Tuesday, August 07, 2012

Today's Headlines

Posted by Gary .....at 3:06 PM

Bloomberg:
  • German Factory Orders Fall Twice as Much as Forecast. German factory orders declined more than twice as much as economists forecast in June as sales to euro-area countries slumped. Orders, adjusted for seasonal swings and inflation, dropped 1.7 percent from May, when they rose 0.7 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.8 percent decline, according to the median of 35 estimates in a Bloomberg News survey. From a year earlier, orders fell 7.8 percent when adjusted for work days. “All in all, quite a gloomy report,” said Annalisa Piazza, an economist at Newedge Strategy in London. “Exports are badly hit by the current cyclical slowdown and the export- led German industrial sector is not going to be spared from the slump in trade activity.” Orders from the euro region sank 4.9 percent in June after jumping 7.8 percent in May, today’s report showed. Domestic orders fell 2.1 percent, while demand from non-euro nations rose 0.6 percent.
  • German Rents, Costs, Have Surged, Led by Berlin, Bild Says. German rents and heating costs have surged since the start of the 1990s, led by Berlin and Baden- Wuerttemberg, Bild-Zeitung reported, citing figures published by the Federal Statistics Office in Wiesbaden. Rents in the two states rose nine percent over the past six years, Bild said. Since 1995, rents in all of Germany increased 23.5 percent on average, the newspaper said. Electricity costs have surged 80 percent since 1991 while heating prices have climbed as much as threefold, depending on the type of fuel, Bild said.
  • Defaulting Sovereigns Risk Second Restructuring, Moody's Says. Nations that undergo distressed debt exchanges risk defaulting a second time, Moody’s Investors Service said in a report that may presage challenges facing Greece. Of 30 sovereign distressed exchanges since 1997, more than a third were followed by another default event, according to Moody’s. Losses to investors ranged from 5 percent to 95 percent with a mean of 47 percent, New York-based Moody’s said.
  • S&P 500 Puts at 14-Month Low as VIX Tumbles on ECB Bets: Options. The cost of protecting against a drop in U.S. stocks fell to its lowest level in more than a year amid increasing optimism European policy makers will take steps to ease the region's debt crisis. Puts with an exercise level 10% below the S&P's 500 Index cost 9.18 points more than calls betting on a 10% rally, according to data on three-month options compiled by Bloomberg. The price relationship known as skew fell to 8.73 last month, the lowest since May 2011.
  • Monti Told by Lawmaker Allies to Halt Berlusconi Criticism. Italian Prime Minister Mario Monti was advised by allies in parliament to curb his criticism of his predecessor, Silvio Berlusconi, or risk seeing his government fall. Monti, who relies on Berlusconi’s People of Liberty party to govern, told the Wall Street Journal in an interview published today that Italy’s borrowing costs would be substantially higher if the billionaire were still in charge.
  • Oil Surges to 2-Month High. Crude oil for September delivery increased $1.37, or 1.5 percent, to $93.57 at 11:42 a.m. on the New York Mercantile Exchange. The contract touched $93.69, the highest level since May 17. Prices are down 5.3 percent this year. Brent oil for September settlement rose $2.16, or 2 percent, to $111.71 on the London-based ICE Futures Europe exchange. The contract reached $111.85, the highest level since May 16.
  • U.S. CEOs Less Confident on Economy, Survey Shows. Confidence among U.S. chief executive officers declined in the second quarter as more business leaders said economic conditions will worsen in the next six months, a private survey showed. The Young Presidents’ Organization sentiment index fell to 60 in the second quarter from 65.1 in previous three months, the largest decline since the survey began in 2009. Readings greater than 50 show the outlook was more positive than negative. “High gas prices, ongoing woes in Europe, and reduced growth in Asia, China in particular, no doubt dampened CEO optimism in the latest survey,” Stephen Slifer, YPO Global Pulse economic adviser and chief economist at NumberNomics, said in a statement. “The results seem to be pointing toward slower growth ahead and not a global contraction.”
  • US Job Openings Rise in June. The number of positions waiting to be filled climbed by 105,000 to 3.76 million, the most since July 2008, from a revised 3.66 million the prior month, the Labor Department said today in Washington. Hiring and firings cooled.
  • Gen Y Eschewing V-8 for 4G Threatens Auto Demand. The auto industry says it’s concerned that financially pressed young people who connect online instead of in person could hold down peak demand by 2 million units each year. The rate of U.S. auto sales to 18-to-34-year-old buyers declined to 11 percent in April 2012, down from 17 percent for the same age group in April 2007, before the recession, according to Southfield, Michigan-based R.L. Polk & Co.
  • Egypt Buries Soldiers Slain in Border Attack. Egypt buried on Tuesday the 16 soldiers killed by suspected Islamist militants in the Sinai Peninsula near the borders with Gaza and Israel, as pressure built on the new Egyptian president to back away from plans to ease restrictions on crossings to the Palestinian territory. The ceremonies were disrupted by hecklers who chanted against President Mohammed Morsi of Egypt's Muslim Brotherhood and Gaza's Hamas rulers. Both Islamist groups condemned the killings, but the deadly attack is likely to prevent any relaxation of security along the border and fuel Egyptian fears of Palestinian militancy spilling across.
  • Harder-Luck Foreclosures Grow as Funding for Help Wanes.
Wall Street Journal:
  • Gunmen Kill 19 at Nigerian Church. Gunmen fired on a worship service in a church in central Nigeria, killing at least 19 people—including the pastor—and wounding others in a nation often divided by religion, the military said Tuesday. The attack targeted a Deeper Life church in the town of Otite in Kogi state, about 155 miles southwest of Nigeria's capital, Abuja. Blood stained the floors of the church as police and soldiers surrounded it Tuesday morning, witnesses said. It was unclear how many people were wounded in the attack Monday night. The gunmen surrounded the church in the middle of a worship service and opened fire with Kalashnikov assault rifles, military spokesman Lt. Col. Gabriel Olorunyomi said. The church's pastor was among the dead. Soldiers searched for gunmen through the night, but had made no arrests as of Tuesday morning, Lt. Col. Olorunyomi said.
  • Chinese Trial to Echo a Dark Past. When Gu Kailai—the wife of a disgraced Chinese politician—walks into a courtroom here on Thursday, it will recall the trial of another once-powerful woman, more than a quarter-century ago—and a watershed moment in China's modern history.
  • David Wessel Answers Your Tax Questions.
  • Iran Vows Support For Assad's Regime.
  • Romney Attacks Obama on Welfare Mandates. Mitt Romney accused President Barack Obama Tuesday of gutting federal mandates that require welfare recipients to look for work.
  • ECB Bond Purchases Tied to Conditionality. The European Central Bank will tie future purchases of troubled governments' securities to strict conditions to be set by the region's bailout funds, but these purchases could be "substantial" and "sustainable," ECB Governing Council member Ardo Hansson said Monday, in a sign the central bank is determined to rein in surging borrowing costs. In an interview, Mr. Hansson said the ECB could discuss some proposals for its revamped program of government-bond purchases at its next meeting in September.
  • ABA Council Votes Against Accrediting Foreign Law Schools. The vote wasn’t close. The American Bar Association’s Council of Legal Education and Admissions to the Bar overwhelmingly against accrediting foreign law schools, ending more than four years of debate, the National Law Journal reported.
Barron's:
CNBC.com:
  • Gross to Investors: Stay Away From Europe. Bill Gross’ latest message to investors - don’t put your money into Europe because they are not going to get out of their debt crisis any time soon. Gross, Founder and Co-Chief Investment Officer of Pimco, manager of the world’s largest bond fund, wrote in an editorial in the Financial Times on Monday that the ultimate aim of European leaders is to get their hands on private-sector money because they know they will need it to fund the European economy. The current public-spending program is not sustainable and efforts to fix the debt crisis have been, and will be, futile, he said. Policymakers in Europe now face an unprecedented expansion of risk spreads and credit agency downgrades which “almost guarantee that sickbed countries can never be discharged from intensive care,” he added. He warned investors not to part with their money. “Investors get distracted by the hundreds of billions of euros in sovereign policy checks, promises that make for media headlines but forget it’s their trillions that are the real objective,” Gross wrote. “Even Mr Hollande in left-leaning France recognizes that the private sector is critical for future growth in the EU. He knows that, without its partnership, a one-sided funding via state-controlled banks and central banks will inevitably lead to high debt-to-GDP ratios and a downhill vicious cycle of recession.” “Psst…investors: Stay dry my friends!” Gross said. “Interest rates over and above each country’s nominal GDP growth rate will inevitably add to a country’s debt as a percentage of GDP , even if budgets are in primary balance,” he said. “At current yields, growth rates, and deficits, the spread may incrementally add 2-3 percent to Spain and Italy’s tenuous debt ratios every year.” If GDP growth remains close to flat, the two nations will still drown in debt even if they have to borrow at 4 percent. And without the private sector’s participation, all efforts such as the European Financial Stability Facility and ultimately the European Stability Mechanism, will be futile, he said.
  • European CEO Confidence at 9-Month Low: Survey. Confidence levels among European CEOs are at a nine-month low, with less than a third of the region’s business leaders expecting conditions to improve over the next year, according to a survey by the Young Presidents’ Organization (YPO).
  • A Story of Caution and Fear for Small Businesses. Small businesses are less inclined to hire or to spend on growing their businesses than they were earlier in the year, according to the latest Wells Fargo/Gallup Small Business Index. The quarterly survey’s latest statistics tell a story of caution, even perhaps fear. The number of business owners expecting to be in a good financial position in the next 12 months declined seven percentage points to 59 percent. Meanwhile, those expecting increased revenue in the next 12 months declined by six percentage points to 43. Separately, the July NFIB Small Business Survey report shows that small business optimism is at its lowest level since October 2011.
  • London Banks Take Another Hit on StanChart Iran Claims. Standard Chartered’s share price, which lost close to a fifth of its value in early trading Tuesday after news of U.S. regulators’ allegations that it helped Iran launder up to $250 billion broke, may not be the only victim of the accusations.

Business Insider:

Zero Hedge:

New York Times:

  • ‘Les Riches’ in France Vow to Leave if 75% Tax Rate Is Passed. President François Hollande is vowing to impose a 75 percent tax on the portion of anyone’s income above a million euros ($1.24 million) a year. “Should I be preparing to leave the country?” the executive asked Mr. Grandil. The lawyer’s counsel: Wait and see. For now, at least.

Reuters:

  • Spanish, Italian yields bounce as caution sets in. Spanish and Italian short-term government bond yields rose on Tuesday as caution took over after a strong rally fuelled by the prospect of the European Central Bank buying the two countries' debt. Investors are not yet fully convinced ECB intervention would succeed in insulating Spain and Italy in the debt crisis and worries remain over the barriers that must be overcome before the ECB can step in. The ESM bailout fund, which the ECB wants countries to tap before it buys their bonds, is not yet functional, awaiting among other things a German Constitutional Court ruling on it on Sept 12. Germany's Bundesbank has also yet to be convinced of the plan to buy bonds and some analysts wonder how strong any ECB intervention would be given failed past attempts to cap borrowing costs in Greece, Ireland and Portugal. Ten-year Spanish yields rose 6 bps to 6.86 percent, with the psychological 7 percent level that sparks fear of an imminent loss of market access still within reach. Equivalent Italian yields were 5 bps higher at 6.05 percent.
  • Number of Firms Operating in Spain Hits 5-Year Low. The number of companies operating in Spain fell for a fourth straight year in 2011 to a five-year low, according to data on Tuesday, highlighting the impact of the global crisis that has tipped the country into recession and made one in four jobless. The national statistics institute (INE) said the number of companies active in the euro zone's fourth largest economy fell by 1.6 percent last year to 3.199 million, marking the fourth consecutive year of contraction.
  • Italy's recession pain stretches to a year. Italy shrank further into recession in the second quarter for a 2.5 percent yearly decline, data showed on Tuesday, threatening attempts by Mario Monti's technocrat government to control a debt crisis that is undermining the whole euro zone. A 0.7 percent fall in gross domestic product, only slightly better than the first quarter's 0.8 percent decline, means the Group of Seven economy has now been contracting for at least a year, according to figures from government agency ISTAT. This will weaken tax revenues and hit jobs and consumer spending, a vicious circle which makes it harder for Monti, who is aiming to cut the budget deficit to 0.1 percent of GDP in 2014, to meet his public finance goals.
  • Fitch: rule changes could increase U.S. banks cap ratios volatility.
  • US gasoline demand dips as prices rise-MasterCard(MA). U.S. motorists bought fewer gallons of gasoline in the last two weeks as prices at the pump shot up, MasterCard said in its weekly SpendingPulse report released Tuesday. Gasoline demand fell 3 percent over the two weeks ending Aug. 3 from a year earlier, after the average price at the pump rose 10 cents to $3.53 per gallon, MasterCard said. Last week's four-week moving average for demand was 4 percent lower than a year earlier.

Telegraph:

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