Thursday, March 08, 2012

Today's Headlines

  • Greece Restructuring Deadline Looms as Bond Investors Signal Swap Accord. The Greek government’s deadline for the biggest sovereign restructuring in history approached with a majority of investors signaling their readiness to participate in the debt swap. The euro and stocks gained before the offer’s close at 10 p.m. in Athens today as Greek Prime Minister Lucas Papademos told his Cabinet ministers that Greece had made “an appropriate framework with significant incentives” for bondholders. “For this reason I look forward to the maximum possible participation of the private sector,” Papademos said, according to an e-mailed transcript of his comments. Finance Minister Evangelos Venizelos told Parliament that “a historic process will be completed tonight,” and the results announced tomorrow.
  • Draghi Lays Groundwork for ECB Stimulus Exit as Inflation Takes Spotlight. European Central Bank President Mario Draghi signaled he’s done enough to battle the sovereign debt crisis, laying the groundwork for an eventual exit from record-low interest rates and emergency lending measures. Declaring that the environment “has improved enormously” and there are “many signs of returning confidence in the euro,” Draghi turned the spotlight instead on “upside risks” to inflation, which is now forecast to remain above the ECB’s 2 percent limit this year. That suggests policy makers don’t plan to cut rates further or add to their 1 trillion euros ($1.32 trillion) of long-term loans to banks, economists said.
  • Greek Swap Seen Provoking Aftershocks on Borrowing: Euro Credit. Greece’s day of reckoning with bondholders dawns with economists from Barclays Capital to Deutsche Bank AG concerned that the world’s largest debt restructuring will provoke aftershocks. Eight months of negotiations reach a head with today’s deadline for private creditors to accept a bond swap aimed at writing off 106 billion euros ($140 billion) of Greek debt. The government vows to bind holdouts to the deal should participation fall short of its target. Possible repercussions include a surge in borrowing costs for other indebted nations as investors refuse to lend to countries that may follow suit in imposing losses on bondholders. The accord may also trigger derivatives designed to insure against default, and may not be enough to prevent Greece from reneging on its debts in the coming years. “We have to be on alert for all kinds of potential risks surrounding this,” said Julian Callow, head of international and European economics at Barclays Capital in London. “We are in such unknown territory here by the sovereign debt standards of advanced economies that we have to pay attention.”
  • Citigroup European Debt Chief Says Greek Euro-Exit Risk Remains. Greece risks being forced to exit the euro even with private investors agreeing to the biggest sovereign-debt restructuring in history, said Citigroup Inc. (C)’s head of European government-bond trading. “The private-sector involvement will be no panacea for Greece and unlikely to lead to debt sustainability,” Zoeb Sachee said in an e-mailed response to questions. New Greek bonds received in exchange for existing securities will probably trade between 22 percent and 27 percent of face value depending on their maturities, Sachee said. That would reflect the risk of “further PSI or default,” or a “euro-zone exit,” he said.
  • Mersch at ECB Would Back German Criticism, Sueddeutsche Says. Yves Mersch is the top candidate to succeed Jose Manuel Gonzalez-Paramo on the management board of the ECB, as he is backed by Germany, France, and smaller European nations including Finland, Austria, and the Netherlands. Naming Mersch to the post would mean backing for criticism voiced by Bundesbank chief Jens Weidmann that the ECB too carelessly handed hundreds of billions of euros to ailing nations while accepting dubious guarantees in return, the newspaper said.
  • Sovereign, Corporate Bond Risk Falls Before Greek Debt Exchange. The cost of insuring against default on European sovereign and corporate debt fell as Greece moved closer to completing its debt swap. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped 5 basis points to 349 at 1 p.m. in London. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings fell 7 basis points to 581, according to JPMorgan Chase & Co. A decline signals improved perceptions of credit quality. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was down two at 133 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers declined one basis point to 214 and the subordinated gauge was two lower at 356.5.
  • Household Net Worth Rises For First Time in 3 Quarters. Household wealth in the U.S. climbed from October through December for the first time in three quarters as an increase in stock prices outstripped a decline in home values. Net worth for households and non-profit groups increased by $1.19 trillion in the fourth quarter from the previous three months to $58.5 trillion, the Federal Reserve said today in its flow of funds report from Washington. Housing wealth decreased by the most in more than a year. The value of household real estate fell by $367.4 billion, the first decrease in three quarters. Owners’ equity as a share of total household real-estate holdings dropped to 38.4 percent last quarter from 38.9 percent. Mortgage borrowing decreased at a 1.5 percent pace, the 11th consecutive drop. Other forms of consumer credit, including auto and student loans, climbed at a 6.9 percent pace, the biggest gain in at least seven years. Total non-financial debt climbed at a 4.9 percent annual pace last quarter, led by a 13 percent increase by the federal government and a 4.6 percent gain among businesses. State and local government borrowing dropped at a 1 percent pace.
  • Crude Oil Rises a Second Day on Signs Sanctions Are Cutting Iran Exports. Oil rose for a second day in New York on signs that sanctions on Iran are succeeding in cutting the nation’s crude exports. Futures climbed as much as 0.9 percent, adding to yesterday’s 1.4 percent increase. U.S. lawmakers proposed new measures against Iran’s nuclear program, while Barclays Capital said shipments from the Persian Gulf nation have dropped by 300,000 to 400,000 barrels a day. Oil for April delivery gained as much as $1 to $107.16 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.76 at 12:56 p.m. London time. Prices are 8 percent higher this year. Brent oil for April settlement was at $125.16, up $1.04 on the London-based ICE Futures Europe exchange.
  • Oil Rallies More From Dollar Outlook Than Iran: Chart of the Day. Higher oil prices may have more to do with the dollar's outlook than with tensions related to Iran's nuclear program, according to Jack Ablin, chief investment officer at Harris Private Bank. Yesterday's price of $106.16 a barrel for deliveries next month of West Texas Intermediate, the benchmark U.S. crude, was .063 times the price of April gold futures. The ratio was less than the monthly average of .071 since 1985, according to Bloomberg. The relatively low number shows oil is rising "on the prospect of a debased dollar" as the Federal Reserve seeks to bolster real-estate and stock prices, Ablin wrote. Higher costs for crude "are a by-product of one of the Fed's intended consequences: asset inflation."
  • Gold Futures Advance as Greek Rescue Spurs Demand for Dollar Alternative. Gold rose for a second day on signs that investors are buying the precious metal as an alternative to a slumping dollar. The U.S. currency fell for a second day against the euro as Greece moved closer to completing its debt swap. European Central Bank President Mario Draghi said inflation will probably breach the bank’s 2 percent limit this year even as the economy stalls.
  • Airline Passenger Growth Limited by Economy Until 2015, FAA Says. A sluggish economy and higher fuel prices will hold down airline growth until 2015, according to a U.S. Federal Aviation Administration forecast.
  • Obama Lobbies Senate Dems to Head Off Keystone Pipeline Amendment. President Barack Obama, seeking to head off an election-year showdown over energy policy, has been calling wavering Senate Democrats to lobby against a Republican measure that would force approval of the Keystone XL oil pipeline from Canada. With a vote coming as soon as today, the president has made personal appeals to Democrats from Midwestern states, where many of the jobs would be created by building TransCanada Corp. (TRP)’s pipeline from Canada’s oil sands to refineries on the U.S. Gulf Coast, according to a Senate Democratic aide, who spoke on condition of anonymity to discuss the private conversations. White House press secretary Jay Carney confirmed Obama’s calls while declining to identify who was targeted by the effort.
  • Ayatollah Khamenei Says Obama's Iran Comments Are 'Good Words'. Iran's Supreme Leader Ayatollah Ali Khamenei said President Barack Obama's comments that there is room for diplomacy in the international community's standoff with Iran are "good words."
  • Obama Faces Swing State Anger Over Gas Prices. Voters in some U.S. swing states are feeling the pinch of rising gasoline prices more than those in states that tend to vote Democrat, posing a challenge to President Barack Obama’s re-election, according to a report. Gasoline in Florida, Michigan, Nevada and Pennsylvania costs more than the national average of $3.76 a gallon, Trevor Houser, a partner at the New York-based policy analysis firm Rhodium Group, said yesterday in a report. Consumers in Iowa, New Mexico and Ohio spend more on gasoline as a percentage of their personal income than the national average.
  • Jobless Claims in U.S. Rose 8,000 Last Week. The number of Americans filing claims for jobless benefits rose to 362,000 last week, a level consistent with an improving labor market. Applications for unemployment insurance payments increased by 8,000 in the week ended March 3, Labor Department figures showed today. Economists forecast 352,000 claims, according to the median estimate in a Bloomberg News survey. The average over the past four weeks held close to a four-year low.
Wall Street Journal:
  • Goldman(GS) Begins Hedge Fund Wind-Down. Goldman Sachs began this month unwinding its investments in hedge funds to comply with the Volcker Rule’s ban on banks holding more than 3% of the assets of any single fund. The process will take more than two years. It will redeem up to 10% of its stakes in certain hedge funds each quarter over ten consecutive quarters, starting in March 2012 and ending in June 2014.
Business Insider:
  • US Soldier in Afghanistan Says It's Outrageous That Obama Apologized For Koran Burnings. Several U.S. soldiers have been killed. And on Monday, a suicide bomber blew himself up at the entrance of Bagram Airfield in retaliation for the incineration of Islam's holy book. "The insurgents used the Koran to write jihadists messages to pass to others. In doing so, they violated their own cultural practice and defiled the Koran." The holy books were confiscated from a U.S. prison, Parwan Detention Center at Bagram Airfield, after they were discovered to contain extremist messages and were mistakenly taken out with the office trash. Sgt. Shively continued, "The insurgents turned the Koran into contraband. Therefore it’s ridiculous that we would even consider apologizing.”
  • Here's Apple's(AAPL) First Ad For The New iPad. (video)
Zero Hedge:


  • Americans Love McDonald's(MCD) But Overseas Growth Is Slowing. McDonald's overseas sales growth slowed last month. Americans though couldn’t get enough of the Golden Arches. The growth slip was most noticeable in Asia, the Middle East and Africa, where comparable store sales growth fell by 1.6%. Weak consumer demand in Japan and the Chinese lunar New Year hampered efforts there, the company said today. European sales growth suffered too, falling by 0.9%. The emerging markets decline are likely the most troubling factor for investors. Emerging markets are largely seen as a potential gold mine for all retailers—especially so for low-cost food chains that can easily appeal to rapidly expanding populations.
  • Egypt Parliament to Reject Govt in Vote - Muslim Brotherhood. The Egyptian parliament is likely to declare it has lost confidence in the government of Prime Minister Kamal al-Ganzouri via a formal vote, Muslim Brotherhood leaders said on Thursday, a move that will add to pressure on the ruling military council to appoint a cabinet led by the group. Emboldened by its success in parliamentary elections, the once-banned Brotherhood has become more critical of the Ganzouri cabinet which is set to govern until the end of June according to a timetable drawn up by the ruling generals.


  • Homeless Household Levels Up by 14%. The number of households classed as homeless increased by 14% last year, Government figures have revealed. Some 48,510 applications for homelessness assistance were approved by councils, up from 42,390 in 2010. Among them were 69,460 children or unborn babies, the statistics from the Department for Communities and Local Government showed. Leslie Morphy, chief executive of homeless charity Crisis, said: "Our worst fears are coming to pass.

Cinco Dias:

  • Most Spanish regions consider it will be impossible to meet the budget deficit targets set for this year by the central government of Prime Minister Mariano Rajoy, citing private conversations with officials.
The Australian:
  • US Offers Israel Bombs To "delay" Iran Attack. THE US offered Israel advanced weaponry in return for it committing not to attack Iran's nuclear facilities this year, according to an Israeli report last night. Citing unnamed Western diplomats and intelligence sources, the report in the Maariv daily said that during Prime Minister Benjamin Netanyahu's visit to Washington this week, the US administration offered to supply Israel with advanced bunker-busting bombs and long-range refuelling planes. In return, Israel would agree to put off a possible attack on Iran until next year, after the US elections in November. The issue of Iran was top of the agenda at talks between Mr Netanyahu and US President Barack Obama in Washington this week.
  • China should raise tolerance for small- and medium-sized companies' non-performing loans to about 5%, citing Yang Ziqiang, governor of China's central bank's Jinan branch.
Securities Times:
  • Home prices in China's seven or eight major cities must decline, citing Housing Minister Jiang Weixin. If home prices rise further at current rates and the property market bubble bursts, the impact on the economy will be "very large," Jiang said.

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