Thursday, August 30, 2012

Today's Headlines

Posted by Gary .....at 3:10 PM

Bloomberg:
  • Rajoy Delays Spain Bailout as Regions Line Up for Aid. Prime Minister Mariano Rajoy delayed seeking a second rescue for Spain while pledging to continue bailing out its regions as Valencia requested more money to settle bills and cover debt. Rajoy spoke today following a meeting in Madrid with French President Francois Hollande. Catalonia, Valencia and Murcia this week claimed more than half of an 18 billion-euro ($23 billion) fund announced by Rajoy last month to help the regions face bond redemptions and finance their deficits in the second half. A Valencia official who declined to be identified in line with government policy said the region will seek another 1 billion euros from the central government mostly to pay education and health bills. The country’s regions risk overwhelming a plan to tackle the euro area’s third-biggest budget deficit. They were responsible last year for most of Spain’s overspending, which remained nearly unchanged from 2010 at 8.9 percent of gross domestic product. Rajoy reiterated Spain won’t seek a second bailout until European leaders make aid conditions clear.
  • German Unemployment Rises for a Fifth Month Amid Crisis. German unemployment increased for a fifth straight month in August as the European debt crisis curbed demand for exports and companies held back investment. The number of people without a job increased a seasonally adjusted 9,000 to 2.90 million, the Federal Labor Agency in Nuremberg said today. Economists forecast a gain of 7,000, the median of 31 estimates in a Bloomberg News survey shows.
  • Greece Must Complete Cuts Package in the Next Week, ANA Reports. Greece’s government must settle on an 11.5 billion-euro ($14.4 billion) package of austerity measures by Sept. 6, as the troika of inspectors representing its international creditors will arrive in Athens Sept. 7, state-run Athens News Agency reported, without citing anyone. The government’s austerity package for 2013 and 2014 may include cutting Christmas and Easter bonuses for pensioners, abolishing seasonal unemployment benefits for as many as 160,000 employees, cutting wages in state-run companies and reducing subsidies for local governments and state investment projects, the news agency said.
  • Emerging Market Puts Decline to Cheapest Level in Year: Options. The cost of options protecting against losses in emerging-market stocks has fallen to the lowest level in a year amid speculation the shares will rally as global central banks support economic growth. Puts that profit should the iShares MSCI Emerging Markets Index decline 10% cost 9.6 points more than calls betting on a 10% gain, according to data on two-month options compiled by Blomberg.
  • Emerging-Market Stocks Fall for Fifth Day on Slowdown Concern. Emerging-market stocks dropped for a fifth day, the longest declining streak in seven weeks, as losses at Chinese shipping companies and rising unemployment in Germany fueled concern that the economic slowdown is deepening. The MSCI Emerging Markets Index (MXEF) fell 0.9 percent to 944.52 by 11:10 a.m. in New York, heading for the lowest level on a closing basis since July 27. China Shipping Container Lines Co. tumbled 11 percent, the most in the MSCI index. OAO Mosenergo, the Moscow-based power generator controlled by OAO Gazprom, slumped 2.3 percent. Brazil’s Bovespa stock index slid for a second day, led by losses for state electricity utility company Cia. Energetica de Sao Paulo.
  • ICBC’s Profit Growth Slows as Overdue Loans Rise for China Banks. Industrial & Commercial Bank of China Ltd. led the nation’s biggest lenders in posting slower profit growth as a sluggish economy curtailed demand for financial services and more borrowers defaulted on debt. Overdue loans rose at the five banks as the economy decelerated for a sixth quarter, and China’s liberalization of interest rates threatens to squeeze margins in the second half. “Credit quality of Chinese banks has obviously deteriorated, which is a reflection of the significant decline in the economy,” said Lewis Wan, the Hong Kong-based chief investment officer at Pride Investment Group Ltd., which manages $300 million of assets. “The profit growth will certainly stall some more as lending margins shrink and fee income slows.”
  • Copper Demand in China Seen Growing at Slowest Pace in 15 Years. Copper consumption in China, the world’s biggest user, is expected to expand this year at the slowest rate since 1997 as economic growth cools, according to Beijing Antaike Information Development Co. Usage may increase 5 percent to about 7.7 million metric tons supported by demand from the power industry, Yang Changhua, who’s studied the market for more than a decade, said in a phone interview from Beijing. “It could turn out to be even lower, and we’re not optimistic about next year,” Yang said yesterday. “This time is different from 2008,” said Yang. Growth in copper demand “reached almost 10 percent as Beijing’s stimulus package boosted infrastructure construction then, but now even if there are stimulus policies, the potential for further growth is relatively small.”
  • Jobless Claims in U.S. Unchanged Last Week at One-Month High. More Americans than forecast filed applications for unemployment benefits last week, a sign that progress in the labor market is faltering amid a slowing economy. Jobless claims were little changed at 374,000 in the week ended Aug. 25, matching the upwardly revised figure from the prior week, the Labor Department reported today in Washington. The median forecast of 50 economists surveyed by Bloomberg News called for 370,000. The four-week moving average, a less volatile measure, climbed to a six-week high.
  • Americans Boost Spending For First Time In Three Months. Americans stepped up spending in July for the first time in three months as an increase in incomes helped make up for a jobless rate stuck above 8 percent. Purchases increased 0.4 percent after being little changed in June, Commerce Department figures showed today in Washington.
  • Consumer Comfort in U.S. Hovered Last Week Near Seven-Month Low. Consumer confidence in the U.S. held close to a seven-month low last week as Americans’ view of the buying climate fell to the lowest level of the year. The Bloomberg Consumer Comfort Index was little changed at minus 47.3 in the period ended Aug. 26, from the prior week’s minus 47.4 reading that was the weakest since mid-January. The gain halted a six-week decline that was the longest since 2008, when the U.S. was in a recession. Unemployment stuck above 8 percent may encourage consumers to keep rebuilding savings rather than boost spending, which accounts for about 70 percent of the economy. Gasoline prices, which are projected to be the highest on record for a Labor Day holiday, are another source of discomfort for Americans. “Strained household balance sheets, a soggy economy and a sluggish labor market are the probable causes behind the sharply negative view,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Based on the deterioration among different demographic groups and the decline in economic expectations, household spending is likely to remain on a sub 2 percent track for the remainder of this year.”
  • Ciena(CIEN) Tumbles on Wider Losses, Weak Economy. Ciena Corp. (CIEN), a maker of communications-network equipment, tumbled the most in more than a year after reporting a wider-than-projected loss and forecasting lower revenue than analysts had estimated. The economy is taking a toll, and Ciena has been slow to book revenue on new products, Chief Executive Officer Gary Smith said. “We are experiencing the effects of ongoing macroeconomic challenges and slower-than-expected rollouts of new design wins,” Smith said in a statement. Ciena shares (CIEN) fell 13 percent to $14.53 at 9:48 a.m. in New York. The stock, up 38 percent this year through yesterday, dropped as low as 14 percent earlier in today’s session, marking the biggest intraday decline since June 2011.
  • China Armed Forces to Safeguard Disputed Territory, Xinhua Says. China’s armed forces are capable of protecting the country’s maritime rights including islands claimed by both China and Japan, the Xinhua News Agency reported, citing Defense Ministry spokesman Geng Yansheng. Any action by Japan cannot change China’s claim over the islands, Geng said according to Xinhua. The islands are known as the Diaoyu in Chinese and the Senkaku in Japanese.
  • SEC Proposal Could Lead To Hedge Fund Advertising. Hedge funds may go from soliciting individual investors behind closed doors to conducting wide advertising campaigns without restriction under a rule proposed yesterday by the U.S. Securities and Exchange Commission. SEC commissioners voted 4-1 to invite public comment on a proposal for how to end decades of limits on the pursuit of investors by private funds and startups. The shift drew criticism from investor-protection groups and the mutual-fund industry, including the Washington-based Investment Company Institute, which have said that lifting the ban without restrictions may expose investors to misleading advertisements by some private funds.
  • Obama Second Term Would Defy Confidence Measure. A second term for Barack Obama would make him the first president in more than 40 years to win with an electorate that has such a sour outlook on the economy. The BGOV Barometer shows that the Conference Board’s consumer confidence measure has accurately signaled the result of the re-election bids of the last seven presidents, starting with Richard M. Nixon’s 1972 campaign. The incumbent president has won in years when the monthly confidence number averages above 95, bad news for Obama with the indicator averaging 66 so far in 2012. “People are anxious, and from the standpoint of the public, they have a limited store of options,” Bruce Buchanan, a political scientist at the University of Texas-Austin who studies voter behavior in presidential elections, said in a telephone interview. “All they can do if they’re unhappy with the direction of economic events and growth and prosperity and such is change horses.”
  • WPP Cuts Full-Year Sales Forecast on Client Spending. WPP Plc (WPP), the world’s biggest advertising agency, cut its full-year sales growth forecast as clients in North America and continental Europe reduced spending. The stock dropped the most since October 2011.
  • Roach Says Bernanke Shouldn’t Be Reappointed as Fed Chief: Keene. Yale University professor Stephen Roach said Federal Reserve Chairman Ben S. Bernanke shouldn’t be given a third term because of his role in managing the U.S. economy before the financial crisis. “I think Bernanke tried his best post-crisis, but he’s part of the problem pre-crisis,” Roach said on Bloomberg Radio’s “Bloomberg Surveillance” with Ken Prewitt and Tom Keene today. “He and Alan Greenspan condoned asset bubbles at a time the economy needed more discipline.”
Wall Street Journal:
Barron's:
CNBC.com:
  • French PM: 75% Tax Will Not Define Government. France’s Prime Minister has told CNBC that his government will work hard with businesses to avoid major job losses and dismissed claims that his government is anti-business and driving away investment with a 75 percent tax on high earners.

Business Insider:

Zero Hedge:

Foreign Policy:

  • Everything You Think You Know About China Is Wrong. Are we obsessing about its rise when we should be worried about its fall? For the last 40 years, Americans have lagged in recognizing the declining fortunes of their foreign rivals. In the 1970s they thought the Soviet Union was 10 feet tall -- ascendant even though corruption and inefficiency were destroying the vital organs of a decaying communist regime. In the late 1980s, they feared that Japan was going to economically overtake the United States, yet the crony capitalism, speculative madness, and political corruption evident throughout the 1980s led to the collapse of the Japanese economy in 1991. Could the same malady have struck Americans when it comes to China? The latest news from Beijing is indicative of Chinese weakness: a persistent slowdown of economic growth, a glut of unsold goods, rising bad bank loans, a bursting real estate bubble, and a vicious power struggle at the top, coupled with unending political scandals. Many factors that have powered China's rise, such as the demographic dividend, disregard for the environment, supercheap labor, and virtually unlimited access to external markets, are either receding or disappearing.

Reuters:

  • Iron ore hits lowest in nearly 3 yrs; miners' shares tumble. Iron ore prices fell to their lowest levels since 2009 on Thursday, dragging down shares in miners including top producers of the steelmaking ingredient, Rio Tinto and BHP Billiton , as a slowdown in top consumer China threatened to further sap demand. Benchmark iron ore with 62 percent iron content slid nearly 2 percent to $88.70 per tonne on Thursday, according to data provider Steel Index, the lowest since October 2009, although recorded spot prices fell as low as $59 in early 2009. The iron ore price has dropped by a third, or almost $50 per tonne, since July, as Chinese steel producers shun cargoes and the appetite of the world's largest consumer cools. Prices could fall up to 30 percent more, with no sign consumption will rebound anytime soon, analysts and traders said. "It's possible for prices to fall to as low as $65 to $70 in the spot market, before a recovery back to the $80 to $90 range," said Fairfax I.S. analyst John Meyer, adding that the price slide could continue for the next one to two months. Iron ore is a leading economic indicator as it highlights demand in key industrial sectors such as construction and carmaking. Many traders are currently trying to liquidate their iron ore cargoes with little success, a further sign that a rebound is not on the cards in the short term. "Not only is a recovery in the near term unlikely, there is also no sign that the fall will stop," a UK-based iron ore trader said. "Looking at the cost curve these prices make no sense but there are no signs at all of an improvement in demand. The further traders wait the more they lose and waiting for a recovery is a big risk to take." A second trader said he was getting "no interest whatsoever" for an iron ore cargo he was offering. A movement of the iron ore swaps forward curve on Thursday also indicated the market has lost faith in a price recovery in the near term. Swaps tied to iron ore deliveries for the firt quarter next year traded above swaps for the last quarter this year, showing players think a rebound is unlikely until 2013. The iron ore market will remain under pressure until the steel sector recovers and this will not be a quick process, analysts said. "With sluggish manufacturing activity in Europe and a construction market that's struggling to pick up in China, demand for steel has dropped sharply with no quick fix in sight," said Metal Bulletin research steel analyst Kashaan Kamal. Chinese steelmakers said the sector, nourished by a decade of breakneck growth, needs to brace itself for weak demand and razor-thin margins over the next 3-5 years that will force inefficient mills to shut."The speed in the fall of the iron ore price is alarming. I don't think many people expected it to be sub $100 and to see it go below $90 is eye-opening to say the least," analyst Asa Bridle at Seymour Pierce said.
  • Hedge funds bet France is more peripheral than core. Hedge funds are going against market consensus and betting that ultra-low French government bond yields are unsustainable, believing a sluggish economy and the new government's policies will eventually force up borrowing costs. Many macro funds now think the yields, which have collapsed this year, cannot remain around the lowest levels seen for more than 20 years. France's economy, after all, is teetering on the brink of recession. The funds, which are often at the leading edge when it comes to future market moves, are also sceptical about the policies of French President Francois Hollande, who was elected in May. These include raising taxes on the rich and cutting the pension age to 60 for some workers, risking a reduction in tax revenues, increasing pressure on France's welfare system and hitting its credit rating. "The market seems to be looking at France as a safe haven, yet we very much believe that French yields should be converging towards Italian and Spanish yields rather than to those pertaining to Germany," said Pedro de Noronha, managing partner at London-based Noster Capital.
  • Retailers fare well in August, sales beat estimates. n">Nearly all U.S. retailers posted better-than-expected sales gains in August at stores open at least a year as parents and students wrapped up back-to-school purchases, setting the stage for a strong third quarter. August same-store sales rose 3.6 percent at retailers tracked by Thomson Reuters I/B/E/S, trumping forecasts for a 2 percent rise.
  • Iran doubles underground nuclear capacity -UN agency. Iran has doubled the number of uranium enrichment centrifuges it has in an underground bunker, a U.N. report said on Thursday, showing Tehran continued to develop its nuclear programme despite Western pressure and the threat of an Israeli attack.
  • Brazil banks put the brakes on lending as defaults rise. Brazil's banks abruptly slowed the pace of loan disbursements in July as caution took center stage among private sector lenders seeking to protect earnings from near record delinquencies and a drop in borrowing costs. Outstanding loans in the nation's banking system rose 0.7 percent to 2.183 trillion reais ($1.06 trillion) in July from June, the slowest pace of credit expansion on a monthly basis since February, the central bank said in a report on Thursday. In the 12 months ended in July, credit grew 17.7 percent, the slowest since April 2010.
  • World food prices jumped 10 percent in July - World Bank. World food prices jumped 10 percent in July as drought parched crop lands in the United States and Eastern Europe, the World Bank said in a statement urging governments to shore up programs that protect their most vulnerable populations.
  • Slovak PM: chance of euro zone collapse 50-50. Euro zone member Slovakia sees a 50-50 chance of the currency bloc breaking up, Prime Minister Robert Fico said on Thursday, ahead of a series of meetings of leading officials next month that may prove decisive for the future of the 17-member club. "I am worried about a euro zone collapse, of course," Fico told a televised news conference. "It will depend on how we handle the situation in some countries like Greece and Spain. It also depends on how individual euro zone countries react to documents that concern strengthening European integration... I see a euro zone breakup as realistic as holding together, 50 to 50."

Telegraph:

The Guardian:

  • Correspondence and collusion between the New York Times and the CIA. Mark Mazzetti's emails with the CIA expose the degradation of journalism that has lost the imperative to be a check to power. Judicial Watch, released Tuesday a new batch of documents showing how eagerly the Obama administration shoveled information to Hollywood film-makers about the Bin Laden raid. Obama officials did so to enable the production of a politically beneficial pre-election film about that "heroic" killing, even as administration lawyers insisted to federal courts and media outlets that no disclosure was permissible because the raid was classified. Thanks to prior disclosures from Judicial Watch of documents it obtained under the Freedom of Information Act, this is old news. That's what the Obama administration chronically does: it manipulates secrecy powers to prevent accountability in a court of law, while leaking at will about the same programs in order to glorify the president. But what is news in this disclosure are the newly released emails between Mark Mazzetti, the New York Times's national security and intelligence reporter, and CIA spokeswoman Marie Harf.

Public Service Europe:

  • Eurozone Crisis Drives Concerns About Global Economy. The eurozone crisis continues to act as a drag on growth in emerging economies as well as leaving countries in central and eastern Europe open to the harmful impact of further shocks, according to Moody's rating agency. Meanwhile European Central Bank president Mario Draghi has said that the euro's institutional weaknesses should be solved through gradual progress towards full economic and monetary union – and that there is no need for an all or nothing move towards a United States of Europe. In a new report, Moody's said growth in emerging market economies such as China, India and Brazil would be slower than previously expected because the downside risks to the recovery had increased. It predicted growth in these countries of 5.2 per cent this year, down from an earlier estimate of 5.8 per cent. In a separate report Moody's said that countries in central and eastern Europe could also be hit by the impact of the eurozone crisis. European Union member states in eastern Europe that are not part of the single currency have "high average sensitivity and would be significantly affected by further euro area development", it warned.

China News Service:

  • Chinese Premier Wen Jiabao said the international financial crisis and Euro debt problems are having an increasing impact on the world, citing Wen.
  • Chinese Premier Wen Jiabao said the first concern is whether Greece will leave the euro zone and the second is whether Italy and Spain will take comprehensive rescue measures, according to a pool report of Wen's meeting with Germany's Angela Merkel. The European debt crisis has continued to worsen, Wen said. Italy, Greece and Spain must increase their determination for reform, he said.

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