Thursday, September 27, 2012

Today's Headlines

Posted by Gary .....at 3:00 PM
Bloomberg: 
  • Spain Pledges Cuts to Meet Deficit Target as Bailout Loom. Spanish Prime Minister Mariano Rajoy’s nine-month-old government announced its fifth austerity package in what may be a move to head off tougher conditions demanded as part of a potential European bailout. Rajoy’s Cabinet approved a new tax on lottery winnings and a cut in ministries’ spending to shrink the euro area’s third- biggest budget deficit. The 2013 target is 4.5 percent of gross domestic product compared with a 6.3 percent goal for this year. He’s risking a deeper recession while an unemployment rate of 25 percent stokes mounting protests. Rajoy “wants to seriously limit any conditionality” and preserve as much authority as possible, Antonio Barroso, an analyst at Eurasia Group in London, wrote in a note yesterday. The package is intended “to limit the demands that would be attached to a rescue package.” Spain will make more of its budget adjustment through spending cuts than increasing taxes next year even as it tries to shelter pensioners and the unemployed, Montoro said. “The adjustment isn’t being made on social spending,” Montoro said.
  • Merkel Allies Reject Joint EU Bank Guarantees, Urge Stress Tests. German coalition lawmakers called on Chancellor Angela Merkel's government to ensure that big euro-region banks are compelled to pass checks before coming under European supervision, with any restructuring needed carried out at the home country's expense. "Banks that pose systemic risks are to be subjected to a stress test and restructured or liquidated at the expense of the national restructuring fund before they are included in the direct supervision mechanism," said the motion sponsored by Merkel's Christian Democratic Union and their Free Democratic Party coalition partner. 
  • Euro-Area Economic Confidence Unexpectedly Fell in September. Economic confidence in the euro area unexpectedly fell in September as leaders strived to rein in the debt crisis in the single-currency bloc and the economy’s slump deepened (EUGNEMUQ). An index of executive and consumer sentiment in the 17- nation euro area dropped to 85 from 86.1 in August, the European Commission in Brussels said today. Economists had forecast no change in the indicator, the median of 28 estimates in a Bloomberg News survey showed. European consumers and executives are growing more pessimistic (EUGNEMUQ) about the outlook after the debt crisis pushed at least five of the countries using the euro into recession. 
  • GM(GM) Says ‘Nobody’ Makes Money Amid European Car-Price Cuts. General Motors Co. (GM) said Europe’s car industry will remain unprofitable at current vehicle pricing levels, while Volkswagen AG (VOW) said some competitors are at risk of going out of business without state aid. Fiat SpA (F) and PSA Peugeot Citroen (UG) are producing “very scary numbers” with discounts of as much as 30 percent off gross sale prices, Susan Docherty, who runs European operations for GM’s Chevrolet unit, told reporters today at the Paris Motor Show. “Nobody can make money in Europe when you’ve got incentives at that level.” Demand has plunged so much that deliveries continue to tumble, even with such large price cuts. Although discounting in Germany is at the highest in more than a year, according to industry publication Autohaus PulsSchlag, car sales across Europe may fall to a 17-year low, the region’s main auto- manufacturing trade group has predicted.
  • Spain’s Bubble-Era Building Gear Sold as Developers Cut Off.
  • PBOC Adviser Says Easing Restrained by Concerns on Homes. A People’s Bank of China academic adviser said concern for a rebound in property prices may help explain why the government is holding back from easing monetary policy to counter a deepening economic slowdown. That concern “is indeed a big restraint,” Chen Yulu, president of Beijing’s Renmin University, said yesterday to reporters after speaking at a forum in the city. Further cuts in reserve requirements or interest rates depend on how much external demand worsens, Chen said. “China’s monetary policy is in a quite difficult position,” said Chen, 45. “On one hand, it has to stabilize growth; on the other hand, it has to avoid a rebound in home prices.” The country is not repeating past “one size fits all” easing measures, and “that’s the direction of monetary policy that we will continue to uphold -- the reverse-repo operations exactly reflect such an orientation,” Chen said. “Once property bubbles are formed, there is no country in the world that is able to address the problem effectively --most countries have to go through a crisis,” Chen said. “China must seek a soft landing and can’t afford such a crisis.”
  • China Calls Japan’s Refusal to Budge on Islands ‘Outrageous’. China’s Foreign Ministry described as “outrageous” and “self-deceiving” Japanese Prime Minister Yoshihiko Noda’s remark that his country would never budge on its ownership over East China Sea islands claimed by both sides. While Japan isn’t seeking a military confrontation with China and wants to keep talking “calmly,” the disputed islands “are an inherent part of our territory in light of history and also under international law,” Noda told reporters in New York yesterday. “There can’t be any compromise that would be a step back from this basic position.” “The Chinese people made enormous sacrifices and contributions to the victory of the world anti-fascist war and now, a defeated country is trying to grab the territory of a victor,” Foreign Ministry spokesman Hong Lei said today, referring to Japan’s defeat in World War II. “This is outrageous.”  
  • U.S. Economy Expanded Just 1.3% in Second Quarter. The economy in the U.S. grew less than previously forecast in the second quarter, reflecting slower gains in consumer spending and farm inventories. The world’s largest economy expanded at a 1.3 percent pace from April through June after growing at a 2 percent rate in the first quarter. The revision compared with a prior estimate of 1.7 percent and the Bloomberg survey’s 1.7 percent median forecast. Household purchases, which account for about 70 percent of the economy, rose at a 1.5 percent annual pace last quarter, the slowest in a year after a previously reported 1.7 percent gain. Purchases advanced at a 2.4 percent rate in the prior three- month period. “Consumption is not good,” said Thomas Simons, an economist at Jefferies Group Inc. in New York. “Consumers are still driving GDP but only at a very modest pace.”
  • Pending Sales of Existing Homes in U.S. Fell 2.6% in August. Americans signed fewer contracts than forecast to purchase previously owned homes in August, showing the recovery in the housing market will be uneven. The index of pending home resales dropped 2.6 percent after a revised 2.6 percent gain in July that was more than initially reported, figures from the National Association of Realtors showed today in Washington. The reading compared with a median forecast of a 0.3 percent gain in a Bloomberg survey of 40 economists.
  • Oil Rises on China Stimulus Speculation and Spain Budget. Futures rose as much as 2 percent and equities gained on signals China will announce measures to boost the economy after the Shanghai Composite Index (MXWD) fell below the 2,000 level. Crude oil for November delivery rose $1.20, or 1.3 percent, to $91.18 a barrel at 10:47 a.m. on the New York Mercantile Exchange. Brent oil for November settlement increased $1.50, or 1.4 percent, to $111.54 a barrel on the London-based ICE Futures Europe exchange. 
  • Gold Sets Records in Euros and Francs on Currency Concern. Gold climbed to a record priced in euros and Swiss francs on concern that central banks’ moves to boost economies will devalue currencies, spurring demand for the metal as an alternative investment. Bullion for immediate delivery in London reached 1,379.32 euros an ounce and has rallied 14 percent this year, data compiled by Bloomberg show. Gold priced in dollars rose 13 percent this year to $1,771.30 by 4:49 p.m. local time and is trading 7.8 percent below the all-time high set in September 2011. The commodity set a record 1,667.18 Swiss francs today and peaked in Indian rupees earlier this month.
Wall St. Journal: 
  • Markets Hub: Weak Economy Only Getting Weaker. We’ve been harping on the weak economy, and this morning brought a spate of data that highlighted exactly what we were saying. The U.S. is currently in a “stall-speed” economy, and this is not a safe place to be. Steve hit the data this morning, so we won’t rehash that. We will add a couple more layers, though. Check out the Aruoba-Diebold-Scotti index, published weekly by the Philadelphia Fed. This little-known but useful index is designed to illustrate business conditions, and is currently at its weakest level since 2010. Also, Sageworks, a private research and data firm, reported that sales growth at private companies has slowed to 5.4% from 11% in January, and while that’s faster than the rate for the broader economy, “it’s the slowest rate since November 2010 and comes at a time of mixed results for other economic indicators,” the firm wrote. 
  • Fed’s Plosser: Economy Immune to Fed Stimulus Right Now. A veteran Federal Reserve official argued Thursday that new central bank stimulus efforts are unlikely to spur the growth supporters want, as those same policies further complicate the Fed’s eventual exit strategy. The economy “is not doing as well as anybody would like” and “I think the case is pretty clear we are in a funk” as households cut debt and companies hunker down in the face of pervasive uncertainty about the future, Federal Reserve Bank of Philadelphia President Charles Plosser said in an interview with Dow Jones Newswires. Given what ails the nation, “I am really dubious” stimulus now being provided by the Fed is “really going to have very much effect on the real aspects of our economy, mostly employment and real growth,” Plosser said. 
  • Looking for the 'Next Big Thing'? Ranking the Top 50 Start-Ups. This Year's List Shows a Focus on Business Tech as Health Care and Energy Fade. 
  • Harsh Words for Fed From Beijing, Seoul. Chinese and South Korean central-bank officials criticized the U.S. Federal Reserve's latest easing efforts and advocated reducing Asia's dependence on the U.S. dollar. The comments Thursday, at a joint seminar in Beijing by the two central banks, are the clearest indication yet of a rising backlash in Asia against U.S. monetary policy, suggesting it could speed up the search for alternatives to the dollar as the main global currency. "The rise in global liquidity could lead to rapid capital inflows into emerging markets including South Korea and China and push up global raw-material prices," said Bank of Korea Gov. Kim.
  • U.S. Ties Libya Attack to 'Powder Keg' in Mali. Mali has become an incubator for terrorist activity that demands urgent international attention, world leaders said Wednesday, as the U.S. drew its most explicit link between al Qaeda havens in such places and the recent attack on the U.S. Consulate in Benghazi, Libya. The political, economic and humanitarian crisis in Mali—and much of the broader North African region known as the Sahel—has turned the country into a "powder keg" for terrorist activity by al Qaeda's Saharan front, said Secretary of State Hillary Clinton.
Fox News:
  • US Officials Knew Libya Attack Was Terrorism Within 24 Hours, Sources Confirm. U.S. intelligence officials knew within 24 hours of the assault on the U.S. Consulate in Libya that it was a terrorist attack and suspected Al Qaeda-tied elements were involved, sources told Fox News -- though it took the administration a week to acknowledge it. The account conflicts with claims on the Sunday after the attack by U.S. Ambassador to the United Nations Susan Rice that the administration believed the strike was a "spontaneous" event triggered by protests in Egypt over an anti-Islam film. Two senior U.S. officials said the Obama administration internally labeled the attack terrorism from the first day in order to unlock and mobilize certain resources to respond, and that officials were looking for one specific suspect. In addition, sources confirm that FBI agents have not yet arrived in Benghazi in the aftermath of the attack. Four Americans including U.S. Ambassador Christopher Stevens were killed in the assault. The account that officials initially classified the attack as terrorism is sure to raise serious questions among lawmakers who have challenged the narrative the administration put out in the week following the strike. A few Republican lawmakers have gone so far as to suggest the administration withheld key facts about the assault for political reasons. 
MarketWatch.com: 
CNBC: 
  • Netanyahu Presses for Iran 'Red Line' in UN Speech. Israel's Benjamin Netanyahu, in his speech to the United Nations, called for setting a "red line" for Iran's nuclear program on Thursday. "Red lines don't lead to war; red lines prevent war," the Israeli prime minister told the General Assembly. He said the red line must be set on Iran's enrichment of uranium.
Zero Hedge:
Business Insider:
FINAlternatives:
  • Simons Backs Democrats With $4 Million To Super PACs. While many of his peers have switched sides, one hedge fund billionaire is keeping faith with President Barack Obama and the Democratic Party—and in a big way. Renaissance Technologies founder James Simons has taken advantage of a 2010 Supreme Court decision allowing unlimited donations to so-called Super PACs, one of just a few Democratic supporters to fully embrace the controversial vehicles. The retired former math professors has donated at least $4 million to the PACs, making him the biggest giver to Democratic Super PACs in the country.
RasmussenReports:
Reuters:
  • TEXT-Fitch: Weaker global growth outlook despite monetary policy stimulus. Fitch Ratings says weak recent data and high-frequency indicators highlight the persistent weakness and downside risks facing the global recovery. In its latest quarterly Global Economic Outlook (GEO) Fitch forecasts the economic growth of major advanced economies (MAE) to remain weak at 1% in 2012, followed by only a modest acceleration to 1.4% in 2013 and 2% in 2014. "Notwithstanding a new round of forceful monetary policy stimulus measures in September from the Fed, ECB and BoJ, as well as a rate cut by the People's Bank of China in July, Fitch has revised down its global GDP forecasts for 2012 and 2013 compared with the previous GEO in June 2012," says Gergely Kiss, Director in Fitch's Sovereign team. The agency forecasts global growth, based on market exchange rates, at 2.1% for 2012, 2.6% in 2013 and 3% in 2014, compared with 2.2%, 2.8% and 3.1% in the previous GEO. Fitch forecasts that the eurozone economy will contract 0.5% in 2012, followed by growth of only 0.3% and 1.4% in 2013 and 2014 respectively, even weaker than forecast in the June GEO, despite the recent supportive policy announcements by the ECB. Business and household sentiment has weakened over recent months, financing conditions remain tight and fiscal austerity measures are biting in the periphery, while core countries' growth momentum is slowing. In the US, the persistently high unemployment rate, which has not declined since Q112, and the deceleration of growth in H112 underlines the weakness of the US economy, compared with normal cyclical recoveries. 
  • U.S. commercial paper market shrinks for fourth straight week. The amount of seasonally adjusted U.S. commercial paper contracted for a fourth consecutive week in the week ended September 26, Federal Reserve data showed on Thursday. 
  • Brazil cbank cuts 2012 GDP view, signals end to rate cuts. Brazil's central bank slashed its 2012 economic growth forecast on Thursday but signaled that it is unlikely to keep cutting interest rates to boost the economy because inflation looks on track to rise more than initially expected. In its quarterly inflation report, the bank predicted that the world's sixth-largest economy will expand just 1.6 percent this year, down sharply from its previous estimate of 2.5 percent but in line with most market forecasts. The easing cycle now looks to be over, as the central bank raised its inflation forecast for this year to 5.2 percent from 4.7 percent. 
  • Emerging economies at risk if rich nations should slow - IMF. The International Monetary Fund cautioned emerging market countries on Thursday that their impressive growth could be at risk if advanced economies should slow, urging policymakers to ensure their economies were ready to respond. 
  • Up to 700,000 Syrians may flee by year-end -UNHCR. Up to 700,000 Syrian refugees may flee abroad by the end of the year, the U.N. refugee agency said on Thursday, nearly quadrupling its previous forecast for the exodus from the deepening crisis.
 AP: 
  • EU wants $12B a year from US over Boeing(BA) aid. The European Union said Thursday it is asking the World Trade Organization to impose up to $12 billion per year in sanctions on the United States as part of a long-running dispute involving government subsidies to plane-makers Airbus and Boeing. The EU said in a statement that the amount was "based on estimates of the damages suffered by the EU due to unfair and biased competition from the U.S. industry," which received U.S. government subsidies.
Telegraph:
Bild:
  • German FDP's Doering Rejects Third Greek Bailout Package. One of the leaders of Merkel's junior coalition partner, FDP, has rejected another bailout for Greece in a newspaper interview. A 3rd package would "lead straight into a quagmire of debt, FDP general secretary Patrick Doering said. There will be no additional time, no more money, he said.

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