Tuesday, July 10, 2012

Today's Headlines

Posted by Gary .....at 2:48 PM

Bloomberg:
  • Euro-Split Case Drives Krone Appeal in Binary Bet. The appeal of the Danish krone is growing as securities denominated in the Nordic nation’s currency offer a hedge against the risk of a euro-area breakup that even German assets can’t provide. “For an international investor with euro-zone exposure, buying Danish assets can be a hedge against the extreme scenario of the euro breaking up,” Ian Stannard, chief European currency strategist at Morgan Stanley in London, said in a phone interview. “In that scenario, the Danish asset may appreciate and work as a hedge against the drop in the euro-zone asset.”
  • Euro Weakens as Investors Sell to Buy Higher-Yield Assets. The euro fell to a two-year low versus the dollar and weakened against all of its 16 most-traded peers as traders used the shared currency to fund purchases of higher-yielding assets. The 17-nation currency dropped to the weakest on record versus Australia’s dollar five days after the European Central Bank cut its key interest rate to an all-time low 0.75 percent. Mexico’s peso climbed versus the dollar on bets Europe’s crisis will ease. The pound slid against most major counterparts after Bank of England Governor Mervyn King said the U.K. economy doesn’t show “great signs” of recovering from recession. “The euro is now the main funding currency, and everyone wants to be short euro,” said Sebastian Galy, a senior foreign- exchange strategist at Societe Generale SA in New York. “The dollar is no longer the main funding currency.” A short position is a wager a currency will decline in value. The euro depreciated as much as 0.6 percent to $1.2235, the lowest since July 2010, before trading at $1.2253 at 12:07 p.m. New York time, down 0.5 percent.
  • ECB Says EU Crisis Plans Risk Harming Deposit Guarantees. The European Central Bank said the European Commission’s plans to handle the failure of large lenders may threaten its independence and could damage confidence in national guarantee programs for bank deposits. ECB Vice President Vitor Constancio made the remarks during a debate on a draft law with finance ministers in Brussels today. Some ministers also raised concerns over the proposal, which Michel Barnier, the European Union’s financial services chief, has described as a “cornerstone” of the bloc’s efforts to build a so-called banking union. There is a “potential difficulty” with how Barnier’s proposal would interact with deposit-guarantee programs, Constancio said. It’s necessary to avoid “any doubts of the citizens” on the capacity of such plans to fulfill their commitments, he said.
  • Investment Bankers Face Termination as Europe Fees Fall. Investment bankers in Europe are girding for a second wave of job cuts in less than a year after the euro area’s debt crisis drove fees from mergers and securities underwriting to a nine-year low. Credit Suisse Group AG (CSGN) and UBS (UBSN) AG, Switzerland’s biggest lenders, face the most pressure to boost efficiency as that country runs ahead of others in introducing tougher capital and liquidity rules to curtail risk-taking, making some businesses unviable.
  • China’s Stocks Fall to 6-Month Low After Imports Trail Estimates. China’s stocks fell, dragging the benchmark index down to a six-month low, after a government report showed imports rose less than anticipated in June while export growth slowed. Shenzhen Chiwan Wharf Holdings Ltd. led a decline for port operators as a gauge of export orders showed a contraction for the first time since January, suggesting that overseas shipments may slow in coming months. Poly Real Estate Group Co. (600048), the nation’s second-biggest developer, slumped 3.7 percent after forecasting lower first-half profit.
  • Dodging Bubble Means Canada Economy Loses Edge: Mortgages. Canadian Finance Minister Jim Flaherty’s efforts to avert a housing bubble are hastening the end of a six-year streak of outperforming the U.S. economy. Changes implemented yesterday include shortening the maximum length of government-insured mortgages to 25 years from 30 years to quell demand for new homes and curb record household borrowing that Flaherty said has become a greater risk to the economy than slowing growth. The rule changes make it harder for some buyers to qualify for mortgages. Ebbing demand for homes removes one more driver from the world’s 10th largest economy, said Douglas Porter, deputy chief economist at Bank of Montreal. Residential construction was the fastest expanding segment in the first quarter, responsible for almost half of Canada’s 1.9 percent growth as consumer and government spending slowed. “Basically the consumer is all tapped out, the housing market has no room to grow, we’re seeing fiscal restraint,” Porter said. “It’s very difficult to imagine Canada outpacing the U.S. economy in growth terms.”
  • Oil-Tanker Glut Seen Expanding to Widest in Month on Slow Demand. A glut of supertankers in the Persian Gulf expanded to the widest in a month as demand to hire the ships slowed, a Bloomberg News survey showed. There are 23% more VLCCs available for hire over the next 30 days than there are likely cargoes, according to a Bloomberg survey of six shipbrokers and owners today. That's 1 percentage point more than last week, and the largest surplus of VLCCs in the region since June 12.
  • Bullard Says Fed Would Consider More Action If Economy Worsens. Federal Reserve Bank of St. Louis President James Bullard said the U.S. central bank would consider more stimulus if the economy slows significantly. “If things slow down a lot more and the U.S. economy looked like it was going back into recession or there were risks of deflation then we would consider more action,” Bullard told reporters in London today. “But I don’t think we’re at that juncture.” Bullard added that inflation rates in the U.S. are “around target” and the situation isn’t similar to that of 2010. “I don’t think we can look at any more extension of operation twist beyond the end of this year,” Bullard added.
  • Fed Reluctance May Push Yields to Lows, Misra Says: Tom Keene. Yields on benchmark 10-year Treasury notes may drop as low as 1.25 percent if the Federal Reserve is slow to provide more stimulus as the U.S. economy weakens, according to Bank of America Corp.’s Priya Misra. “Markets are obsessed with QE3 right now. They expect QE3 the next bad data print. Everyone expects the Fed to jump in. What if the Fed wants to wait?” Misra, head of U.S. rates strategy at Bank of America Merrill Lynch, said on Bloomberg Television’s “Surveillance” in an interview with Tom Keene. “If we continue to get weak data and the Fed doesn’t jump in right away, that is when markets panic.”
  • Democrats to Risk Fiscal Cliff by Targeting Top Earners. Congressional Democrats have developed a get-tough strategy to try to force Republicans to go along with President Barack Obama’s call for higher taxes for the wealthiest Americans. Democrats say they are prepared to go over the so-called fiscal cliff at the end of the year if Republicans continue their opposition to more revenue from top earners, allowing the George W. Bush-era tax cuts to temporarily expire for everyone on Dec. 31 and accepting scheduled spending reductions, including for Pentagon programs favored by Republicans. Democrats who say their party blinked two years ago by not separating lower rates for the richest taxpayers from those for the middle class maintain they have the leverage to prevail this time, saying no deal on taxes and spending would be better than a bad deal.
  • Libor Woes Threaten to Turn Companies Off Syndicated Loans. The scandal surrounding the London interbank offered rate is threatening to undermine confidence in syndicated loans and hasten companies’ flight to bonds. “What corporate treasurers are concerned about is the damage this Libor problem will do to market confidence,” said John Grout, the policy and technical director at the Association of Corporate Treasurers in London, which has about 4,500 members. “If people lose trust in banks and Libor, which is indexed to a huge amount of debt and derivatives instruments, market liquidity could be reduced and borrowing costs could rise for corporates.”
  • CFTC Votes 4-1 to Approve Swap Definition Starting Overhaul. The U.S. Commodity Futures Trading Commission voted today to define when trades are considered swaps under the Dodd-Frank Act, a step that triggers more than a dozen rules under the 2010 financial-regulation overhaul. The agency’s commissioners voted 4-1 to approve a 600-page measure governing when interest-rate, credit, commodity and other trades involving companies including JPMorgan Chase & Co. (JPM), Barclays Plc (BARC) and Cargill Inc. should face rules to limit risk in the $648 trillion global market. The Securities and Exchange Commission unanimously approved the rule in a private vote on July 6, the agency said in a statement yesterday.
  • Camp Says Health-Care Ruling Opens New World For Taxes. The U.S. Supreme Court decision upholding the 2010 health-care law’s individual insurance mandate as a tax opens a “brave new world” for Congress to impose levies, said Representative Dave Camp, chairman of the House Ways and Means Committee. Congress must consider the implications of allowing a tax on “inactivity,” such as the penalty for not having health insurance, Camp, a Michigan Republican, said at a hearing today in Washington. “Under that premise, what is there to stop future Congresses from using this taxing authority to compel a similar ‘it’s for the good of the country’ outcome?” he said. “If one refuses to purchase the goods and services the government thinks are best for the country, the act of not purchasing can now trigger a tax.”
  • Applied Materials Falls After Reducing Fiscal 2012 Forecast. Applied Materials Inc. (AMAT) shares fell the most in seven months after the chipmaking-equipment provider sliced its fiscal 2012 sales and profit forecasts amid weakness in Europe, China, and the personal-computer market. For the year that ends Oct. 28, 2012, net sales won’t reach the previous outlook of $9.1 billion to $9.5 billion, the Santa Clara, California-based company said today in statement. Per- share earnings excluding some items will be less than a previous projection of 85 cents a share to 95 cents, the company said.
  • Credit Suisse German Clients Homes Raided by Tax Agents, HB Says. Credit Suisse Group AG (CSGN)’s German client’s homes were searched by tax agents probing the possible use of so-called “Bermuda products” involving several billion euros to hide funds from the tax authorities, Handelsblatt reported, without saying where it got the information. Some 7,000 customers, mainly German, that used accounts in Bermuda disguised as tax-free insurance products are affected, the newspaper said, citing unidentified banking officials.
Wall Street Journal:
  • Schäuble Warns Against Fund Delay. German Finance Minister Wolfgang Schäuble on Tuesday urged the country's highest court to dismiss a challenge to the constitutionality of the euro-zone's permanent bailout fund and warned of shocks to the European economy if the court were to delay its implementation.
  • Videogames Reach for the Cloud. Moving Beyond PlayStation, Sony Looks to Stream Games Over the Web.
  • Off the Tax Cliff He Goes. President Obama wants lower rates for GE(GE) and J.P. Morgan(JPM) than for small business. So the 2013 tax cliff is a big enough economic problem that President Obama now wants to postpone it for some taxpayers. But it isn't so big that he's willing to curb his desire to raise taxes on tens of thousands of job-creating businesses.
Fox News:
  • Survey: Small Business Optimism Sinks in June. The economy and uncertain political climate are taking a toll on small business owners' optimism, making them hesitant to expand. The National Federation of Independent Business said its index of small business owners' sentiment fell 3 points in June to 91.4 after edging lower in May. The index, compiled from a survey of NFIB members, shows that business owners are concerned about the economy. The number of owners expecting business conditions to improve in six months fell 8 percentage points and the number expecting their sales to rise slid 5 percentage points. Nearly a quarter of those surveyed say their biggest problem is weak sales. Owners said they are scaling back plans to hire and to buy equipment. That's a troubling sign for the U.S. labor market, which is struggling to gain traction. "This month's survey was a real economic downer," said NFIB Chief Economist William Dunkelberg. "The economy has definitely slowed; job growth will be far short of that needed to reduce the unemployment rate." Small businesses also are hesitant to expand because of high political uncertainty, the NFIB said. With the results of the presidential and congressional elections four months away, owners don't know what to expect in terms of taxes and government regulations.
CNBC.com:
  • Hypocrisy on LIBOR is Massive: Hedge Fund.
  • NY Fed May Have Known About Libor Fixing in 2007. The Federal Reserve Bank of New York may have known as early as August 2007 that the setting of global benchmark interest rates was flawed. The role of the Fed is likely to raise questions about whether it and other authorities took enough action to address concerns they had about the way London Interbank Offered Rates, or Libor, were set, or whether their struggle to keep the banking system afloat through the financial crisis meant the issue took a backseat.
  • When Foreclosure Supplies Fall, the Bottom Falls Out of Housing. Growing activity in the spring housing market brought new growth in home prices, but those gains are growing ever more precarious because they are dependent on low-priced, distressed properties.
  • FBI Investigates Peregrine Financial. The Federal Bureau of Investigation confirmed it was involved in investigating the circumstances surrounding a $200 million shortfall in customer accounts discovered at a Chicago-based futures broker.

Business Insider:

Zero Hedge:

NY Post:

Chicago Tribune:
  • China Copper Imports Fall 17.5% on Month in June. China's copper arrivals fell 17.5 percent in June from a month earlier, preliminary customs data showed on Tuesday, resuming a slowdown for much of this year due to falling demand for goods in the world's second-biggest economy. The monthly fall was broadly in line with the expectations of traders and analysts as copper demand in the world's top consumer of the metal has mostly stayed weak this year, even though imports spiked in May. "Credit in China is said to have increased in June. But so far we have not seen demand for copper pick up," a trader at a large producer of refined copper said.
markit:

CNN:

Reuters:

  • Einhorn says Fed stimulus counterproductive. David Einhorn, founder and president of hedge fund Greenlight Capital, told CNBC on Tuesday that the U.S. Federal Reserve's economic stimulus program was counterproductive. Einhorn, known for his prescient call against Lehman Brothers, also said he still favored Apple Inc(AAPL). He said low interest rates as a result of the Fed's economic stimulus were "depressing" and kept savers from generating income. "I think it's actually counterproductive," Einhorn said of the stimulus program, adding that it lowers the standard of living and drives up food and oil prices. He said he would suggest a rise in interest rates on U.S. Treasury bonds to "a reasonable level" of 2 to 3 percent. Einhorn said Apple, which he praised at this year's Ira Sohn investing conference, was "the best big-growth company we have." "We're two, three years into the Apple investment, and the way it seems headed it's likely we'll be there for a good while longer," he said. "I think the stock is very very substantially undervalued." He said Amazon.com Inc(AMZN) was "tough on its competitors" because it does not "feel the need to make a profit." "It's very hard to compete against somebody who doesn't feel the need to make a profit," he said, adding that he is not "short" Amazon.
  • Spain's savings banks to be forced to sell controlling shares in lenders -document. Spain's savings banks could be eventually forced to sell their controlling shares in commercial lenders and list some of them, according to a memorandum of understanding for an up to 100-billion-euro European aid for the Spanish banking system. "The Spanish authorities will prepare by end-November 2012 legislation clarifying the role of savings banks in their capacity as shareholders of credit institutions with a view to eventually reducing their stakes to non-controlling levels," the document obtained by Reuters said. "Moreover, authorities will provide by end-November 2012 a roadmap for the eventual listing of banks included in the stress test, which have benefited from state aid as part of the restructuring process." The document also says that holders of hybrid capital and subordinated debt in state-rescued banks will have to take a haircut on their investments in order to minimise the cost to taxpayers of the banks restructuring.
  • US Gasoline Demand Down Over Last Two Weeks - MasterCard. U.S. motorists pumped fewer gallons of gasoline over the last two weeks as they faced economic uncertainty, MasterCard's SpendingPulse report showed on Tuesday. Demand over the two weeks ended on Friday was 4.1 percent lower than a year earlier, the data showed. Gasoline consumption last week, including the July 4 holiday on Wednesday, was down 3 percent from the previous week, signaling a weak summer driving season. The average price of gasoline fell 15 cents over the two-week period to $3.33 a gallon, 7 percent lower than a year earlier, MasterCard said. The four-week moving average for demand fell for the 68th consecutive week, down 3.9 percent from a year earlier.
  • Brazil Stocks Fall More Than 2% on China Data. Brazil's benchmark Bovespa stock index fell more than 2 percent on Tuesday after data showed imports in China, a key purchaser of Brazilian raw materials such as iron ore, petroleum and soy, rose at only half the pace expected in June.

Telegraph:

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