Friday, September 28, 2012

Today's Headlines

  • Spain Banks Have $76 Billion Capital Deficit in Stress Test. Spain’s banks have a capital deficit of 59.3 billion euros ($76.3 billion), less than previously estimated, according to a test designed to lift doubts about a financial industry hit by real estate losses. The Bankia (BKIA) group, a nationalized lender, had a 24.7 billion-euro capital deficit in the tests conducted by management consultants Oliver Wyman that also showed Banco Popular Espanol SA (POP) had a 3.22 billion-euro shortfall. The stress tests of 14 lenders showed no capital deficit for seven banks, including Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA (BBVA) and Banco Sabadell SA, the Bank of Spain and Economy Ministry said in a joint statement today.  
  • U.K. AAA Rating Now Faces Greater Downgrade Risk, Fitch Says. The U.K. faces an increased risk of a downgrade to its top credit rating after Fitch Ratings said that government debt will peak at a higher level and later than it previously predicted. Fitch affirmed Britain’s AAA level and kept the nation on negative outlook, according to a statement released today in London. The ratings company said it doesn’t expect to resolve the question mark hanging over the top grade until 2014. “The negative outlook on the U.K. rating reflects the very limited fiscal space, at the ’AAA’ level, to absorb further adverse economic shocks in light of the U.K.’s elevated debt levels and uncertain growth outlook,” Fitch said in the statement. “Weaker than expected growth and fiscal outturns in 2012 have increased pressure on the U.K.’s AAA rating.”
  • ECB’s Asmussen Joins IMF in Warning Greece May Need More Aid. European Central Bank Executive Board member Joerg Asmussen said Greece may need more aid, joining the International Monetary Fund in expressing doubt that the two existing bailouts will suffice. Even if Greece meets its budget goals, “there could be additional need for external financing because, for example, growth is worse than was initially anticipated,” Asmussen said at an event in Berlin today. Such financial aid can only come “from the member states of the euro zone,” he said, ruling out ECB involvement because that would be “prohibited monetary state financing.” The comments mean two thirds of the so-called troika that’s inspecting Greece’s financial position have now publicly spoken about the possible need for an additional bailout.
  • Hollande Raises Tax on Rich, Companies to Cut French Deficit. President Francois Hollande’s first annual budget raised taxes on the rich and big companies and included a minimum of spending cuts to reduce the deficit. The 2013 blueprint relies on 20 billion euros ($26 billion) in tax increases, including a levy of 75 percent on incomes over 1 million euros, and eliminating limits on the wealth tax. Hollande aims to reduce spending by 10 billion euros, bringing the deficit to 3 percent of output from 4.5 percent in 2012. The budget predicts growth of 0.8 percent.  
  • Spanish Bonds Have Weekly Drop Amid Bailout-Request Speculation. Spain’s 10-year bonds had a weekly decline as the nation held off from seeking a bailout that would enable the European Central Bank to buy its debt. The securities erased an intra-day decline, and the market closed before stress tests conducted by management consultants Oliver Wyman showed Spain’s banks have a combined capital shortfall of 59.3 billion euros ($76.3 billion). German bunds extended their longest run of quarterly gains since 1998 even as a report showed euro-area inflation accelerated in September. French bonds rose for the first week since August as President Francois Hollande’s government delivered its budget.
  • European Stocks Decline to Lowest in Three Weeks. Hennes & Mauritz AB declined 1.7 percent after SEB AB and CA Cheuvreux SA advised investors to sell the shares. Electrocomponents Plc (ECM) plunged the most in more than seven years after saying full-year profit will miss projections. Cap Gemini SA (CAP) rose 0.8 percent after Accenture Plc forecast full-year earnings that topped analyst estimates. Air France-KLM gained 4.6 percent after UBS AG upgraded the shares. The Stoxx 600 lost 1.2 percent to 268.48 at the close of trading in London, the lowest since Sept. 5, as investors awaited the stress-test report from Oliver Wyman, a New York- based management consulting firm. The gauge, which lost 2.7 percent this week, has still rallied 6.9 percent this quarter as global central banks expanded stimulus.
  • S&P 500 Poised for Worst Week Since June on Economy. U.S. stocks fell, sending the Standard & Poor’s 500 Index toward its worst week since June, as business activity unexpectedly contracted in September.
  • New York Plaza District Offices Empty as Banks Cut Space. Manhattan’s Plaza district, the area near Central Park that commands the nation’s highest office rents, has a glut of space as financial firms cut back and tenants seek trendier neighborhoods south of Midtown. The availability rate for offices in the Plaza submarket reached 12.3 percent last month, a two-year high, as space leased to Citigroup Inc. (C) and General Motors Co. (GM) went on the market, according to data from brokerage Colliers International. It was 10.5 percent in the third quarter of last year.
Wall St. Journal: 
  • Romney: Under Obama, U.S. on Road to Greece. Republican presidential candidate Mitt Romney said in a new radio interview the U.S. economy would show little improvement and could get worse in the next two years if President Barack Obama were re-elected. Mr. Romney, speaking to WMAL in Washington, D.C., offered a range of criticisms of Mr. Obama, suggesting the White House is not showing enough leadership to head off the so-called fiscal cliff, and claiming efforts by the Federal Reserve to boost the economy have not worked. “I think you’re going to see America on the road to Greece unless we change course,” Mr. Romney said when asked what the economy would look like under Mr. Obama two years from now. He added, “I believe you’d see continued extraordinarily slow economic growth and perhaps even contraction.”
  • As Yuan Tests Dollar High, Beijing Comes to Pivot Point. China's yuan on Friday briefly hit its highest level against the U.S. dollar since the launch of the modern Chinese currency-trading system in 1994, underscoring the global impact of U.S. efforts to juice its economy and raising tough questions for Beijing over whether to tolerate or stop further strengthening. Traders and analysts attributed the recent rally to renewed weakness in the dollar in the wake of the latest round of bond purchases launched by the U.S. Federal Reserve, in a move known as quantitative easing.
  • Rebel Offensive Intensifies in Syria's Largest City. Rebels in Syria's largest city, Aleppo, said they are pushing into new neighborhoods as fighting intensified in a "decisive battle" to break a stalemate on a key front line in the civil war. Antigovernment fighters in Damascus said they were regrouping for a parallel push in the capital to capitalize on the momentum from an attack on army command headquarters there Wednesday, a security breach that illustrated the growing sophistication of rebel operations.
  • Post Office Expects to Default This Weekend...Again. The struggling U.S. Postal Service expects to default this weekend, the second time in recent months the cash-strapped agency will have missed a deadline to set aside funds for future retiree health benefits. 
  • CEO Tim Cook Is ‘Extremely Sorry’ About Apple(AAPL) Maps. 
  • The Drones Are Coming...And Americans Are Scared. More than a third of Americans worry their privacy will suffer if drones like those used to spy on U.S. enemies overseas become the latest police tool for tracking suspected criminals at home, according to an Associated Press-National Constitution Center poll. Congress has directed the Federal Aviation Administration to come up with safety regulations that will clear the way for routine domestic use of unmanned aircraft within the next three years.
Zero Hedge:
Business Insider: 
  • Fed's Fisher says U.S. is 'drowning' in unemployment. The United States is "drowning in unemployment," its economy is running at stall speed and inflation is "not a problem," but easier monetary policy is not the answer, one of the Federal Reserve's most hawkish policymakers said on Friday. "We've had a recovery that is quite disappointing," Dallas Fed President Richard Fisher said. But without more certainty on tax policy and regulation, he said, "all the monetary accommodation in the world" will not get businesses hiring again. In particular, businesses are unable to plan for the future as long as a raft of spending cuts and tax increases dubbed the 'fiscal cliff' looms at the end of the year, he said. "A short-term fix to the fiscal cliff will do nothing but push out the envelope of indecision and we will continue to be plagued by high unemployment," Fisher said.  
  • TEXT-S&P: growth in U.S. capital goods is likely to moderate. 
  • Iran will stop at nothing to protect Syria-Clinton.
  • French budget and Spanish bank stress tests: live. Spain has revealed that it needs almost €60bn to shore up its battered banking sector, as France's 2013 budget shows that a new 75pc tax rate will raise just €200m in extra revenue next year.
  • Hahn Says Bundesbank Mustn't Buy Bonds If Deemed Illegal. Joerg-Uwe Hahn, justice minister in the German state of Hesse said the Bundesbank mustn't participate in the ECB's announced bond-buying program if its lawyers conclude the program violates the law.

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