Wednesday, November 17, 2010

Today's Headlines


Bloomberg:
  • Ireland Leads Increase in European Sovereign Debt Risk, Default Swaps Show. Ireland led an increase in the cost of insuring European government debt as finance ministers stopped short of an immediate bailout package and LCH Clearnet Ltd. raised the margin requirement for Irish bond trading. Credit-default swaps on Ireland jumped 35 basis points to 554.5, according to data provider CMA. Contracts on Greece increased 22 basis points to 950, Portugal rose 7 to 429, Italy was 6 higher at 192 and Spain was up 9.5 at 266. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments increased 2 basis points to 170. The cost of insuring against losses on European corporate bonds fell, according to JPMorgan Chase & Co. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined 3 basis points to 470. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings decreased 0.5 basis point to 103.75. The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers fell 1 basis point to 135.5 and the subordinated index was 1.5 lower at 214.5, JPMorgan prices show.
  • Spain Boosts Interest Payments as Irish Slump Infects Region: Euro Credit. Spain’s borrowing costs may rise at tomorrow’s auction of as much as 4 billion euros ($5.4 billion) of bonds as the European Union’s squabbling with Ireland over emergency aid threatened to infect neighboring countries. The extra yield investors demand to hold Spanish 10-year bonds over German bunds of similar maturity rose 3 basis points to 201.4, up 29 basis points from Sept. 16 when Spain last sold debt maturing in 2010 and 2041. Spain priced 3.7 billion euros of 12-month bills yesterday to yield 2.363 percent, compared with 1.842 percent a month earlier.
  • Republicans Express 'Deep Concerns' in Letter to Bernanke. The four top Republicans in Congress wrote to Federal Reserve Chairman Ben S. Bernanke today expressing “deep concerns” over the central bank’s second- round of Treasury bond purchases. “While intended to improve the short-term growth of the U.S. economy and help maintain a stable price level, such a measure introduces significant uncertainty regarding the future strength of the dollar,” the letter said. The purchases could “result both in hard-to-control, long-term inflation and potentially generate artificial asset bubbles.”
  • World Food Import Costs Will Exceed $1 Trillion This Year, UN's FAO Says. World food imports will exceed $1 trillion this year, close to the record reached in the food- crisis year of 2008, on surging commodity prices, the United Nations’ Food and Agricultural Organization said. The global cost of importing foodstuffs will jump 15 percent to $1.026 trillion in 2010, from $893 billion last year and compared with $1.031 trillion in 2008, the Rome-based FAO said in a report today. The world faces “harder times ahead” unless production of major food crops rises next year, it said. “It is unlikely that the effects of higher prices will be contained in their respective sectors, as many of these commodities constitute major feedstock ingredients for the livestock or biofuels sector,” the FAO said. “With price increases largely reflecting scarcity in export supply, global competition for securing foodstuffs is set to intensify.’”
  • CFTC's Dunn Says Swaps Industry May Have to Pay for Reforms. The derivatives industry may have to pay for regulatory reforms if Republicans in Congress limit funding, said Commodity Futures Trading Commissioner Michael Dunn.
  • First Solar(FSLR) Expects German Market to Shrink Next Year, Handelsblatt Says. First Solar Inc. expects the German solar market to shrink in 2011, Handelsblatt reported, citing an interview with Chief Executive Officer Rob Gillette. The German market, which was until now the biggest market for First Solar, will only represent 25 percent to 30 percent of the company’s revenue at the end of next year, Gillette told the newspaper. North America will become the biggest market, the CEO is cited as saying. The world’s biggest solar company plans to almost double production capacity by 2012, which would give it almost a fifth of the global market, according to the German newspaper.
  • The Baltic Dry Index, a measure of commodity-shipping costs, extended its lengthiest decline in more than four months as fleet expansion produced a vessel glut. The gauge fell 1.4% to 2,188 point today. That's a 15th straight retreat, the longest drop since a 35-day slide ended July 15. Rents for grain-hauling panamax ships lost 4.3% to $17,103 a day, the lowest level since July 19, on course for the biggest weekly decline in seven weeks.
  • Oil Declines a Fourth Day on China Rate Speculation, Europe Debt. Oil fell for a fourth day as speculation that fuel demand will drop on China’s steps to cool its economy outweighed signs that U.S. consumption is rising. Futures retreated as much as 1.4 percent, extending the biggest three-day decline since August, after Chinese Premier Wen Jiabao said the government was drafting measures to counter inflation in the world’s biggest energy consumer. Prices also fell on concern Europe’s debt crisis is worsening as ministers considered a rescue package for Irish banks.
  • McDonald's(MCD) Raises China Prices on Higher Raw Material Costs. McDonald’s Corp., the world’s largest restaurant chain, increased prices for its burgers, drinks and snacks in China to offset costs after the country’s inflation surged to a two-year high.
  • Mortgage Applications in U.S. Post Biggest Drop of 2010. The number of U.S. mortgage applications dropped last week by the most this year as an increase in borrowing costs caused refinancing to plunge. The Mortgage Bankers Association’s index fell 14 percent in the week ended Nov. 12, the Washington-based group said today. Refinancing plummeted 17 percent, the most since early April, and purchase applications were down 5 percent. “Yields in the market have moved up, and if the mortgage refinancing window has not shut, it soon will,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “Mortgage rates are moving up sharply with Treasury yields. Consumers are still cautious on the outlook for the economy, so they’re hesitating to buy the biggest of big-ticket items, the family house.”
  • 'Fed Up' Travelers, Unions Balk at Airport Body Scans. Tension at U.S. airports between security and privacy may peak Nov. 24, one of the year’s busiest travel days, with a protest over growing use of full-body X-rays and of extensive pat-downs for those who reject the scans. That date, just before the Thanksgiving holiday, is National Opt-Out Day for several groups urging passengers to avoid the scanners and to slow the screening by choosing a physical search. Organizers and some airline labor unions object to the radiation exposure and detailed view of bodies, and also call the pat-downs an unwarranted invasion of privacy.
  • Boeing(BA) May Delay 787 Dreamliner to 2012, Morgan Stanley Says.
  • U.S. Consumer Prices Rose in October; Core Unchanged.
  • Goldman(GS) Selects 110 Partners as Wall Street Rebounds.

Wall Street Journal:
  • Fed to Require Capital Plan From Banks. The Federal Reserve will require all 19 banks that underwent stress tests during the height of the financial crisis to undergo another review of their capital and their ability to absorb losses under an "adverse" economic scenario.
  • Osborne Says U.K. Ready to Help Ireland. The U.K. is ready to help Ireland tackle its mounting debt problems, Chancellor of the Exchequer George Osborne said Wednesday.
CNBC:
  • Deficit Panel Calls for National Sales Tax, 'Drastic Reform'. Warning of a "death spiral" without drastic changes, a group of experts on the U.S. federal budget deficit on Wednesday called for a 2011 Social Security tax holiday, a soft drink tax and government spending freezes.
  • We're Importing Oil From the Enemy: Boone Pickens. Touting his energy plan to get America off foreign oil, financier T. Boone Pickens told CNBC Wednesday that the U.S. is importing oil from its "enemies." "We need to get off OPEC oil, and that's what I want," said Pickens, who is chairman and founder of the BP Capital Management hedge fund. "Right now, with two wars in the Middle East (Iraq and Afghanistan), we are importing oil from the enemy."
  • Warren Buffett's Warning on CNBC: Fed Easing Creates 'Dangers' for Confidence in Dollar. In a live telephone interview on CNBC's Squawk Box this morning following up on his New York Times op-ed, Buffett essentially warned that the Fed's $600 billion quantitative easing program probably won't help the economy very much, but could undermine confidence in the U.S. dollar.
Business Insider:
  • My Chinese Maid is Breaking The Law to Buy a Second Home. I’ve frequently commented that the Chinese government’s administrative measures, earlier this year, to “cool” its overheated property market had done nothing to change the fundamental dynamics driving so many Chinese to invest in real estate, and in particular, unproductive real estate.
  • Bob Rubin: "US in Terribly Dangerous Territory," Bond Market May be Headed for "Implosion". Warning of the risk of an "implosion" in the bond market, former Treasury Secretary Robert Rubin says the soaring federal budget deficit and the Fed's quantitative easing are putting the U.S. in "terribly dangerous territory." Speaking at an event at The Pierre Hotel in New York City honoring Sen. Kent Conrad (D-N.D.), Rubin joined the growing number of current and former officials (foreign and domestic) to criticize QE2. The Fed's plan to buy $600 billion of Treasuries "has a lot of risk," he said, calling the international reaction "horrendous."
Zero Hedge:
Forbes:
  • California Suggest Suicide; Texas Asks: Can I Lend You a Knife? In the future, historians may likely mark the 2010 midterm elections as the end of the California era and the beginning of the Texas one. In one stunning stroke, amid a national conservative tide, California voters essentially ratified a political and regulatory regime that has left much of the state unemployed and many others looking for the exits.
Fox Business:
  • Angelides Launching Probe into Mortgage Market. Add Phil Angelides to the growing list of regulators investigating whether banks committed fraud in the $6.4 trillion mortgage-bond market, the FOX Business Network has learned. The Financial Crisis Inquiry Commission, which Angelides chairs, has begun investigating whether mortgages packaged into bonds and now held by investors including government agencies like Fannie Mae and Freddie Mac were done so improperly, thus calling into question the legality of trillions of dollars of debt, according to people with direct knowledge of the matter.
  • Civil 'Servants'? Wealth of Congress Members Grew 16% in 2008-2009. Congressional members' personal wealth collectively rose by more than 16 percent between 2008 and 2009, despite the economy-busting effects of the Great Recession, according to a new study released Wednesday by the Center for Responsive Politics.
St. Louis Beacon:
  • St. Louis Fed President Says It's Time to Reform Housing Finance. The time has come to reform housing finance according to best principles and sound lending practices, St. Louis Federal Reserve President James Bullard told participants at a conference Wednesday morning on Government-Sponsored Enterprises -- Fannie Mae and Freddie Mac. "The extent of congressional meddling in this market has been astonishing to the point where one can barely identify what the private sector outcomes would be in the absence of intervention,'' said Bullard in his opening statement. "To the extent possible, we need to let the private sector provide the bulk of U.S. housing finance going forward, without the incentive-distorting set of government programs and taxpayer guarantees that caused our current system to collapse.'' Bullard said that those programs meant well but ended up costing everyone dearly. "It makes little sense to try to design programs that subsidize everyone,'' he said. "If everyone is subsidized, then no one is subsidized."
Real Clear Markets:
  • Cities Face a Deepening Fiscal Crisis. The steep fiscal crisis that many states face includes staggering retirement costs for their workers, estimated at some $3 trillion in unfunded future promises. The size of those liabilities has already shaken up some municipal bond investors, and the inadequate, sometimes misleading way that states account for these steep costs has attracted the attention of the Securities and Exchange Commission. But lurking beneath those obligations is another huge set of liabilities from municipal governments, that is, from cities and counties whose politicians have also made astonishing promises to workers that they will have trouble keeping.
Politico:
  • Health PACs Favor Dems. Health-sector political action committees — ranging from doctors to hospitals to drug companies — generally favored Democrats. Of the $42 million that 122 health-sector PACs gave to congressional candidates this cycle, 58 percent went to Democrats and 41 percent to Republicans, according to the nonprofit Center for Responsive Politics.
  • GOP Gains Upper Hand on Spending. With a bipartisan compromise fading, Democrats appear resigned to another short-term, year-end spending bill that sets up an early fight in the new Congress between the White House and newly empowered Republicans demanding deep cuts in domestic appropriations.
Reuters:
  • Best Buy(BBY) Says Holiday Shoppers May Buy at Last Minute. Consumers might delay this year's holiday shopping until the last minute because of the sluggish economy, the head of consumer electronics retailer Best Buy Co Inc (BBY.N) said. Brian Dunn, the chief executive officer of Best Buy, also said he expects strong sales for e-readers, smartphones, tablet computers such as the Apple Inc (AAPL.O) iPad, and gaming products like Microsoft Corp's (MSFT.O) Kinect and Sony Corp's (6758.T) Playstation Move.
  • Target(TGT) Sees Holidays Boosting Sales to 3-Year High. Target Corp (TGT.N) expects to post its best same-store sales in three years during the upcoming holiday season, sending its shares up as some analysts bet it will outpace larger rival Wal-Mart Stores Inc (WMT.N).
Telegraph:
  • Why the BBC Cannot be Trusted on 'Climate Change': The Full Story. When the history of the greatest pseudoscience fraud in history – aka “Climate Change” – comes to be written, no media organisation, not even the Guardian or the New York Times, will deserve greater censure than the steaming cess pit of ecofascist bias that is the BBC.
Die Welt:
  • European Central Bank Governing Council member Yves Mersch said the central bank can't always provide the rear-guard defense for troubled governments and banks, citing an interview.
Kathimerini:
  • Greece's Health Minister Andreas Loverdos committed to cut spending on health by 1.4 billion euros in 2011 following a meeting with European Union and IMF officials in Athens.

IrishTimes.com:
  • Irish Bailout Amount Likely to be Very Large Figure. ANY NEGOTIATIONS about the provision of support for Ireland’s banks from the European stability fund for Ireland most likely centre around a very large figure, according to informed sources. Any support would have to be large enough to restore international confidence in the Irish banks and also perhaps to allow them to reduce their indebtedness to the European Central Bank. The interest rate that would apply to the funding, how it would be packaged, its size and what it should be used for would be among the issues being negotiated, one source said.
China Finance:
  • China should start property tax trials in Shanghai and Chongqing first and then consider expanding to other cities, Jia Kang, head of the Ministry of Finance's research institute, wrote.

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