Wednesday, June 24, 2009

Today's Headlines

Bloomberg:

- The Federal Reserve refrained from increasing its $1.75 trillion bond-purchase program, said the pace of economic contraction is slowing and predicted inflation will remain “subdued for some time.” “Substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time,” the Federal Open Market Committee said in a statement after a two-day meeting in Washington where it also kept the benchmark interest rate between zero and 0.25 percent. The rate will stay at “exceptionally low levels” for an “extended period.”

- Mortgage applications in the U.S. increased last week for the first time in a month as purchases climbed, adding to evidence the market is stabilizing. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 6.6 percent to 548.2 in the week ended June 19, from 514.4 the prior week. The group’s purchase index advanced to the highest level in two months, and its refinancing gauge improved for the first time in five weeks.

- The Baltic Dry Index fell to its lowest level in almost two weeks in London on speculation demand is weakening. Global trade will plunge 16% this year before expanding 2.1% in 2010, the Paris-based Organization for Economic Cooperation and Development said today. Iron Ore is the biggest single dry-bulk commodity hauled at sea and China its largest user. Chinese imports fell 6.2% last month. “We expect the physical market to decline further this week on the back of lower activity and weaker freight market sentiment,” Rikard Vabo and Lars Erich Nilsen, analysts at Oslo-based Fearnley Fonds ASA, a specialist investment bank, wrote today. The index dropped 123 points, or 3.2%, to 3,751 points on the Baltic Exchange.

- A benchmark gauge of corporate credit risk in the U.S. fell as a government report showing an increase in durable-goods orders bolstered speculation the recession is moderating. Credit-default swaps on the Markit CDX North America Investment-Grade Index Series 12, which is used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, fell 4.9 basis points to a mid-price of 140.4 basis points as of 12:40 p.m. in New York, according to CMA DataVision. Credit swaps on retailers including J.C. Penney Co. and Nordstrom Inc. declined. Swaps on Plano, Texas-based J.C. Penney fell 23 basis points to 239 basis points, according to CMA. Contracts on Nordstrom, a Seattle-based department store chain, dropped 18 basis points to 237 basis points. Contracts on Miami-based Ryder System Inc., the largest U.S. truck-leasing company, fell 17 basis points to 227 basis points, according to CMA.

- Wheat prices were inflated by index investors and the Commodity Futures Trading Commission should enforce limits on positions to curb speculation, a congressional investigation reported. Index traders pushed futures beyond levels justified by supply and demand, Senator Carl Levin said yesterday as he released a report by the Senate Subcommittee on Investigations into price movements in 2008 wheat trading. The Chicago Board of Trade needs to eliminate waivers that allow funds to hold more than 6,500 contracts at any one time, which would lower the influence of non-agricultural buyers, Levin said. Speculation “created unwarranted costs and risks for wheat farmers, grain merchants, grain processors and consumers,” Levin told reporters. Index traders “have undermined the futures market” and can sometimes force consumers to pay more for food and limit the ability of farmers to manage risk, said Levin.

- Metals prices may decline in the next three months as China, the world’s biggest user, begins to run down inventories that were built up earlier this year, according to Francisco Blanch at Merrill Lynch & Co. “China has been accumulating inventories of commodities for the last six months or so,” Blanch, head of global commodity research at Merrill, said today in an interview. “This accumulation of inventories now needs to be cleared off. End-user demand in China has not really picked up.” “Inventories in relation to demand will probably prove, in my opinion, to be a bit overdone in the short run, which is why we expect commodity prices to come off,” Blanch told Bloomberg Television. “Oil and the metals markets will start to suffer because of large inventory accumulation.” Stockpiles of copper monitored by the Shanghai Futures Exchange rose last week to the highest in 21 months, totaling 68,536 tons, nearly quadruple the level at the start of the year. The exchange’s tally does not include material held by the State Reserve Bureau. The stockpiling comes amid complaints lodged with the World Trade Organization by the European Union and the U.S. about Chinese export restrictions on magnesium, coke and zinc. China is unfairly using export taxes to keep materials costs lower for domestic steel and manufacturing companies, hurting overseas competitors, according to the U.S. and the EU. “The story in China in this particular case could obviously result in restrictions in other parts of the trading world,” Blanch said. An increase in protectionism may be “a key driver of a further downturn in trading, which could be quite negative,” he said.


Wall Street Journal:

- A major union this week called on Morgan Stanley(MS) -- which repaid $10 billion in government bailout funds last week -- to reverse recent salary increases for senior executives and other top earners. The raises, part of an effort to reduce the importance of annual bonuses, were awarded this year amid executive-pay restrictions associated with the aid. The raises "weakened the link between top executive pay and performance," wrote Gerald McEntee, international president of the American Federation of State, County and Municipal Employees in a letter to Morgan Stanley, also provided to The Wall Street Journal.


NY Times:

- Lawyers for President Obama are quietly drafting first-of-their kind guidelines barring workplace discrimination against transgender federal employees, officials said Tuesday. The guidelines will be in an updated federal handbook for managers and supervisors to be distributed and posted online in the next couple of months, and they could also be included in other materials for managers. They will list transgender people — those who identify their gender differently from the information on their birth certificates — as among several groups protected by antidiscrimination laws. Though transgender men and women are not believed to make up more than a fraction of a percent of the federal work force, their inclusion in the discrimination guidelines is seen as a breakthrough by transgender and gay rights advocates.

MarketWatch:
- All derivatives dealers should have capital and leverage limits, be subject to new fraud penalties, reporting and recordkeeping regulations, said a key regulator on Wednesday. "By fully regulating the institutions that trade or hold themselves out to the public as derivative dealers we ensure that all OTC products, both standardized and customized, are subject to robust oversight," Commodity Futures Trading Commission Chairman Gary Gensler told the Managed Funds Association in Chicago.

NY Post:

- After making billions off the backs of rich people, a growing number of hedge funds are betting they can strike gold by morphing into mutual funds and targeting the middle class. An example of the shift came this week when New York firm Bull Path Capital Management opened its doors to mutual fund investors after successfully converting one of its hedge funds into a mutual fund. AQR Capital, under Cliff Asness, launched a mutual fund using some of his firm's hedge-fund strategies, and more AQR mutual funds are on track to be launched later this year. One of the earliest adopters was Highbridge Capital, which began such offerings in 2005.


LA Times:

- For years, the powerful Service Employees International Union has played a lead role in the campaign for a landmark federal law that would allow workers to join a labor organization simply by signing petitions. Now, as part of a high-stakes battle in California, the union is urging federal officials to throw out petitions signed by tens of thousands of its own members who have asked to be represented by a rival upstart group. The David-vs.-Goliath face-off pits the SEIU, its $300-million annual budget and its legions of staffers, lobbyists and lawyers against a band of about 150 insurgents who are either volunteers or being paid from donations. Most have defected from the SEIU's 2-million-strong ranks. In lodging legal challenges to the roughly 80 petitions filed by its fledgling competitor, the SEIU has moved to block organizing elections at hospitals, clinics and nursing homes up and down the state. And it has used some of the same tactics that employers often use to thwart union drives.


Miami Herald:

- Addressing hundreds of the nation's sheriffs in Fort Lauderdale, Homeland Security Secretary Janet Napolitano said Tuesday that her department would work to secure the nation's border and enforce immigration laws. ''Make no mistake about it. We are a law enforcement department. We will enforce the nation's immigration laws.'' Napolitano said. As the keynote speaker at the National Sheriffs' Association annual conference on Tuesday, Napolitano discussed immigration and other issues facing law enforcement. Napolitano said she would take legal action against employers who make money from the labor of illegal immigrants, creating the demand for undocumented workers. Napolitano has been pushing for tougher national laws against such employers since she was governor of Arizona.


USA Today:

- Construction company CEO David Dominguez no longer worries about inadvertently hiring workers who are in this country illegally. That's because he uses E-Verify, the federal program that allows him to quickly check the legal status of potential employees. Dominguez, who builds residential interiors in Arizona and California, said that as word gets around about the program, job applicants without legal status avoid businesses such as his, Andrew Lauren Co., which use E-Verify. "The system works," Dominguez said. His San Diego-based company has been using E-Verify for several years in hiring office workers and laborers. The voluntary federal program has seen a rapid growth in use this year, Department of Homeland Security records show. More than 1,000 employers are signing up each week on average, and employment checks are approaching 200,000 a week.


Publico:

- Jose Manuel Gonzalez-Paramo, a member of the European Central Bank’s executive board, said the central bank will wait and see how its latest unconventional measures work, citing an interview. “We are going to wait and see how the latest measures work,” he said, when asked if there was room for further rate cuts and more unconventional measures. Policy makers haven’t decided if 1% is the lowest level for interest rates, he said. “We are no longer in free fall, but we are still falling,” he said.


China Knowledge Online:

- China Telecom Corp Ltd, the nation's largest fixed-line operator, is in talks with Canada's Research In Motion Ltd (RIMM) to introduce BlackBerry devices into the market China, said a senior executive from the Chinese operator, sources reported.

The National:
- In the normally staid and conservative world of Saudi Arabian business, controversy rarely comes to light. The rulers and the big families that dominate commercial life there usually ensure any “delicate” situations are dealt with, well, delicately. So the goings-on at the Al Gosaibi conglomerate and its vaguely related Saad Group have brought some unwelcome attention to the kingdom’s corporate culture and apparatus. Outside investors have not liked what they have heard so far. What began as a little local difficulty for The International Banking Corporation (TIBC) of Bahrain has had knock-on effects in the UAE and Oman, and could have even more serious consequences in other financial sectors, including the global banking giant HSBC.

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