Tuesday, March 08, 2011

Today's Headlines

  • Crude Oil Declines as OPEC May Hold Emergency Meeting Amid Libyan Turmoil. Crude oil fell as members of the Organization of Petroleum Exporting Countries discussed whether to hold a special meeting and Libyan rebels prepared an offensive to regain a town. Crude slipped as much as 2 percent after Kuwait’s oil minister said OPEC members are considering whether to convene an “urgent meeting.” Futures trimmed losses as opponents of Libyan leader Muammar Qaddafi sought to recapture Bin Jawad. Goldman Sachs Group Inc. and Bank of America Merrill Lynch today raised oil-price forecasts. “OPEC may schedule a meeting to discuss increasing production,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The OPEC news and signals that the U.S. may release some strategic reserves is making some investors think twice about being long.” Crude oil for April delivery dropped 87 cents, or 0.8 percent, to $104.57 a barrel at 9:41 a.m. on the New York Mercantile Exchange. Futures touched $106.95 yesterday, the highest intraday price since Sept. 26, 2008.
  • Greek Bond Yields, Swaps Climb to Records Before EU Leaders Discuss Crisis. Greek 10-year bond yields and credit-default swaps surged to a record as borrowing costs increased at a debt sale and before European leaders begin meetings aimed at containing the sovereign debt crisis. Spanish bonds also slid as the government sold debt through banks. Greek bond losses extended declines to a ninth day after the nation’s credit rating was cut by Moody’s Investors Service yesterday. Portuguese 10-year bonds fell for a second day before a notes auction tomorrow. German 10-year bonds dropped amid speculation the nation’s economic growth will add to pressure on central bankers to increase interest rates. “There is quite a lot of peripheral supply that needs to be digested and apparently we’re struggling to find more buying interest at these levels,” said Marcel Bross, a fixed-income strategist at Frankfurt-based Commerzbank AG. “We have these important meetings coming up, where we see some potential for disappointment.” The yield on 10-year Greek bonds jumped as much as 52 basis points to 12.85 percent, the most since Bloomberg began collecting the data in 1988, with the increase in yields the biggest since Oct. 27. The extra yield investors demand to hold the securities instead of German bunds widened to as much as 956 basis points, the most since Jan. 10. The euro fell 0.4 percent to $1.3912. Credit-default swaps insuring Greek government bonds rose five basis points to an all-time high 1,037 basis points, meaning it costs $1.04 million annually to insure $10 million of debt for five years.
  • Asia Confronts Oil-Price Shock as Central Banks Pressured to Raise Rates. A jump in crude oil costs in excess of 20 percent in the past two weeks is escalating the danger of inflation in Asia, where central banks are already grappling with consumer price pressures fueled by job and spending gains. The Bank of Thailand and Bank of Korea will each raise key interest ratesthis week by a quarter percentage point, median estimates in Bloomberg News surveys of economists show. Malaysia may also be approaching the end of its pause in boosting borrowing costs, as four of 17 analysts polled see a March 11 move, the highest such share since the last increase, in July. “The region is particularly prone to food and oil price shocks as a greater percentage of household income is spent on food and transportation,” said Vishnu Varathan, an economist in Singapore at Capital Economics (Asia) Pte.
  • Icahn's Activist Funds to Return Fee-Paying Capital to Outside Investors. Billionaire Carl Icahn will return all of the fee-paying capital in his hedge funds, marking the end of a six-year experiment in which he sought to use outside money to gain influence over the companies he targeted for change. Outside investors had already withdrawn much of their money from Icahn’s hedge funds, leaving just $1.76 billion of fee paying assets, according to a copy of a client letter that Icahn filed this morning with the U.S. Securities and Exchange Commission. One reason for the withdrawals from the $7 billion fund group is that it didn’t bar investors from cashing out during the 2008 financial crisis, Icahn said in the letter. “While it may sound ‘corny’ to some, the losses that were incurred by investors in our funds in 2008 bothered me a great deal more, in many respects, than my own losses,” Icahn said in the letter. “I do not wish to be responsible to limited partners through another possible market crisis.”
  • Confidence at U.S. Small Companies Climbs to Three-Year High, Survey Shows. Confidence among U.S. small companies rose in February to the highest level in three years as hiring and sales expectations increased, a survey showed. The National Federation of Independent Business’s optimism index climbed to 94.5, the highest since the recession began in December 2007, the Washington-based group said today in a statement. The reading compares with the average 100.7 during the previous expansion that started in November 2001. Hiring plans rose to the second-highest level since September 2008, a sign employment may pick up in coming months. At the same time, earnings expectations remained negative, and fewer businesses said it was a good time to expand.
  • Bank of America(BAC) Says Home-Loan Business in 'Recovery Mode'. Bank of America Corp. (BAC), the largest U.S. lender, said its residential mortgage business is in “recovery mode” after contributing to a net loss last year and will be “transitioning to business as usual” in 2012. The stock advanced in early trading. The commercial- and investment-banking businesses are already transitioning this year and may post what the company considers normalized earnings in 2012 and 2013, Charlotte, North Carolina-based Bank of America said today in a slide show on its website.
  • Iran opposition leader Mir Hossein Mousavi, whose whereabouts had been unclear for three weeks, is under house arrest, according to his website.
  • Louisiana Sues BP(BP), Partners for $1 Million a Day Over Spill. BP Plc (BP/) and its partners in the Gulf of Mexico well that blew up should pay the state of Louisiana at least $1 million a day for damages caused by the worst oil spill in U.S. history, state Attorney General Buddy Caldwell said in a lawsuit against the oil company.
  • McDonald's(MCD) February Same-Store Sales Rise 3.9% on Asia. McDonald’s Corp. (MCD), the world’s biggest restaurant chain, reported sales rose 2.7 percent at stores open at least 13 months in the U.S. last month, missing analysts’ estimates. Analysts had projected a gain of 4 percent, according to the average of three estimates compiled by Bloomberg. Global comparable sales increased 3.9 percent, the Oak Brook, Illinois- based company said today in a statement. Analysts had estimated same-store sales would rise 3.8 percent.
  • Cotton Futures Plunge by Daily Limit After Rally to Record Seen Overdone. Cotton dropped by the daily maximum, slumping for the first time in eight days, as recent gains to a record were seen as exaggerated and investors sold the fiber to lock in profits. May-delivery cotton fell 7 cents, or 3.3 percent, to $2.0714 a pound on ICE Futures U.S. Before today, the price gained 21 percent in seven days, the longest rally since September 2009.
  • Clean-Energy Guarantees Should Be Probed for Record-Keeping, Lawmaker Says. Lax record-keeping at the U.S. Energy Department underscores the need for an investigation into the agency’s loan guarantees for clean-energy projects, the head of the House Energy and Commerce Committee said. The Energy Department’s inspector general said in a report released yesterday that the department’s loan guarantees haven’t met U.S. standards for record-keeping. “The lack of accountability identified by the IG is exactly why Congress is investigating this loan program,” Fred Upton, the Michigan Republican who heads the energy panel, said today in an e-mailed statement.
  • Europe May Face More Ratings Cuts, Greek Default, S&P Says. Some countries in the euro region may have their credit ratings cut further while a Greece debt default is a “possibility,” said Moritz Kraemer, managing director of European sovereign ratings at Standard & Poor’s. Asked if the worst was over for the region’s sovereign credit-rating outlook, Kraemer said: “I wish I could say yes, but the answer is no.” “We still have a number of countries with a negative outlook or CreditWatch negative, indicating their credit ratings may be going down further,” Kraemer said in an interview in London. “Trigger points for that could be slippage in fiscal consolidation and structural reforms, but also decisions that will be taken at the European level later this month.”
  • Senate Said to Be Nearing Bill to Delay 'Swipe' Fee Rules. A bipartisan group of U.S. senators is drafting legislation that would delay the implementation of debit-card “swipe” fee rules that banks say would cost them billions of dollars in annual revenue, according to two Senate aides with knowledge of the plan.
  • BofA Segregates Almost Half of its Mortgages Into 'Bad Bank'. Bank of America Corp. (BAC), the biggest U.S. lender by assets, is segregating almost half its 13.9 million mortgages into a “bad” bank comprised of its riskiest and worst-performing “legacy” loans, said Terry Laughlin, who is running the new unit. “We are creating a classic good bank, bad bank structure,” Laughlin told investors at a meeting in New York today. He was promoted last month to manage the costs of resolving disputes stemming from the company’s 2008 purchase of Countrywide Financial Corp. “We’re going to get after this, we’re going to do it the right way and we’re going to put it to bed in the next 36 months,” he said.

Wall Street Journal:
  • Gadhafi Loyalists Launch New Attacks. Forces loyal to Col. Moammar Gadhafi have launched a new round of attacks on rebel positions, keeping up a counteroffensive to prevent the opposition from advancing toward the capital Tripoli, as Col. Gadhafi's inner circle is debating whether the man in charge of Libya since 1969 should remain in power or relinquish his role.
  • Expectations Low for EU Talks. Market expectations that Europe's leaders will agree on a strong and flexible bailout fund to resolve the continent's debt crisis aren't likely to be met, said two senior government officials from within the currency area. The proposals to beef up the European Financial Stability Facility, or EFSF, are encountering growing German intransigence after Berlin failed to achieve its own agenda for reforming euro-zone economies. In recent meetings, German officials have shown an increasing unwillingness either to strengthen Europe's temporary bailout mechanism or to augment its powers, as Germany is forced to compromise on its own program
Business Insider:
Zero Hedge:
Atlanta Journal Constitution:
  • Christians and Muslims Clash in Egyptian Capital. Clashes between Christians and Muslims have escalated in a day of violent protests in Egypt's capital. Soldiers fired shots in the air to break up the clashes that broke out south of the capital while people burned tires and smashed parked cars. Earlier Tuesday, thousands of Christians demonstrated in two other Cairo locations against perceived persecution by the country's Muslim majority. Hundreds of Egyptian women demanding equal rights and an end to sexual harassment also were confronted by men who verbally abused and shoved them in a separate protest on Cairo's central Tahrir Square. Tensions remain high nearly a month after mass protests ousted President Hosni Mubarak.
Boston Globe:
  • Apple(AAPL) Ships Over 1 Million MacBook Airs in New Notebook's First Quarter. Concord Securities analyst Ming-Chi Kuo tells AppleInsider that his most recent checks in Asia indicate Apple shipped a total of 1.1 million of its 11- and 13-inch MacBook Airs during the three-month period ending December, making the new breed of ultra-thin portables one of the company's most successful Mac product launches ever. Those figures are about 63% higher, or 400,000 units more, than the 700,000 units that Kuo had initially estimated.
Pittsburgh Post-Gazette:
  • Corbett Swings Budget Ax at Schools, Colleges. Making good on his promise not to raise taxes, Gov. Tom Corbett this morning released a $27.3 billion budget, slashing $866 million out of current spending through cuts in virtually every spending area. The cuts bring spending back to 2008-09 levels.
  • Freshman Democrat Joe Manchin: Obama Has 'Failed to Lead' on Budget. West Virginia Sen. Joe Manchin ripped President Barack Obama on his budget proposals in a Senate floor speech Tuesday, a rare rebuke from a freshman Democrat who clearly is worried about the politics of deficit spending as he faces a tough reelection in 2012. Manchin charged the president with failing to lead the way in reducing spending, while also criticizing Republicans for offering “partisan” and “unrealistic” budget proposals. “Why are we doing all this when the most powerful person in these negotiations — our president — has failed to lead this debate or offer a serious proposal for spending and cuts that he would be willing to fight for?”
  • NPR Exec: Tea Party is 'Scary,' 'Racist'. James O’Keefe, master of the video sting, targets NPR this time, in a pretty damaging interview with Ron Schiller, NPR’s senior vice president for development, and Betsy Liley, senior director of institutional giving. O’Keefe’s compatriots, Shaughn Adeleye and Simon Templar, posed as members of a Muslim group with ties to the Muslim Brotherhood that wants to give NPR $5 million in light of the recent Republican threats to defund public broadcasting. In the course of a lunch at CafĂ© Milano, Schiller presents himself as a liberal who thinks the tea party is “scary” and that there are not enough Muslim voices on the American airwaves, nodding as his lunchmates say they are glad NPR allows Hamas's and Hezbollah's views to be heard. He claims the Republican party has been “hijacked” by the tea party, and when one of his lunch partner’s suggests that they’re “radical, racist, Islamaphobic, Tea Party people,” Schiller says, they’re “not just Islamaphobic, but really xenophobic, I mean basically they are, they believe in sort of white, middle-America gun-toting. I mean, it’s scary. They’re seriously racist, racist people.”
  • Iran Forces Fire Teargas to Disperse Opposition Backers. Iranian security forces fired teargas to disperse anti-government protesters in Tehran on Tuesday, the opposition website Kaleme reported. The authorities, seeking to avoid revival of the mass anti-government rallies that erupted after the disputed 2009 presidential vote, had warned against any "illegal" gatherings by the opposition after websites called for rallies on Tuesday.
Financial Times:
  • Hedge Funds Bet Oil Prices to Rise Past $150. Hedge funds are placing aggressive bets that crude prices could rise past $150 a barrel if the unrest in the Middle East spills over into Saudi Arabia, the world’s top oil exporter. The number of call options giving holders the right to buy US crude at $150 by June have surged more than 40 per cent in the past week to contracts equal to 32m barrels.
  • European banks will have to withstand a .5% contraction of gross national product in the Eurozone this year as part of the European Banking Authority's stress tests, citing information the authority sent to banks. The simulation also includes a .2% contraction in 2012 as well as a slump in the real estate markets.

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