Monday, November 14, 2011

Today's Headlines

Posted by Gary .....at 2:59 PM

Bloomberg:
  • Spanish-German Spread Widens to Euro Record; Italy Bonds Slump. Spain's government bonds slid, driving yields to the most relative to German bunds since the euro was created in 1999, after Italy's five-year borrowing costs rose to the highest since June 1997 at a debt sale today. Spanish and Italian debt plunged as European Central Bank Governing Council member Jens Weidmann suggested policy makers should end their support of the region's most indebted nations. Europe's banks need to sell more Italian bonds to avoid being sucked into the debt crisis, said Christian Clausen, president of the European Banking Federation. Spain will auction up to 4 billion euros ($5.45 billion) of bonds due 2022 on Nov. 17. "The investor community is preparing for further setbacks," said David Schnautz, a fixed-income strategist at Commerzbank AG in London. Seeing Italian yields "above 7 percent last week did a lot of damage and there will be a lot of pending desire to offload here," he said. "The demand for safe-haven assets is on the front foot." The yield on 10-year Spanish bonds climbed 25 basis points, or 0.25 percentage point, to 6.10 percent at 4 p.m. London time, surpassing 6 percent for the first time since the European Central Bank was said to start buying the nation's debt on Aug. 8. The 5.5 percent securities maturing in April 2021 fell 1.715, or 17.15 euros per 1,000-euro face amount, to 95.75. The spread over German bunds widened 32 basis points to 428 basis points after touching 430 basis points. The yield on 30- year Spanish debt reached 6.73 percent, the most since Bloomberg began collecting the data in 1998. Credit-default swaps protecting Spain's government bonds rose 21 basis points to a record 441, according to CMA prices. Italian bonds fell for the first time in three days, pushing the 10-year yield 25 basis points higher to 6.70 percent, approaching the euro-era record 7.48 percent set Nov. 9. The difference in yield between 10-year Italian and German bonds expanded by 34 basis points to 490 basis points. It reached a record 575 basis points on Nov. 9. Italy's Treasury sold 3 billion euros of notes due in September 2016 at a yield of 6.29 percent, the highest since June 1997 and up from 5.32 percent at the previous auction on Oct. 13. Demand increased to 1.47 times the amount on offer, from 1.34 times last month. Spain is scheduled to auction as much as 3.5 billion euros of bills maturing in 12 months and 18 months tomorrow, before offering 5.85 percent securities maturing in 2022 on Nov. 17. Italian bonds declined even as the ECB was said to purchase the securities today, according to three people familiar with the transactions who declined to be identified because the deals are confidential. "The co-option of monetary policy for fiscal needs must come to an end," the ECB's Weidmann said today in a speech at a conference in Frankfurt. The increasing pressure on the central bank to act "lessens the imperative" on leaders to implement the "necessary measures," he said. The yield spread between German bonds and Belgian securities widened to as much as 282 basis points, the most since the euro's creation. The French-German spread increased 14 basis points to 164 basis points, and the Austrian-German yield difference climbed 13 basis points to 161 basis points.
  • Merkel's CDU Delegates at Party Gathering Support Allowing Exits From Euro. German Chancellor Angela Merkel’s Christian Democratic Union voted to offer euro states a voluntary means of leaving the currency area, for the first time raising the prospect of a move not envisaged under euro rules. CDU delegates meeting in the eastern German city of Leipzig for their annual party congress backed a motion on the euro today that included a clause permitting euro exits without exclusion from the European Union. “We’re not throwing anybody out,” Finance Minister Wolfgang Schaeuble said in an interview from Leipzig with broadcaster Phoenix. “We want Greece to stay in, that everybody stays in,” he said. “But if a country can’t carry the burden or doesn’t want to carry the burden, and the Greek people have to carry a heavy load, then we have to respect the country’s decision.”
  • France, Spain Default Risk Rises to Records, Credit Swaps Show. The cost of insuring against default on French and Spanish government bonds rose to records, according to traders of credit-default swaps. Swaps on France climbed six basis points to 207 as of 3 p.m. in London, surpassing the record closing price of 203.5 on Nov. 10, according to CMA. Contracts on Spain climbed 21 basis points to a record 441. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose eight basis points to 342. Belgium jumped 14 to an all-time high of 320 and Italy was 30 higher at 555. An increase signals deterioration in perceptions of credit quality. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings rose 21 basis points to 743.5, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased 6.25 to 179.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers climbed 12.5 basis points to 279.5 and the subordinated gauge was 17 higher 510.
  • Euro-Area Industrial Production Drops Most in 2 1/2 Years. European industrial production declined the most in 2 1/2 years in September, led by capital and consumer goods, as the sovereign-debt crisis pushed the economy toward a recession. Production in the 17-nation euro area dropped 2 percent from August, when it rose 1.4 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a drop of 2.3 percent, according to the median of 35 estimates in a Bloomberg News survey.
  • Hungary Junk Risk Sends Yield to 2-Year High as Debt Sale Fails. Hungarian bonds tumbled, raising a benchmark yield to the highest in more than two years as the forint weakened and a government debt auction failed on mounting concern the country will lose its investment-grade rating. The forint was the world’s worst-performing currency today, losing 1.5 percent to 315.29 per euro by 4:45 p.m. in Budapest. The yield on notes due in 2017 surged 48 basis points, or 0.48 percentage point, to 8.632 percent. The cost of insuring the debt against default surged to the highest since March 2009. Standard & Poor’s will likely decide on the country’s BBB- credit grade this month, it said in the U.S. late on Nov. 11 after placing Hungary on “CreditWatch with negative implications.” Fitch Ratings cut the outlook on Hungary’s lowest investment grade to negative from stable that day. The rating outlook revision “risks adding fuel to fire given the performance of the forint of late,” BNP Paribas SA strategists led by Bartosz Pawlowski in London wrote in a report today. “We continue to expect a ratings downgrade to Hungary by the end of the month” and “a sub-investment grade rating risks outflows” from the local bond market, the strategists said. Hungary’s “unpredictable” policies, including the dismantling of checks on policies, levying of extraordinary industry taxes and forcing lenders to swallow exchange-rate losses on loans, are harming investment and growth at a time when the economic environment is deteriorating, S&P said.
  • Crude Oil Declines as Italian Bond Yields Climb, Adding to Europe Concern. “There’s a growing realization that reform in Italy won’t occur overnight,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The Italian economy and political system have been confounding experts for a long time.” Crude oil for December delivery dropped $1.14, or 1.2 percent, to $97.85 a barrel at 1:01 p.m. on the New York Mercantile Exchange. Prices rose 5 percent last week and have increased for six consecutive weeks, the longest run of gains since April 2009. Brent oil for December settlement fell $2.51, or 2.2 percent, to $111.65 a barrel on the London-based ICE Futures Europe exchange.
  • Buffett Bets IBM(IBM) to Avoid 'Wild Swings' That Burned Technology Investors.
  • Credit Suisse Rating Under Review by Moody's. Credit Suisse Group AG (CSGN), the second- biggest Swiss bank, may have its long-term credit rating cut by Moody’s Investors Service after the investment banking unit posted a loss and income at the wealth-management division fell. The ratings company put Credit Suisse AG’s Aa1 rating and Credit Suisse Group AG’s Aa2 rating on review for a downgrade, Moody’s said in a statement today. The Zurich-based lender’s results were “more volatile” than peers and its year-to-date returns compared with risk weighted assets were weaker.
  • NJ Taxes Cause Rich People to Move, Economist Says. New Jersey’s high taxes drive out wealthy residents, slowing the state’s recovery, said Charles Steindel, the treasury department’s chief economist. Property, income and estate taxes are the top reasons people leave, said Steindel, who released a study of federal tax data and a survey of financial advisers today at an economic forum in Trenton organized by the treasury department.
Wall Street Journal:
  • Europe's Rescue Funds Get Little Traction. Efforts to bolster and accelerate the implementation of the euro zone's rescue funds have hit major roadblocks that will likely delay their launch and further eat away at investor confidence, say people familiar with the matter. Discussions to increase the lending capacity of the European Financial Stability Facility, the euro-zone's transitional €440 billion fund (about $600 billion), have yielded no real progress as major differences persist among member governments, said a European diplomat. Finance ministers last week pledged that an enlarged fund should be operational by December.
  • ECB Bazooka Could Spur Euro Crisis. European politicians argue tirelessly that the euro isn't in crisis, and so far the markets seem to believe them. At $1.3622, the euro is up 1.7% against the dollar year-to-date, and far above the lows of $1.20 it hit in June 2010 after the euro-zone debt crisis first exploded.
Business Insider:
Zero Hedge:
Credit Writedowns:
MyFoxNY:
  • Small Business Owners Plan Counter-Protest to Occupy Wall Street. Small business owners in Lower Manhattan are planning a counter-protest Monday against the Occupy Wall Street crowd. They say the motley crew hanging around Zuccotti Park is destroying their businesses. Fox 5 News reported that small businesses in the area have lost a reported $479,000 due to a lack of regular traffic. The business owners, who employ hundreds of people, will be on the steps of City Hall at 5 p.m. Their main message will be that it's time for the crowds to go home. They are also upset that Mayor Bloomberg has done nothing to help get rid of the encampment.
The Atlantic
Reuters:
  • EU Financial Transaction Tax Would Be "Suicide" - Osborne. A European financial transaction tax would be catastrophic for the continent without the participation of countries such as the United States and China, Chancellor George Osborne said on Monday. European Union policymakers have suggested a tax on financial trading to raise cash for a range of areas from development to bailouts, but Britain has rejected the idea, to safeguard London's position as a global centre of finance. "Proposals for a Europe-only financial transactions tax are a bullet aimed at the heart of London," Osborne said in article for the London Evening Standard newspaper. "The ideas of a tax on mobile financial transactions that did not include America or China would be economic suicide for Britain and for Europe." "The EU should be coming forward with new ideas to promote growth, not undermine it."
  • U.S. Concerned About U.N. Nuclear Work With Syria. The United States took renewed aim at Syria during an International Atomic Energy Agency meeting on Monday, expressing "strong reservations" about a technical cooperation project between the U.N. body and Damascus.
Financial Times:
Telegraph:
AFP:
  • China Cracks Down On 'Fake Journalists and News'. China said on Monday it had launched a campaign to crack down on 'fake journalists and news' and 'illegal media outlets', as it further tightens its grip on the media in the Internet era. The move is the latest in a slew of measures introduced by Beijing in recent weeks aimed at controlling the circulation of information and the fast-growing Internet, which now has more than half a billion users in the country. The General Administration of Press and Publication (GAPP) - China's publishing body - said in a statement that 'fake newspapers and periodicals, media outlets, journalists and news' had repeatedly emerged in the country. This has 'severely disturbed the press and publication order and affected social harmony and stability,' GAPP said, adding it had launched a nationwide crackdown that would last until the end of the year.
Basler Zeitung:
  • Lars Feld, an economic adviser to German Chancellor Angela Merkel, said it would be a mistake for the ECB to start printing money to help contain the region's debt crisis. Quantitative easing by purchasing bonds on a large scale "would massively damage the central bank's credibility in the longer term" and undermine its independence, Feld said in an interview. It would also "pose a certain inflation potential." He also said a splitting-up of the currency union or the exit of a member state would trigger "enormous disruptions" on financial markets and threaten banks in countries including Germany and France. "To me, this would be a nightmare," Feld said.
Globe and Mail:
RTHK:
  • Evergrande's housing price outlook in China for the rest of the year is "difficult," citing Chairman Hui Ka Yan.
Xinhua:
  • China will face a "severe" external trade situation for a period of time as the global financial crisis continues to deepen, citing Vice Commerce Minister Zhong Shan.
  • Yuan revaluation would cause many bankruptcies of small, medium-sized Chinese companies, without improving U.S. trade deficit, Xinhua reported in an unsigned commentary. U.S. politicians "don't have a single thought about global responsibilities" and "squeezing China" is an "old trick" in the run-ups to U.S. presidential elections, the commentary said.

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