- Euro Finance Chiefs to Defer Decision on Greece. European finance chiefs are set to defer ratifying a 130 billion-euro ($173 billion) rescue for Greece, pressing the government in Athens to put a newly struck austerity plan into action. “It’s up to the Greek government by concrete actions -- through legislation, other actions -- to convince its European partners that the second program can be made to work,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said today as he arrived for an emergency meeting of euro-area finance ministers in Brussels. European stocks rose for the first time in four days and the euro reached a two-month high against the dollar as the accord in Athens after all-night talks spurred optimism over enactment of the financial lifeline and debt-swap agreement needed for Greece to dodge default and economic collapse.
- El-Erian: Greece Agreement May Be Questionable. The agreement reached by Greek political leaders to win the nation’s second bailout may be “analytically questionable,” Pacific Investment Management Co.’s Mohamed A. El-Erian said. “It is very unlikely to lead to growth, jobs, financial stability and new investments,” El-Erian, chief executive and co-chief investment officer of the world’s biggest manager of bond funds, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “This agreement will be very difficult to sell when the principals, those who have agreed, have to go to their constituents.”
- ECB Taking Losses on Greek Debt May Sink Italy: Euro Credit. The International Monetary Fund's pressure on the European Central Bank to take part in Greek debt writedowns may backfire by deterring the central bank from extending its program of buying bonds from distressed nations. Greek creditors meet in Paris today to discuss a debt-swap designed to halve the nation's privately held obligations by eliminating 100 billion euros ($132 billion) of debt. While bonds bought by the ECB in its Securities Market Program are exempt from the deal, Greece needs to trim its burdens further to qualify for further aid and make a payment of 14.5 billion euros on March 20. "They will have to think of something, but it would be wrong to force the ECB to take losses," said Stuart Thomson, who helps oversee $121 billion at Ignis Asset Management in Glasgow. "The ECB taking a haircut would imply a fiscal transfer, which isn't its mandate. And the SMP would collapse if they do that. We can do without another rout in the market."
- Sovereign Default Swap Costs Rise as Greek Credit Event Looms. The cost of insuring European government bonds rose amid speculation a bailout package for Greece will trigger a credit event leading to a payout on default swaps insuring the nation’s debt. Investors are betting losses will have to be imposed on private investors who fail to support a debt restructuring through so-called collective action clauses. The nation’s creditors meet in Paris today to discuss a debt-swap designed to halve the country’s privately held obligations. A payout on Greek swaps makes it more likely contracts on other indebted nations may be triggered, and the Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed five basis points to 328 at 11:30 a.m. in London, the highest in a week. “Collective action clauses will have to go in place,” Paul Donovan, deputy head of global economics at UBS AG in London, said in an interview with Caroline Hyde on Bloomberg Television’s “First Look.” “That will mean that credit- default swaps should be triggered.” “Even 70 percent participation is not enough to reach a 120 percent target,” said Alessandro Giansanti, a senior rates strategist at ING Groep NV in Amsterdam. “That target is already short based on new expectations of GDP growth. They really want full participation and the only possibility for that is a coercive exchange. The risk is high for a credit event.” The cost of insuring European financial company debt also rose with the Markit iTraxx Financial Index linked to senior bonds of 25 banks and insurers increasing eight basis points to 211 and the subordinated index climbing 10 to 351, according to JPMorgan Chase & Co. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings jumped nine basis points to 572 while the Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 0.25 basis point to 131.5 basis points.
- Draghi Softens Outlook on Risks as ECB Refuses to Show Its Hand on Greece. European Central Bank President Mario Draghi signaled the economic outlook has improved, suggesting policy makers may be less inclined to add to stimulus as Greece reached agreement on austerity measures to secure a bailout. “The economic outlook remains subject to high uncertainty and downside risks,” Draghi said at a press conference in Frankfurt today. Last month, he said the outlook was subject to “substantial” downside risks. The ECB left its benchmark interest rate at a record low of 1 percent, as predicted by 55 of 57 economists in a Bloomberg News survey, and Draghi said officials didn’t discuss a rate change. “With the more optimistic outlook, a March rate cut is still possible but far from certain,” said Christian Schulz, senior economist at Berenberg Bank in London. “If the rebound in confidence indicators gains strength and more hard data confirms the trend, the ECB may leave rates unchanged.”
- US. Jobless Claims Fell Last Week to 358,000. (video)
- World Food Prices Rose Most in 11 Months. Global food prices rose 1.9 percent in January, the biggest gain in 11 months as the cost of oilseeds, dairy and grains increased, the United Nations Food and Agriculture Organization said. An index of 55 food items climbed to 214.3 points from a restated 210.3 points in December, the Rome-based FAO said on its website today. All commodity groups in the index advanced, according to the UN agency. Costlier food is driving up living costs in China, home to about a fifth of the world population. Chinese inflation unexpectedly accelerated in January on the back of food prices, which rose 10.5 percent last month compared with a year earlier, up from 9.1 percent in December, the country’s National Bureau of Statistics reported today. “International prices of all major cereals with the exception of rice rose in January,” the FAO wrote. “Prices of all the commodity groups that compose the index registered gains, with oils increasing the most.”
- U.S. Postal Service Loses $3.3B, Warns of Cash Drain. The U.S. Postal Service said it lost $3.3 billion in the quarter ended Dec. 31 -- typically its strongest -- and that it expects to run out of cash in October unless Congress agrees to cuts in facilities and employees. “If the Postal Service is unable to reduce its operating costs by $20 billion a year by 2015, we may not be able to return to profitability,” Postmaster General Patrick Donahoe said at a board meeting in Washington today. “We may become a long-term burden to the taxpayers if we are not able to make these reductions quickly.” The ninth consecutive quarter of losses may increase pressure on Congress from the Postal Service and customers to approve legislation intended to return it to solvency.
- Oil Rises for Third Day on U.S. Jobless Claims, Greek Austerity Agreement. Crude for March delivery gained $1.08, or 1.1 percent, to $99.79 a barrel at 1:06 p.m. on the New York Mercantile Exchange. Prices are up 1 percent this year. Earlier, they touched $100.18 a barrel. Brent oil for March settlement increased $1.19, or 1 percent, to $118.39 a barrel on the ICE Futures Europe exchange, rising for an eighth day. Total fuel demand in the U.S. fell to 17.6 million barrels a day last week, the lowest level since 1999, the Energy Department reported yesterday. The Organization of Petroleum Exporting Countries also cut its 2012 forecast for global oil consumption by 120,000 barrels a day to 88.76 million in its monthly market report today. The Energy Department trimmed its global demand forecast for the year to 89.25 million barrels a day on Feb. 7 from 89.38 million in January.
- Chen Says China Exports Probably Fell in January, Hurting Small Businesses. Chinese Commerce Minister Chen Deming said exports probably fell in January after foreign trade slowed in the second half of last year, as he pledged to maintain “stability” in the yuan’s exchange rate. Overseas (CNFREXPY) sales last month “cannot make us optimistic” and are “expected to have negative year-on-year growth due to Chinese New Year and other factors,” Chen said yesterday in a written response to Bloomberg News. “Chinese trading companies, particularly small and micro businesses, have come under growing pressure.”
- Syria Forces Hit Opposition Towns Amid Turkey-Russia Plans to End Conflict. Syrian President Bashar al-Assad’s forces attacked cities where the opposition is concentrated as countries including Turkey, France and Russia sought to present their own solutions to end the violence. Syria’s army continued shelling Homs, killing at least 126 people, Al Jazeera reported today, and more than 300 people have died during Assad’s siege since Feb. 3, Human Rights Watch said today. More than 5,400 people have died since protests began last March, according to the United Nations.
- Euro-Zone Ministers to Review Greek Deal. Euro-zone finance ministers gathered here on Thursday to review a new Greek political accord on budget austerity and the details of a planned debt restructuring aimed at slashing the country's debt burden to private creditors by €100 billion ($132.6 billion).
- 'Mortgage Deal from Hell' Hurts Responsible Borrowers: Bove. (video) Homeowners who kept up on their payments would lose while those who fell behind would win under an apparent deal between big banks and state governments, banking analyst Dick Bove said. The agreement, expected to be worth at least $26 billion, would compensate both victims of alleged foreclosure fraud and underwater homeowners whose debt exceeds the value of their properties. While the agreement is being hailed in some circles as justice for those duped into buying overvalued homes, Bove, the vice president of equity research at Rochdale Securities, thinks the deal is misguided. "Those people lucky or smart enough to stop making payments on their homes may get their loan balances reduced," he said. "Other beneficiaries of the agreement may be homeowners who have seen the value of their houses drop below the size of their mortgages. They get a freebie that other homeowners who have paid their mortgages down will not get."
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- Facebook(FB) Now Has Competition. (graph) Among social networks, Google + (GOOG) is growing faster than Facebook, just after one year of existence. While it took Facebook nearly a year to reach a million users and more than four years to reach 100 million, it took only Google+ about two weeks to reach 10 million, and less than a year to reach 100 million. Paul Allen, the founder of Ancestry.com, says Google+ could reach 400 million users by the end of the year. At its foundation, Google+ benefits from huge competitive advantages such as solid network effects over Facebook. Around 2004, at the foundation of Facebook, the web site was available only to students. Google+ is getting advertising from the world's largest search engine.
- Illinois Pension Takes First Step Into Hedge Funds. The $6.85 billion pension will allocate approximately 9% to Blackstone Alternative Asset Management, Diversified Global Asset Management and The Rock Group, according to a HFMWeek report.
Frankfurter Allgemeine Zeitung:
- Subsides from the European Union ruined the economy in Greece as the country didn't invest the funds it received in new and competitive technologies and spent it on consumption rather, Greek Economy Minister Michalis Chrysochoidis said in an interview. As a result, producers switched to become importers as that offered better returns, Chrysochoidis said. Spending cuts and a worsening recession could lead to a "big bang" at some point in Greece, he said.
- China lenders' reserve-requirement cuts may be postponed after inflation jumped last month, citing government officials and economists.
- China still faces "relatively large" pressure from imported inflation, citing Sheng Laiyun, a spokesman for the National Bureau of Statistics.