Friday, August 26, 2011

Today's Headlines

  • Bernanke Doesn't Signal More Stimulus. Federal Reserve Chairman Ben S. Bernanke said the central bank still has tools to stimulate the economy without providing details or signaling when or whether policy makers might deploy them. “In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus,” Bernanke said in a speech today to central bankers and economists gathered at an annual forum in Jackson Hole, Wyoming. He said a second day has been added to the next policy meeting in September to “allow a fuller discussion” of the economy and the Fed’s possible response. While Bernanke sought to reassure investors and the public that U.S. growth is safe in the long run and that the Fed still has tools to aid the recovery if needed, he stopped short of indicating that the central bank will move ahead with a third round of government bond-buying. “Although important problems certainly exist, the growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years,” Bernanke said in prepared comments at the mountainside symposium hosted by the Kansas City Fed. “It may take some time, but we can reasonably expect to see a return to growth rates and employment levels consistent with those underlying fundamentals.”
  • Irene May Cut Electricity for Days, U.S. Says. Hurricane Irene may cause power outages that last for “days or longer” on the U.S. East Coast and inland, along with flooding, high winds and downed trees, said Federal Emergency Management Agency Administrator Craig Fugate. “It’s so important for people to prepare,” Fugate said at a news conference with emergency officials in Washington today. “People need to leave early" if local officials advise them to evacuate, he said. "Travel a safe distance. Get somewhere safe.”
  • Merkel: Markets Won't 'Blackmail' Euro Leaders. German Chancellor Angela Merkel said investors are trying to “blackmail” governments into helping debt-strapped European countries, underscoring the need for all euro-area governments to reduce debt. “After the states bailed out the banks, the financial markets are again trying to blackmail states and tell them, ‘You’ve made so much debt,’” Merkel said today at a rally of her Christian Democratic Union in the eastern city of Brandenburg, about 50 kilometers (30 miles) from Berlin. The solution is to press “countries that are highly indebted to really do their homework and get their debt down,” she said. “A Europe with a common currency requires common duties.” Merkel is underlining her stand on the euro region’s debt crisis in local election rallies in August before national lawmakers vote next month on a second aid package for Greece and an expansion of the powers of the European Union’s crisis fund. She stood firm in rejecting euro bonds, joint debt issuance by euro countries, which is supported by Germany’s two main opposition parties, the Social Democrats and Greens. “That’s where we have to put up a clear stop sign and say we won’t do that,” Merkel said. “Everybody has to do their homework. Responsibility has to be pointed out.”
  • S&P 500 Trails 'Very Fair' Value After Losses. (chart) Stocks could recoup all of the past month’s losses before reaching “very fair” prices, according to David Bianco, chief U.S. equity strategist at Bank of America Merrill Lynch. The Standard & Poor’s 500 Index ought to be valued at 14 times to 16 times earnings because 10-year Treasury notes yield next to nothing after adjusting for inflation, Bianco wrote two days ago in a report. The index, which fell 13 percent in the last month, closed yesterday at about 12 times his profit projection for this year. The CHART OF THE DAY compares Bianco’s price-earnings range with annual ratios during the past half-century, as cited in his report. The figure for 2011 is an estimate, based on his projections that the index will end the year at 1,400 and S&P 500 companies will earn a combined $97 a share. “Low rates benefit P/E more” than slowing economic growth hurts the ratio, he wrote. Each one-percentage-point decline in the real yield on 10-year Treasuries increases the fair P/E by as much as 20 percent, by his calculations.
  • U.S. Recovery Sputters, Consumer Confidence Sinks. The U.S. economy expanded less than previously estimated in the second quarter, underscoring the weakness that has prompted the Federal Reserve to mark down its growth forecasts. Gross domestic product climbed at a 1 percent annual rate from April through June, down from a 1.3 percent prior estimate, revised Commerce Department figures showed today in Washington.
  • Fed's Plosser Says 2012 Outlook Hasn't Changed, Opposes More Asset Buying. Federal Reserve Bank of Philadelphia President Charles Plosser said his growth outlook for 2012 hasn’t changed much in recent weeks and that he opposes a third round of asset purchases by the Fed. “I am not sure it would be beneficial to the kind of problems we are facing,” Plosser said today in an interview with CNBC television in Jackson Hole, Wyoming. While first-half growth has been weaker than expected, he said his “forecasts for 2012 really haven’t changed very much.”
  • China Broadens Reserve Requirements, BofA Says. China’s central bank extended lenders’ reserve requirements to cover their margin deposits to reduce liquidity, according to Bank of America Merrill Lynch. The measure will be phased in from Sept. 5 and take full effect on Feb. 15, economist Lu Ting wrote in an e-mailed note today, without saying where he got the information. The broader rules may drain 900 billion yuan ($140 billion) from the banking system, the equivalent of an increase of about 130 basis points in the reserve requirement ratio, he said. Reuters reported today that the central bank planned to widen the base for calculating reserve requirements, citing unnamed banking officials.
  • Corn, Soybeans Gain as Crop Tour Shows U.S. Yields May Drop; Wheat Climbs. Corn futures rose to an 11-week high, and soybeans gained on signs that hot, dry weather in the U.S. Midwest is eroding crop yields. Wheat also advanced. “The markets are more and more focused on the supply side of the grains and the threats there, as highlighted by this week’s Pro Farmer tour,” Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana, said in a telephone interview. “There’s a lot of nervousness as to what’s out in those fields.” Corn futures for December delivery climbed 6.25 cents, or 0.8 percent, to $7.4975 a bushel at 10:21 a.m. on the Chicago Board of Trade. Earlier, the price reached $7.50, the highest for a most-active contract since June 9. Before today, the commodity was up 11 percent this month. Soybean futures for November delivery rose 1Link2.75 cents, or 0.9 percent, to $14.055 a bushel. Earlier, the oilseed touched $14.08, the highest since July 19. Wheat futures for December delivery gained 4.25 cents, or 0.5 percent, to $7.92 a bushel on the CBOT. The price is headed for a fifth straight weekly gain.
  • Libyan Rebels Seek Aid as Qaddafi Invokes Jihad. Forces loyal to Muammar Qaddafi battled rebels in the Libyan capital, Tripoli, as the opposition National Transitional Council said the North African nation’s humanitarian aid needs are “urgent.” Security is “a top priority, but we cannot achieve such a goal without being able financially and economically to establish our power and the NTC rule,” the council’s prime minister, Mahmoud Jibril, told reporters today in Istanbul.
  • Tiffany(TIF) Gains Most in Three Months After Raising Profit Forecast. Tiffany & Co., the world’s second- largest luxury jewelry retailer, rose the most in three months after raising its full-year earnings forecast, helped by price increases and sales in the Asia-Pacific region. Tiffany advanced $4.30, or 6.8 percent, to $67.41 at 10:02 a.m. in New York Stock Exchange composite trading, after earlier rising 7.4 percent, the biggest intraday gain since May 26. The shares had gained 50 percent in the 12 months before today.
  • Sino-Forest Executives Ordered to Resign. The Ontario Securities Commission said it ordered five executives of Sino-Forest Corp. (TRE) including Chief Executive Officer Allen Chan to resign because the forestry operator may have misrepresented revenue and exaggerated its timber holdings.
  • Explosion at UN Center in Nigerian Capital Kills 18, Injures More Than 30. At least 18 people were killed today in a suicide car-bomb attack on a United Nations office complex in Nigeria’s capital, Abuja, police said.
  • BNY Mellon(BK) Said to Plan Sale of $17 Billion Alcentra Unit. Bank of New York Mellon Corp. is seeking buyers for its Alcentra unit, which manages $17 billion of loans and high-yield bonds, according to four people with direct knowledge of the plan. The world's biggest custody bank hired Credit Suisse Group AG to run the sale of the group that manages the majority of its assets in collateralized loan obligations in both the U.S. and Europe, said the people, who declined to be identified because the talks are private.
Wall Street Journal:
  • Short Interest On Nasdaq, NYSE Climbs In 1st Half of August. Short interest in Nasdaq-listed stocks rose 4.1% in the first half of August from the prior two-week period, while short interest in stocks on the New York Stock Exchange increased 7.9%, the exchanges said Wednesday.
  • Irene Closes In On North Caroline Coast. Irene churned toward the Outer Banks of North Carolina on Friday as a slightly weakened Category 2 hurricane, with winds of about 105 miles per hour, down from 115 mph on Thursday night. "All indications point to this being a historic hurricane," President Barack Obama said in a statement Friday from the Martha's Vineyard estate where he has been vacationing this week. "I cannot stress this highly enough: If you are in the projected path of this hurricane, you have to take precautions now," Mr. Obama said. He said he would leave Martha's Vineyard Friday night, instead of Saturday morning, to deal with the hurricane.
  • Greek Banks' Liquidity Is Suffering As Nervous Clients Withdraw Savings. Greece's worsening slump is threatening to compound another risk for the country: the steady withdrawal of money from Greek banks. In the last 20 months, the country's banks have suffered an unprecedented withdrawal of customer deposits. Tens of thousands of Greeks—from the well-heeled to the less well-off—have moved their savings out of the country or stashed the cash in safe-deposit boxes or under a mattress, bankers say. The consequence for many Greek banks is a growing shortage of liquidity that is increasing their reliance on emergency funding from the European Central Bank and forcing them to further cut lending.
  • BofA(BAC) Close to Selling Part of China Construction Stake. Just a day after revealing a landmark, $5 billion investment by Warren Buffett, Bank of America is close to another major deal, says a person familiar with the matter: the sale of at least half its 10 percent stake in China Construction Bank to a smattering of sovereign-wealth funds and institutions. BofA’s planned deal, which could close as early as Monday afternoon in Hong Kong, when a six-year lockup on the U.S. bank’s investment expires, could raise between $8.5 billion and $9 billion, depending on the exchange rate and CCB’s closing share price that day, this person says.
Business Insider:
Boy Genius Report:
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 23% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -21 (see trends).
  • Richard Sulik, chairman of Freedom and Solidarity, one of Slovakia's four ruling parties, said he opposes any increase in the size of the European Financial Stability Faciility, citing an interview. "We're not saving the Greeks, but the profits of the German and French banks," Sulik said.
  • China and North Korea pledged to promote military ties during a meeting between Chinese defense minister Liang Guanglie and Jon Chang Bok, chief of the general logistics bureau of the North Korean armed forces department.
  • China's energy bureau is studying introducing a control mechanism for energy consumption so as to curb rapid growth of energy-intensive industries, according to a report on the central government's website.
  • China will "appropriately" raise resources taxes on oil, coal and natural gas, citing a report from the National Development and Reform Commission to the National People's Congress.

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