Boehner Humiliated, Cancels Vote, Stock Futures Tank; Stocks and Treasuries Unusually Correlated

Friday, July 29th, 2011

by Michael ‘Mish’ Shedlock, Global Economic Trends Analysis

Thursday morning Bloomberg reported House Majority Leader Cantor Predicts House Republicans Will Pass Debt Plan Today

House Majority Leader Eric Cantor predicted Republicans would pass a debt-limit increase plan today as some freshman lawmakers pledged support for the measure in the face of unified Democratic opposition in the Senate.

Vote Cancelled

Kiss that prediction of Cantor goodbye. Thursday evening Republicans put off vote on debt limit because Boehner clearly lacks the votes.

An intensive endgame at hand, Republican leaders abruptly postponed a vote Thursday night on legislation to avert a threatened government default and slice federal spending by nearly $1 trillion.

“The votes obviously were not there,” conceded Rep. David Dreier, R-Calif., after Speaker John Boehner and the leadership had spent hours trying to corral the support of rebellious conservatives.

The decision created fresh turmoil as divided government struggled to head off an unprecedented default that would leave the Treasury without the funds needed to pay all its bills. Administration officials say Tuesday is the deadline for Congress to act.

Senate Democrats stood by to scuttle the bill — if it ever got them — as a way of forcing Republicans to accept changes sought by Obama.

Based on public statements by lawmakers themselves, it appeared that five of some two dozen holdouts were from South Carolina. The state is also represented by Sen. Jim DeMint, who has solid ties to tea party groups and is a strong critic of compromising on the debt issue.

Others said conservatives wanted additional steps taken to try to ensure that a constitutional balanced-budget amendment would be sent to the states for ratification. As drafted, the legislation merely requires both houses of Congress to vote on the issue.

Even before the House voted, Reid served notice he would stage a vote to kill the legislation almost instantly.

“No Democrat will vote for a short-term Band-Aid that would put our economy at risk and put the nation back in this untenable situation a few short months from now,” he said.

Boehner Humiliated

Boehner was humiliated and justifiably so. He had nothing to gain and everything to lose by attempting to ram-rod a gaseous bill through the House that was guaranteed dead-on-arrival in the Senate.

Majority leader Cantor made matters worse by predicting passage.

Stock Futures Tank in Unusual Correlation with Treasuries

Please consider U.S. S&P 500 Futures Retreat as McCarthy Says No Vote on Debt Plan Tonight

Futures on the Standard & Poor’s 500 Index fell after the U.S. House of Representatives postponed a vote to increase the nation’s debt limit, boosting concern that the lawmakers are far from an agreement to avoid default.

S&P 500 futures expiring in September lost 0.8 percent to 1,286.9 at 12:28 p.m. in Tokyo. The decline suggests the U.S. equity benchmark may extend its 3.3 percent slump from the past four days when markets open in New York.

Stocks and Treasuries are moving in tandem twice as often as they normally do, a sign investors are growing convinced the U.S. will lose its AAA credit rating and that an impasse among lawmakers may spur losses in both markets. The S&P 500 has risen or fallen together with 10-year Treasury notes 80 percent of the time in the last 10 days, compared with the average since 2000 of 41 percent, according to data compiled by Bloomberg.

Not Raising the Debt Ceiling Would be Blessing

I am sticking to what I said in Not Raising the Debt Ceiling Would be Blessing; Debt Limit Analysis; Interactive Map, You Decide What Not To Pay

All things considered, especially since Boehner’s credibility is gone in his latest gaseous proposal, the best thing for Congress to do would be to NOT hike the debt ceiling and work out a credible plan over the next month.

Is Mish a “closet Liberal-humanist?”

In response to that post I received a humorous email from “BC” who wrote…

Mish, your choices reveal your empathy! Are you a closet Liberal-humanist?!

Your choices favor the elder working class, the working-class and poor ill, unemployed, poor and “food challenged”, and imperial legionaries and auxiliaries against the corporate-statists!!!

Are you one of those maladjusted working-class types who just doesn’t “get it”?!

Wink , wink ;-) ;-).

To see my choices as to what I would cut and to make your own choices about what to do if the debt ceiling is not raised, click on the above link for an interactive map.

Mike “Mish” Shedlock

http://globaleconomicanalysis.blogspot.com

Copyright © Michael ‘Mish’ Shedlock, Global Economic Trends Analysis

Tags: Balanced Budget Amendment, Bloomberg, David Dreier, Debt Issue, Debt Limit, Debt Plan, Democratic Opposition, Eric Cantor, Federal Spending, Global Economic Trends, Holdouts, Jim Demint, John Boehner, Michael Mish, Mish Shedlock, Party Groups, Republican Leaders, Senate Democrats, Senate Vote, Stock Futures
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New Fall Looks For The Dollar: The Debt Ceiling Collection

Thursday, July 28th, 2011

By EconMatters

After House Speaker John Boehner (R-Ohio) abruptly withdrew from the debt talks with the White House last Friday, the latest development is the dueling proposals from the Republican leader in the House and Democratic leader of the Senate to hopefully get the federal $14.3-trillion debt ceiling lifted.

Nevertheless, Lawmakers remain at odds over how to avoid a debt default. With a fast approaching Aug. 2 deadline, the impasse saga at Washington only serves to sharpen the image of an unprecedented U.S. sovereign default into HD 3D.

Investors’ fear and worries over the potentially devastating default have tanked the equities and commodities, while gold hit a record of almost $1,620/oz. Rather than the conventional risk-off trade–”sell commodities, buy the dollar”– investors threshed the dollar, but still have faith in the U.S Treasury. The U.S. dollar has lost 7% year-to-date, while Treasury has not seen as much pressure, considering the debt fiasco (See Charts Below) Typically, when investors sell the dollar, it pressures the U.S. bond market as well.

Part of the dollar weakness has to do with lots of forex players coming into the market just to short the dollar. Another factor in the diverging behaviors between the currency and bond markets is that more and more people believe the probability of a U.S. sovereign credit downgrade is a lot greater than that of a total debt default.  The resilience of the U.S. treasury is also is a clear indication that the bond market expects the debt ceiling will be raised before the August 2 deadline.

Major rating agencies, including Moody’s, S&P and Fitch, have warned of an imminent downgrade if Washington fails to pass the debt ceiling, which could result in an interest rate spike for the federal and state governments, corporations, and individuals.

JP Morgan estimated that a U.S. credit-rating cut would likely raise the nation’s borrowing costs by increasing Treasury yields by 60 to 70 bps over the “medium term,” adding $100 billion a year to government costs while dragging down economic growth.

At the same time, despite a long-term debt and deficit problem, fundamentally, the United States currently does not have an immediate solvency issue.  When push comes to shove, people still flock to the U.S. Treasury for safety.  So it is really of grave concern that the government of the world’s largest economy would let a political soap opera become a short-term crisis to its currency, markets and not to mention the nation’s image and reputation.

Some have said that the Fed and Washington want the value of the dollar to plummet so the nation’s debt may be repaid in cheaper dollars. Perhaps all this debt ceiling mess is just part of the grand design?  If so, then pretty soon, these Art of Defaced US Dollars would be worth more than the real dollar.

EconMatters, July 28, 2011

Tags: Aug 2, Bond Market, Bond Markets, Commodities, Debt Ceiling, Debt Default, Democratic Leader, Dollar Weakness, Fiasco, House Speaker, Impasse, John Boehner, Jp Morgan, Last Friday, Leader Of The Senate, Republican Leader, Resilience, State Governments, U S Treasury, Year To Date, Yie
Posted in Commodities, Markets | Comments Off

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

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