Friday, July 29, 2011

Today's Headlines

Posted by Gary .....at 3:06 PM

Bloomberg:
  • Economy in U.S. Grows Less Than Forecast. The U.S. economy grew less than forecast in the second quarter, after almost stalling at the start of the year, as consumers retrenched. Gross domestic product climbed at a 1.3 percent annual rate following a 0.4 percent gain in the prior quarter that was less than earlier estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 1.8 percent increase. Household purchases, about 70 percent of the economy, rose 0.1 percent. “The second-half rebound is melting away,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, the only forecaster polled to correctly estimate the gain in GDP. “It’s a very, very difficult situation for policy makers. The Fed could give a pretty strong signal that they are not likely to move on interest rates for a very long time.” The yield on the benchmark 10-year note decreased to 2.85 percent at 11:12 a.m. in New York from 2.95 percent late yesterday. The Fed’s preferred price gauge, which is tied to consumer spending and strips out food and energy costs, climbed at a 2.1 percent pace, the most since the last three months of 2009, compared with 1.6 percent in the first quarter, as higher oil and food costs pushed up prices of other goods and services. “This is the worst of all worlds for investors, certainly the worst of all worlds for the Fed,” John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said in an interview on Bloomberg Television. “A little too much inflation, not enough growth, that is a tough scenario in the U.S.” Consumer spending from April through June showed the smallest gain since the second quarter of 2009, when the economy was in recession. The slump reflected a 4.4 percent plunge in purchases of durable goods like automobiles. Higher expenses for necessities like food and energy may have curtailed spending on less essential items. The cost of a gallon of regular gasoline climbed in May to about $4 a gallon, the highest in almost three years, according to AAA, the nation’s biggest auto group. The absence of faster job growth is also discouraging shoppers. The unemployment rate climbed to 9.2 percent in June while payrolls grew by 18,000, the fewest in nine months, Labor Department figures showed on July 8.
  • Spain Faces Moody's Rating Reduction as Greek Bailout Increases Debt Risks. Spain faces a possible downgrade by Moody’s Investors Service as its regions struggle to cut budget deficits and last week’s Greek bailout increases the risk that bondholders will have to pay for further European rescues. Moody’s is reviewing the nation’s Aa2 classification, the ratings company said in a statement today. A cut would probably be “limited to one notch,” Moody’s said. The euro fell. Spain has the same credit rating as Italy, which is also on review for downgrade at Moody’s. “This news is a blow to Europe’s efforts to contain the debt crisis to smaller countries like Greece or Portugal,” said Kornelius Purps, a fixed-income strategist at UniCredit SpA in Munich. While European leaders on July 21 agreed to bulk up their rescue fund to set up a firewall around countries such as Spain, the yield on the country’s 10-year bond has again breached 6 percent after falling last week. Moody’s also said it’s concerned that it will take too long for European officials to empower the 440 billion euros ($629 billion) fund so that it can buy government debt. Spanish 10-year bonds fell for a third straight day, pushing the yield on the securities 4 basis points higher to 6.08 percent as of 10:13 a.m. in London. The additional yield investors demand to hold the securities instead of benchmark German bunds rose by eight basis points to 348 basis points. In its note, Moody’s said the last Greek rescue plan is likely to increase pressure on Spain as the package “has signaled a clear shift in risk for bondholders of countries with high debt burdens or large budget deficits” and because it is unclear when the bailout fund’s new powers will take effect. “Challenges to long-term budget balance remain due to Spain’s subdued economic growth and fiscal slippage within parts of its regional and local government sector,” Moody’s said. Moody’s also cut debt ratings of six Spanish regions by one level to reflect the “deterioration of their fiscal and debt positions.” Castilla-La Mancha, the central territory with Spain’s worst deficit, was cut to A3 from A2, while the northern region of Catalunya was lowered to Baa1 from A3. Five more regions were put under review, three of them for a downgrade. The debt and deposit ratings of five Spanish banks were also placed on review by Moody’s. Lenders facing a possible downgrade are Banco Santander SA (SAN), CaixaBank, Banco Bilbao Vizcaya Argentaria SA (BBVA), La Caixa and CECA.
  • Michigan Consumer-Sentiment Index Fell to 63.7 in July From 71.5 in June. Confidence among U.S. consumers dropped more than forecast in July to the lowest level in two years, which may hold back the biggest part of the economy. The Thomson Reuters/University of Michigan final index of consumer sentiment fell to 63.7, the weakest since March 2009, from 71.5 in June. The gauge was projected to decline to 64, according to the median forecast of economists surveyed by Bloomberg News. The preliminary June reading was 63.8. “We have to see a pickup in job growth at the very least before the consumer shows a little more enthusiasm to spend,” Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said before the report. “It doesn’t inspire much confidence in a consumer-led economic recovery, at best the consumer will lag the recovery.” The Michigan survey’s index of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, decreased to 75.8 from 82 the prior month. The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 56 from 64.8.
  • Crude Oil Tumbles, Heads for Weekly Decline, on U.S. GDP, Debt Stalemate. Oil fell, heading for the first weekly drop since June, as the U.S. economy grew less than estimated in the second quarter and a deadlock of U.S. lawmakers over raising the debt limit further threatened expansion. Futures tumbled as much as 2.6 percent after the Commerce Department reported that gross domestic product rose at a 1.3 percent annual rate, less than the 1.8 percent median estimate of economists surveyed by Bloomberg News. Crude for September delivery fell $1.33, or 1.4 percent, to $96.11 a barrel at 11:24 a.m. on the New York Mercantile Exchange. Earlier, it touched $94.95, the lowest price since July 18 on an intraday basis. Prices are down 3.8 percent this week and have risen 69 cents in July. Crude in New York is extending losses as prices slide below the 50-day moving average, according to data compiled by Bloomberg. Front-month futures have settled for more than a week above this indicator, at $97.33 today. A breach of technical support usually means prices will continue to fall.
  • S&P Slammed by Wall Street Banks Over Pulled Commercial Mortgage Rating. Wall Street banks including Morgan Stanley and Deutsche Bank AG slammed Standard & Poor’s decision to suspend ratings on commercial-mortgage bonds after finding a flaw in the review process. S&P withdrew rankings it had assigned to a $1.5 billion offering from Goldman Sachs Group Inc. (GS) and Citigroup Inc., forcing the banks to scuttle the deal after it was placed with investors. It then yanked ratings on Freddie Mac’s $1.19 billion deal that JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) sold earlier this month that has yet to be completed. “The manner in which S&P took its action has severely eroded investor and issuer confidence in its ratings,” Morgan Stanley analysts led by Richard Parkus in New York wrote in a note yesterday, referring to the Goldman Sachs and Citigroup transaction. “Such an event is unprecedented within the CMBS market.”
  • Homeownership Falls to Lowest Since 1998. The U.S. homeownership rate fell to the lowest level since 1998 in the second quarter as stricter lending standards blocked purchases and foreclosures forced people out of their residences. The ownership rate through June was 65.9 percent, the lowest since the same rate 13 years ago, the U.S. Census Bureau said in a report today. The vacancy rate, the share of properties empty and for sale, was 2.5 percent, compared with 2.6 percent in the first quarter. The strictest mortgage standards in more than a decade are disqualifying potential buyers while owners are being evicted from homes after falling behind on loan payments, said Wayne Yamano, director of research at John Burns Real Estate Consulting in Irvine, California. Home purchases fell in June to a 4.77 million annual pace, the National Association of Realtors said July 20. If housing demand remains at that level, 2011 would have the fewest sales since 1997.
  • Turkey's Top Four Generals Resign After Erdogan Tension. Turkey’s top four generals stepped down, the first such mass resignation in the country’s history, amid tensions with Prime Minister Recep Tayyip Erdogan over alleged military plots to undermine his government. Chief of General Staff Isik Kosaner asked to leave because he “deemed it necessary,” the state news agency Anatolia reported from Ankara, citing no one. The chiefs of the army, air force and navy announced their resignations soon after, the NTV news channel reported. Those three were due to retire at the end of August, NTV said. The lira fell 1.3 percent and credit- default swaps rose 10 basis points to 193, data provider CMA said.
  • Denmark Debt Risk Soars on Concern Banking Crisis Is Deepening. The cost of insuring against default on Denmark’s sovereign debt soared to a record on concern the government will have to support the nation’s failing banks. Credit-default swaps on Denmark jumped 14 basis points today to 88, according to CMA. The contracts, which are up from 28 basis points on June 7, are the worst performing of any government in the past month. Denmark has allowed 11 banks to fail since 2008, putting pressure on the country’s remaining lenders to support a system- wide deposit insurance scheme. As many as 15 more of the nation’s lenders could default, Standard & Poor’s said yesterday. “Investors are concerned the contagion could spiral out of control,” said Suki Mann, head of credit strategy at Societe Generale SA in London. “Given the kind of concerns there are for the financial system in general, the S&P report wasn’t helpful. But it did highlight concerns the market does have.”
  • Merck(MRK) to Cut Up to 13,000 Jobs. Merck & Co., the second-largest U.S. drugmaker, plans to eliminate an additional 12,000 to 13,000 jobs by 2015, expanding a restructuring program to save as much as $4.6 billion a year. As much as 14 percent of the company’s 91,000 employees will lose their jobs, based on the size of the workforce at the end of last month.
Wall Street Journal:
MarketWatch:
CNBC.com:
  • Washington Is Annoyed at Wall Street's Lack of Panic. I just got off the phone with a source on Capitol Hill who has spent the past few days trying to convince Republicans to vote for a debt ceiling hike. He told me that the biggest obstacle he faces has been "market complacency." "Frankly, a bit of panic would be very helpful right now," he said. As he explained it, lots of people in Washington, D.C., expected that this would be a week marked by panic in the markets. Stocks would tank. Bonds would get clobbered. The dollar would do something dramatic. And all of this would help convince reluctant lawmakers that they had to reach a compromise on the debt ceiling. "We were following the script from 2008. When the market collapsed after TARP failed, that spooked everyone enough to get them to fall in line. We thought the same thing would happen this week," he said.
Business Insider:
 Zero Hedge:
 NY Post:
  • YouTube Finalizing Plans to Push Movie-Rental Business Into Mainstream. Walmart isn't the only one looking to push its streaming video movie service into the mainstream. Google's(GOOG) popular YouTube site is also finalizing plans to push its nascent paid movie rental business into the mainstream in the next few months, sources familiar with plans told The Post. One source said an announcement of such video-on-demand plans was expected before the end of the year.
New York Times:
  • Grassley Questions Education Agency's Ties to Hedge Funds. Senator Charles E. Grassley is examining whether Education Department officials disclosed confidential government information to hedge fund managers, including the well-known stock picker Steve Eisman. The inquiry stems from the agency’s recent efforts to overhaul the for-profit college industry. Expecting tough new rules in the wake of the controversy, Mr. Eisman and other hedge fund traders placed huge bets against the industry. In a letter this week, Mr. Grassley questioned the education secretary, Arne Duncan, about the agency’s ties to the hedge fund world and the lack of policies restricting contact with Wall Street players. “If it is indeed the case that Department of Education employees were on familiar terms with hedge fund short-sellers, this raises serious questions regarding the internal controls,” Mr. Grassley, Republican of Iowa, said in the letter. “My concerns center on the possibility that senior Department of Education staffers may have provided information to short-sellers during the time leading up to the public release” of new regulations.
  • Weak Earnings in Germany Raise Concerns of Slowing Growth.
Chicago Tribune:
  • Emanuel Projects $635.7 Million Budget Shortfall Next Year. Chicago's budget shortfall next year is expected to be $635.7 million, according to Mayor Rahm Emanuel’s preliminary budget documents viewed this morning by the Tribune. Without significant changes in how the city operates, that gap would widen in coming years to $741.4 million in 2013 and $790.7 million in 2014, the documents state. Much of the budget imbalance results from long-term union contracts with locked-in raises, rising health care costs for workers and increased borrowing in recent years that brought higher interest payments. The budget figures do not include shortfalls in city pension systems, which could add costs of $500 million or more annually in coming years. Absent changes in the pension systems or new revenue sources, that could result in a doubling of the city property tax, according to The Civic Federation, a non-partisan budget watchdog group.
Seeking Alpha:
USDA Foreign Agricultural Service:
Gallup:
  • Obama Approval Drops to New Low of 40%. (graph) President Obama's job approval rating is at a new low, averaging 40% in July 26-28 Gallup Daily tracking. His prior low rating of 41% occurred several times, the last of which was in April. As recently as June 7, Obama had 50% job approval. Obama's approval rating averaged 46% in June and was near that level for most of July; however, it has stumbled in the past few days, coinciding with intensification of the debt ceiling/budget battle in Washington.
The Hill:
Reuters:
  • Italy Economy Minister Admits "Mistakes", Won't Resign. Italian Economy Minister Giulio Tremonti on Friday dismissed speculation he would resign though he admitted making a mistake by using a luxury Rome apartment belonging to a former aide being investigated for corruption. "I have a job that is very difficult and involves a lot of effort, and I want to continue doing it, as best I can, in the interest of my country," Tremonti told Italian television, appearing both apologetic and defiant. "Yes, I have made mistakes, the only excuse is that I've worked a lot," he said. Widely seen as the guarantor of Italy's financial stability, Tremonti has faced growing pressure over the apartment, adding to market jitters that the country could be next in the firing line as the euro zone's debt crisis widens.
  • Toothless CDS Blamed for Failing to Stop Sovereign Contagion. Fears that credit default swaps would not provide protection against a sovereign default as previously hoped could be one of the reasons behind some of the recent sell-off in Eurozone peripheral sovereign cash bonds, bond market participants said this week.
  • Fed's Lockhart Says Bar High to Further Easing.
Vatan:
  • Iranian forces have seized three bases in northern Iraq used by a Kurdish forces affiliated with the Kurdistan Workers' Party, or PKK. The Iranian assault on PJAK, the Party for a Free Life in Kurdistan, began July 16 and has taken some of the group's bases close to the Kandil Mountains in Iraq. The action may have support from Turkish intelligence and special forces.

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)