Thursday, February 17, 2011

Today's Headlines

  • Bahrain Army Moves to End Protests as Unrest Spreads. Bahrain’s army was deployed in the capital, Manama, after five people were killed in clashes between pro-democracy protesters and police as unrest spread across the Middle East. The military said it took control of large parts of the city and told people not to congregate in the main public areas. Police earlier used teargas shells and buckshot against mostly Shiite Muslim protesters who had gathered at the city’s Pearl Roundabout traffic junction to call for a constitutional monarchy and a change of government.
  • Iran Says It's Sending Two Warships to Canal, TV Says. Iran is arranging with Egyptian officials to have two of its warships use the Suez Canal, Iranian state-run Press TV said. The Suez Canal Authority said after today’s report that no Iranian naval vessels had been granted permission to sail through the waterway.
  • Factories in Philadelphia Area Expand at Faster Pace. Manufacturing in the Philadelphia region expanded in February at the fastest pace in seven years, underscoring factories’ contribution to the economic expansion. The Federal Reserve Bank of Philadelphia’s general economic index rose to 35.9, the highest level since January 2004 and exceeding the median forecast of 21 in a Bloomberg News survey of economists. The employment index in the Philadelphia Fed report climbed to 23.6, the highest level since April 1973, from a reading last month of 17.6. A measure of the average workweek rose to 12.8 in February from 10.6. The Philadelphia Fed’s new orders measure rose to 23.7, the highest level since Sept. 2004, from 23.6 in January. The shipments gauge jumped to 35.2 from 13.4 last month. The index of prices paid increased to 67.2 from 54.3 the prior month, while the measure of prices received advanced to 21 from 17.1.
  • Consumer Prices, Jobless Claims Exceed Forecasts. The consumer-price index advanced 0.4 percent for a second month, led by the biggest increase in food costs in more than two years, according to figures today from the Labor Department in Washington. Americans are paying more for air travel and clothing as growing economies in Asia and Latin America boost demand for commodities like oil and cotton. Another report today showing more people than projected filed claims for jobless benefits last week indicates workers don’t have the power to seek bigger pay increases, evidence inflation is unlikely to flare. Over the past 12 months, costs climbed 1.6 percent. Energy costs increased 2.1 percent in January from a month earlier and rose 7.3 percent for the prior 12 months, today’s report showed. Food prices rose 0.5 percent last month, the biggest gain since September 2008, and were up 1.8 percent for the 12-month period. The so-called core rate, which excludes volatile food and fuel prices, rose 0.2 percent, the biggest gain since October 2009. These expenses increased 1 percent from January 2010, compared with a record-low 0.6 percent year-over-year gain as recently as October. Core inflation was boosted by a 1 percent increase in the cost of clothing, the most since February 2009, and a 2.2 percent rise in airline fares.
  • U.S. Senate Democrats Told to Embrace Spending Cuts or Risk Voter Rebuff. Democratic senators gathered at a Virginia resort last week to plot political strategy got alarming news from a trusted pollster: Republicans are winning the debate over dealing with the budget deficit. The Democrats learned that while the public’s top concern is improving the economy, more voters view cutting spending rather than investing as the best way to do so. And right now, they trust Republicans more to do the trimming. These views were pronounced among independents, whose support Democrats will need in 2012 to hold the Senate, recapture the House and keep President Barack Obama in office. The data, presented to Democratic senators at their retreat by Geoff Garin, president of Peter D. Hart Research Associates, and obtained by Bloomberg News, highlight a dilemma for Obama and Democrats in the showdown with Republicans over federal spending. They must find a way to show the public they’re willing to cut, and they’re divided over how far to go.
  • Bahrain Leads Surge in Mideast Debt Risk as Unrest Escalates. Bahrain led an increase in the cost of insuring Middle Eastern sovereign debt on concern escalating unrest will destabilize the Persian Gulf, where most of the region’s oil is produced. Credit-default swaps on Bahrain jumped for a fourth day, rising 18.5 basis points to 286, the highest since July 2009, according to CMA prices at 3 p.m. in London. Swaps on Egypt rose to the highest in more than a week as protests continued after last week’s resignation of President Hosni Mubarak. Pro-democracy protesters in Bahrain, home to the U.S. Navy’s Fifth Fleet, stepped up demands for the government to resign after a security crackdown left at least three people dead. Egypt’s banks and stock market remain shut with no official date to reopen. “Protests are becoming more geopolitical,” said Gabriel Sterne, an emerging-market economist at brokerage Exotix Ltd. in London. “The fact that it’s spread to wealthy countries makes it look like it’s more a cry for democracy rather than economic.” Egypt’s army urged people to return to daily life, saying protests are hurting the economy and threaten to weaken security. Finance Minister Samir Radwan said yesterday that more than two weeks of unrest cost the economy $310 million a day, as tourists shunned the country. “Up to now, investors have been rather patient and optimistic for the medium-term outlook for Egypt but the longer the disruption goes on, that patience wears thin,” Sterne said. “From an investor’s perspective, there’s been a disappointing follow up in Egypt with strikes continuing.” Swaps on Egypt rose 9.5 basis points to 350, the highest in more than a week, according to CMA. Contracts on Israel increased 2 basis points to 145, Lebanon rose 5 to 360, Dubai added 5.5 basis points to 423, Qatar was 3 higher at 102 and Saudi Arabia was up 3 at 125.
  • Cotton Tops $2 for First Time in New York. Cotton topped $2 a pound in New York for the first time ever as accelerating global growth boosted demand for garments manufactured in China, the world’s biggest consumer and importer, amid shrinking global supplies. Cotton for May delivery rose by the exchange limit of 7 cents, or 3.6 percent, to a record $2.0193 a pound on ICE Futures at 10:35 a.m. in New York. Before today, prices were up 35 percent in 2011, the most of any of the 19 commodities in the Reuters/Jefferies CRB Index.
  • Fed's Evans Says 'Disappointing' Recovery Warrants Current Stimulus Steps. Federal Reserve Bank of Chicago President Charles Evans said monetary stimulus is still needed to spur the “disappointing” pace of the economic recovery. “With unemployment too high and inflation too low -- and both forecasted to stay that way over the next two years -- we have missed on both of our policy objectives,” Evans said in the text of remarks prepared for delivery in Rockford, Illinois, today. “There is currently no policy conflict between improving the employment and inflation outcomes. This leads me to conclude that accommodative monetary policy continues to be beneficial for achieving each of these goals.” The central bank is also failing to meet its goal of price stability, which is “costly” as consumers took on debt with an inflation rate of about 2 percent in mind, Evans said. “Unexpectedly low” inflation also lowers revenue for businesses, increasing the real cost of labor and making companies less likely to hire, he said.
  • Brent Crude Trades Near Two-Year High on Mideast Supply Concern. Oil traded near the highest in more than two years in London as civil unrest spread in the Middle East, renewing concern crude shipments will be disrupted. Brent futures were little changed after closing yesterday at the highest level since September 2008 as pro-democracy demonstrations stretched into a third day in Bahrain, while protesters clashed with police in Yemen and Libya, the eighth- biggest oil producer in the Organization of Petroleum Exporting Countries. Brent crude for April settlement was at $103.67 a barrel, down 11 cents, at 1:39 p.m. on the ICE Futures Europe exchange in London after advancing as much as 52 cents to $104.30 a barrel. The contract rose yesterday by $2.14 to $103.78, the highest close since Sept. 25, 2008.
  • Gold Climbs for Fourth Day on Demand for Hedge Against Inflation. Gold advanced for a fourth day, touching a one-month high, as rising consumer prices boosted investor demand for an inflation hedge. The cost of living in the U.S. climbed in January for a seventh month, the government said today. Gold futures for April delivery climbed $7, or 0.5 percent, to $1,382.10 an ounce at 10:52 a.m. on the Comex in New York. Earlier, the price touched $1,833.80, the highest since Jan. 13. The metal reached a record $1,432.50 on Dec. 7.

Wall Street Journal:
  • Loss of the Big Board to Germans Is a Crime, but Who's Guilty? The Big Board is an American institution, a symbol of our financial and corporate might. So who's responsible?
  • Oil Industry Says Key Demand Met to Resume Deep-Water Drilling. An oil-industry consortium said Thursday that a response system that could quickly shut off a gushing well is ready, meeting a key demand from federal regulators before deep-water drilling can resume. But a new report from the president's oil-spill commission, also released Thursday, focuses on the need to prevent offshore oil spills in the first place, emphasizing that last summer's Deepwater Horizon spill was caused mainly by management failures and poor judgment, not a lack of hardware or technology.
Business Insider:
New York Times:
  • Google(GOOG) Search Results Get More Social. Google is taking its biggest step yet toward making search results more social. Though Google remains many people’s front door to the Web, people have increasingly been turning to social networking sites like Facebook and Twitter to search for shopping tips, what to read or travel information from people they know. Google said Thursday that its search results would now incorporate much more of that information.
  • Steve Jobs Has Months To Live? American Cancer Society Cries Foul. The National Enquirer has reported that Steve Jobs has only six months to live based the paper’s analysis of photographs that purportedly show the Apple founder. Hogwash. Even if the photographs are real, the estimate of how much time Jobs has left, or any speculation about his condition, is baseless. You don’t have to take my word on that – you can listen to Otis Brawley, Chief Medical Officer of the American Cancer Society and a noted oncologist.
  • HUD to Rental Policy Groups: Sign Agreement, Stay Quiet. Obama administration officials told a group of housing proponents this month that they must sign a confidentiality agreement to continue participating in talks — a highly unusual request that has drawn criticism from a top Republican lawmaker who is investigating the matter. The agreement, obtained by POLITICO, bars participants from disclosing details discussed at meetings of a rental policy working group.
  • Chinese Oil Majors on Foreign Tech Binge. Chinese oil majors are set to accelerate their overseas buying spree in unconventional oil and gas assets, with an eye on technology key to help shift China's reliance on coal to lower-carbon fuel over the next decade. Such technology will be critical for China to boost energy security and tap its own potentially vast unconventional gas resources -- part of the drive by the world's fastest-growing major economy to triple gas use -- as Chinese firms lack the expertise.
  • Special Report: China Flexed Its Muscles Using U.S. Treasuries. Confidential diplomatic cables from the U.S. embassies in Beijing and Hong Kong lay bare China's growing influence as America's largest creditor. As the U.S. Federal Reserve grappled with the aftershocks of financial crisis, the Chinese, like many others, suffered huge losses from their investments in American financial firms -- from Lehman Brothers to the Primary Reserve Fund, the money market fund that broke the buck. The cables, obtained by WikiLeaks, show that escalating Chinese pressure prompted a procession of soothing visits from the U.S.Treasury Department. In one striking instance, a top Chinese money manager directly asked U.S. Treasury Secretary Timothy Geithner for a favor. In June, 2009, the head of China's powerful sovereign wealth fund met with Geithner and requested that he lean on regulators at the U.S. Federal Reserve to speed up the approval of its $1.2 billion investment in Morgan Stanley(MS), according to the cables, which were provided to Reuters by a third party. Although the cables do not mention if Geithner took any action, China's deal to buy Morgan Stanley shares was announced the very next day.
  • Portugal Seen Taking Bailout by April - Eurozone Source. European Union member states are increasingly concerned about Portugal's ability to fund itself in financial markets and believe Lisbon will have to seek a bailout by April, a euro zone source said on Thursday. The EU has a rescue plan ready for Portugal, but it is dependent on Lisbon asking for the aid and making that request to both the EU and the International Monetary Fund. Portugal remains adamantly opposed to asking for assistance. "Portugal is drowning. It's not going to be able to hold on beyond the end of March," the euro zone source said. "That's already understood to be the case in financial markets, but now it's also understood among (EU) finance ministers."
  • U.S. CEOs See Business Conditions Improving - Survey. Chief executives of major U.S. companies have a brightening view of business and economic conditions and look for the Federal Reserve to raise interest rates modestly this year, a survey by the Business Council found. A strong majority -- 70.4 percent -- of CEOs expect business conditions in their industry to improve over the next six months, the group said in a study conducted with The Conference Board and released on Thursday. That represents a marked change from the last edition of the survey, in October, when just 34.2 percent expected business conditions to improve. The improvement reflected a surge in confidence about the U.S. economy, and a brightening of CEOs' views of Europe, while their confidence in China deteriorated. Just under 46 percent expected Chinese business conditions to pick up over the next six months, compared with 49.3 percent who expected that in October.
  • Canada's Harper Talks of "Horrendous" US Budget Deficit. In blunt comments on the U.S. economy, Canadian Prime Minister Stephen Harper said the United States faced "horrendous" budget challenges but should not look to Canadians to help overcome them.
  • US Bank Regulators See Flaws in Debit Fee Crackdown. U.S. banking regulators acknowledged flaws in plans to cut debit card processing fees, adding to pressure on the Federal Reserve to modify how it implements part of the Dodd-Frank financial law. Sheila Bair, chairman of the Federal Deposit Insurance Corp, cited the likelihood that lower debit transaction fees would force smaller banks to make up for lost revenue with higher account fees for customers.
Globe and Mail:
  • Cyber Attack Hits Ottawa; Probe Focuses On IP Addresses From China. A number of federal departments are struggling to deal with an outside cyber attack – including at the Department of Finance where officials are busy working on next month’s budget. According to senior federal officials, an attack that first became public at Treasury Board earlier this month also hit elsewhere in the federal public service, including Finance. An investigation into the attack is focused on Chinese IP addresses.
China Finance:
  • Chinese banks are facing risks from loans to the property industry because of government tightening measures and housing market uncertainty, citing an interview with Xiang Junbo, chairman of Agricultural Bank of China Ltd. Loans to local-government financing vehicles also carry significant risks as some banks have inadequate internal controls while lending to these vehicles is large and "highly concentrated," Xiang said.

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