Wednesday, August 17, 2011

Today's Headlines

  • Merkel-Sarkozy Crisis Plan Shuns Steps Sought by Investors. The latest Franco-German strategy to counter the euro debt crisis stressed ideas already in the works, shunning bolder steps investors were seeking to calm markets. German Chancellor Angela Merkel and French President Nicolas Sarkozy ruled out steps such as the issuance of euro bonds or expanding the bailout fund. They backed a plan being drawn up for national balanced-budget amendments and reheated one rejected last year for a financial-transactions tax. They called for the 17 euro leaders to hold two summits a year, the same number of times they have already met in 2011. “There remains an ongoing tension between investors who want a quick fix and the policy makers who are working on the building blocks for the future,” said Jacques Cailloux, chief euro-area economist at Royal Bank of Scotland Group Plc. “Everyone can recognize that the building blocks are important, but stronger leadership with a clearer road map is sorely missing in this direction.”
  • European Banks Fall as Merkel, Sarkozy Propose Financial Tax. European banking and exchange shares tumbled, led by Deutsche Boerse AG (DB1) and Barclays Plc (BARC), after the leaders of Germany and France proposed a tax on financial transactions. Deutsche Boerse, the German stock exchange operator that is buying NYSE Euronext, dropped 5 percent to 41.10 euros in Frankfurt trading, while Barclays, Britain’s second-biggest bank by assets, slid 4.2 percent in London. The Bloomberg Banks and Financial Services Index declined 1.1 percent.
  • Treasury Yield Curve Flattest in Week on Concern U.S. Recovery Faltering. The extra yield Treasury investors get to hold 30-year bonds instead of two-year notes shrank to the narrowest in a week on speculation the U.S. economic recovery is stalling. “What the curve flattening is telling us is that there is risk capital that is finding its way into the bond market and grabbing whatever yield it can,” said Steven Ricchiuto, chief economist in New York at Mizuho Securities USA Inc., one of the 20 primary dealers that trade with the Fed. “It’s the economic scenario. People are not comfortable.” The difference between yields on two-year notes and 30-year bonds fell to 3.38 percentage points at 1:02 p.m. in New York, from 3.48 yesterday. The spread was the narrowest since Aug. 10, when it was the smallest since October 2010.
  • Wholesale Prices Rose More Than Forecast. Wholesale costs in the U.S. rose more than forecast in July, led by higher prices for tobacco, trucks and pharmaceuticals, showing declines in commodity expenses have yet to filter to other goods. The 0.2 percent advance in the producer price index followed a 0.4 percent drop in June, Labor Department figures showed today in Washington. Economists forecast a 0.1 percent increase, according to the median estimate in a Bloomberg News survey. The so-called core measure, which excludes volatile food and energy, climbed 0.4 percent, the most since January.
  • Europe Bankers Slam Transaction Tax Plans. Banks criticized Franco-German plans for a tax on financial transactions, saying they will jeopardize economic growth and distort markets, as the British, Dutch and Swedish governments distanced themselves from the proposals. “The financial-services industry should not be seen as an additional source of tax revenue but as an essential part of a stable and sustainable economy,” said the Association for Financial Markets in Europe, which represents firms including Deutsche Bank AG (DBK) and BNP Paribas (BNP) SA. A “tax would be a brake on economic growth,” it said in a statement. Lenders would pass on the cost of the levy to customers in the same way they already transfer the cost of U.K. Stamp Duty on share purchases to clients, Brian Mairs, a spokesman for the British Bankers’ Association, a London-based lobby, said today. A tax would only work if implemented globally or it would trigger “distortions” in financial markets, Mairs said.
  • Plosser Says Federal Reserve May Have to Increase Rates Before Mid-2013. Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said the Fed will probably need to raise interest rates before mid-2013 and that policy makers should have waited to see how the economy performed before pledging to hold rates at record lows for two years. “It was inappropriate policy at an inappropriate time,” Plosser, 62, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. Plosser spoke in his first interview since he dissented from a Fed decision on Aug. 9 to step up stimulus for an economic recovery that’s “considerably slower” than anticipated. Plosser said that it wasn’t clear that the economy needed additional stimulus, especially given rising inflation and a decline in the unemployment rate since November to 9.1 percent.
  • Fed Shouldn't Protect Stock Traders: Fisher. Federal Reserve Bank of Dallas President Richard Fisher said the central bank shouldn’t ease monetary policy whenever there is a big drop in U.S. stock prices, an action he said some traders might view as a “Bernanke put.” “My long-standing belief is that the Federal Reserve should never enact such asymmetric policies to protect stock market traders and investors,” Fisher said today in prepared remarks in Midland, Texas. “I believe my FOMC colleagues share this view.” Fisher’s comments offered his first explanation of his dissent from the Federal Open Market Committee decision last week to specify a date for their commitment to low borrowing costs.
  • Target's(TGT) Profit Tops Analysts' Estimates on Cost Reductions. Target Corp., the second-largest U.S. discount retailer, posted second-quarter profit that surpassed analysts’ estimates as cost reductions helped offset sales of lower-margin goods.
  • Deere(DE) Profit Beats Estimates as Farm-Equipment Demand Gains. Deere & Co. (DE), the world’s largest farm-equipment maker, reported fiscal third-quarter profit that topped analysts’ estimates and raised its full-year earnings forecast as global demand improved.
  • Wheat Gains for Third Day as Dryness in U.S. May Curb Winter-Crop Seeding. Wheat for December delivery gained 5.25 cents, or 0.7 percent, to $7.5725 a bushel by 1:15 p.m. London time on the Chicago Board of Trade. The grain reached $7.60, the highest level since Aug. 3, after climbing for a third week last week.
  • Crude Oil Advances in New York as Dollar Declines, Boosting Commodities. Crude rose to the highest level in almost two weeks, advancing as the dollar fell against the euro, increasing the appeal of dollar-denominated commodities as an investment. “The decline of the dollar is increasing demand for all things priced in the currency, such as oil and gold,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “If the dollar continues to fall, you are going to see a further rally in commodities.” Crude for September delivery rose 68 cents, or 0.8 percent, to $87.33 a barrel at 12:21 p.m. on the New York Mercantile Exchange.
  • U.K. Unemployment Claims Rise at Fastest Pace Since May 2009. U.K. unemployment claims increased the most in more than two years in July, adding pressure on Prime Minister David Cameron to ease the pace of budget cuts as the economic outlook worsens.
  • Chavez Preparing Government Takeover of Venezuela's Gold Mining Industry. Venezuelan President Hugo Chavez said he’s preparing a decree to give the government exclusive control over gold mining in the country to pare illegal operations and boost international reserves. Chavez, speaking today on state television, said Venezuela can’t allow illegal miners to continue exploiting deposits rich in gold and coltan, an ore containing tantalum, which is used in mobile phones and video-game consoles. “The area is run by the mafia,” said Chavez. “We’re going to nationalize gold. We can’t keep allowing them to take it away.”
Wall Street Journal:
  • Junk-Bond Spreads Pricing in 'Mild Recession:" BofA Analysts. We’ve been warning here about the warning lights flashing on the credit-market dashboard. Bank of America-Merrill Lynch credit strategists recently suggested that one of those indicators is pointing to a recession. Oleg Melentyev and Christopher Hays write:
  • First Solar(FSLR) Drops 6%: Utility Biz Head Leaves, Goldman Trims Rating. Shares of solar energy technology provider First Solar (FSLR) are down $5.55, or 5%,at $98.91 this morning after the company last night announced its former chief financial officer, Jens Meyerhoff, currently head of its division that sells projects to utilities, will leave the company at the end of September.
Business Insider:
Zero Hedge:
Washington Post:
  • China Online Video Giant Tudou Opens 13 Percent Below IPO Pricing. A rocky financial climate isn’t stopping this IPO—Chinese online video site Tudou has started trading on the NASDAQ this morning under the symbol ‘TUDO.’ Last night, Tudou priced its shares $29 a piece, raising $174 million in the offering. This morning, Tudou opened 13 percent below its pricing at $25.11 per share, giving the company a valuation of $2.8 billion (as opposed to $3.2 billion at $29 per share)
Rolling Stone:
Institutional Investor:
  • Hedge Fund Managers Blast 'Self-Serving' Buffett. Buffett’s immodest proposal does not sit well with some of the wealthiest people in our society — successful hedge fund managers. Every one of the handful of billionaire hedge fund managers I contacted railed at Buffett’s proposal, calling it self-serving. All of the managers — none of whom agreed to be quoted by name, of course — criticize Buffett for not calling for a hike in the one area that would affect him the most: the long-term capital gains rate, which is currently just 15 percent. They are all very quick to point out that most of Buffett’s profits over the years have come from long-term capital gains. He’s been known to hold some positions for decades. “He’s a total BS guy,” says one. “He never pays tax because he never sells.” The manager notes that Buffett has agreed to leave his entire fortune to his foundation when he dies; this will result in no estate taxes being paid. “He’s not even charitable to our country,” the manager adds. “When Buffett hits himself, it will add credibility,” scoffs another well-known hedge fund manager.
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 20% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22 (see trends).
  • India Protests Swell as Anti-Graft Activist Fasts. Protests swelled across India on Wednesday in support of a self-styled Gandhian anti-corruption campaigner fasting to the death in jail, with Prime Minister Manmohan's Singh's beleaguered government apparently unable to end the standoff. An uncompromising Singh, 78, who is widely criticised as out of touch, dismissed the fast by Anna Hazare demanding tougher laws as "totally misconceived," sparking outrage as lawmakers cried "shame." "It is a wake-up call for all of us unless we put our house in order. The people of this country are becoming restless," said Arun Jaitley, a leader of the opposition Hindu nationalist Bharatiya Janata Party.
  • Baidu(BIDU) May Face Tougher Rules After State Media Criticism. Chinese search engine Baidu Inc may face tighter regulations after facing a barrage of criticism from state media over its business practices at a time when it is cementing its dominance of the booming Internet market.
  • Merkel, Sarkozy Discussed Euro Bonds Briefly, Both Negative. German Chancellor Angela Merkel and French President Nicolas Sarkozy discussed proposals for common euro zone bonds briefly in their talks on Tuesday and both rejected the idea, Merkel's spokesman said on Wednesday. "Both sides only discussed this briefly and with a negative view, by which I mean they both explained to each other why they don't think euro bonds are the right remedy," Merkel's spokesman Steffen Seibert told a regular news conference.
  • Analysis: Viability of Sarkozy's Euro Crisis Ideas in Question. In trademark showman style, French President Nicolas Sarkozy has unveiled a slew of proposals aimed at driving panic-sellers away from the euro zone, but some look poorly thought through or even unviable.
  • Obama Says Revenues Needed for U.S. Deficit Fix.
  • Rise of China State-Owned Firms Rattles US Companies.
  • US Candidate Perry Says Fed Should Open Its Books. Republican presidential candidate Rick Perry on Wednesday called for more transparency from the Federal Reserve to show that the U.S. central bank was not engaging in unspecified "improper" actions.
Financial Times:
  • China's State Broadcaster Attacks Bidu(BIDU). China’s main state broadcaster has unleashed a series of attacks against Baidu, the country’s largest online search company, in a move certain to fuel concerns among foreign investors about the risks of operating in the Chinese internet industry. In a barrage of investigative reports, microblog posts and commentary, CCTV criticizes Baidu as a “monopolist” which it alleges abuses its power and fails to manage content on its site in a responsible way.
  • Maersk Hit by Sharp Fall in Container Profits. “As we anticipated at the start of the year, the shipping market has been difficult, due to growing capacity,” Mr Andersen said. “We expect the slow economic growth and market volatility to continue for the coming quarters.”
  • Nerves, Noise or Funding Fears? (video) A bank has approached the European Central Bank to borrow dollars - is this another hint that the region's bank funding is a wee bit upset?
  • EMU Crisis Deepens as Slump Reaches Europe's AAA Core. The German economy slowed drastically over the early summer and may be on the cusp of a double-dip recession, dashing hopes that Europe's industrial engine would eventually lift EMU's southern bloc out of slump.
  • Billionaire investor George Soros said a collapse of the euro may spark a global financial crisis in a "new Great Depression," citing an interview. "It would lead to a banking crisis that would be totally out of control."
  • Al-Qaeda, Jihadis Infest the San Francisco, California-Based 'Internet Archive' Library. Besides the U.S. government, Al-Qaeda and other jihadi groups are continually and increasingly using the Internet Archive to spread their propaganda/recruitment messages, including video and audio recordings of speeches, attacks, publications, and much more. They often include content encouraging, and urging, terrorist attacks against America. It can be assumed that Al-Qaeda-related material was first posted to the Internet Archive for legitimate research purposes, but that at some point Jihadis discovered that it was an accessible website that they can easily use for their online jihad campaign. Content is uploaded to and downloaded from the Internet Archive by jihadis daily.

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