Tuesday, November 08, 2011

Today's Headlines

Posted by Gary .....at 2:14 PM

Bloomberg:
  • Berlusconi Lacks Majority in Budget Vote. Prime Minister Silvio Berlusconi failed to muster an absolute majority in a routine parliamentary ballot, fueling further calls for him to resign as Italy struggles to convince investors it can fund itself. Berlusconi won 308 votes in the 630-seat Chamber of Deputies. The lower house had failed to pass the measure in an initial ballot last month, prompting a confidence motion that the premier won on Oct. 14. Since then, Berlusconi has faced defections that threaten to bring down his government. “The government doesn’t have a majority,” Pier Luigi Bersani, leader of the main opposition Democratic Party, said as he called on the premier to resign after the vote. “We all know that Italy runs the real risk of not being able to access the financial markets in the next few days.”
  • Italian Bonds Fall on Berlusconi Vote, Margin Charge Speculation. Italy's bonds fell after Prime Minister Silvio Berlusconi won a routine vote without an absolute majority, casting doubt on the nation's ability to enact austerity measures under his leadership. Italian 10-year yields climbed to a euro-era record amid speculation LCH Clearnet Ltd., Europe's largest clearing house, will raise its margin charge on the debt, a rumor denied by the company. German government bonds pared a decline after European Central Bank council member Jens Weidmann said the bank can't bail out nations by printing money. "The problem is that he hasn't gone," said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London, referring to Berlusconi. "The other big problem is there's a lot of talk going around the market that LCH are going to revise the margins on Italian debt. A lot of people will have to jettison their positions" under such a move, he said. Italy's 10-year bond yield rose 11 basis points, or 0.11 percentage point, to 6.77 percent at 5:07 p.m. London time, the most since the introduction of the 17-member currency in 1999. The difference in yield, or spread, over similar-maturity German securities widened to a record 497 basis points.
  • UniCredit's $10 Billion Fundraising Jeopardized as Contagion Strikes Italy. UniCredit SpA (UCG), Italy’s biggest bank, will decide this week whether to proceed with a 7 billion-euro ($10 billion) stock sale as Prime Minister Silvio Berlusconi fights to remain in power and the country’s debt crisis worsens. Chief Executive Officer Federico Ghizzoni is considering announcing the share sale as soon as Nov. 14, when the Milan- based lender reports third-quarter earnings, four people with knowledge of the talks said. The bank is preparing to hire six to eight underwriters to manage the sale, which may raise 5 billion euros to 7 billion euros, the people said.
  • Weidmann: ECB Can't Print Money for Financing. European Central Bank council member Jens Weidmann said the ECB cannot bail out governments by printing money. “One of the severest forms of monetary policy being roped in for fiscal purposes is monetary financing, in colloquial terms also known as the financing of public debt via the money printing press,” Weidmann, who heads Germany’s Bundesbank, said in a speech in Berlin today. The prohibition of monetary financing in the euro area “is one of the most important achievements in central banking” and “specifically for Germany, it is also a key lesson from the experience of hyperinflation after World War I,” he said.
  • Iran Worked to 'Miniaturize' Weapon Design. Iran sought to design a nuclear weapon to fit on the Persian Gulf country’s missile warheads and continued working to raise an atomic explosions yield as late as 2010, the United Nations inspectors reported today, citing “credible” intelligence from more than 10 countries. Iran carried out “work on the development of an indigenous design of a nuclear weapon including the testing of components,” the International Atomic Energy Agency said today in a 15-page restricted document obtained by Bloomberg News. “Some activities relevant to the development of a nuclear explosive device continued after 2003” and “some may still be ongoing.” The document, drawing on eight years of collected evidence, shows that Iran worked to re-design and miniaturize a Pakistani nuclear-weapon design by using a web of front companies and foreign experts, according to the report and an international official familiar with the IAEA’s investigation. The IAEA’s conclusion that Iran continued weapons work until at least 2010 clashes with U.S. intelligence estimates that Tehran’s government stopped pursuing a nuclear bomb in 2003. Until now, atomic inspectors had only voiced concerns publicly about the “possible existence” of weapons work in Iran. The new analysis is likely to heighten public pressure on Iran. The IAEA report “could increase the risk of a military attack on Iran’s nuclear facilities” and therefore “justified a certain risk premium on the price of oil,” Commerzbank wrote today in a research note.
  • Gold Futures Advance in New York as Europe Crisis Spurs Investor Demand. Gold futures topped $1,800 an ounce for the first time in almost seven weeks as concern that European leaders will be unable to contain the region’s debt crisis spurred demand for the precious metal. “The turmoil in Europe has brought the fear trade back to gold,” Lance Roberts, the chief executive officer of Houston- based Streettalk Advisors, said in a telephone interview. “Also, a renewed wave of policy easing by central banks is helping gold.” Gold futures for December delivery rose 0.6 percent to $1,801.20 an ounce at 12:58 p.m. on the Comex in New York. Prices earlier reached $1,804.40, the highest since Sept. 21.
  • Negative Deposit Rates Pose Risk to Funding of China's Banks, Moody's Says. China’s negative interest rates may hinder banks from increasing deposits and weaken the nation’s ability to cope with shocks from the global financial crisis, Thomas Byrne, a senior vice president at Moody’s Corp. said. “It’s important to eliminate negative interest rates as it runs the risk of undermining the deposit bases banks use to fund themselves,” Byrne said in an interview in Beijing yesterday. Having “dependable” funding “can reduce lots of vulnerabilities” for China’s banking system, he said. Deposits in China’s banking system rose the least in almost four years in the third quarter, data from the People’s Bank of China show. Savings rates have lagged behind inflation for 20 months, encouraging money to seek higher returns in areas such as property and informal lending, where interest is as high as 70 percent a year, according to Dong Tao, a Hong Kong-based economist with Credit Suisse AG.
  • U.S. Plans Lease Sales in Gulf of Mexico, Offshore Alaska. President Barack Obama’s administration plans 15 offshore oil-lease sales from 2012 to 2017, keeping the Atlantic and Pacific seaboards off-limits for drilling. The government will hold 12 lease sales in the Gulf of Mexico and 3 off of Alaska’s coast, the Interior Department said today in an e-mailed statement announcing its proposed five-year oil and gas leasing program.
  • Job Openings in U.S. Rise to Three-Year High. The number of positions waiting to be filled in the U.S. rose in September to the highest level in more than three years, indicating some companies are preparing for an improving economy. Job openings increased by 225,000 to 3.35 million, the most since August 2008, a month before the collapse of Lehman Brothers Holdings Inc. intensified the financial crisis, Labor Department data showed today in Washington. Hiring advanced by 185,000 to 4.25 million, and firings also climbed. Payrolls grew by 80,000 workers in October, and gains in the prior two months were revised up, Labor Department figures showed last week. At the same time, hiring is short of the pace needed to reduce unemployment hovering around 9 percent.
Wall Street Journal:
  • Berlusconi to Resign After New Budget Is Approved. Italy's prime minister Silvio Berlusconi promised to the country's head of State Giorgio Napolitano he will resign after the 2012 budget bill is approved, Italy's president office said in a statement. Mr. Berlusconi's move came after his centre-right government failed to muster a majority in a key vote in the lower house of Parliament Tuesday. According to the statement, Mr. Berlusconi expressed worries over "the urgent necessity to provide precise answers" to Italy's European partners with the approval of the 2012 budget bill, to which growth-boosting measures required by the EU should be attached. After Mr. Berlusconi resignation, President Napolitano said he will start consultations with all the political parties on the possible future options.
  • JPMorgan(JPM) One of Several Banks Doubting Bailout Leverage Plans - Sources. J.P. Morgan Chase & Co. (JPM) is one of several global banks that have recently voiced doubts to euro-zone officials about plans they are considering to leverage the bloc's sovereign rescue fund, people familiar with the discussions said Tuesday. Doubts from large financial institutions are among the main obstacles facing euro-zone governments as they try to boost the bloc's lending capacity to prevent Italy from being sucked into the crisis. Drawing in private investors with promises of guarantees from the rescue fund, the European Financial Stability Facility, will be crucial to these efforts. The euro zone is focusing on two major leverage options, and Klaus Regling, the EFSF chief executive, has been sounding out financial market participants around the world to understand whether the options are feasible. The first option would be to use the EFSF to guarantee part of new bonds issued by euro-zone governments. The second would create "co-investment funds" that would use EFSF money to absorb first losses on sovereign debt purchased by the funds. J.P. Morgan has expressed doubts that the fund will be able to raise the large amounts of money that will be needed to boost the bloc's lending capacity to around EUR1 trillion, these people said. The EFSF will only have around EUR260 billion of its EUR440 billion lending capacity left over for Italy and Spain, so that is nearly EUR750 billion in funds that will need to come from the private sector to backstop those two countries, a daunting amount in an environment where even the EFSF is facing higher borrowing costs.
  • Exxon(XOM) Sees Global Shale Boom. Exxon Mobil Corp. is confident the shale boom that has changed the U.S. energy landscape will spread across the globe, resulting in increased oil and natural-gas supplies, a top executive said. "We do believe there is potential for unconventional oil development from shale resources globally," Mark Albers, Exxon Mobil senior vice president, said in an interview. "We are pursuing that not only in a number of the countries where we have unconventional gas potential but also here in the U.S."
MarketWatch:
CNBC.com:
Business Insider:
Zero Hedge:
 Politico:
Reuters:
  • Gloomy Outlook For China Exporters As Factory Closure Wave Looms. Up to a third of Hong Kong's 50,000 or so factories in China could downsize or shut by the end of the year as exporters get hit by cost rises and darkening global demand for Chinese goods, a major Hong Kong industrial body said on Tuesday. The Federation of Hong Kong Industries, which represents around 3,000 industrialists running factories in China, said it expected orders in the second half of this year and the first half of 2012 to fall between 5-30 percent. The European debt crisis and a fragile U.S. economy have depressed this year's Christmas orders, Stanley Lau, deputy chairman of Hong Kong's leading industrial promotion body, told a news briefing. He said a consolidation was on the cards, with around a third of Hong Kong's 50,000 or so factories in China likely to scale down operations or close by year-end. "We feel that this is not an overestimate," said Lau, who is also the owner of a Hong Kong watch factory in China, citing higher raw material costs and rising factory worker wages, which had already risen up to 20 percent this year. "Many (factory owners) can't see when the market will have a rebound so they are trying to cut their losses by closing, before all their money is gone," Lau said. One additional risk on the near horizon, however, was the specter of yet another round of expected minimum wage hikes from between 18-20 percent on January 1 in a number of key factory regions in southern China, Lau warned. "If we continue to see labor costs keep increasing, in the future the Hong Kong industries operational pressures will become more and more severe," he told reporters. A Reuters on-the-ground survey at Asia and China's largest trade event, the Canton Fair in southern China, found that many factory owners were now bracing for another severe round of factory closures given a sharp drop in orders from Western customers, primarily in the major market of Europe.
  • Oil Up On Iran Buy Italy Uncertainty Limits Rise. Oil prices rose on Tuesday on geopolitical concerns about Iran's nuclear program and seasonal demand from the Northern hemisphere's winter. Crude pared gains after a budget vote in Italy and the possibility the prime minister will resign. A U.N. International Atomic Energy Agency report due this week is expected to show recent activity in Iran aimed at developing nuclear bombs, Western diplomats said. ICE Brent December crude rose 40 cents to $114.96 a barrel by 11:18 a.m. (1618 GMT), having traded from $114.20 to $116.48. U.S. December crude rose 35 cents to $95.87 a barrel, after reaching $96.87.
  • McDonald's(MCD) Key October Sales Top Expectations.
USA Today:
  • Sarkozy, Obama Rip Netanyahu (in private). Beware the open mike. President Obama and French counterpart Nicolas Sarkozy forgot that lesson last week, and got caught questioning the honesty of a major ally, Israel Prime Minister Benjamin Netanyahu. "I cannot bear Netanyahu, he's a liar," Sarkozy told Obama before the two made joint statements during last week's G-20 summit in Cannes, France, Reuters reported. "You're fed up with him, but I have to deal with him even more often than you," Obama replied, according to the French interpreter, per Reuters. Both leaders were unaware that the microphone was already turned on and French reporters could hear the private conversation.
Financial Times:
Telegraph:

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