Thursday, September 20, 2012

Today's Headlines

Posted by Gary .....at 3:17 PM

Bloomberg:
  • China Stocks Fall to Lowest Level Since 2009 on Japan Row, Data. China’s stocks slumped, dragging down the benchmark index to the lowest level since February 2009, after a report on manufacturing signaled a contraction and escalating tensions with Japan threatened trade. Dongfeng Automobile Co., which makes light trucks in China with Nissan Motor Co., slumped to the lowest level since November 2008 as a Japanese auto group said protests over disputed islands will hurt sales of the nation’s cars in China. Jiangxi Copper Co. and Aluminum Corp. of China Ltd., the biggest copper and aluminum producers, led declines for metal stocks after a HSBC Holdings Plc and Markit Economics survey showed factory output may contract for an 11th month in September. The Shanghai Composite Index (SHCOMP) fell 2.1 percent to 2,024.84 at the close, the most among Asia’s benchmark indexes. The CSI 300 Index (SHSZ300) dropped 2.2 percent to 2,195.95, with eight of 10 industry groups losing more than 2 percent.
  • Citigroup(C) Warns Irish Investors to Plan for Losses. As Irish bonds extend their rally, the gains for investors may be disguising a different story. The yield on Ireland’s benchmark 2020 bond fell below 5 percent today for the first time since the country’s international rescue in November 2010. The debt is the second- best performing in the euro region this year, trailing only fellow bailout recipient Portugal. All of the optimism that Ireland can raise money in the markets and avoid a debt restructuring is premature as the nation struggles to emerge from its worst recession in modern history, said Michael Saunders, Citigroup Inc.’s head of European economics in London. “Ireland faces an almost impossible task to get back to fiscal balance,” Saunders said. Visits to the country showed “life is tough, very tough and not getting that much better anytime soon,” he said. Saunders said a slower economic revival may eventually make Ireland’s debt, which more than tripled during the past five years, unsustainable.
  • Noyer Says All Euro Banks Must Be Supervised by ECB, FAZ Reports. European Central Bank Governing Council member Christian Noyer said the ECB must have oversight of all euro-area banks when it takes up its new role as a supervisor, Frankfurter Allgemeine Zeitung reported, citing an interview. The ECB, which is due to take the role from January under a proposal by the European Commission, “must cover, in any case, all 6,000 banks within the euro area,” FAZ quoted Noyer as saying. “It’s better to forget about the entire project if it only includes the 20 biggest banks.” Asked whether there might be a conflict of interest between monetary policy and banking supervision, Noyer, who heads the Bank of France, said that “14 out of 17 central banks in the euro area are also responsible for banking oversight,” FAZ reported. “Monetary policy is separated from banking supervision by Chinese walls.” With regard to the ECB’s new bond-buying program, Noyer said it will be “up to elected governments and the IMF” to say whether or not countries under the program “fulfill conditionality,” according to FAZ. “We will not hesitate to stop the bond purchases right away if a country doesn’t adhere to the conditions under the ESM.” 
  • European Stocks Drop on China Manufacturing Report. European stocks declined for the third time in four days after a report signaled that Chinese manufacturing will contract for an 11th month, adding to concern the global economic slowdown is deepening. A gauge of mining companies posted the biggest drop of the 19 industry groups in the benchmark Stoxx Europe 600 Index. (SXXP) Daimler AG (DAI) lost 2 percent after saying earnings will fall at its Mercedes Benz Cars business. Telenet Group Holding NV (TNET) surged 13 percent after Liberty Global Inc. (LBTYA) made a $2.5 billion offer to buy the rest of the communications company. 
  • Pakistan Deploys Army as Protests Over Anti-Islam Film Flare. Pakistan deployed the army to protect diplomatic missions in Islamabad amid some of the most sustained and violent protests yet against an American-made film that denigrates Prophet Muhammad. “We have to do everything we can to protect foreigners in the country,” Information Minister Qamar Zaman Kaira said in an interview with the GEO television channel, criticizing violence he said was an attempt to sabotage the government’s call for peaceful rallies tomorrow. “Is this the way to show respect to our Prophet?” Kaira said. Earlier riot police had fired tear gas and warning shots as hundreds of stick-wielding students, some in college uniforms, converged on the so-called red zone that houses the U.S. embassy and the prime minister’s house, breaking through barbed-wired barricades flung across roads. “We will not tolerate insult to our Prophet,” demonstrators shouted as they bid to outwit police and gain access to the heavily guarded enclave. The State Department in a statement warned Americans against non-essential travel to Pakistan, citing a series of recent developments that may put U.S. citizens at risk.
  • Philadelphia Area Manufacturing Contracts for Fifth Month. Manufacturing in the Philadelphia region shrank for a fifth straight month in September, reinforcing signs the industry will offer less support to the U.S. economy. The Federal Reserve Bank of Philadelphia’s general economic index improved to minus 1.9, higher than forecast, from minus 7.1 in August. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The median forecast of 62 economists surveyed by Bloomberg was minus 4.5. The figures, which showed a slump in sales and cutbacks in employment, add to concern a pillar of the expansion is faltering. Cooling exports due to the European debt crisis, combined with slower business investment and restrained household spending in the world’s largest economy, mean manufacturing may stay depressed.
  • More Americans Than Forecast Filed Jobless Claims. More Americans than forecast filed applications for unemployment benefits last week, adding to concern the labor market is slackening.
    Jobless claims decreased by 3,000 in the week ended Sept. 15 to 382,000, Labor Department figures showed today in Washington. The median forecast of 49 economists surveyed by Bloomberg projected 375,000. Looming tax increases and government spending cuts slated to take effect next year, should lawmakers fail to act, may block any pickup in hiring following last month’s smaller-than-projected gain in payrolls.
  • Index of U.S. Leading Indicators Declined in August. The index of U.S. leading economic indicators fell in August, led by a decline in new orders for manufacturing. The Conference Board’s gauge of the outlook for the next three to six months decreased 0.1 percent after a revised 0.5 percent increase in July, the New York-based group reported today. Economists projected the gauge would fall by 0.1 percent, according to the median estimate in a Bloomberg survey.
  • Household Worth in U.S. Fell in Second Quarter as Stocks Dropped. Net worth for households and non-profit groups decreased by $322 billion in the second quarter, or 0.5 percent from the previous three months, to $62.7 trillion, the Federal Reserve said today in its flow of funds report from Washington.
  • UPS Hurt by Slowdown in Manufacturing in Asia, Brutto Says. United Parcel Service Inc. (UPS) projects short-term economic headwinds amid a decline in manufacturing orders in Asia while the company pursues a major acquisition in Europe, the head of its international division said. “We’ve seen down-trading at UPS,” Dan Brutto said this morning at a Bloomberg Government newsmaker breakfast in Washington.
  • Norfolk Southern(NSC) Profit Drop Echoes FedEx(FDX) Slowdown Signal. Norfolk Southern Corp. (NSC)’s quarterly profit will trail analysts’ estimates as dwindling volumes at the second-biggest eastern U.S. railroad add to signs of a slowing domestic economy. A drop in coal carloads and merchandise shipments will offset container-freight gains, paring revenue by about $120 million for the three months ending Sept. 30, the company said late yesterday. Fuel-surcharge receipts will decline by $80 million. Norfolk Southern’s disclosure built on FedEx Corp. (FDX)’s cut in its annual earnings forecast a day earlier, when the operator of the world’s largest cargo airline cited falling delivery demand and customers choosing cheaper services. Those carriers span the shipping spectrum, moving everything from commodities and new cars to overnight-express envelopes and pharmaceuticals. “Those are two aspects of the same issue,” said Robert Dye, chief economist at Dallas-based Comerica Inc. (CMA) “With FedEx we can probably broaden the scope out and say they’re responding to cooler global macroeconomic conditions. But with Norfolk Southern they’re clearly responding to the U.S.”
  • Libor-Like Manipulation Possible in Benchmarks Around the World. The same lack of oversight that enabled traders to manipulate the London interbank offered rate plagues other benchmarks around the globe, according to a group of international securities regulators. Fewer than half of the benchmark interest rates surveyed in the U.S., Europe and Asia were based on actual transactions, according to a confidential International Organization of Securities Commissions discussion paper obtained by Bloomberg News. Instead, the rates were calculated by methodologies that were unclear, not transparent and only rarely subject to specific regulatory standards or obligations, the group said.
  • Emerging-Market Company CDS Gauges Start Up as Indexes Roll. Two new measures of default risk on emerging-market debt start trading today along with the latest series of existing corporate and sovereign benchmarks. Markit Group Ltd., which administers gauges of credit- default swaps, said it’s offering the Markit iTraxx CEEMEA and Markit CDX LatAm Corporate indexes “in response to increasing client demand for an efficient tool to hedge and gain exposure to corporate debt” in central and eastern Europe, the Middle East and Africa as well was Latin America.
  • Microsoft(MSFT) Avoided Billions in U.S. Tax, Senate Memo Says. A U.S. Senate committee memo said Microsoft Corp. (MSFT) used aggressive international tax maneuvers to avoid billions of dollars in taxes over the past three years. The committee memo, released in advance of a 2 p.m. hearing in Washington today, said Microsoft used transactions with subsidiaries in Puerto Rico, Ireland, Singapore and Bermuda to save at least $6.5 billion in taxes. In 2008, Hewlett-Packard Co. (HP) created a series of short-term internal loans that allowed the company to tap its offshore cash for domestic operations without paying taxes, according to the memo.

  Wall Street Journal:
  • Stocks to Get Boost, Again, from Research. Some newly public companies again will be in line to benefit from "booster shots" to their stock prices. Securities regulators are set to lift a nine-year ban that prevents analysts from issuing research on initial public offerings their banks have underwritten around the expiration of lockup periods, according to regulators. In the past, banks were accused of using the research to hype stocks at a time when the shares might face selling pressure. 
  • Holder Aide Faces Heat Over Fast and Furious. House Republicans on Thursday took aim at Lanny Breuer, the Justice Department's top criminal prosecutor, a day after a report by the department's internal watchdog on the bungled Fast and Furious gun-trafficking case largely spared him from blame. Republicans have called for Mr. Breuer's resignation and stepped up the attacks at a hearing Thursday of the House Oversight and Government Reform Committee on the report. "How does he escape discipline?" said Rep. Trey Gowdy (R., S.C.). 
  • French Downturn Tests Hollande's Strategy. François Hollande talked a lot about focusing more on growth and less on austerity when he was campaigning for the French presidency. But the latest flash Markit purchasing managers indexes present him with a problem. They show the sharpest decline in French private-sector output since April 2009, raising the stakes for next week's budget by adding to the pressure for further savings.
 Fox News:
  • Former GM CEO Urges U.S. Treasury to Sell Stake in Automaker. The U.S. government should sell all of its stake in General Motors Co as quickly as possible, former GM chairman and chief executive Ed Whitacre said on Thursday. In an opinion piece published in the Wall Street Journal, Whitacre called the Treasury Department's holding a "distraction" for the company, which exited U.S.-funded bankruptcy protection more than three years ago. The Treasury now owns about 26.5 percent of GM's shares. Unless the U.S. government sells all it remaining share, the automaker will never be able to shake its "Government Motors" moniker, Whitacre wrote. "That label, as competitors and GM employees are keenly aware, is code for one thing: 'GM is a failure'," Whitacre wrote. "And while GM might have been a failure three years ago, it's not today." GM's $50 billion bailout was funded through the Troubled Asset Relief Program, which imposes rules about how the money can be used. As a result, GM spends too much time discussing executive compensation, hiring and management with Washington officials, said Whitacre. This prevents the automaker from being "a master of its own destiny."
CNBC.com:
Zero Hedge:
Business Insider:
Reuters:
  • Copper falls after China, France factory data. London copper fell on Thursday after data from top consumer China showed manufacturing activity continued to contract, while prices came under more pressure as a poor reading from France pushed the euro down against the dollar. Manufacturing in China contracted for an 11th month in a row in September, according to a private sector survey of factory managers that indicated the world's second largest economy remains on track for a seventh quarter of slowing growth. French business activity tumbled at its fastest rate since April 2009 raising worries of a deepening recession and pushing the euro down, although a German private sector contraction eased in September. Three-month copper on the London Metal Exchange fell by 1.21 percent to $8,248.75 a metric ton by 0736 GMT.
  •  Daimler warns on full-year Mercedes profit. Daimler warned that profit would slip at its flagship Mercedes-Benz Cars division this year due to a deteriorating market in Europe and China, spooking investors in German rivals including BMW and Volkswagen. "We are gearing up for a challenging environment," Chief Executive Dieter Zetsche told reporters in Stuttgart.
  • Fitch: U.S. non-profit hospitals face reimbursement reductions.
  • US urges Brazil in "clear terms' not to hike tariffs. U.S. Trade Representative Ron Kirk, in a letter obtained on Wednesday, urged the Brazilian government to reconsider plans for "protectionist" tariff increases expected to have a significant negative effect on U.S. exports. "I am writing to state in strong and clear terms the United States' concern about scheduled and proposed tariff increases in Brazil and Mercosur," Kirk said in a Sept 19 letter to Brazilian Foreign Minister Antonio de Aguiar Patriota.
  • White House Now Backs U.S. View That Libya Attack Was Terrorism. The White House said on Thursday it was "self-evident" that a deadly assault on the U.S. consulate in Libya was a "terrorist attack" that may have had an al Qaeda connection, reinforcing an intelligence assessment of the violence. "It is self-evident that what happened in Benghazi was a terrorist attack," White House spokesman Jay Carney told reporters travelling with President Barack Obama. "Our embassy was attacked violently and the result was four deaths of American officials."
Financial Times:
  • Brazil’s finance chief attacks US over QE3. Guido Mantega, Brazil’s finance minister, has warned that the US Federal Reserve’s “protectionist” move to roll out more quantitative easing will reignite the currency wars with potentially drastic consequences for the rest of the world. “It has to be understood that there are consequences,” Mr Mantega told the Financial Times in an interview on Thursday. The Fed’s QE3 programme would “only have a marginal benefit [in the US] as there is already no lack of liquidity . . . and that liquidity is not going into production.”
Telegraph: 
Financial Times Deutschland:
  • German coalition lawmakers back Finance Minister Wolfgang Schaeuble in opposing an EU Commisison plan to give the ECB blanket powers of oversight for the currency area's lenders. Lawmakers want to limit ECB oversight to system-relevant banks.
Les Echos:
  • Brazil's Mantega Says Credit May Dry Up in Europe. This year is already a lost year for Europe, Brazilian finance minister Guido Mantega says in an interview. "We are at the stage of promises in Europe. Too little has been done, too late," Mantega said. Brazil will continue to take steps to keep the real devalued, he said.

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