his position on Oct. 20. The premier announced the date of his departure during a televised news conference today in Adelaide during which he endorsed Education Minister Jay Weatherill as his successor. The October departure is earlier than plans announced by Rann last week while he was traveling in India. http://www.bloomberg.com/news/2011-08-08/south-australia-s-premier-rann-to-step-down.html

Japan escalated its campaign to convince investors that the nation’s post-earthquake challenges mean they shouldn’t pile into the yen as a haven from the turmoil over U.S. and European debt. On his third day in the job, Takehiko Nakao, vice finance minister for international affairs, oversaw currency sales that sent the yen down the most against the dollar since September; it recouped some of the loss today. With Nakao’s boss Yoshihiko Noda this week referring to mid-1990s style intervention as a useful reference, investors may need to brace for further action, according to Gareth Berry, a strategist at UBS AG in Singapore. http://www.bloomberg.com/news/2011-08-04/japan-dusts-off-mr-yen-s-toolkit-as-post-quake-rebound-at-risk.html

Australian stocks plunged, dragging the nation’s key index down more than 20 percent from its April 2010 peak, after Standard & Poor’s cut the U.S. credit rating, fueling concern a global economic recovery will stall. Billabong International Ltd. (BBG), the world’s biggest surfwear maker that gets almost half its sales from the Americas, dropped 3 percent. James Hardie Industries SE (JHX), the No. 1 seller of home siding in the U.S., lost 2.7 percent. BHP Billiton Ltd. (BHP), the world’s No. 1 mining company, sank 3.7 percent after commodity prices tumbled. Commonwealth Bank of Australia, the nation’s largest lender by market value, lost 0.7 percent, paring losses after the Group of Seven nations pledged to support financial stability. http://www.bloomberg.com/news/2011-08-08/australia-stocks-near-20-fall-from-peak-after-u-s-downgrade.html

CNBC.com
Standard & Poor’s may downgrade the long-term credit rating of the U.S. once again in less than three months after sending shockwaves through the bond and stock markets by stripping the nation of its top notch triple-A rating last week, according to an emergency Sunday night conference call for clients of Bank of America Merrill Lynch. http://www.cnbc.com/id/44054807

The U.S. doesn’t deserve a AA-plus credit rating, much less triple-A, commodity bull and noted investor Jim Rogers told CNBC on Monday. Rogers said the country was unlikely to be able to pay off its debt and Standard and Poor’s rating cut had come too late and should have happened long ago. “It seems to me it’s physically, humanly impossible for the U.S. to ever pay off its debt,” Rogers said. “They can roll it over and continue to play the charade, but the U.S. is bankrupt.” http://www.cnbc.com/id/44054257

Washingtonpost.com
China’s stocks fell, dragging the benchmark index down as much as 20 percent from a November high, as the loss of America’s top credit rating fueled concern global economic growth will slow. Jiangxi Copper Co. and PetroChina Co., the nation’s biggest producers of copper and oil, dropped at least 2.4 percent after metals and crude prices slumped. China Cosco Holdings Co. fell to a record low, pacing losses by shipping lines, on concern trade will falter. “The downgrade hammered investors’ confidence in the economic recovery and it will be hard to turn that pessimistic sentiment around,” said Mei Luwu, a fund manager at Lion Fund Management Co. which oversees more than $7.8 billion. http://washpost.blo omberg.com/story?docId=1376-LPL3R21A1I4I01-4U95HGP95RNH7B566D48P0F9ND

BBC.co.uk
Police have condemned a wave of “copycat criminal activity” across London in a second night of looting and disorder following riots in Tottenham. Officers had been attacked and a number of police vehicles had been damaged, the Metropolitan Police said. A Foot Locker shop in Brixton, south London, was set on fire while other nearby stores were looted. Three officers were hurt when a vehicle hit them as they tried to make an arrest in Waltham Forest, east London. http://www.bbc.co.uk/news/uk-england-london-14439970

At least 50 people have died after the Syrian army stormed Deir al-Zour, the largest city in the east and a scene of frequent protests, activists say. Scores of tanks and armoured vehicles are reported to have entered several areas of the city after a heavy bombardment that began before dawn. President Bashar al-Assad has defended his security forces’ deadly crackdown. http://www.bbc.co.uk/news/world-middle-east-14435177

The US economy created 117,000 jobs in July, a better-than-expected outcome, according to the US Labor Department. The figure was better than June’s, which was itself revised up from 18,000 to 46,000.  The overall unemployment rate in July fell to 9.1% from 9.2%. The news helped the Dow Jones share index to close higher. It comes after the index suffered its biggest one-day drop since 2008 on Thursday due to worries about the global economy. http://www.bbc.co.uk/news/business-14420702

Telegraph.co.uk
Debt crisis: Is this the end for the euro? Europe’s leaders, policymakers and bond vigilantes are engaged in a fatal three-way game of brinkmanship. The showdown will see either careers bite the dust or the end of the euro. Somehow, though, the ultimate price will be paid. http://www.telegraph.co.uk/finance/financialcrisis/8686133/Debt-crisis-Is-this-the-end-for-the-euro.html

Bank of England to cut UK growth rate again. The Bank of England is this week set to slash its forecasts for the UK economy once more and signal that interest rates are going nowhere in an attempt to safeguard the fragile recovery in the wake of the continued shock to global markets following America’s credit downgrade. http://www.telegraph.co.uk/finance/economics/8686263/Bank-of-England-to-cut-UK-growth-rate-again.html

Sharp fall in number of first-time buyers. First-time buyers have fallen below 20pc of the housing market in more than half of the regions across Britain as cash-strapped consumers struggle to step on to the property ladder. http://www.telegraph.co.uk/finance/economics/houseprices/8687380/Sharp-fall-in-number-of-first-time-buyers.html

Independent.co.uk
The Bank of England will indicate later this week whether it is open to a fresh round of quantitative easing in the face of ongoing economic headwinds. The central bank will release its quarterly inflation report on Wednesday, which is likely to support the view that interest rates will stay at 0.5 per cent deep into 2012. Howard Archer, economist at IHS Global Insight, said: “The Bank of England is also likely to indicate that it is keeping the door open to more quantitative easing, particularly if the heightened financial turmoil persists.” http://www.independent.co.uk/news/business/news/bank-of-england-will-leave-door-open-for-qe-2333627.html

Smh.com.au
The clouds of economic gloom gathering over the US and Europe could have a silver lining for Australian borrowers – a double rate cut is now predicted for next month. After global shares sustained $2.5 trillion losses last week and US government had its credit rating cut by Standard & Poor’s late on Friday (US time), investors are now pricing in a 50 basi s point cut by the Reserve Bank when its board meets on September 6, according to Credit Suisse data. http://www.smh.com.au/business/double-rate-cut-tipped-for-september-20110808-1ii9g.html#ixzz1UPZOaXao

Job advertisements declined in July suggesting employment growth will moderate in months to come, a survey shows. The ANZ job ads index, which offers a forward indicator of job market strength, fell 0.7 per cent in July following a 3.7 per cent rise in June. Newspaper job ads fell 0.5 per cent to 8318, while internet ads slid 0.7 per cent to 178,833, hinting at looming job market softness through the second half of the year. “This has left the trend for job advertising in slight decline for four successive months,” said Ivan Colhoun, ANZ Head of Australian Economics and Property Research. http://www.smh.com.au/business/job-market-shows-signs-of-softness-2011 0808-1iidr.html#ixzz1UPZaNdXl

Theglobeandmail.com
The development of Canada’s oil sands will single-handedly undo greenhouse gas gains made by weaning the country’s electrical supply off coal, a government study predicts. The Environment Canada forecast of Canada’s carbon output over the next decade casts in stark terms the challenge facing the country as it pursues major energy development at a time of continued global efforts to bat down emissions. http://www.theglobeandmail.com/report-on-business/oil-sands-expected-to-undo-carbon-cuts/article2122227/

Xinhuanet.com
The Chinese government will not lower oil prices for the time being, as conditions for price cuts have not yet been met, the nation’s economic planning agency told Xinhua Monday. The remarks were made by the head of the pricing department of the National Development and Reform Commission (NDRC) in response to claims by the public that China’s current domestic prices fail to reflect falling international crude oil prices. Global oil prices plummeted recently on concerns that the negative impact of a prolonged U.S. debt crisis and fears of a double-dip global recession will sap oil demand.http://news.xinhuanet.com/english2010/business/2011-08/08/c_131035544.htm

The roller-coaster debate over raising the US national debt ceiling finally concluded after the two parties made compromises. The Democratic Party-led administration removed the political restraint of debt default before the general election in 2012, and the Republican Party-led House of Representatives secured a promise to cut government spending over the next decade. The two parties had threatened each other using the interests of global creditors, staging a preview of next year’s general election. Meanwhile, the hidden trouble in the global financial market and economic recovery has temporarily been avoided. http://news.xinhuanet.com/english2010/indepth/2011-08/08/c_131035408.htm

While the Chinese government made it clear that it was unhappy about the possibility that the United States could default on its debt, it was also clear that China’s concerns are not a major factor in US politics. The United States has always been an incredibly insular country. The vast majority of the public has very little interest in or concern for what is going elsewhere in the world, except insofar as it directly affects the US. http://news.xinhuanet.com/english2010/business/2011-08/08/c_131035390.htm

Russia would not review the amount of reserves it holds in U.S. dollars after the United States lost its AAA credit rating, Russian Deputy Finance Minister Sergei Storchak said Saturday. “We will not review it, because there is not much difference between AAA and AA+,” Storchak was quoted by Interfax news agency as saying. Meanwhile, Pavel Medvedev, a member of the State Duma’s financial market committee, told RIA Novosti news agency the U.S. downgrading would not influence Russia. http://news.xinhuanet.com/english2010/business/2011-08/06/c_131033524.htm

Cs.com.cn
France has “total confidence in the solidity of American economy,” the Economy Minister Fracois Baroin was quoted by AFP on Saturday.  “France has a total confidence to the solidity of American economy and its fundamentals, as well as to the determination of American government to implement the educing deficit plan approved by the Congress this week,” Baroin said. His comments came after the rating agency Standard & Poor’s downgraded the US rating from “AAA” to “AA+”, owning to the market concerns over the widening American budget deficit.http://www.cs.com.cn/english/ei/201108/t20110808_2998654.html< SPAN LANG=”sv”>

China is likely to increase benchmark interest rates again in the near term to curb inflation, according to the latest comments by analysts. A let-up of the government’s tightening measures in the third quarter should not be expected, chief economist Li Xunlei of Guotai Junan Securities said rcently. The possibility of more interest rate hikes in the third quarter could not be ruled out, said Li. China’s inflation escalated to a three-year high of 6.4 percent in June. The government is expected to announce July’s consumer price index, the main inflation gauge, this week.http://www.cs.com.cn/english/ei/201108/t20110808_2998637.html

Thehindu.com
Indian stocks plunged deep into the red this morning as the Sensex lost more than 500 points within minutes of the market opening on concerns over the US losing its top-notch credit rating due to mounting debts.  The 30-share benchmark index dropped within minutes of opening to 16,793.07 points, its lowest level since June, 2010, registering a fall of 512 points from its previous close. The NSE’s Nifty was also down by 131 points at 5,079.65 points at 0930 hours, after hitting a low of 5,060.05 points earlier in the morning. http://www.thehindu.com/business/Economy/article2335372.ece?homepage=true

Economictimes.com
To understand the furor over the decision by Standard & Poor’s, the rating agency, to downgrade US government debt, you have to hold in your mind two seemingly (but not actually) contradictory ideas. The first is that America is indeed no longer the stable, reliable country it once was. The second is that S&P itself has even lower credibility; it’s the last place anyone should turn for judgments about our nation’s prospects. http://economictimes.indiatimes.com/news/international-business/america-no-longer-stable-reliable-country-sp-credibility-even-lower-paul-krugman/articleshow/9525022.cms

Yohnapnews.co.kr
South Korean banks have no problems with their foreign currency liquidity conditions, the top financial regulator said Monday, downplaying the significance of a regulatory probe into them.
The Financial Services Commission and its executive body, the Financial Supervisory Service (FSS), have created a task force to look into 12 local lenders’ foreign currency liquidity  conditions and required them to craft contingency plans to brace for global financial turmoil, sparking fears that the industry may be facing problems. http://english.yonhapnews.co.kr/business/2011/08/08/38/0503000000AEN20110808002600320F.HTML

TheMoscowTimes.com
Russian inflation slowed more than economists expected in July as prices for fresh fruits and vegetables declined. Consumer prices advanced 9 percent from a year earlier last month, down from 9.4 percent in June, the State Statistics Service said Friday. The data matched the figure released Thursday by the Central Bank. Prices were unchanged from a month earlier. The Central Bank left interest rates unchanged Thursday for a third month because of slowing inflation and concern that sluggish growth around the world may hurt Russia’s recovery. : http://www.themoscowtimes.com/business/article/inflation-eases-up-thanks-to-fruit-vegetables/441706.html#ixzz1UPcal0t0

TehranTimes.com
Iran has resumed oil swaps with Caspian Sea countries and will deliver the first cargo to buyers in the Persian Gulf in the next 20 days, the director of the international affairs department of the National Iranian Oil Company said here on Sunday. Mohsen Qamsari told the Mehr News Agency that the swap deals are being resumed after a hiatus of nearly five months. At the time, Oil Ministry officials had argued that the oil swaps were not in the national interests. http://www.tehrantimes.com/index.php/economy-and-business/1271–iran-resumes-oil-swaps-

Iran exported over 10 million tons of mineral goods, worth $2.73 billion, during the first three months of the current Iranian calendar year (began on March 21). In comparison to the corresponding figures of the same time span in previous year, the amounts show 68 percent and 9 percent increase in terms of value and weight, respectively, the IRNA news agency reported.  Iran exported $22 billion worth of industrial and mineral goods during the previous calendar year, up 20 percent year on year. http://www.tehrantimes.com/index.php/economy-and-business/1270-irans-quarterly-mineral-exports-up-68

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News That Matters (July 26, 2011)

Tuesday, July 26th, 2011

by thetrader.se

FT.com
The cost of trading US Treasury futures was set to rise on Monday as the CME Group adopted defensive measures given the impasse in Washington over raising the Federal debt ceiling, the FT reports. CMEhttp://ftalphaville.ft.com/thecut/2011/07/26/634126/cme-raises-requirements-on-trading-treasury-futures/

Prince Alwaleed bin Talal, News Corp’s most powerful shareholder after the Murdoch family with 7 per cent of the media conglomerate’s voting shares, has rebuffed calls to change its dual-class share structure or leadership in the wake of the phone-hacking affair. The long-standing friend of Rupert Murdoch http://ftalphaville.ft.com/thecut/2011/07/26/634091/alwaleed-backs-murdochs-on-news-structure/

A deal on the debt ceiling looked further away than ever after Monday night speeches by President Barack Obama and Republican House speaker John Boehner. Mr Obama urged congressional leaders to reach a “fair compromise” over the next few days to avoid a US default http://ftalphaville.ft.com/thecut/2011/07/26/634046/no-title-locked-3/

Anshu Jain and Jürgen Fitschen are set to take over the reins of Deutsche Bank as co-chief executives next May, succeeding Josef Ackermann after his decade in charge of Germany’s biggest bank, reports the FT.http://ftalphaville.ft.com/thecut/2011/07/25/634011/deutsche-bank-announces-co-ceos/

Bank of Ireland has been saved from possible government control by a group of overseas institutional investors that has agreed to buy up to €1.12bn ($1.6bn) of the troubled lender’s shares. Wilbur Ross, the US billionaire, a large Canadian firm and a number of US fund managers are thought to be among the investors that have committed to buy a stake of up to 37.3 per cent in the bank. http://www.ft.com/intl/cms/s/0/db7af348-b6bb-11e0-ae1f-00144feabdc0.html#axzz1TBR7mQo3

German industrial groups are set to add to rising cash piles when they report quarterly results this week, piling pressure on corporate boards to explain how they plan to make best use of their huge liquid resources.Siemens, the industrial conglomerate, and Volkswagen, Europe’s biggest carmaker by sales, are among scores of companies generating large amounts of cash as a result of strong demand in emerging markets for German-engineered goods. http://www.ft.com/intl/cms/s/0/e6ddc964-b3ae-11e0-855b-00144feabdc0.html#axzz1TBR7mQo3

Ing is to sell its insurance operations in Latin America for €2.68bn ($3.85bn) to Colombia’s Grupo de Inversiones Suramericana, the Dutch bancassurer said on Monday. The deal moves ING closer to meeting European Commission demands that it split its banking and insurance operations as a condition for receiving Dutch state aid during the financial crisis. http://www.ft.com/intl/cms/s/0/d356ef94-b695-11e0-ae1f-00144feabdc0.html#axzz1TBR7mQo3

Bank lending to British businesses contracted in June at a faster rate than the average of the previous six months, according to the latest data, sounding a gloomy note ahead of second-quarter growth figures on Tuesday. Economists forecast that the economy expanded by just 0.2 per cent in the three months through June, according to a poll by Thomson Reuters, with expectations ranging from 0.8 per cent growth to a contraction of 0.3 per cent compared with output in the first quarter. Even if the worst predictions are wrong, it is likely that Britain’s economy has broadly stagnated since the end of September 2010, economists noted. http://www.ft.com/intl/cms/s/0/e965c3c6-b69c-11e0-ae1f-00144feabdc0.html#axzz1TBR7mQo3

WSJ.com
Asian stock markets were mostly higher Tuesday amid growing optimism over a possible solution to the U.S. debt ceiling debate, while robust results from Canon and Kao helped support the Japanese market.  Japan’s Nikkei Stock Average rose 0.1%, Australia’s S&P/ASX 200 climbed 0.6%, South Korea’s Kospi Composite added 0.4% and New Zealand’s NZX-50 fell 0.2%. Dow Jones Industrial Average futures were down 16 points in screen trade. http://online.wsj.com/article/SB10001424053111903999904576468943067418936.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Chinese commentators and officials in Asian nations with massive stockpiles of U.S. government bonds expressed confidence Washington would reach a debt deal while fretting that a failure to do so could have dire consequences for the global economy. A U.S. default would trigger major market volatility, raise interest rates, and could “kill off a still-weak economic recovery,” said Zhang Ming, deputy director of the research section for international finance within the Chinese Academy of Social Science, in an essay. http://online.wsj.com/article/SB10001424053111904772304576467731364425182.html?mod=WSJAsia_hpp_LEFTTopStories

Financial markets on Monday began taking seriously the prospect of a downgrade of the U.S.’s triple-A credit rating, which it has held for nearly a century. The new worries came as Republicans and Democrats moved even further apart, pushing separate plans for reducing the nation’s deficit and raising its borrowing limit.  President Barack Obama warned in a televised prime-time speech that with no clear resolution in sight in Congress, the U.S. government is on the brink of a default that could deeply damage the economy. http://online.wsj.com/article/SB10001424053111903999904576468553582790160.html?mod=WSJ_hp_LEFTTopStories

South Korea said Tuesday it will raise electricity charges by 4.9% on average from Aug. 1 to help the nation’s electricity provider, Korea Electric Power Corp., finance its fuel costs, but the move will complicate the struggle to control high inflation. Analysts say further hikes in electricity charges are likely in coming months to help state-run Korea Electric Power, or Kepco, effecthttp://online.wsj.com/article/SB10001424053111903999904576469042850154786.html?mod=WSJASIA_hpp_LEFTTopWhatNews

U.S. Treasury Secretary Timothy Geithner on Monday told Greece’s finance minister that he “welcomed the progress” from Greece in implementing measures for its economic overhaul, the Treasury Department said. In a meeting with Greek Finance Minister Evangelos Venizelos, Mr. Geithner “underscored the need for continued and full implementation of the program,” the Treasury said. “They also discussed the agreement reached by European leaders last week to reinforce the institutions of the euro area.” http://online.wsj.com/article/SB10001424053111903999904576467201581028880.html?mod=WSJAsia_hpp_LEFTTopStories

Marketwatch.com
Gold futures advanced in electronic trading Tuesday, with the precious metal rising $2.90 to $1,615.10 an ounce, with U.S. lawmakers still unable to reach a deal on lifting the debt ceiling. Gold for August delivery hit a fresh record high of $1,624.30 an ounce on Monday and a new settlement high of $1,612.20 an ounce, after U.S. debt talks stalled and Greece’s credit rating was cut again. http://www.marketwatch.com/story/gold-futures-build-on-gains-as-debt-talks-stall-2011-07-26?link=MW_home_latest_news

Benchmark light sweet crude-oil futures edged higher in Nymex electronic trading on Tuesday, up 26 cents at $99.46 a barrel. The gains followed a speech by U.S. President Barack Obama on the current debt standoff in the U.S. Obama said that he’s confident that lawmakers will reach an agreement on the debt ceiling by the Aug. 2 deadline, a situation which would likely support demand for oil.http://www.marketwatch.com/story/oil-futures-edge-higher-in-nymex-electronic-trade-2011-07-26?link=MW_home_latest_news

Greece’s finance minister said Monday the recently agreed European aid package has given his debt-ridden country new momentum to regain its financial footing, while he also brushed off a fresh credit-rating downgrade.  Evangelos Venizelos, speaking at the Peterson Institute for International Economics, said that his country would push forward with a privatization program as it aims for positive economic growth and a primary surplus in 2012. http://www.marketwatch.com/story/greek-finance-minister-brushes-off-downgrade-2011-07-25

Reserve Bank of Australia Gov. Glenn Stevens hit out Tuesday over the way Europe and the U.S. have so far dealt with their sovereign-debt issues. Stevens said “in both the U.S. and European cases, the process of allowing things to go right to the brink of a very disruptive event before an agreement is reached on the way forward has been a source of great uncertainty and anxiety around the world … [and] that anxiety has extended to Australia.” http://www.marketwatch.com/story/australia-slams-us-europe-debt-delays-2011-07-25

Bloomberg.com
Japan’s government aims to complete earthquake reconstruction in the next 10 years to help the nation recover from March’s record temblor.  Finance Minister Yoshihiko Noda said at a press conference in Tokyo today that most of the rebuilding will be completed in five years. The government plans to spend 19 trillion yen ($243 billion) over that period, according to a draft government proposal obtained by Bloomberg News. http://www.bloomberg.com/news/2011-07-26/japan-aims-to-complete-reconstruction-efforts-within-10-years.html

Reserve Bank of Australia Governor Glenn Stevens said the nation’s subdued household spending will likely rebound “at some point” as consumers gain confidence in the sustainability of mining-led growth. “As a better sense of the degree of persistence is gained, people will probably be more confident to spend than perhaps they are just now,” he said today in Sydney. “It is entirely possible that, were some of the current raft of uncertainties to lessen, the mood could lift noticeably, so I don’t think we need to be totally gloomy.” http://www.bloomberg.com/news/2011-07-26/rba-s-stevens-sees-end-to-gloomy-consumer-on-australian-trade-led-growth.html

“The Federal Reserve and the Treasury can work together to generate enough cash probably for the next two or three months to avoid any kind of automatic default on the Treasury debt,” Silvia, who is based in Charlotte, North Carolina, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “There’s a way of getting around this issue for at least another month or two.” http://www.bloomberg.com/news/2011-07-25/u-s-can-avoid-default-at-least-until-september-silvia-says.html

Bank of Korea Deputy Governor Kim Jae Chun said economic growth will pick up in the second half and exports are “pretty strong,” leaving room to concentrate on quelling inflation.  “A possible economic slowdown is not in our list of policy concerns,” Kim, 57, said in an interview in his office in Seoul yesterday. “The economy will pace up in the second half on a year-on-year basis.” http://www.bloomberg.com/news/2011-07-26/bank-of-korea-s-deputy-kim-sees-rebound-even-as-debt-crisis-clouds-outlook.html

House Speaker John Boehner said he made a “sincere effort” to work with President Barack Obama on a plan to raise the debt limit, and he said the president created the “crisis atmosphere” surrounding the issue. “The president has often said we need a ‘balanced’ approach — which in Washington means: we spend more, and you pay more,” Boehner said in response to Obama’s televised speech tonight. “The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today. This is just not going to happen.” http://www.bloomberg.com/news/2011-07-26/boehner-says-he-made-sincere-effort-to-work-with-obama-on-debt.html

The Government of Singapore Investment Corp., the city’s sovereign wealth fund, said the investment environment remains “challenging” as inflation risks increase and the recovery of developed nations falter. GIC, manager of more than $100 billion of Singapore’s reserves, said in its annual report today that it boosted investments in emerging economies to tap their potentially higher returns, and cut back in Europe and the U.S.http://www.bloomberg.com/news/2011-07-25/economic-climate-still-challenging-gic.html

CNBC.com
Can a bailout fund whose backers include some of the countries it may be called upon to bail out really succeed? That’s the question being asked by skeptical investors about the European Financial Stability Facility— the rescue fund of 440 billion euros, or $632 billion, that is being given new, amplified powers to help the euro zone end the sovereign debt crisis. http://www.cnbc.com/id/43880026

NYTimes.com
But in fact, Indian exports of goods are now nearly double exports of services, growing 37.5 percent, to $245.9 billion, in the 12 months that ended in March. Leading the way are high-value products like industrial machinery, automobiles and car parts, and refined petroleum products. Indian exports are following a different path from that taken by other Asian countries like Japan, Korea and China. Those countries started by exporting products like garments and toys made by large numbers of low-paid, low-skilled workers, before moving to more sophisticated products like cars and industrial machinery.http://www.nytimes.com/2011/07/26/business/media/manufactured-goods-lead-surge-in-indian-exports.html?_r=1&ref=global

Foxbusiness.com
The United States can’t default on its debt obligations, House Speaker John Boehner said Monday night, minutes after President Barack Obama urged leaders in Congress to compromise and send him a bill to cut the deficit and raise the debt ceiling. Boehner called for “significant” spending cuts and said the House will pass a bill this week that cuts spending by $1.2 trillion over 10 years and raises the debt limit.http://www.foxbusiness.com/2011/07/25/boehner-says-us-cant-default-on-debt/#ixzz1TBWuNXDD

BBC.co.uk
South Korea’s ambitions to enter the Indian energy market have received a big boost as the two countries signed a civil nuclear deal. The agreement will allow South Korea to export its nuclear energy technology to India.  The deal comes at a time when India has been struggling to keep up its energy supply to meet the increased demand in wake of its rapid expansion. South Korea is the ninth country to sign a nuclear deal with India. http://www.bbc.co.uk/news/business-14287086

UK growth figures published on Tuesday are expected to show that the UK economy slowed between April and June. They may even show it contracted, some analysts forecast, after growth of 0.5% in the first quarter. A weak figure from the Office for National Statistics will put pressure on the government to boost growth. But Chancellor George Osborne has said that it is important for the government to stick to its economic plan “in a world of very great uncertainty”. http://www.bbc.co.uk/news/business-14275637

Telegraph.co.uk
Weak growth is putting Britain’s precious AAA sovereign credit rating at risk, experts have warned ahead of Tuesday’s lacklustre GDP figures. The economy stalled in the six months to March and data this morning are expected to show sluggish growth of just 0.2pc for the quarter to June, half the level predicted by the Office for Budget Responsibility (OBR). Zero growth in the three months to June or a slow third quarter could cost the UK its gold-plated rating, economists now fear. http://www.telegraph.co.uk/finance/economics/8660752/Weak-UK-growth-puts-AAA-rating-at-risk-experts-warn.html

Independent.co.uk
The Greek bailout has increased, rather than decreased, the danger that Europe’s debt crisis could spread to Spain and Italy, Moody’s warned yesterday as it significantly cut Greece’s credit rating and said a default appeared inevitable. Although the credit ratings agency stopped short of naming Spain and Italy, Moody’s was referring to them when it said that for some “non-Aaa sovereigns with high debt burdens or large budget deficits… the negatives will far outweigh the positives and weigh on ratings in the future”. http://www.independent.co.uk/news/business/news/greek-bailout-could-worsen-eu-debt-crisis-warns-moodys-2326054.html

Smh.com.au
The release of quarterly inflation data tomorrow is likely to fire up the debate about just how expensive, or cheap, life has become. Despite the rise in consumer prices expected to come in at 3.4 per cent for the June quarter, after travelling at 3.3 per cent in the March quarter, many Australians remain unconvinced that price increases at those levels reflect their own experience. http://www.smh.com.au/business/inflation-perceptions-go-bananas-20110726-1hxwq.html#ixzz1TBa9ANrE

Cs.com.cn
There are 113 listed companies published the semi-year reports by date of July 26, among which 85 listed companies declared their net profit rising, covering 75.22 percent, said Wind, a market researcher based in Shanghai today. The 85 companies announced average profit rising 223.83 percent while another 28 listed companies reported losing or profit declining. http://www.cs.com.cn/english/ei/201107/t20110726_2980300.html

The surplus of Chinese banks’ foreign exchange from bank-to-client transactions reached 273.7 billion U.S. dollars in the first half of 2011, the State Administration of Foreign Exchange (SAFE) said in an online statement yesterday. During the period, institutional and individual clients sold 788.2 billion U.S. dollars in foreign exchange to banks while purchasing 514.4 billion U.S. dollars, the.
More foreign currencies were sold than bought through Chinese banks over the May-to-June period as the yuan continued to appreciate, resulting in 43 billion U.S. dollars of foreign exchange surplus in June compared with 51.9 billion U.S. dollars in May, the statement said. http://www.cs.com.cn/english/ei/201107/t20110726_2980297.html

Xinuhanet.com
China’s registered urban unemployment rate was 4.1 percent at the end of June, with 9.08 million people registered as unemployed, the Ministry of Human Resources and Social Security said on Monday. The unemployment rate was unchanged from that at the end of first quarter, spokesman Yin Chengji said at a press conference. The country created 6.55 million job opportunities in the first six months of the year and helped 2.9 million laid-off workers get re-employed, Yin said. http://news.xinhuanet.com/english2010/china/2011-07/25/c_131008006.htm

U.S. President Barack Obama warned Monday night that failure to compromise and raise the debt ceiling would severely harm the world’s largest economy as Washington is running out of time to avert an unprecedented default by Aug.2. “If we stay on the current path, our growing debt could cost us jobs and do serious damage to the economy,” Obama said in a televised speech to the nation. He said “both parties have responsibilities to solve the problem,” however, there are still two approaches. http://news.xinhuanet.com/english2010/business/2011-07/26/c_131009592.htm

Singapore’s consumer price index (CPI) in June rose 5.2 percent year on year, up from 4.5 percent in May, the Department of Statistics said on Monday. The upward cost pressures were mainly attributable to sectors of transport, housing and food. The cost of transport rose by 10.4 percent, largely due to higher prices of cars and petrol. In particular, the increase in car prices in June partially reflected the lower base effect as car prices dropped in June last year, the department said. The rise in accommodation costs and http://news.xinhuanet.com/english2010/business/2011-07/25/c_131008320.htm

Thehindu.com
Singapore plans to act as a facilitator to bring in China’s savings into the Indian economy and other South Asian countries. Similarly, it has evinced interest in promoting the concept and practices of real estate investment trust (REIT) in India. These were some of the immediate spin-off ideas that emerged during the South Asian Diaspora Convention (SADC), which was held here late last week. Hosting the first-ever global event under the SADC banner, Gopinath Pillai, Chairman of the Singapore-based Institute of South Asian Studies (ISAS), said the conference was designed as a confluence of scholars, businessmen, thinkers and the doers. http://www.thehindu.com/business/Industry/article2293501.ece

Tags: Alwaleed Bin Talal, Anshu Jain, Bank Of Ireland, Barack Obama, Canadian, Class Share, Congressional Leaders, Crude Oil, Defensive Measures, Dual Class, Federal Debt Ceiling, India, Industrial Groups, Institutional Investors, John Boehner, Josef Ackermann, News That Matters, Phone Hacking, Rupert Murdoch, Share Structure, Thecut, Treasury Futures, Wilbur Ross
Posted in Canadian Market, ETFs, India, Markets, Oil and Gas | Comments Off

News That Matters (July 22, 2011)

Friday, July 22nd, 2011

By www.thetrader.se

FT.com
Two former News of the World executives have challenged James Murdoch’s testimony to members of parliament, the FT reports, alleging that he had been informed of a critical e-mail relating to phone http://ftalphaville.ft.com/thecut/2011/07/22/631036/james-murdochs-testimony-challenged/

US president Barack Obama and Republican House speaker John Boehner were on Thursday still struggling to overcome resistance from their respective parties to a debt ceiling deal, the NYT says. The latest talks http://ftalphaville.ft.com/thecut/2011/07/22/631016/democrats-testy-on-latest-debt-talks/

EU’s internal market commissioner says the EU proposal to harmonise capital rules will still allow the UK to ringfence its retail banks. Michel Barnier told the FT that his proposal would split into two jurisdictions so that the UK, http://ftalphaville.ft.com/thecut/2011/07/22/630981/uk-ringfencing-could-go-ahead-says-barnier/
Apple is considering using some of its massive cash pile to bid for Hulu, the online video service, Bloomberg says, citing two people with knowledge of the auction, which began last month. The talks were said to be in Apple an early stage and spokespeople for both companies declined to comment. http://ftalphaville.ft.com/thecut/2011/07/22/630886/apple-considering-hulu-bid/

European leaders have agreed a new €109bn bail-out of Greece under which private bondholders will be called on to participate for the first time, contributing a target of a further €37bn. The FT says deal will almost certainly lead to the first default on eurozone bonds since the creation of the single currency. In addition to the €109bn in new loans from international lenders, http://ftalphaville.ft.com/thecut/2011/07/22/630836/eu-leaders-agree-greek-bailout-terms/

Speculation about the content of a second Greek bail-out package has delivered a brutally volatile session, with the euro and European bank stocks falling on fears of a selective default by Athens before rallying sharply again in the belief that the EU was finally getting to grips with the eurozone’s fiscal difficulties, http://ftalphaville.ft.com/thecut/2011/07/21/630801/euro-jumps-on-greek-hopes-in-volatile-session/

Italy and Germany have voiced their opposition to a second release of oil by western nations’ strategic petroleum reserves, a sign that the International Energy Agency might not extend into August the 60m barrels release it ordered for July http://ftalphaville.ft.com/thecut/2011/07/21/630111/oil-rises-on-iea-release-disappointment/

Ericsson’s second-quarter profitability was hurt by contracts in Europe and India, losses at the Swedish telecoms equipment maker’s joint ventures, and higher-than-expected costs for a job reduction plan http://ftalphaville.ft.com/thecut/2011/07/21/630081/ericsson-hit-by-europe-and-india-projects/

Private creditor participation in Greece’s latest rescue programme will be very strictly limited to the Greek crisis and will be specifically excluded as a model for any other eurozone country in financial difficulties. A proposal for bond swaps for all Greek government debt falling due for repayment up to the end of 2019 has emerged as the central element in the scheme, although the eurozone governments now accept that such a plan would almost inevitably trigger a “selective default” declaration by credit rating agencies http://www.ft.com/intl/cms/s/0/185853ee-b3b7-11e0-855b-00144feabdc0.html?ftcamp=rss#axzz1ScNZAlhf

One thing is likely after this week’s negotiations in Brussels: Greece will become the first western developed world country to default in more than 60 years. trategists expect all three main rating agencies to determine that Greece has defaulted, because bondholders will suffer losses whatever plan policymakers decide to adopt involving private creditors. The options are debt exchanges, rollovers or buy-backs. http://www.ft.com/intl/cms/s/0/4bdcccce-b3a6-11e0-b56c-00144feabdc0.html#axzz1ScNZAlhf

With the euro in peril and the US on the brink of bankruptcy, the west seems to have enough to worry about without fretting about cricket. Yet a private dinner, in London on Monday night, was just the latest indication of how global power is shifting from west to east – and how India’s newly rich and powerful elite is throwing its weight around far from home. http://www.ft.com/intl/cms/s/0/52c2fc78-b3cb-11e0-855b-00144feabdc0.html#axzz1ScNZAlhf

Britain has opted out of an ambitious European Central Bank project to streamline Europe’s multiple securities settlement systems, even though the project could eventually help lower the cost of trading in the region’s capital markets. The move comes as the debt crisis in the eurozone has raised questions among some eurosceptic politicians about integration of the UK’s financial system with the region.  http://www.ft.com/intl/cms/s/0/03b6fd5a-b06f-11e0-a5a7-00144feab49a.html?ftcamp=rss#axzz1ScNZAlhf

WSJ.com
Asian shares rose Friday as sentiment improved after euro-zone leaders struck a deal on a second bailout package for Greece, sending banks around the region higher.  Japan’s Nikkei Stock Average tacked on 0.7%, Australia’s S&P/ASX 200 added 0.7%, South Korea’s Kospi rose 0.4% and New Zealand’s NZX-50 was up 0.4%.  Dow Jones Industrial Average futures were down two points in screen trade. http://online.wsj.com/article/SB10001424053111903461104576460861280995414.html?mod=WSJASIA_hpp_LEFTTopWhatNews

President Barack Obama and House Speaker John Boehner are moving toward a deficit-reduction deal that could cut as much as $3 trillion in spending and overhaul the tax code by the end of next year to raise up to $1 trillion, according to people familiar with the talks. Until now, Republicans have shot down every proposal that involved higher taxes. But Democrats could be the major obstacle to this package because they worry that upfront spending cuts would be ironclad while any tax increases would be subject to later agreement. http://online.wsj.com/article/SB10001424053111903461104576460003775319310.html?mod=WSJAsia_hpp_LEFTTopStories

The Federal Reserve Bank of New York again is facing scrutiny over stockholdings held by a senior official during the 2008 financial crisis. Then-New York Fed President Timothy Geithner issued a waiver that allowed William Dudley—executive vice president of the regional Fed bank’s markets group—to work on the controversial bailout of American International Group Inc. even though he held shares in the company, according to a congressional audit report released Thursday. http://online.wsj.com/article/SB10001424053111904233404576460643538406116.html?mod=WSJASIA_hpp_LEFTTopWhatNews

When Google Inc. launched its Google+ social-networking site three weeks ago, executives handed out sailor hats to the hundreds of employees working on the project, symbolizing their year-long journey to that point. So far, the sailing has been mostly smooth. On Wednesday, Web-traffic watcher comScore Inc. estimated Google+ has had 20 million unique visitors since its launch, including five million visitors from the U.S. A Google spokeswoman declined comment.  http://online.wsj.com/article/SB10001424053111904233404576460394032418286.html#ixzz1So5BlInB

After a series of missteps, Morgan Stanley found its footing in the second quarter, generating its highest quarterly revenue since 2007 and overtaking rival Goldman Sachs Group in bond trading for the first time since the financial crisis. The New York investment bank’s surprise performance was driven partly by its decision to take on more risk when trading on behalf of clients during the quarter—a move that contrasts with Goldman’s risk-aversion during the same period. http://online.wsj.com/article/SB10001424053111903461104576459583979243892.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Cotton prices, which surged to historic highs this spring, have plunged 38% so far this month, roiling mill owners and apparel makers. It’s a reversal for clothing makers that spent the last year grappling with higher costs and how much, if any, could be passed along to consumers. Now, retailers are wondering if lower cotton prices, off 53% since their March 4 peak, will last or if the roller-coaster ride will continue. “There’s never been this kind of volatility in cotton—ever,” Eric Wiseman, chief executive of VF Corp., the world’s largest apparel company, said in an interview on Thursday.  http://online.wsj.com/article/SB10001424053111903554904576458270983393048.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Alabama’s troubled Jefferson County faces an 80 percent chance of declaring bankruptcy, one of its commissioners said on Thursday, as U.S. experts gathered to discuss the implications of a possible Chapter 9 filing. Another commissioner said the county has yet to hear a response from creditors over its proposal that $1.3 billion be shaved off its crippling $3.2 billion sewer bond debt as part of a settlement to avoid what would be the largest municipal bankruptcy in U.S. history. http://www.huffingtonpost.com/2011/07/21/jefferson-county-alabama-bankruptcy-municipal_n_906016.html

Marketwatch.com
Thirty non-U.S. firms to accept a debt exchange of Greek bonds as well as a still-undetermined-sized buyback, according to the Institute of International Finance. All instruments will be priced to produce a 21% Net Present Value loss based on an assumed discount rate of 9%. “Not withstanding the progress made by Greece during the last one and a half years, the scale of Greece’s economic imbalances and the inefficiencies that have been embedded in its economic structures require a special approach that can enhance debt sustainability and restore confidence in the future of the Greek economy,” they said in a statement. http://www.marketwatch.com/story/30-international-firm-sign-up-to-greek-bond-swap-2011-07-21

Reuters.com
Gold steadied below $1,600 on Friday, as Europe’s sweeping new action on the debt crisis and signs of progress on a U.S. deficit reduction deal sapped some

safe-haven demand. But lingering uncertainty over the U.S. debt talks supported sentiment. Spot gold edged up 0.2 percent to $1,590.71 an ounce by 0040 GMT.

U.S. gold GCcv1 inched up 0.3 percent to $1,591.40. http://www.reuters.com/article/2011/07/22/markets-precious-idUSL3E7IM02520110722

A humbled John Paulson told investors on Thursday he was “too aggressive” with some of the stock bets in his flagship funds and he is trimming back some of his riskiest holdings. The hedge fund manager told clients in a conference call that he was dialing back the risk by moving away from bank holdings with heavy mortgage exposure. http://www.reuters.com/article/2011/07/21/us-hedgefunds-paulson-idUSTRE76K5MQ20110721

The number of Americans filing new claims for unemployment benefits rose more than expected last week, pointing to a labor market that is struggling to regain momentum. Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 418,000, the Labor Department said on Thursday. Economists polled by Reuters had forecast claims rising to 410,000 from a previously reported 405,000. http://www.reuters.com/article/2011/07/21/us-usa-economy-idUSTRE7662I420110721

Standard & Poor’s reiterated on Thursday it sees a real risk that future U.S. government deficits may meaningfully miss discussed targets and that there is a 50-50 chance the U.S. AAA credit rating could be cut within three months, perhaps as soon as August. The deficit reduction debate is coming up against an August 2 deadline when the $14.3 trillion limit on America’s borrowing capacity is exhausted, putting in jeopardy payments on U.S. Treasury debt as well as paychecks for federal employees and soldiers. http://www.reuters.com/article/2011/07/21/us-usa-ratings-sandp-idUSTRE76K3TU20110721

Bloomberg.com
Facebook Inc., the world’s biggest social network, is coming under the scrutiny of Australia’s attorneys general who are considering proposals to regulate the website, including raising the age limit of those allowed to join and ensuring parents have access to their children’s pages. The proposals were raised by South Australia’s Attorney General John Rau at a two-day meeting in Adelaide of the country’s top law enforcement officials that began yesterday. They include requiring Facebook to verify ages of people creating an account and restricting access to those 18 years of age and over. http://www.bloomberg.com/news/2011-07-22/australia-considers-facebook-age-limit.html

Looking beyond the debt-limit shenanigans preoccupying Washington, the big issue for the U.S. economy is long-term unemployment and what to do about it.  President Barack Obama is always hawking some kind of jobs plan, whether it’s training more engineers, enticing businesses with short-term hiring incentives or creating yet another commission to study the issue. On the Republican side, House Speaker John Boehner is fond of beginning his press statements with the question, “Where are the jobs?” The implication is that the GOP has a better jobs plan than the president’s $830 billion fiscal stimulus. (There are 1.3 million fewer private-sector workers today than when the American Recovery and Reinvestment Act was passed in February 2009.)  http://www.bloomberg.com/news/2011-07-21/ailing-u-s-economy-seeks-jobs-doc-with-magic-rx-caroline-baum.html

NYTimes.com
Sales of Microsoft’s core Windows computer operating system continued to erode for the second consecutive quarter as consumers shifted away from PCs to tablets. The software giant’s mixed financial results, reported Thursday, showed a company struggling with the muted demand for computers while winning strong sales for Xbox 360 and products for business customers. “We felt like it was a very solid close to a very solid fiscal year,” Peter Klein, Microsoft’s chief financial officer, said in an interview.  http://www.nytimes.com/2011/07/22/technology/microsoft-posts-mixed-results-in-4th-quarter.html?_r=1&ref=global

Telegraph.co.uk
Britain’s public sector borrowed more in June than it did a year earlier, highlighting the difficulties the Chancellor faces in hitting his target to shrink the annual overshoot in spending. The public sector borrowed £14bn last month, the Office for National Statistics reported, an increase on the £13.6bn seen a year earlier and disappointing market expectations for a fall. The rise mainly reflected the fact that central government spending was £2.3bn up the previous year, while receipts from taxes and other income grew only £2.1bn. http://www.telegraph.co.uk/finance/economics/8652170/UK-borrowing-climbs-in-June.html

Retail sales returned to growth last month after stores started their summer sales early to lure cautious consumers.  Sales including fuel bounced back with a modest 0.7pc growth in June. In May they dropped a revised 1.3pc, according to Office for National Statistics (ONS) figures released on Thursday.  The monthly increase was led by household-goods stores, where sales jumped 2.6pc. However, the rise was not enough to make up for May’s decline. http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8653085/Retail-sector-grows-as-shops-start-summer-sales-early.html

Rising utility and food bills have prompted the Bank’s Monetary Policy Committee (MPC) to raise its expectations for inflation. The outlook for inflation looks grim – especially for the 70pc of consumers that are already cutting back on everyday expenses such as food and petrol, according to a survey, by Brewin Dolphin, the private client investment manager. The Bank of England had hoped that it would soon start to fall nearer to its 2pc target, but the minutes of the Monetary Policy Committee published this week suggest otherwise. http://www.telegraph.co.uk/finance/personalfinance/consumertips/8651299/70pc-of-consumers-cut-back-as-inflation-bites.html

Independent.co.uk
britain’s banks are still lending less money to businesses, the Bank of England warned yesterday, publishing figures which showed that two years’ of declines continued over the second quarter of 2011. Lending to business fell at an annualised rate of 3.7 per cent over the three months to the end of June, the Bank said, despite the promises of the banking sector, under the Project Merlin agreement, to make finance more widely available. http://www.independent.co.uk/news/business/news/lenders-still-failing-to-help-firms-bank-says-2318450.html

Smh.com.au
Brent crude futures rose as Europe’s sweeping new action on the debt crisis and signs of progress on a US deficit reduction deal offset weak economic data from the world’s second largest oil consumer, China.The International Energy Agency’s decision to not release more oil from emergency reserves also supported prices. Brent for September rose 29 cents to a low of $US117.80 a barrel, after reaching a high of $US118.17 earlier. US crude was up 29 cents at $US99.42 a barrel, headed for a 2 per cent rise this week, its fourth straight weekly gain. http://www.smh.com.au/business/markets/brent-rises-on-debt-plan-iea-decision-20110722-1hrha.html#ixzz1SoBjlA9X

Import and export price figures show the terms of trade most likely hit a new high in the June quarter. The terms of trade is an index of the ratio of export prices to import prices. High export prices boost domestic income and encourage investment in export industries, while lower import prices mean the buying power of the nation’s income is boosted even more. The figures from the Australian Bureau of Statistics (ABS) on Friday showed the export price index rose by 6.0 per cent in the June quarter while import prices rose by 0.8 per cent. Over the year to June, the export price index was up by 10.5 per cent, while the import price index actually fell back by 1.0 per cent.   http://www.smh.com.au/business/terms-of-trade-hit-new-high-20110722-1hs4n.html#ixzz1SoBVgRke

Xinhuanet.com
Bank of China (BOC), a major state-owned commercial lender, said Thursday that it has provided more than 12 billion yuan (1.9 billion U.S. dollars) of loans to support Tibet’s development over the past ten years. These loans have made possible the much-needed assistance to the development of the region’s transportation, telecommunications, energy, and water-related infrastructure sectors. They have also boosted the mining, tourism, Tibetan medicine and ethnic handcraft industries in the southwestern region, said a statement publicized Thursday on the BOC’s website. http://news.xinhuanet.com/english2010/china/2011-07/21/c_131000905.htm

China’s consumer prices will likely fall in the second half of the year, trimming growth of the consumer price index (CPI) to 4 percent by the year’s end, the Bank of Communications said in a report Thursday. The bank forecast the rise of CPI, the main gauge of inflation, would be controlled at around 5.2 percent from a year earlier this year. The report attributed the weakening inflation mainly to tighter liquidity, slower economic growth, lower international commodity prices and adequate grain supplies. http://news.xinhuanet.com/english2010/china/2011-07/21/c_131000629.htm

Recovery from the financial crisis still had a long way to go in spite of the economic growth, U.S. Federal Reserve Chairman Ben Bernanke said Thursday. “Nearly three years later, the recovery from the crisis in the United States and in many other countries remains far from complete,” Bernanke said in a testimony to a Senate panel. He said the financial crisis of 2008-2009 was unprecedented in its scope and severity, adding federal regulators would finalize some of the rules for the financial reform act during this summer. http://news.xinhuanet.com/english2010/business/2011-07/21/c_131000948.htm

Thehindu.com
Food inflation eased marginally to 7.58 per cent for the week ended July 9 from 8.31 per cent in the previous week owing to a fall in prices of pulses even as other edibles such as vegetables, cereals, fruits and milk continued to rule at higher levels. The WPI weekly data on food and other primary articles revealed that the fall in food inflation despite the rise in prices may perhaps be just a statistical anomaly owing to high base effect as the rate of price rise in the like week a year ago was at a high of 19.52 per cent. http://www.thehindu.com/business/Economy/article2281238.ece

India achieved tenth rank in export of services worldwide, while emerged as the 20th biggest merchandise exporter in 2010, according to a latest WTO report. In 2009, the country stood at the 12th and 22nd position globally in services and goods exports, respectively. In value terms last year, India exported services and merchandise worth $110 billion and $216 billion, respectively, the ‘World Trade Report 2011′ said. http://www.thehindu.com/business/Economy/article2282331.ece

Encouraged by moderation in food inflation to 7.58 per cent for the week ended July 9, Finance Minister Pranab Mukherjee on Thursday expressed hope that price situation would improve in the days ahead. “If this declining trend continues, I do hope it will have a moderating influence on the price front,” Mr. Mukherjee told reporters here. His comments came after food inflation fell to a three-week low of 7.58 per cent for the week ended July 9 on the back of cheaper pulse prices and a high base last year. http://www.thehindu.com/business/Economy/article2281428.ece

Yonhapnews.co.kr
South Korea’s imports of leisure products jumped during the first half of this year as demand for equipment for camping and other family activities increased, customs data showed Friday. According to the data by the Korea Customs Service, South Korea imported US$198 million worth of leisure products during the January-June period, up 26.8 percent from a year earlier. http://english.yonhapnews.co.kr/business/2011/07/22/33/0503000000AEN20110722004100320F.HTML

Themoscowtimes.com
Billionaire Alexander Lebedev denied an interest in acquiring Rupert Murdoch’s defunct News of the World but said he wanted to publish a similar newspaper in Russia. Lebedev, whose media assets include three British newspapers and Novaya Gazeta, was quoted by Bloomberg as saying in an interview this week that he “half-jokingly” wished to remake News of the World under the brand World News and use it to expose corruption by rich and powerful people.  http://www.themoscowtimes.com/business/article/lebedev-plans-own-news-of-the-world/440907.html#ixzz1SoETQpq5

Russia may be able to balance its budget this year thanks to higher oil prices and a growing economy, Prime Minister Vladimir Putin said after the surplus widened in June. “We hope the deficit this year will be minimal, and perhaps we’ll be able to make it through this year without one,” Putin told a government meeting in Moscow on Thursday. The government expects deficits in 2012-14 and will need “strenuous work” to rein in costs. The federal budget surplus surged to 640.2 billion rubles ($23 billion) through June, equivalent to 2.7 percent of gross domestic product, the Finance Ministry said Thursday on its web site. The surplus in June widened to 5.9 percent of GDP from 5.3 percent a month earlier. http://www.themoscowtimes.com/business/article/putin-sees-high-oil-prices-balanced-budget-this-year/440909.html#ixzz1SoEctW99

Fin24.com
Pretoria – The Reserve Bank left its repo rate unchanged as expected on Thursday, saying a forecast that inflation would now breach its upper target level by year-end was balanced by risks to fragile economic growth. The dovish tone of Governor Gill Marcus’s statement, which suggested monetary policy could remain accommodative this year, led government bonds to extend gains, pushing yields to their lowest levels in about two weeks. The Bank’s monetary policy committee (MPC) has now left rates on hold at its last four policy meetings after a two-year loosening cycle that ended in November 2010 and saw 650 basis points lopped off the repo rate, taking it to an historic low of 5.5%. http://www.fin24.com/Economy/Dovish-Sarb-seen-leaving-rates-on-hold-20110721

Tehrantimes.com
The Organization for Investment, Economic and Technical Assistance Of Iran (OIETAI) has approved 134 million dollars worth of new foreign investment plans in the country, IRIB reported on Wednesday.  OIETAI head Behrouz Alishiri said that the newly approved plans are related to industry and tourism sectors as well as fuel products and packaging industry.
Executing these plans will improve Iran’s economy by increasing job creation, accelerating transfer of technology and developing exports, he added.  http://www.tehrantimes.com/Index_view.asp?code=244462

Inflation in Iran in its last calendar month of Khordad (May 22-June 21) reached 15.4 percent, ISNA news agency reported on Wednesday, quoting Subsidies Reform Organization Chief Behrouz Moradi as saying.  “”According to statistics from the Central Bank of Iran, the inflation rate in the first three months of the current Iranian calendar was 13.2%, 14.2 % and 15.4%, respectively”, Moradi added.  http://www.tehrantimes.com/Index_view.asp?code=244461

via thetrader.se

Tags: Bank stocks, Barack Obama, Cash Pile, Crude Oil, Debt Ceiling, E Mail, Former News, India, Infrastructure, International Lenders, James Murdoch, John Boehner, Massive Cash, Members Of Parliament, Michel Barnier, Murdochs, News Of The World, Nyt, Retail Banks, Single Currency, Target, Thetrader, World Executives
Posted in India, Infrastructure, Markets, Oil and Gas | Comments Off

News That Matters (July 19, 2011)

Tuesday, July 19th, 2011

by http://thetrader.se

All you need to know, for all news continue

Ft.com
US Senate leaders said the chamber will remain in session until agreement is reached over the US debt limit, Bloomberg reports, as President Barack Obama threatened to veto a proposal to require the government to balance its budget as part of a debt deal http://ftalphaville.ft.com/thecut/2011/07/19/626666/us-bipartisan-deal-still-elusive/

Gold burst through $1,600 an ounce for the first time as the eurozone’s escalating debt crisis sent fear through financial markets, the FT reports, taking the metal’s price to a nominal record. Markets turned up the pressure on European leaders ahead of a crunch summit on Thursday http://ftalphaville.ft.com/thecut/2011/07/19/626641/gold-soars-as-investors-head-for-safe-havens/

European leaders are looking at ways to keep Greek banks afloat as part of a new €115bn bail-out plan for Athens, the FT says. The plans could add as much as €20bn to an increasingly costly bail-out planhttp://ftalphaville.ft.com/thecut/2011/07/19/626481/european-bank-tax-discussed/

Despite house prices that remain comfortably below their 2007 peak and interest rates at record lows, first-time buyers still find UK house prices unaffordable, according to an analysis by Coutts, the private banking arm of RBS. Carl Astorri, http://ftalphaville.ft.com/thecut/2011/07/19/626441/first-home-buyers-still-struggling/

Companies are going out of business at a much faster rate than headline figures would suggest, the FT reports, with new data from Companies House raising questions about the anticipated pace of economic recovery. According to data from the Insolvency Service http://ftalphaville.ft.com/thecut/2011/07/19/626416/uk-business-failure-rate-higher-than-thought/

WSJ.com
Asian stock markets were mixed Tuesday, as investors stayed cautious due to ongoing debt jitters in Europe and the U.S., while utilities companies dragged the Tokyo market lower amid growing concerns of electricity shortages. Japan’s Nikkei Stock Average fell 0.5%, Australia’s S&P/ASX 200 was flat at 4475.8, South Korea’s Kospi Composite rose 0.2% and New Zealand’s NZX-50 fell 0.2%. Dow Jones Industrial Average futures were up 39 points in screen trade. In Tokyo, utilities stocks fell amid mounting concerns of electricity shortages after two power companies halted operations at their plants over the extended weekend. http://online.wsj.com/article/SB10001424052702303661904576454802137808760.html?mod=WSJASIA_hpp_LEFTTopWhatNews

Leftist President-elect Ollanta Humala said he would retain the government’s current central bank president, who is known as a tough inflation fighter, a sign of continuity in economic policy that buoyed investors. Keeping Brown University-educated Julio Velarde, the first appointee to be announced by the government that takes over July 28, alleviates some of the uncertainties about Mr. Humala’s economic philosophy that have depressed financial markets and the broader economy for months, analysts said. http://online.wsj.com/article/SB10001424052702303661904576454292811338936.html?mod=WSJ_hp_LEFTWhatsNewsCollection

U.S. Secretary of State Hillary Clinton arrived in New Delhi Monday evening to hold strategic dialogue aimed at strengthening political and economic relations between India and the U.S. During her three-day visit to India, which comes a week after triple bomb blasts in India’s financial capital of Mumbai killed 18 people, Ms. Clinton is expected to hold discussions with Indian leaders on a host of bilateral, regional and international issues. They include, not surprisingly, counter-terrorism, the situation in Afghanistan and Pakistan, civil nuclear energy cooperation, economic progress, defense, trade and environment, U.S. and Indian officials said. http://blogs.wsj.com/indiarealtime/2011/07/19/can-hillary-clinton-jumpstart-india-u-s-relations/

Apple Inc. is getting closer to offering the iPhone through China’s largest mobile carrier, state-owned China Mobile Ltd., giving the company access to hundreds of millions of new customers. The effort is Apple’s latest move in the risky Chinese market, which could play a central role in the company’s growth plans. http://online.wsj.com/article/SB10001424052702304223804576447963332660164.html#ixzz1SWUp1DDm

The Financial Stability Board on Monday said large systemic banks should face an additional capital surcharge of the highest quality in order to prevent a new financial crisis, throwing its weight behind proposals made in June by global banking regulators to increase the resilience of the global financial system. http://online.wsj.com/article/SB10001424052702303661904576454150039990610.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Chinese police “gunned down” several rioters after four people were killed in an attack on a police station in the northwestern region of Xinjiang, the state media reported, in what appeared to one of the most violent incidents in the mostly Muslim area since it was shaken by ethnic rioting in 2009. Two security personnel and two hostages were killed, and one other security officer was injured in the attack, which began around midday Monday in Hotan, a small, remote oasis city on the edge of the Taklamakan desert, the state-run Xinhua news agency said. The agency gave no details of how many attackers were killed or injured. http://online.wsj.com/article/SB10001424052702303661904576453511012413464.html?mod=WSJEUROPE_hpp_sections_world

Marketwatch.com
The minutes of the interest-rate meeting of the Reserve Bank of Australia, released Tuesday, showed that board members adopted a wait-and-see attitude to interest rates before the next reading on consumer inflation. The members said that they believed that they had time to assess the likely strength of inflationary pressures in Australia and that “it would be prudent to use that time.” The rate-setting board said that the next quarterly consumer inflation reading, due out at the end of July, http://www.marketwatch.com/story/australias-rba-says-inflation-reading-to-be-key-2011-07-18

Reuters.com
European governments and banks struggled to reconcile competing proposals for a second bailout of Greece on Monday, three days before leaders meet to prevent the crisis from spreading through the region. The euro zone summit scheduled for Thursday in Brussels is likely to agree on a rescue of Greece, supplementing a 110 billion euro ($154 billion) bailout launched in May last year, a French government spokeswoman said. http://www.reuters.com/article/2011/07/18/us-eurozone-debt-idUSTRE76H2GB20110718

The world economy should expand steadily this year and next thanks mainly to prospering emerging powers, a Reuters poll showed, but fiscal troubles lurking in Europe and potentially the United States risk blowing this view apart. The quarterly survey of more than 350 economists from all over the world showed a dimmer outlook for most of the rich-world Group of Seven economies since the last survey in April.http://www.reuters.com/article/2011/07/18/us-economy-global-poll-idUSTRE76H1FE20110718

Ratings agency Moody’s on Monday suggested the United States should eliminate its statutory limit on government debt to reduce uncertainty among bond holders. The United States is one of the few countries where Congress sets a ceiling on government debt, which creates “periodic uncertainty” over the government’s ability to meet its obligations, Moody’s said in a report. http://uk.reuters.com/article/2011/07/18/uk-usa-debt-moodys-idUKTRE76H0WJ20110718

America’s leading mortgage lenders vowed in March to end the dubious foreclosure practices that caused a bruising scandal last year. But a Reuters investigation finds that many are still taking the same shortcuts they promised to shun, from sketchy paperwork to the use of “robo-signers.” http://www.reuters.com/article/2011/07/19/us-foreclosure-banks-idUSTRE76H5XX20110719

Bloomberg.com
China’s tax revenue rose 29.6 percent to 5 trillion yuan ($773 billion) in the first half of the year, giving officials more room to maneuver as they grapple with swelling local-government debt. The gain, reportedby the Ministry of Finance on its website today, compared with a 32.4 percent increase in the first quarter from a year earlier. “Stable” economic growth and rising company profits helped to bolster revenue, with inflation also playing a role, the ministry said. The fiscal strength that encouraged Standard & Poor’s to raise China’s debt rating in December may help the nation to absorb any fallout from loans going bad after stimulus spending that began in 2008. http://www.bloomberg.com/news/2011-07-19/chinese-tax-revenue-surges-30-countering-risk-from-local-government-debt.html

India loses 14 trillion rupees ($314 billion) from tax evasion annually, depriving it of funds for investment in roads, ports and power, said Arun Kumar, author of “The Black Economy in India.” General government tax revenue totals an estimated 18 percent of gross domestic product, the lowest among the four BRIC nations, and down from an average 19 percent the past five years, International Monetary Fund data show. http://www.bloomberg.com/news/2011-07-18/india-government-sees-growth-imperiled-with-rising-greek-like-tax-evasion.html

Cnbc.com
Treasury Secretary Tim Geithner told CNBC Monday that he is certain that congressional leaders will strike a deal to raise the federal debt ceiling prior to the Aug. 2 deadline to avoid default. “Each side has said definitively that default is not an option,” he said, “They’re not going to play around with this.” “If the United States of America were to default it would be catastrophic for the American economy, for the American financial system, for the average American people, it would be a substantial unfair tax on all Americans and it would bring the world economy … to the edge of recession again,” he said. “There’s no alternative for Congress raising the debt limit and that’s why you’re seeing Republicans as well recognize that reality and take default off the table.” http://www.cnbc.com/id/43792737

Nytimes.com
Germany has long sat at the center of the European economy, but Europe is no longer as central to Germany as it used to be. German companies, instead of concentrating their investment overwhelmingly on countries like France and Italy, are sending a growing proportion of their euros to places like Poland, Russia, Brazil and especially China, which is already the largest market for Volkswagen and could soon be for Mercedes and BMW. http://www.nytimes.com/2011/07/19/business/global/Germany-Europes-Powerhouse-Drifts-East.html?_r=1&ref=global

Foxbusiness.com
Goldman Sachs has cut its forecast for U.S. second-quarter growth to 1.5 percent from 2 percent, citing weak consumer spending. The downgrade follows last week’s raft of weak reports on retail sales, manufacturing and consumer sentiment, which have raised concerns that some of the factors impeding growth are no longer of a temporary nature, as previously thought. A combination of bad weather and high commodity prices slowed economic activity in the first three months of 2011. But growth in the second quarter was also dealt a blow by supply chain disruptions from Japan following the March earthquake.http://www.foxbusiness.com/markets/2011/07/18/goldman-cuts-2q-us-economic-growth-output/#ixzz1SWa0LqEt

Telegraph.co.uk
Portugal’s new leader Pedro Passos Coelho has told the nation to brace for further austerity measures after his government discovered a “colossal” €2bn (£1.7bn) hole in the public accounts left by the outgoing Socialists. Yields on two-year Portuguese debt rose to a fresh record of 20.3pc on Monday, reflecting fears by investors that the country would struggle to pull itself out of downward spiral without some form of debt restructuring. http://www.telegraph.co.uk/finance/financialcrisis/8646189/Portugals-Prime-Minister-Pedro-Passos-Coelho-discovers-colossal-budget-hole.html

Shares in Britain’s largest banks hit 12-month lows as investors took fright at the results of Friday’s European banking industry stress tests. Barclays‘ shares closed down 7pc at 207.65p, while shares in partially state-owned lenders Lloyds Banking Group and Royal Bank of Scotland ended the trading session down more than 6pc. Even shares in Standard Chartered, which did not take part in the exercise, and HSBC, which did but passed with flying colours, were hit, closing the day down 0.8pc and 1.5pc respectively. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8645926/UK-banks-hit-12-month-lows-following-European-stress-tests.html

Australian investment banking group Macquarie, once dubbed the “millionaires’ factory”, may be forced to cut thousands of jobs after its shares slumped to a two-year low. Macquarie’s shares have fallen by around 17pc since June 1, in part because the group appears to be losing market share to competitors. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8645864/Macquarie-urged-to-cut-1000-jobs-as-shares-slump.html

House asking prices have fallen for the first time this year as the number of unsold properties on estate agents’ books reaches record levels, a report revealed today. The average asking price for a home dropped 1.6pc, or £3,797, to £236,597 in July, bringing to an end a run of six months of rises, according to property website Rightmove. Greater competition to attract buyers amid “muted demand” has prompted the largest July fall since 2008 when asking prices fell 1.8pc. http://www.telegraph.co.uk/finance/personalfinance/8644814/Unsold-properties-on-estate-agents-books-hit-record-high.html

Guardian.co.uk
The president of the World Bank, Robert Zoellick, blamed Barack Obama has for the deadlock in global trade talks and called on the White House to show the leadership that would bring almost a decade of fruitless negotiations to a successful conclusion. Amid growing concern that a complete failure in the stymied Doha round could result in a new era of protectionism, Zoellick accused the United States of peddling “excuses” when officials in Washington called the World Trade Organisation’s (WTO) talks structurally flawed. http://www.guardian.co.uk/business/2011/jul/18/world-bank-chief-blames-barack-obama-doha

Straitstimes.com
SINGAPORE’S exports grew weakly in June, confirming that the Singapore economy has slowed down in the second quarter of this year. Singapore’s non-oil domestic exports grew by just 1.1 per cent, dragged down by electronics exports which shrank 17 per cent. But non-electronics exports grew by 12 per cent, led by ships and boats, thus buffering the drop in electronics on export figures. China continued to grow as an important market for Singapore’s exports, with exports to China rising by 12 per cent last month. http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_692135.html

Theglobeandmail.com
Iran warned India it would stop supplying oil from Aug. 1 if a payments dispute is not resolved, the semi-official Fars news agency reported, a move likely to harm the two countries’ annual $12-billion (U.S.) trade. “Iran might stop giving permission to export its oil to India from Aug. 1 if the dispute over receiving payments from India is not resolved,” an unnamed oil official told Fars on Monday.http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_692135.htm

Xinhuanet.com
The world’s biggest dairy company Tuesday announced an expansion of its production in China with an agreement to invest 260 million yuan (40 million U.S. dollars) in its third Chinese dairy farm. New Zealand-based Fonterra, a farmer-owned cooperative, said the agreement with the government of Yutian County, Hebei Province, was the next step in its strategy to build a high-quality and sustainable fresh milk supply for the Chinese market. http://news.xinhuanet.com/english2010/business/2011-07/19/c_13994705.htm

Venezuela will introduce a new law on prices to curb its soaring inflation, Vice President Elias Jaua said Monday. “The regulations aim to set fair prices and limit profit margins according to the income of the population and the companies,” Jaua told a press conference. Jaua said the new law will not affect the private sector, but “the consultation with private companies does not reduce the competence of the national executive of setting prices.” http://news.xinhuanet.com/english2010/business/2011-07/19/c_13994642.htm

Global aid for trade commitments have reached some 40 billion U.S. dollars in 2009, a 60-percent increase from the 2002-05 baseline period, said a World Trade Organization (WTO) report on Monday. According to the report launched by the Geneva-based WTO, disbursements in purpose of aid for trade have been increasing at a constant growth rate of above 10 percent each year since 2006, reaching some 29 billion dollars in 2009, the report said, drawing a conclusion that “past commitments are being met.” http://news.xinhuanet.com/english2010/business/2011-07/19/c_13993203.htm

Thehindu.com
Tata Group Chairman Ratan Tata has cautioned that “self-imposed fiscal prudence” to tackle inflation, mainly in India and China, could cause another global slowdown. Addressing shareholders of group firm Tata Motors in the Annual Report for 2010-11, Mr. Tata said, “Inflation is indeed a lurking enemy of healthy growth and needs to be controlled.” Yet, there was a need to strike a balance between controlling inflation and driving economic growth failing which there could be another global slowdown, he said. http://www.thehindu.com/business/Economy/article2243090.ece

The Tummalappalle uranium mine in the Cuddapah district of Andhra Pradesh has the potential to become the largest uranium mine in the world, according to the Department of Atomic Energy. The earlier estimated reserves at the mine were 14,000 tonnes, but it has since been revised to 49,000 tonnes, said Dr Srikumar Banerjee, Secretary, Department of Atomic Energy, on Monday, during an interaction with the media at a function to mark the start of construction of two nuclear-power reactors at Rawatbhata in Rajasthan. http://www.thehindubusinessline.com/industry-and-economy/article2248276.ece?homepage=true

Economictimes.com
Rising inflationary pressure has forced Indian consumers to cut down spends during the second quarter of 2011, despite optimism about job prospects and the state of personal finances, according to a survey by the Nielsen Company. Though Indian consumers continue to remain the most optimistic globally, their confidence level slipped by 5 points to 126 index points in the second quarter of 2011 from 131 points in the previous quarter. As per the Nielsen Global Online Survey , 56 per cent of the Indians surveyed said it was a good time to buy things they wanted, compared to 61 per cent in the previous quarter.http://economictimes.indiatimes.com/news/economy/indicators/indian-consumer-confidence-declines-in-q2-of-2011-nielsen/articleshow/9270264.cms

Yohnapnews.co.kr
The number of South Korean corporate bankruptcies fell to the lowest level in four months in June as companies’ funding situations remained in good shape, the central bank said Tuesday. The number of companies that went belly-up totaled 109 in June, down 14 from the previous month, according to the Bank of Korea (BOK). The June reading marked the lowest level since a record low of 99 tallied in February.http://english.yonhapnews.co.kr/business/2011/07/19/33/0503000000AEN20110719004100320F.HTML

Khaleejtimes.com
Even after hitting a record high of above $1,600 per ounce on Monday, prospects are that gold price is poised to continue its breathtaking rally to scale loftier heights ranging from $2,000 to $5,000 over the coming few years. The yellow metal, which has time and again rewarded its investors looking for safe havens in times of volatility and uncertainty in the global market, is now set for an 11^th straight year of gains driven by central-bank buying, weaker currencies and increased demand from emerging-market investors on the backdrop of looming debt crises in the world’s biggest economy and the eurozone.http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/business/2011/July/business_July328.xml&section=business

Tags: Asian Stock Markets, Barack Obama, Brazil, Business Failure, Debt Crisis, Debt Deal, Debt Limit, European Leaders, Failure Rate, First Home Buyers, First Time Buyers, Greek Banks, India, Insolvency Service, Record Lows, Safe Havens, Senate Leaders, Thetrader, Tokyo Market, Uk House Prices, Us Senate, Utilities Companies
Posted in Brazil, India, Markets | Comments Off

“Land of the Predictable”: Pimco CEO Warns U.S. Debt Default Might Have “Catastrophic” Effect; Obama’s Hypocrisy

Tuesday, June 28th, 2011

In yet another of the seemingly endless self-serving fear-mongering exercises, Pimco’s El-Erian Says U.S. Debt Default Might Have ‘Catastrophic’ Effect

Pacific Investment Management Co. LLC Chief Executive Officer Mohamed El-Erian said a short-term default by the U.S. on its debt might have “catastrophic” legal consequences.

“We would be in the land of the unpredictable” if lawmakers fail to reach an agreement to raise the $14.3 trillion debt ceiling and the U.S. misses a payment “simply because of the technical linkages,” El-Erian said in an interview on CNN’s “Fareed Zakaria GPS” program, scheduled to air today.

U.S. lawmakers are seeking a path to increasing the debt limit and to cutting at least $1 trillion from the long-term deficit before an Aug. 2 deadline. President Barack Obama plans to hold separate meetings at the White House June 27 with Senate leaders Arizona Democrat Harry Reid and Kentucky Republican Mitch McConnell in an effort to break an impasse that scuttled a seven-week negotiating effort led by Vice President Joe Biden.

“My advice is please try and get together and solve this issue in the context of a medium-term reform package,” El-Erian said. “If you can’t do that and you’re going to kick the can down the road, kick the can rather than face something that could be catastrophic in terms of legal contracts being triggered.”

“So when we look at Treasuries, we see the big buyer stepping away from the market, for certain. And we ask the question, who else is going to be buying at these levels, and we can’t identify another buyer of the size of the Fed.”

El-Erian said the U.S. fiscal problems are dwarfed by those of Greece, whose debt reached 143 percent of gross domestic product last year.

“It is inevitable that Greece would have to restructure its debt,” he said. “Greece has two problems: it has too much debt and it cannot grow. And until these problems are solved, more and more of Europe is going to become contaminated.”

“Land of the Predictable”

I mock the lame fear-mongering excuses of government officials, politicians, and in this case buyers of government and agency debt who do not want to see interest rates rise out of fear of what it would do to the short-term value of their portfolios.

Thus it was entirely predictable that Pimco would issue a “Catastrophic” warning. As for who would buy US government debt, that answer is quite easy to explain: China and Japan would as a function of trade-deficit math, and they would add to that total, as would the UK, Canada, and Europe. El-Erian knows just that (as much as anyone knows anything in the land of the unknowable).

The biggest irony in El-Erian’s statement is Pimco would be a buyer, and so would millions of others if interest rates rose high enough.

Finally, interest rates would come crashing back down as soon as an agreement was worked out and there is no doubt an agreement will be reached sooner rather than later.

The only thing “unpredictable” is the exact nature of that agreement.

Shutdowns Happened Twice Before

Please note that US government shutdowns have happened twice before, in 1995 and 1996 under president Clinton.

The United States federal government shutdown of 1995 and 1996 was the result of a conflict between Democratic President Clinton and the Republican-controlled Congress over funding for Medicare, education, the environment and public health. It took place after Clinton vetoed the spending bill which Congress sent him. Thereupon, the Federal government of the United States put non-essential government workers on furlough and suspended non-essential services from November 14 through November 19, 1995 and from December 16, 1995 to January 6, 1996. The major players were President Bill Clinton and the Speaker of the U.S. House of Representatives Newt Gingrich.

Nothing Catastrophic Happened

Amidst all this fear-mongering by president Obama, Pimco, and others, I calmly point out that nothing catastrophic happened last time, and there is no reason to believe anything catastrophic would happen this time.

President Obama’s Hypocrisy

Inquiring minds just may be interested in knowing Obama’s track record on debt ceilings when he was Senator Obama.

The Obama administration is warning of catastrophic consequences if Congress does not increase the debt ceiling, the legal limit on how much the federal government can borrow, but Barack Obama held a different view on the issue as a senator in 2006.

Five years ago, then-Sen. Obama (D-Ill.) voted against raising the debt ceiling and even spoke about it on the Senate floor before the Republican-controlled Senate voted 52-48 to increase it.

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” Obama said on March 16, 2006. “Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.”

Failure of Leadership

I remind the president “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”

I urge Congress to disregard the self-serving fear-mongering of president Obama and Pimco CEO El-Erian because we have a debt problem and a failure of leadership to do anything about it. Americans deserve better, and the way to do that is to act responsibly on a deficit-reduction package, now, not 10 years from now.

Mike “Mish” Shedlock

http://globaleconomicanalysis.blogspot.com

Tags: Barack Obama, Canadian Market, Chief Executive Officer, Cnn, Co Llc, Debt Ceiling, Debt Default, Debt Limit, Fareed Zakaria, Fear Mongering, Fiscal Problems, Harry Reid, Joe Biden, Legal Consequences, Legal Contracts, Mitch Mcconnell, Mohamed El Erian, Pacific Investment Management Co, PIMCO, President Joe, Senate Leaders
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