Tuesday, February 14, 2012

Today's Headlines

  • Greece Struggles to Win Second Bailout. European officials jacked up the pressure on the Greek government to deliver budget cuts in exchange for a second bailout as they insisted that default is not an option. Finance ministers canceled a Brussels meeting slated for tomorrow and will hold a teleconference instead to prod Greece to do more to clinch an aid package worth 130 billion euros ($170 billion) along with roughly 100 billion euros of debt relief from private bondholders. “I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the program,” Luxembourg Prime Minister Jean- Claude Juncker, chairman of the euro finance panel, said in a statement today. He also pressed for “further technical work” on Greek budget cuts. Two years after pledging to pull Greece back from the brink, European leaders are torn between pouring more aid into the struggling economy or risking an unprecedented national bankruptcy that might force the country out of the euro and prompt renewed tumult in European markets. Finance ministers will discuss “outstanding issues” tomorrow and hold their next meeting as scheduled on Feb. 20, Juncker said. The postponement pushed the euro down to $1.3115 at 7 p.m. Brussels time from $1.3150 earlier.
  • Greek Economy Shrank 6.8% in 2011, More Than Forecast. Greece's economy, reeling from austerity measures demanded by creditors in exchange for rescue funds, contracted almost a percentage point more last year than the government forecast, according to Bloomberg calculations. Gross domestic product fell 7 percent from a year earlier in the fourth quarter after contracting a revised 5 percent on an annual basis in the previous three months, the Athens-based Hellenic Statistical Authority said in an e-mailed statement today. GDP declined 6.8 percent in 2011, according to Bloomberg calculations, compared with a 6 percent contraction estimated in the government's 2012 budget.
  • ECB Risks Repeat of Ruble Zone Failure, Citigroup's Buiter Says. The European Central Bank risks repeating the mistakes of policy makers after the Soviet Union’s break-up that led to the collapse of the ruble as a regional currency, according to Citigroup Inc. chief economist Willem Buiter. By allowing national central banks to expand their balance sheets at varying rates, the Frankfurt-based ECB’s policies echo condition following the collapse of the Soviet Union, Buiter wrote in a report today. Successor states initially shared a monetary union called the ruble zone only for it to collapse because of a lack of policy cohesion. The ECB may be following a “road at whose end awaits the complete ‘Rublezonefication’ of the common monetary, credit and liquidity policy into 17 different national policies and, ultimately, a fracturing of the monetary union into multiple independent national monetary regimes,” Buiter wrote.
  • European Industrial Output Declines 1.1%, Led by Germany. European industrial production declined in December led by a slump in Germany, adding to signs the region may have slipped into its second recession in three years. Production in the 17-nation euro area fell 1.1 percent from November, when it remained unchanged, the European Union’s statistics office in Luxembourg said today. Economists had forecast a drop of 1.2 percent, the median of 36 estimates in a Bloomberg News (EUITEMUM) survey showed. From a year earlier, production decreased 2 percent. The region’s economy probably failed to grow in the fourth quarter as governments toughened austerity measures, undermining spending and hiring, just as global exports weakened.
  • Sovereign Bond Risk Rises as Moody's Cuts Italy, Spain Ratings. The cost of insuring European sovereign debt rose after Moody's Investors Service cut the ratings of six of the region's governments, including Spin and Italy, and lowered its outlook on France and the U.K. The Markit iTraxx SovX Western Europe Index of cds on 15 governments rose for a fifth day, climbing three basis points to a two-week high of 332 at 10 am in London. Swaps on Spain climbed six basis points to 372, Italy rose two to 402 and the U.K. was up two at 76, all the highest levels in two weeks, according to CMA. Contracts on the Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers was unchanged at 221 basis points and the subordinated index was up 3.5 basis points at 373.5.
  • Emerging Stock Rally May Fade as Bulls Increase, Strategists Say. The biggest purchases of emerging- market stocks by global money managers in more than a decade and the largest mutual-fund inflows in 15 months are signs to Bank of America Corp. and Morgan Stanley that the rally in developing-nation shares may pause. A net 44 percent of investors surveyed by Bank of America this month said they had "overweight" positions in emerging markets, up from 20 percent in January, the biggest monthly increase since 2001, according to a report today. Developing- nation stock funds lured $5.8 billion in the week ended Feb. 8, the most since October 2010, EPFR Global data show.
  • Egypt Minister Says U.S. Used NGOs to Sow Chaos, Ahram Says. Egypt’s planning minister has told investigators that the U.S. directly funded non-governmental organizations in the country with the aim of sowing chaos after the fall of Hosni Mubarak, the state-run Al Ahram newspaper said. Fayza Aboulnaga said the U.S. aimed to thwart a “historic opportunity” for Egypt to regain its regional and international stature, the Cairo-based newspaper said. Egypt has referred 43 people, including the son of U.S. Transportation Secretary Ray LaHood, to trial after a probe into foreign funding of NGOs. The inquiry has added to strains between the U.S. and Egypt and jeopardized American financial aid to the Egyptian military, a close ally.
  • Oil-Tanker Glut Is Unchanged From Four-Week High, Survey Shows. A surplus of the largest oil tankers competing to load crude at Persian Gulf ports stayed unchanged after reaching a four-week high last week, a survey showed. There are 10% more VLCCs available for hire over the next 30 days than there are likely cargoes, according to a Bloomberg survey of seven shipbrokers and owners today. The glut was the biggest since Jan. 10 as of last week.
  • Syria Army Shells Homs as UN Urges International Action. Syria’s army fired artillery at the city of Homs as the United Nations’ top human-rights official, Navi Pillay, urged international action to protect civilians. Security forces resumed shelling the Baba Amr neighborhood at 6 a.m. today and carried out attacks in the southern province of Daraa and Idlib, killing at least 20, Rami Abdel Rahman, head of the U.K.-based Syrian Observatory for Human Rights, said by phone. The assault on Homs began 10 days ago. “The humanitarian situation is very bad, food and medicine are scarce, and there is no electricity,” said Abdel Rahman, who is in touch with a network of activists in Syria. The shelling of Baba Amr today was the “fiercest” of the past five days, he said. Nationwide, about 20 people died yesterday, he said, including in the city of Rastan, which was hit by heavy artillery and machine-gun attacks.
  • Retail Sales in U.S. Rise, Below Forecasts. Sales at U.S. retailers rose less than forecast in January, reflecting an unexpected drop in purchases of automobiles. The 0.4 percent gain reported by the Commerce Department today in Washington was half the 0.8 percent rise median forecast of economists surveyed by Bloomberg News. Purchases excluding car dealers climbed 0.7 percent, more than projected and the biggest gain since March. “Consumers are being very picky at this point,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “We saw aggressive retailer discounting and sharp price cuts in the new year. It bodes poorly for retailers’ margins.” Purchases were also revised down 0.1 percentage point in each of the prior two months -- to unchanged in December and a 0.3 percent rise in November. Stagnant yearend sales prompted economists at Morgan Stanley to trim their tracking estimates for consumer spending in the fourth quarter and first three months of 2012.
  • Philly Fed Boss Warns Against Speeding Recovery. The head of the Philadelphia Federal Reserve Bank warned Tuesday against efforts to accelerate the nation's economic recovery, citing the threat of inflation. Speaking at the University of Delaware, Charles Plosser said the Fed already has taken several steps to help revive the economy, and that with a very accommodative monetary policy already in place, officials must guard against the medium and longer-term risks of inflation. "Inflation risks in the near term, I think, remain modest," he said. "However, I do remain concerned that monetary policy actions have exposed us to substantial inflation risks over the medium and longer term." Plosser noted that the Fed has kept the federal funds rate near zero for more than three years to support the economic recovery. The Fed also has conducted two rounds of asset purchases that have more than tripled the size of its balance sheet and changed its composition from short-term Treasuries to longer-term Treasuries and mortgage-backed securities. "Today, we are in a modest recovery from a very deep recession and a financial crisis," Plosser said. "The financial crisis has passed, however, and monetary policy should not continue to act as if the financial crisis is still upon us." Plosser said he did not support the Federal Open Market Committee's announcement last month that economic conditions were likely to warrant exceptionally low levels for the federal funds rate at least through late 2014, 18 months longer than the mid-2013 date the Fed first signaled in August. "I think economic conditions, as they have evolved even since late last year, do not call for further accommodation," Plosser said. "In fact, the economy has actually improved. Moreover, I continue to oppose using calendar dates to communicate forward guidance."
Wall Street Journal:
  • China's Military Spending to Double by 2015 - Report. China’s defense budget will double by 2015, making it more than the rest of the Asia Pacific region’s combined, according to a report from IHS Jane’s, a global think tank specializing in security issues.
  • EU Says Many Members Vulnerable. Twelve European Union member nations, including Italy, Spain, the U.K. and France, are suffering from significant economic imbalances that leave them vulnerable to further shocks, the European Commission is to say. In a document due to be released Tuesday at 0900 ET by European Economics Commissioner Olli Rehn, the EU's executive arm said it will conduct an in-depth analysis into nearly half of the EU's 27 members, which could eventually lead to demands for policy changes and potentially even sanctions.
  • Exclusive: Yahoo(YHOO) Asia Deal Talks Off For Now.
  • Solar Firm Films for Chapter. 11. Energy Conversion Devices Inc., a pioneering Michigan-based solar-technology company, filed for bankruptcy protection Tuesday with a plan to slash its debt and sell its business at a court-supervised auction. The Auburn Hills, Mich., company filed for Chapter 11 protection in U.S. Bankruptcy Court in Detroit after it was unable to come to terms on an out-of-court deal with its convertible bondholders, according to Michael E. Schostak, director of business development at Energy Conversion Devices.
  • China Deflects Criticism Over Syria. Chinese Premier Wen Jiabao and other senior leaders defended Beijing's handling of the crisis in Syria amid growing international criticism that threatens to cast a shadow over a visit to the U.S. by Vice President Xi Jinping. Mr. Wen, speaking at a news conference on Tuesday at an EU-China summit in Beijing, said China was working to prevent the spread of violence in Syria. He was addressing recent criticism from the U.S., Europe and others that Beijing's unwillingness to support measures against Syria at the United Nations was a key hurdle to restoring peace there.
Business Insider:
Zero Hedge:
New York Times:
  • French Candidate Assails Plan for Greece. The front-runner for the French presidency, the Socialist candidate Fran├žois Hollande, criticized European policy on Greece on Monday, saying that mandatory austerity measures were too severe and would never produce the desired results because “everyone knows” that “there is no rebound in growth in Europe and in Greece.” The Greek government, he said, would “have a short life,” while the austerity plan forced on Greece amounted to a “purge.”
  • Portugal's Debt Efforts May Be a Warning for Greece. Unlike Greece, Portugal is a debtor nation that has done everything that the European Union and the International Monetary Fund have asked it to, in exchange for the 78 billion euro (about $103 billion) bailout Lisbon received last May. And yet, by the broadest measure of a country’s ability to repay its debts, Portugal is going deeper into the hole. The ratio of Portugal’s debt to its overall economy, or gross domestic product, was 107 percent when it received the bailout. But the ratio has grown since then, and by next year is expected to reach 118 percent. That’s not necessarily because Portugal’s overall debt is growing, but because its economy is shrinking. And economists say the same vicious circle could be taking hold elsewhere in Europe.
  • OECD Urges Germany to Address Its Own Economic Weak Spots. The vaunted German economy remains over-regulated and suffers from other weaknesses that could cause growth to slow significantly in coming years, the Organization for Economic Cooperation and Development said Tuesday. In what amounted to a warning against complacency by German leaders, the O.E.C.D. said that the country needs to do more to encourage women and older people to work; strengthen its fragile banking system; and remove regulations that discourage competition among lawyers, engineers and other professions.
Rasmussen Reports:
  • 59% of Catholics Disapprove of Obama's Job Performance. Catholics strongly disapprove of the job President Obama is doing as the debate continues over his administration’s new policy forcing Catholic institutions to pay for contraception they morally oppose. While the president’s overall job approval ratings have improved over the past couple of months, they have remained steady among Catholics. A new Rasmussen Reports national telephone survey finds that 59% of likely Catholic voters nationwide at least somewhat disapprove of the president’s job performance, while 40% at least somewhat approve. But the passion’s on the side of those who don’t like the job he’s doing: 44% Strongly Disapprove versus 19% who Strongly Approve.
  • EU to Punish Spain for Deficits, Inaction. The European Union is likely to take action against Spain's newly installed government by May for delaying austerity measures ahead of a regional election next month, sources familiar with the situation have told Reuters. A final decision still has to be made, but the European Commission believes the new government overstated the deficit figures for 2011 so the current year's data would look better. Spain is also not addressing quickly enough the deterioration in public finances expected in 2012, risking the country's longer-term growth, three senior EU officials said. Asked if the European commissioner for economic and monetary affairs, Olli Rehn, would take action and recommend that the bloc's 27 finance ministers adopt sanctions against Madrid, one of the officials said: "It is very likely." "It is not that we want to. But if there is a deviation, and it is almost inevitable, then we will have to," added the official, who spoke on condition of anonymity.
  • Copper Slides in Sign of Deepening Correction.

USA Today:

  • Pew Study: 1 in 8 Voter Records Flawed. More than 24 million voter-registration records in the United States— about one in eight — are inaccurate, out-of-date or duplicates. Nearly 2.8 million people are registered in two or more states, and perhaps 1.8 million registered voters are dead.


  • Debt Crisis: Live. Tomorrow's meeting to discuss the second Greek bail-out has been called off amid accusations that the debt-stricken country has failed to offer the required political pledges, as Britain is labelled an economy at risk by the EU.


  • An agreement under which private investors would voluntarily take a 70% losss on Greek debt may not result in the targeted writedown of about $132 billion because not enough bondholders accept the terms of the proposal, citing central bankers. While a deal will likely be announced tomorrow as planned, Greece may have to introduce legislation that would bind all bondholders to the revised terms once 50% of the investors agree to the plan.

No comments: