Thursday, August 18, 2011

Today's Headlines

Posted by Gary .....at 2:54 PM

Bloomberg:
  • Dexia Falling Most in Two Years Leads European, U.S. Bank Drop. Dexia SA and Citigroup Inc. led a plunge in European and U.S. banks amid concern the regions’ economies are weakening and speculation that some European lenders may struggle to fund themselves. Dexia, Belgium’s biggest bank by assets, fell 14 percent to 1.57 euros ($2.25) in the largest drop since March 2009. The 46- member Bloomberg Europe Banks and Financial Services Index tumbled 6.7 percent at 4:45 p.m. in London. Citigroup, the third-largest U.S. bank, dropped 7.5 percent to $27.62 at 12:26 p.m. in New York, making it today’s worst performer in the KBW Bank Index of 24 U.S. firms. Europe’s sovereign debt crisis is spurring the Federal Reserve Bank of New York to question the region’s lenders about their access to funds for U.S. operations, the Wall Street Journal reported today, citing people it didn’t identify. An undisclosed euro-area lender borrowed $500 million from the European Central Bank Aug. 17, the first such bid in six months. U.S. shares fell after initial jobless claims unexpectedly rose and Philadelphia-area manufacturing shrank by the most in more than two years. “Macro conditions almost everywhere you’re looking are deteriorating,” said Gary Townsend, a founder of Hill-Townsend LLC in Chevy Chase, Maryland, which has $42 million under management. “These things spell an economic slowdown that is going to impact earnings and possibly credit quality but certainly share prices.” Societe Generale SA, France’s second-largest bank, sank 12 percent in Paris, while Barclays Plc slid 11 percent in London. The KBW index slid 4.7 percent to 36.91. Bank of America Corp., the nation’s biggest lender, declined 6 percent to $7.01. Regions Financial Corp., Alabama’s largest bank, fell 5.6 percent to $4.29.
  • Overseas Banks Seen Cutting Dollar Holdings Amid European Funding Drought. Overseas banks operating in the U.S. may have cut their dollar holdings by about $339 billion in the past four weeks as European banks face a squeeze on funding. The figure may have dropped by about 38 percent to $550 billion in the period, Jens Nordvig, a managing director of currency research at Nomura Holdings Inc. in New York said today. Banks had an average cash buffer of about $50 billion before the 2008 crisis and about $400 billion in 2010, he said. “The crisis we have now is very serious, and comes from concerns about European banks exposure to European sovereigns,” Nordvig said in a telephone interview. “I’m not expecting an imminent dollar shortage, but if you extrapolate this trend then this means that in two to four weeks there will be one.”
  • Dallara Says ECB is 'Stretched' by Sovereign Bond Purchases. The European Central Bank is “being stretched” in its current role as buyer of last resort for European sovereign debt, said Charles Dallara, managing director of the Institute of International Finance. The ECB’s burden will be eased in late September or early October, when European governments approve changes to a rescue fund, Dallara said today in an interview with Bloomberg Television. Euro-area leaders in July announced plans to allow the European Financial Stability Facility to buy bonds on the secondary market. “Ultimately the burden on the ECB is going to need to be eased by some degree of fiscal integration and fiscal consolidation,” Dallara said.
  • U.S. Company Credit-Risk Measure Jumps as Goldman Sachs(GS), BofA(BAC) Swaps Climb. The cost to protect corporate debt from losses rose to the highest level this week amid growing concern the economy is slowing. The perceived credit risk of Bank of America Corp. and Goldman Sachs Group Inc. worsened. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on company debt or to speculate on creditworthiness, increased 5.4 basis points to a mid-price of 115.1 basis points as of 12:18 p.m. in New York, according to Markit Group Ltd. That’s the highest since Aug. 12. Credit-default swaps on Charlotte, North Carolina-based Bank of America jumped 42.8 basis points to 334.3 basis points, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Swaps on New York-based Goldman Sachs rose 20.1 basis points to 205.1 points.
  • Corporate, Sovereign Credit Risk Surges in Europe on Economy. The Markit iTraxx Crossover Index of credit-default swaps lined to 40 companies with mostly high-yield credit ratings increased 44.5 basis points, the most since May 2010, to 644, according to JPMorgan Chase at 4 pm in London. The Markit iTraxx SovX Western Europe Index tied to the debt of 15 governments rose 21 basis points to 298. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 9.5 basis points to 152.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 13 basis points to 233 and the subordinated index climbed 18 to 393.
  • U.S. Consumer Prices Rise More Than Forecast. The cost of living in the U.S. climbed more than forecast in July, which could make it harder for Federal Reserve Chairman Ben S. Bernanke to convince colleagues to immediately act to spur growth after manufacturing in the Philadelphia region plunged in August. The consumer-price index increased 0.5 percent from June, more than twice the 0.2 percent median forecast of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington.
  • Jobless Claims in U.S. Rise Above Forecasts. More Americans than forecast filed applications for unemployment benefits last week, signaling the labor market is struggling two years into the economic recovery. Jobless claims climbed by 9,000 to 408,000 in the week ended Aug. 13, the highest in a month, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a rise in claims to 400,000, according to the median forecast.
  • Philadelphia-Area Factory Index Plunges to -30.7, Lowest Since March of 2009. Manufacturing in the Philadelphia region unexpectedly contracted in August by the most in more than two years as orders plunged and factories shed workers. The Federal Reserve Bank of Philadelphia’s general economic index plunged to minus 30.7 this month, the lowest since March 2009, from 3.2 in July. The August gauge exceeded the most pessimistic projection in a Bloomberg News survey in which the median estimate was 2. The report showed the Philadelphia Fed’s new orders measure dropped to minus 26.8, the lowest since March 2009, from 0.1 in July. The shipments gauge decreased to minus 13.9, the weakest since May 2009, from 4.3 last month. The index of prices paid fell to 12.8 from 25.1 the prior month, while the measure of prices received dropped to minus 9 from 1.1. The employment index in the Philadelphia Fed report decreased to minus 5.2, the lowest since October 2009, from a reading last month of 8.9. A measure of the average workweek slumped to minus 14.4 in January from minus 5.4.
  • Moody's, S&P Mortgage Ratings Face Probe. The U.S. Justice Department is probing Moody’s Investors Service and Standard & Poor’s over ratings of mortgage-backed securities, according to three former employees who said they were interviewed by investigators. Washington-based lawyers from the Justice Department spoke to former employees as recently as last month about whether the companies raised their grades for the complex investments in order to win business, said the former employees, who asked for anonymity because the investigation is ongoing.
  • U.S. Mortgage Rates Hit 50-Year Low. U.S. mortgage rates fell to the lowest in more than half a century as concern that the global economic recovery is faltering spurred demand for bonds that guide home loans, according to Freddie Mac. The average rate for a 30-year fixed loan dropped to 4.15 percent in the week ended today from 4.32 percent, the McLean, Virginia-based mortgage financier said in a statement today. That was the lowest in more than 50 years, Freddie Mac said. The average 15-year rate fell to 3.36 percent from 3.5 percent.
  • General Motors(GM) canceled two scheduled Saturday shifts in August at its Gravatai, Brazil plant to adjust to lower demand, the company said. With the cancellation of the Saturday shifts in August, GM will produce 1,500 fewer vehicles, the company said. Earlier today, Valor Economico reported that GM canceled Saturday shifts in August and September that would reduce production by about 2,300 vehicles.
  • Citadel Follows Paulson in Pre-Rout Bet on Regions Financial. Citadel LLC and Lansdowne Partners Ltd. boosted stakes in Regions Financial Corp. in the second quarter, mimicking earlier bets by hedge fund Paulson & Co., before the bank led this month’s rout in U.S. financial stocks. The three firms, along with Capital Research Global Investors, Fairholme Capital Management LLC and Arrowstreet Capital LP, held a total of $1.21 billion in shares of Birmingham, Alabama-based Regions as of June 30, according to the companies’ regulatory filings this month. Regions has plunged 25 percent this month through yesterday, leading a 16 percent slide in the 24-company KBW Bank Index through yesterday.
  • BofA(BAC) Loan Risk May Rise $9 Billion If Judge Sides With MBIA. Bank of America Corp. may face billions of dollars more in liability for faulty mortgages if a judge agrees with insurer MBIA Inc. that the lender must buy back loans even if the errors didn’t cause a borrower’s default.
  • Gold Futures Soar to Record as Economy Sags. Gold futures surged to a record $1,829.70 an ounce on demand for an investment haven as mounting concern that the global economy is faltering triggered a plunge in equities. Gold futures for December delivery jumped $31.50, or 1.8 percent, to $1,825.30 at 11:25 a.m. on the Comex in New York. Before today, the price climbed 26 percent in 2011, after posting gains in the previous 10 years.
  • Copper Slides as Banks Cut Estimates for Global, Chinese Economic Growth. Copper fell the most in a week after Morgan Stanley and Deutsche Bank AG cut their forecasts for economic growth worldwide and in China, the biggest user of the metal. Copper futures for December delivery slid 6.6 cents, or 1.6 percent, to $3.987 a pound at 10:19 a.m. on the Comex in New York. A close at that price would mark the biggest loss for the contract since Aug. 10.
  • Oil in New York Falls Most in a Week as Banks Cut Global Growth Forecasts. Crude oil declined the most in more than a week as commodities fell around the world after Morgan Stanley and Deutsche Bank AG cut their forecasts for global economic expansion. Crude oil for September delivery dropped $3.94, or 4.5 percent, to $83.64 a barrel at 12:01 p.m. on the New York Mercantile Exchange. The contract fell as low as $82.54. Oil has dropped 8.5 percent this year.
  • HP(HPQ) to Spin Off PCs, Eyes Software Purchase. Hewlett-Packard Co. (HPQ), the world’s largest computer maker, is in talks to buy Autonomy Corp. for about $10 billion and plans to spin off its personal-computer business, people with direct knowledge of the matter said.
  • Gunmen Open Fire on Israeli Bus, Detonate Mine; 14 Injured. Gunmen opened fire on an Israeli bus traveling near the Egyptian border, detonated an explosive device near a patrol and fired an anti-tank missile at forces, injuring at least 14 people. Two gunmen were killed, Army Radio said.At least nine people were injured in the attack on the bus traveling to the southern port city of Eilat, according to Yoseftal Medical Center. In a second incident, an explosive device was detonated when a Israeli patrol passed by, Brigadier General Yoav Mordechai, the chief army spokesman, told Army Radio. In the third incident, an anti-tank missile was fired at forces, Mordechai said, without providing additional details. At least five people were in critical condition, Army Radio said. "This was a sophisticated operation carried out by squads of terrorists that infiltrated into Israel," army spokeswoman Lieutenant Colonel Avital Leibovich said in a phone interview.
Wall Street Journal:
  • European Hedge Funds Nurse Big Losses. Some of the best-known names in the European long/short hedge fund community were left nursing large losses in the early part of August, when global markets plummeted on the back of concerns that Europe wouldn't be able to contain its debt crisis. Funds managed by Lansdowne Partners, Ridley Park Capital, Horseman Capital Management and Henderson Global Investors were among those worst hit, according to investors, with some of the funds having all of their gains for the year wiped out. The performance comes after a period of widespread losses across global equity markets. The Lansdowne U.K. Equity fund dropped 4.3% in the month to Aug. 12, and is down 15.8% this year, according to investors. The Henderson European Absolute Return fund, managed by Stephen Peak, fell 15.64% in the month to Aug. 5, and is down 32.46% this year to Aug. 5, according to investors. Horseman Capital Management's Horseman Global fund dropped 13.51% in the month to Aug. 10, giving back all of its earlier gains this year. It is now down 5.74% this year, investors said. The Ridley Park Paragon fund, managed by former Polar Capital star manager Julian Barnett, has fallen 7.85% this month to Aug. 5 and 25.44% for the year to Aug. 5, according to investors. John Armitage's Egerton European fund is down 4.59% to Aug. 5 and 5.30% for the year to Aug. 5.
  • Political Risk for China's Internet Stocks. China's Internet is the only strategic sector of the economy where private companies dominate. That oddity hasn't escaped the attention of the government. It shouldn't escape the attention of investors either. In their eagerness to buy a piece of the Chinese Internet dream, investors are overlooking the risk of government actions. Baidu(BIDU) had a reminder of the potential for problems this Monday when state broadcaster China Central Television aired a 30-minute special exposing negligence by members of the sales force in allowing fraudulent adverts on its platform. Baidu's stock fell 9% in the two days following the broadcast.
CNBC.com:
  • China Walks Tightrope Between Stability and Reform.
  • Buffett a Hypocrite for Seeking Tax on Ultra-Rich: Laffer. The creator of the Laffer curve called Warren Buffett a hypocrite for urging lawmakers to raise taxes on the super-rich to cut the budget deficit. "The hypocrisy of Warren Buffett is unfathomable," Arthur Laffer, chairman of Laffer Associates, told CNBC Thursday, referring to the Berkshire Hathaway(BRK/A) chairman. "If he really wanted to make (the tax code) fair, why doesn’t he propose a wealth tax on everyone over $1 billion worth of wealth of 50 percent once and for all," Laffer said. "That would really work for him, but of course he’s not going to suggest that because he would have to pay that." Laffer said most of Buffett's wealth is in unrealized capital gains. "It’s never seen a tax, and when he gives (the investments) to the Bill and Melinda Gates Foundation, it never will. This is ridiculous," he said.
Business Insider:Zero Hedge:
New York Times:
CharlotteObserver.com:
  • Delta(DAL) Wants to Rein in Speculators. Airline says financial players in oil markets push up fuel prices to profit from trading. Delta and the Air Transport Association, the lobby for airlines, have been out in front among 98 companies and trade groups that banded together to create the Stop Oil Speculation Now coalition. It's pushing for curbs on financial players in the oil markets, who they believe are pushing fuel prices high to profit from trading rather than from any need to consume fuel. "It warrants as much attention and scrutiny as the stock market gets, and deserves some checks on the power of any individual player so as not to unduly influence" pricing in oil markets, said John Heimlich, the Air Transport Association's chief economist. Airlines argue that huge investment inflows from pension fund investors and Wall Street firms into the oil markets are driving volatility in world oil prices and distorting the price of crude oil and jet fuel. For most of the last 30 years, end-users of oil - such as airlines and trucking companies - dominated the futures market. They traditionally composed 70 percent of the market. Today, that ratio has flipped: Financial players with no intent of ever using a barrel of oil make up 70 percent to 80 percent of the market in any given week. That's why Delta and the Air Transport Association are aggressively pushing regulators to rein in financial speculation. They want to return to a market in which some speculation is encouraged but not to the point that it crowds out oil users
LA Times:
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 19% 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 -23 (see trends).
Reuters:
  • Morgan Stanley(MS) Cuts Global Growth View, Eyes ECB. The United States and euro zone are "dangerously close to recession," Morgan Stanley said on Thursday, criticizing policymakers and predicting the European Central Bank will have to reverse its rates policy. The Morgan Stanley research note, which cut global growth forecasts, was cited by stocks traders as adding to market nervousness over the U.S. and euro zone debt crises and the economic drag of austerity measures in debt-burdened countries. Deutsche Bank added to the gloomy market tone by cutting its gross domestic product forecast for China, a major growth engine for the world economy.
  • AIG(AIG), Banks Say Class-Action Group Too Large. Bailed-out insurer American International Group and dozens of banks have filed motions in federal court to block a proposed nationwide class-action suit against them over AIG's 2008 near-collapse.
  • Austrians, Dutch Follow Finns, Seek Greek Collateral. Austria, the Netherlands and Slovakia said Thursday they want collateral on loans to Greece after Finland secured a commitment, raising question marks over a second bailout agreed for Athens last month. The three countries said their positions were not new and echoed the view of some other euro zone states.
  • European Shares Fall Most Since March 2009. German shares lost most, with traders citing the effects of a short-selling ban on financial stocks in other parts of Europe and intensifying worries about politicians' lack of a plan to address the euro zone sovereign debt crisis. The European banking sector , exposed to the euro zone debt crisis, fell 6.6 percent and is down 29.7 percent this year. Heavyweight fallers included Barclays and Societe Generale , both down 11.6 percent. Germany's Commerzbank fell 10.5 percent. The FTSEurofirst 300 index of top European shares ended the session provisionally 4.9 percent lower at 923.85 points, the biggest fall since March 2009. "The market is beginning to price in a recession. The Philadelphia Fed number was an absolute abomination," Michael Hewson, market analyst at CMC Markets, said.
  • Caterpillar(CAT) Sees Slowdown in Dealer Sales Growth. Caterpillar Inc (CAT.N) said growth in dealer sales of its heavy equipment slowed in the three months ended July, particularly in North America, reinforcing concerns about the struggling U.S. economy.
Telegraph:
  • China House Prices Raise Fears of More Tightening. China's annual housing inflation quickened in July for the second straight month this year, official data showed on Thursday, keeping up pressure on Beijing to rein in the red-hot property sector.
Le Temps:
  • Former European Commission President Jacques Delors said Europe and the euro are "on the edge of a cliff" and member states must embrace closer economic cooperation, citing an interview. The proposal for a European finance ministry is a "crazy gadget" and cooperating in economic matters without ceding some sovereignty won't achieve anything, Delors said.
China Finance:
  • Chinese inflationary pressure will be hard to ease for the meantime as the depreciation of the U.S. dollar may push up commodity prices and because China's autumn harvest is still uncertain, Yan Xianpu, an official with the National Bureau of Statistics, wrote in a commentary.
MEMRI:

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