Bloomberg:
- Portugal's Borrowing Costs Rise, Demand Declines at Sale of 12-Month Bills. Portugal’s borrowing costs increased at an auction of 750 million euros ($974 million) of 12-month bills, the country’s debt agency said. The securities due Sept. 23, 2011, were issued at an average yield of 3.369 percent, the IGCP said. That compares with 2.756 percent at a previous auction of the bills on Sept. 1. Investors bid for 1.6 times the amount offered, compared with a bid-to-cover ratio of 2.1 in the Sept. 1 sale.
- Manufacturing in New York Expanded at Slower Pace. Manufacturing in the New York region expanded at a slower pace than forecast in September, signaling that factory managers remain concerned about a slowdown in U.S. economic growth. The Federal Reserve Bank of New York’s general economic index fell to 4.1 this month, the lowest reading since July 2009, from 7.1 in August. The factory executives’ future outlook dimmed to the lowest level since July 2009. The gauge measuring the outlook six months from now fell to 31.3 from 35.7.
- Production in U.S. Cooled in August as Automakers Scaled Back. Production in the U.S. cooled in August as automakers scaled back following a surge in output the prior month. Industrial production increased 0.2 percent last month after rising 0.6 percent in July, figures from the Federal Reserve showed today. Factory output climbed 0.5 percent excluding autos, the most since May.
- Sovereign Swaps Trades Rise on Bets EU to Compromise on Rules. Credit-default swap investors are building positions on sovereign debt as European Union regulators resist calls by lawmakers to ban some trades. The amount of swaps bought and sold on 15 nations from Greece to Germany rose to $134.5 billion Sept. 10, according to the Depository Trust & Clearing Corp., from $124.6 billion on June 4. The amount of outstanding contracts on Germany has climbed 14 percent since May to $15.3 billion, while contracts on Italy have jumped 11 percent to $26 billion, DTCC data show. The $134.5 billion of protection bought on the 15 nations includes contracts on the Markit iTraxx SovX Western Europe Index. Investors bought or sold swaps contracts covering a net $7.04 billion of Greek sovereign debt as of Sept. 10, according to DTCC, which runs a central registry that captures most trades. That figure, which is the maximum amount on the line if Greece defaults, compares with at least $321 billion of the country’s outstanding debt, Bloomberg data show.
- Crude Oil Futures Drop as U.S. Says Enbridge Line to Be Allowed to Restart. Crude oil fell for a second day after a federal official said Enbridge Energy Partners LP will be allowed to restart a pipeline supplying Canadian crude to the U.S. Midwest. “With the pipeline coming back on line by the end of the week there’s no reason to worry about supply,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The Japanese yen intervention is also pushing oil lower because the oil market has been tied to the dollar.” Crude oil for October delivery fell $1.50, or 2 percent, to $75.30 a barrel at 11:21 a.m. on the New York Mercantile Exchange. Prices are down 5.1 percent this year. Total fuel demand fell 1 percent to 19.5 million barrels in the week ended Sept. 10. Gasoline consumption tumbled 2.6 percent to 9.02 million barrels a day, the lowest level since March.
- 'Death Spiral' Awaits State-Worker Pensions as Illinois Leads Underfunding. U.S. state pensions such as Illinois, Kansas and New Jersey are in a “death spiral,” with assets at many insufficient to cover benefits, payouts consuming a growing portion of resources and costs rising twice as fast as investment gains. Less than half the 50 state retirement systems had assets to pay for 80 percent of promised benefits in their 2009 fiscal years, according to data compiled for the Bloomberg Cities and Debt Briefing in New York today. Two years earlier, only 19 missed the mark. Illinois covered just 50.6 percent of benefits last year, the lowest so-called funded ratio, which actuaries say shouldn’t be less than 80 percent.
- U.S. Home Prices Face 3-Year Drop as Inventory Surge Looms. The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market. Shadow inventory -- the supply of homes in default or foreclosure that may be offered for sale -- is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners. “Whether it’s the sidelined, shadow or current inventory, the issue is there’s more supply than demand,” said Oliver Chang, a U.S. housing strategist with Morgan Stanley in San Francisco. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 or 2 percent a year.”
- Congress Seeks Fannie, Freddie Exit as Banks Eat Sour Loans. U.S. lawmakers will grapple today with how to end the bailout of Fannie Mae and Freddie Mac after two years and almost $150 billion, and who pays the bill for bad loans made during the housing boom. Regulators who seized control of the two mortgage lenders in 2008 are under pressure to stem losses for taxpayers and recoup money from banks that sold faulty loans to Fannie Mae and Freddie Mac -- all without hindering the housing market’s recovery.
- China said to Consider 15% Capital Ratio for Biggest Lenders. China’s banking regulator may require the nation’s biggest lenders to boost their capital adequacy ratios to as high as 15 percent by the end of 2012, a person with knowledge of the matter said. The regulator is drafting a plan that would call for Tier 1 capital of 8 percent, with the overall ratio set at 10 percent, the person said. The plan would add a buffer of up to 4 percent to protect against economic fluctuations, plus a further 1 percent for “systemically important” banks, the person said.
- French, Germans See Euro as 'Bad Thing' Amid Crisis, Poll Shows. Majorities across Europe view the euro as a “bad thing” in the wake of the sovereign debt crisis that rattled the continent, a survey showed. Fifty-five percent of Europeans voiced negative sentiments about the currency, led by a 60 percent disapproval rate in France and 53 percent in Germany, according to a poll released today by the German Marshall Fund of the United States and the Italian foundation Compagnia di San Paolo.
- Greece May Miss Revenue Target, Sell Diaspora Bond, Papaconstantinou Says. Greece will likely miss its target for increasing government revenue this year and plans to sell debt to Greeks living outside the country, as it tries to cut the European Union’s second-biggest budget deficit, Finance Minister George Papaconstantinou said.
- Goldman(GS) Sued Over Alleged Gender Bias as Claimants Seek Class-Action Case. Goldman Sachs Group Inc. was sued by three former female employees who claim they faced discrimination in pay and fewer opportunities for promotion than men at the firm. “The violations of its female employees’ rights are systemic, are based upon companywide policies and practices, and are the result of unchecked gender bias that pervades Goldman Sachs’s corporate culture,” the women said today in a complaint in federal court in Manhattan.
Wall Street Journal:
- Obstacle to Deficit Cutting: A Nation on Entitlements. Efforts to tame America's ballooning budget deficit could soon confront a daunting reality: Nearly half of all Americans live in a household in which someone receives government benefits, more than at any time in history. At the same time, the fraction of American households not paying federal income taxes has also grown—to an estimated 45% in 2010, from 39% five years ago, according to the Tax Policy Center, a nonpartisan research organization.
- Turmoil Facing Trillion Dollar Commercial Paper Market. Two years after the fall of Lehman Brothers shook the world’s markets, the once-popular commercial paper market remains a shadow of its former self. The amount of outstanding commercial paper, a particularly cheap form of short-term funding, stands at $1 trillion today, according to Federal Reserve data—down from its $2.2 trillion peak in August of 2007.
- Retirement on Hold: American Workers $6 Trillion Short. A new study obtained by CNBC says Americans are $6.6 trillion short of what they need to retire.
- Watch French Socialists Freak Out As Sarkozy Raises The Retirement Age. France plunged into austerity today, raising the retirement age from 60 to 62.
- Robert Shiller: Public Anger Over Unemployment Is Growing And It Is Hitting Confidence.
- Credit Suisse to Take Stake in York Capital. Credit Suisse agreed Tuesday to buy a minority stake in the hedge fund York Capital Management for $425 million. The bank, Switzerland’s second largest after UBS, will acquire a one-third stake in York, which manages about $14 billion in assets, according to people with direct knowledge of the deal who were not authorized to speak publicly.
LA Times:
- Rizzo Obscured True Salary. Former Bell City Manager Robert Rizzo went to considerable lengths to keep his huge salary secret, including actions that could invalidate his contracts and potentially require him to repay money he received, some experts believe. According to records and interviews, the city of Bell and Rizzo himself represented his salary as being significantly lower than it was. When one councilman asked Rizzo about his salary last year, the city manager gave him a sum that was less than half the approximately $700,000 Rizzo was actually earning at the time.
- Attorney General Jerry Brown Sues Eight Top Bell Officials. State Atty. Gen. Jerry Brown on Wednesday sued eight top Bell officials and council members, alleging fraud, civil conspiracy and waste of public funds in the first legal action related to the city's salary scandal. Brown demanded that the officials return hundreds of thousands of dollars in unwarranted salaries. He also said he would expand his probe into public salaries in general and called for specific legislative action to reform salary and pension action. He also announced that he would serve subpoenas on the city of Vernon, which has also come under scrutiny for giving city officials excessive salaries.
- Miami Home Sellers Cut Prices By $123.8 Million in August. Nearly one in five home sellers in the city of Miami reduced prices in August, according to a report released Wednesday by real estate search firm Trulia.com. The average reduction was 10 percent, according to the report, which tracked the nation's 50 largest cities. Miami recorded a total of $123.8 million in home price reductions in August, the report found. Nationally, price reductions have increased for three months in a row, totaling 26 percent of all properties for sale. Home sellers have slashed prices by more than $29 billion since July, Trulia found. The average reduction nationally was 10 percent, or $33,892, in August.
- Hedge Fund Leverage Increases. The Bank of America Merrill Lynch (BAML) fund managers’ survey has found that hedge funds have increased the amount of leverage used. At the same time, managers responded to the survey with a low appetite for risk despite a full year of great returns and a mixed year in 2010. The September edition of the survey found hedge funds had raised their gearing levels from 1.16 in August to 1.39, the highest level since March 2008. However average cash balances rose marginally to 4% from 3.8% in August and more respondents were overweight cash in September compared to the previous month as risk aversion increased. Hedge funds also raised their weighted net long exposure during the moth, from 22% to 26%.
- Europe Cools Towards Obama: Poll. President Barack Obama's popularity remains high in Europe but has fallen in the past year as doubts emerge about some of his foreign policies, an opinion poll published on Wednesday showed. The annual Transatlantic Trends survey, conducted during June in 11 European Union countries, Turkey and the United States, found that while Obama remained more popular than his predecessor George W. Bush, there were concerns about the line he had taken on issues such as Iran and its nuclear program. Most of the Europeans surveyed said they wanted the United States to exert strong leadership in world affairs, but fewer than half approved of how he was managing relations with Iran or how he was going about stabilizing Afghanistan.
- USTR Files 2 New WTO Complaints Versus China. The U.S. Trade Representative's office said on Wednesday it has filed two new cases against China at the World Trade Organization for alleged violations of global trade rules.
- Bank of England Governor Mervyn King Warns Unions Accept Cuts or 'Fail Your Children'. Mervyn King, the Governor of the Bank of England, has urged the unions to accept public sector reforms and jobs cuts by warning that anything short of tackling the UK's record Budget deficit would “fail the next generation”.
- IMF officials assisting Greece with tax collection methods are struggling to make headway. The team of officials have detected problems such as inefficiencies in tax collection as well as in implementing changes in tax administration and management of spending. Progress halts when the team departs from Greece.
- Germany's former Finance Minister Peer Steinbrueck said Greece "won't get back on its feet again" unless the government agrees to restructure the country's debt. "It would be a big mistake to keep delaying the inevitable in deference to some banks at the expense of taxpayers," Steinbrueck said.
Valor Economico:
- Brazil may use its sovereign fund to buy dollars and stem the appreciation of the real. The central bank is also considering selling reverse currency swaps as another way to curb the real's gain.
- The adjustment on China's property market will last two to three years, citing Ma Jiantang, the head of the National Bureau of Statistics.
- China's banking regulator is considering imposing a bad loan coverage ratio of 250%, compared with 150% currently, citing an executive at China Construction Bank Corp.
- The Jobs Crisis: Did Stimulus Fail to Create 'Effective Demand'? Unemployment fears have refused to go away despite huge global efforts to prop up growth through policy measures, says the discussion paper presented at the Oslo conference this week. The brainstorming session held jointly by the ILO and the IMF raises questions about the efficacy of the expansionary policies in generating jobs, and points out that time is ripe to consider policies focused on labor markets and income distribution to supplement fiscal and monetary policies. According to ILO figures, over 210 million people across the globe are estimated to be unemployed at the moment, an increase of more than 30 million since 2007. Joblessness poses the gravest threat in the advanced economies. And among the advanced countries it's the United States, the epicenter of the Great Recession, which has been hit the hardest. The U.S. now has the highest increase in the number of unemployed: an increase of 7.5 million unemployed people since 2007. Long-term unemployment in the U.S. is nearing levels not seen since the Great Depression and nearly one out of every six workers is either unemployed or underemployed. The unemployment rate has increased by 3 percentage points in advanced countries since 2007 while it was considerably less - 0.25 percentage points - in emerging markets.
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