Wednesday, June 27, 2012

Today's Headlines

Posted by Gary .....at 2:53 PM

Bloomberg:
  • Merkel Rebuffs Rajoy Plea, Shuts Door To Euro Area Bonds. German Chancellor Angela Merkel shut the door to joint euro-area bonds as a means of lowering Spain’s borrowing costs, saying they are the “wrong way” to achieve the greater European integration needed to stem the debt crisis. Speaking three hours after Spanish Prime Minister Mariano Rajoy made a plea for help from tomorrow’s European summit, Merkel said that euro bonds, euro bills and debt redemption funds are unconstitutional in Germany and economically “wrong and counterproductive.” “I fear that at the summit there will be much too much talk about mutual liability and far too little about improved oversight and structural measures,” Merkel told lower-house lawmakers in Berlin today. “Oversight and liability have to go hand in hand. There can only be joint liability when adequate oversight is ensured.” Merkel is under growing pressure from her European and global counterparts to soften her opposition to debt sharing in the euro area and do more to cut borrowing costs for Spain and Italy. Rajoy, outlining his goals for the two-day European Union summit beginning in Brussels tomorrow, said that Spain can’t go on financing itself at current borrowing rates for long. “The most important thing today is being able to finance ourselves in the markets, that’s the main issue,” Rajoy said in Parliament in Madrid. “And on that point Spain, Italy and other countries are going to push for reasonable decisions to be made,” using the “available instruments.”
  • Spain Scraps Election Pledge as Worsening Slump Hits Deficit. Spain’s government is studying tax increases to rein in the budget deficit, including scrapping a rebate for homeowners that Prime Minister Mariano Rajoy introduced six months ago to meet a campaign pledge. The government needs to plug the deficit as data showed the central administration’s shortfall for the first five months approaching the full-year target and the Bank of Spain said the recession deepened in the second quarter. The government in Madrid may eliminate the tax rebate for mortgage holders and create environmental levies, Deputy Budget Minister Marta Fernandez Curras said yesterday. Spain’s six-month old government enacted two election pledges at its second Cabinet meeting in December, raising pensions and restoring the rebate for homeowners scrapped by the previous administration. That policy is now in danger after the government already broke campaign promises by cutting firing costs and raising income tax as it battles the deficit amid a recession. The yield on Spain’s benchmark 10-year bond rose for a third day, reaching 6.93 percent at 3:49 p.m. in Madrid, compared with 6.38 percent on June 22. The spread with similar German maturities widened to 541 basis points from 536 basis points yesterday.
  • Spanish Yield Curve Flattening May Sink Euro: Technical Analysis. Trading patterns suggest a flattening of the yield curve for Spanish sovereign debt to levels last seen in November would push the euro to less than $1.2288, according to Citigroup.
  • China's Stocks Fall for 6th Day After Daiwa Cuts Growth Estimate. China’s stocks fell for a sixth day, the longest losing streak in six months, after Daiwa Securities Group Inc. cut its second-quarter growth estimate for the world’s second-biggest economy. Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co. led a gauge of material producers lower on the prospect of weaker demand. Shanxi Coal International Energy Group Co. (600546) dropped to the lowest level since August 2010 after the board approved the resignation of its chairman. China Oilfield Services Ltd. (2883) and Offshore Oil Engineering Co. jumped more than 6 percent on expectations oil equipment makers will benefit after Cnooc Ltd. invited bids for oil blocks. “The market is bearish on the long-term outlook for China’s economic growth and we haven’t seen a new driver for the economy emerge so far,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million.
  • Copper Backwardation Widens as One Firm Holds 40-49% of Stocks. Copper for immediate delivery rose to $20 a metric ton more than the three-month contract after the LME reported one unidentified company holds almost half of copper stockpiles in warehouses. The so-called backwardation, signaling limited supplies in the near future, was the most since May 28 by 3:18 p.m. in London. One company held 40-49% of copper worth at least $669 million and stored in LME warehouses by June 25, the LME's daily Warrant Banding Report showed. Inventories in LME-approved warehouses have climbed 10% this month, heading for the first monthly increase since September.
  • Iron-Ore Price Forecast Lowered by Australia as China Cools. Australia, the world’s biggest iron ore exporter, cut its price forecast and said rates may decline 11 percent from last year as slowing growth in China, the largest buyer, curbs demand. The steelmaking raw-material will average $136 a metric ton in 2012, the Bureau of Resources and Energy Economics said in a report today. That compares with $140 estimated by the Canberra- based bureau in March and an average of $153 last year. Shipments from the country may total 479 million tons, down from the 493 million tons predicted in March, it said. Prices dropped 2.2 percent this year as the Chinese economy expands at the slowest pace since 2009 and Europe’s debt crisis threatens global growth.
  • Oil Pares Gain on Gasoline Supply Increases. Oil futures pared gains after the Energy Department said gasoline stockpiles increased more than twice as much as expected last week. Gasoline inventories climbed 2.08 million barrels as refineries raised their production levels to a five-year high, Energy Department data showed. Stockpiles were forecast to gain 1 million barrels, according to a Bloomberg survey. Crude inventories fell less than expected. Crude oil for August delivery advanced $1.12, or 1.4 percent, to $80.48 a barrel at 12:22 p.m. on the New York Mercantile Exchange. Oil traded at $80.69 a barrel before release of the inventory report at 10:30 a.m. Earlier, it touched $80.92. Brent oil for August settlement increased 72 cents, or 0.8 percent, to $93.74 a barrel on the London-based ICE Futures Europe exchange, after surging 2.2 percent yesterday. Gasoline stockpiles increased to 204.8 million barrels in the week ended June 22, the highest level since May 4, the Energy Department reported. Refineries raised their utilization rate to 92.6 percent, up from the previous week’s 91.9 percent and the highest level since July 2007, the report showed.
  • Slowdown Concern Ebbs on Durable Goods, U.S. Home Sales. Orders for durable goods and the number of Americans signing contracts to buy an existing home rebounded in May, easing concern the world’s largest economy is faltering. Bookings for goods meant to last at least three years rose 1.1 percent, the first increase since February, a Commerce Department report showed today in Washington. Pending home sales climbed 5.9 percent after slumping 5.5 percent in April, according to data from the National Association of Realtors.
  • Older Workers In U.S. Drive Competition In Labor Market. About 74 percent of Americans say they plan to work past age 65, according to a May study by economists Jay Bryson and Sarah Watt of Wells Fargo Securities LLC in Charlotte, North Carolina. Thirty-nine percent said they need to earn to make ends meet or maintain their lifestyle, and 35 percent wanted to stay employed. “Many seniors simply aren’t in a position to retire,” said Watt, whose research was based on a Wells Fargo retirement survey done in 2011. “More people are hanging on to the job longer,” she said, as a result of the recession and some longer-term trends.
  • Facebook(FB) Analysts See Shares Staying Less Than $38 IPO Price.
  • Arena's(ARNA) Weight-Loss Pill Approved By U.S. Regulators. Arena Pharmaceuticals Inc. (ARNA) won Food and Drug Administration approval of its weight-loss pill lorcaserin, making it the first obesity medication cleared for sale in the U.S. in 13 years. Arena gained backing to market the treatment, dubbed Belviq, which affects an area of the brain that helps a person eat less and feel full after consuming small amounts of food, the FDA said today in a statement. Arena has licensed the medicine to Tokyo-based Eisai Co. (4523) to sell in the U.S.
  • Japan Sales Tax Risks Growth Grinding to Halt in 2014: Economy. Japan’s Prime Minister Yoshihiko Noda risks stalling the economy by pushing through a higher sales tax that may damp consumption even as it aids efforts to tame the world’s largest debt burden. The nation’s recovery after last year’s earthquake and tsunami could grind to a halt in 2014 when the first increase will take effect, according to UBS AG and Itochu Corp. (8001)
Wall Street Journal:

CNBC.com:

  • McDonald's(MCD) comp. sales haven't necessarily bottomed out for the year, CEO Jim Skinner said in an interview.
  • Europe's Worst Nightmare: What If Euro Can't Be Saved? Here's a nightmare for Europe's leaders to ponder as they prepare for yet another summit to tackle the euro zone crisis: a bond auction fails in Spain, spreading solvency worries to Italy and beyond and triggering uncontrollable bank runs that spell the single currency's end.
  • Merkel Says No Rash Decisions as Spain Sounds Alarm. German Chancellor Angela Merkel said on Wednesday, one day before a crunch European Union summit, that there were no quick or easy solutions to end the euro zone's debt crisis and leaders should avoid making rash promises they could not keep.
  • US Mortgage Applications Fell Last Week. Applications for U.S. home mortgages fell last week as refinancing applications for government loans slowed, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 7.1 percent in the week ended June 22. The MBA's seasonally adjusted index of refinancing applications decreased by 8.3 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell by 1.4 percent.

Business Insider:

Zero Hedge:

Reuters:

Telegraph:

Times:

  • Infrastructure Spending Is No Panacea, HSBC's King Says. Infrastructure spending, the latest "big idea" for generating economic growth in Europe, is a road to nowhere, Stephen King, the chief economist at HSBC Holdings Plc, wrote. Whatever else has been lacking in southern Europe, it has not been a willingness to spend on infrastructure, as the new airports at Athens and Madrid demonstrate, he said. Spain has made a colossal investment in high-speed rail and its ambition is to construct a 6,000-mile high-speed network by 2020, the world's densest relative either to land mass or population size, King said. If infrastructure investment equals economic salvation, it may be asked why Greece's economy has shrunk by 16% in the past 2 years, and why youth unemployment in both Greece and Spain is above 50%, he said.

Europa:

L'Hebdo:

  • German Finance Minister Wolfgang Schaeuble said introducing euro bonds would prompt countries to spend more, citing an interview. "Anyone who has the possibility to spend money at the expense of others will not hesitate to do so," he said. "You would, I would. The markets know that. And that is why you would not be convinced either by euro bonds."

Folha de S. Paulo:

  • Silval Barbosa, governor of the Brazilian state of Mato Grosso, signed a letter of intent with China Development Bank Corp. to build a railroad between the state's capital Cuiaba and the city of Santarem in the state of Para, citing the Mato Grosso government. The bank agreed to lend $10 billion for the project in return for products and services being imported from China.

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