Tuesday, October 16, 2012

Today's Headlines

  • Germany Open to Spanish Precautionary Credit, Lawmakers Say. Germany is open to Spain seeking a precautionary credit line from Europe’s rescue fund, two senior coalition lawmakers said, signaling a reversal of Finance Minister Wolfgang Schaeuble’s public position. The comments by Michael Meister, a deputy caucus leader of Chancellor Angela Merkel’s Christian Democratic bloc, and Norbert Barthle, her party’s budget spokesman, indicate a rolling back of German resistance to a full sovereign bailout for Spain. Schaeuble cautioned Spain against seeking aid on top of its bank bailout as recently as last month.  
  • Schaeuble Risks U.K. Ire With EU Treaty Change Push for Euro. German Finance Minister Wolfgang Schaeuble said he wants legal changes to European Union treaties as early as next year to strengthen the euro area’s ability to enforce budgetary discipline, threatening to stoke tensions with the U.K. and France. Schaeuble said the proposals, which he discussed with Chancellor Angela Merkel, would give the EU’s monetary affairs commissioner powers to reject national budgets and keep European Parliament lawmakers from non-euro states such as the U.K. from blocking decisions that only affect the euro region. “We must take bigger steps toward fiscal union now,” Schaeuble told reporters today on his return flight from a meeting of finance chiefs in Asia. “We could be ready by December to call a convention” to prepare the treaty changes.  
  • Europe Auto Market Headed for Biggest Plunge in 19 Years. European car deliveries headed for their biggest annual plunge in 19 years after the region’s deliveries tumbled 11 percent in September. Registrations last month dropped to 1.13 million vehicles from 1.27 million a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today. Nine-month sales fell 7.2 percent. The market is now on track to decrease as much as 10 percent in 2012, the worst sales slump since the aftermath in 1993 of the region’s currency crisis, the ACEA said. Renault SA (RNO) posted a European sales drop in September of 29 percent, while Fiat SpA (F) decreased 19 percent. Tiremaker Nokian Renkaat Oyj (NRE1V) forecast second-half operating profit will fall on weak demand. “We have seen the European market deteriorate, from an already weak level, rather than recover,” said Marc-Rene Tonn, a Hamburg-based Warburg Research analyst. “That is something that is weighing on the shares.”
  • Citigroup(C) Board Said to Oust Pandit After Multiple Setbacks. Citigroup Inc. (C) directors ousted Chief Executive Officer Vikram Pandit after concluding his mismanagement of operations caused setbacks with regulators and cost credibility with investors, a person with knowledge of the discussions said. Episodes that led the board to replace Pandit with Michael Corbat included the rejection by regulators in March of a plan to boost shareholder payouts, said the person, who requested anonymity because board deliberations are private. Citigroup’s $2.9 billion writedown on the Smith Barney brokerage unit and a two-level cut of its credit rating by Moody’s Investors Service also contributed, the person said.
  • U.S. Consumer Prices Rose in September on Cost of Fuel. The cost of living in the U.S. rose in September for a second month, reflecting a jump in energy expenses that failed to trickle through to other goods and services. The consumer-price index increased 0.6 percent for a second month, the Labor Department reported today in Washington. Economists surveyed by Bloomberg had forecast a 0.5 percent advance.
  • Oil-Tanker Glut at Six-Week High Before November Cargoes Arrive. A glut of the largest oil tankers available in the Persian Gulf is poised to reach a six-week high, a Bloomberg News survey showed, as owners await an influx of cargoes to load for November. There are 21% more VLCCs for hire over the next 30 days than there are likely cargoes, according to the median estimate in a survey of six shipbrokers and owners today. That's a 1.5 percentage-point gain from last week and the biggest excess since Sept. 5. There are about 14 cargoes remaining for October, according to an e-mailed report from Marex Spectron Group. Still, the global supertanker fleet will expand 6.7% this year, about double forecast demand growth of 3.4%, according to Clarkson Research Services Ltd.
Wall Street Journal: 
Fox News:
  • Rio Tinto(RIO) Iron Ore Output Unabated Despite China Concern. Rio Tinto PLC (RIO) continues to deliver record volumes of iron ore undeterred by price volatility and concerns over China's appetite for the steelmaking raw ingredient. The Anglo-Australian company, the world's second-largest producer of iron ore after Brazil's Vale SA (VALE), Tuesday maintained a production target of 250 million metric tons this year after its mines lifted output 5% on the year in the third quarter. Production outpaced sales of the commodity as the company prepared itself for the next stage in capacity growth, Rio Tinto said in its latest quarterly operations report.
  • Credit Clips Homebuilder Confidence. After a summer of significant monthly jumps in confidence among the nation’s home builders, fall appears to be bringing in a chill 
  • US Industrial Production Rises 0.4%. The Federal Reserve said U.S. industrial production rose 0.4 percent in September after a 1.4 percent decline in August. The August decline partly reflected precautionary shutdowns before Hurricane Isaac hit the Gulf Coast. Manufacturing output, the most important component of industrial production, edged up only 0.2 percent in September. For the July-September quarter, factory output fell at an annual rate of 0.9 percent, its first quarterly decline since the spring of 2009.
  • Iran Plotting to Spill Oil in Strait of Hormuz, Magazine Claims. Iran is secretly planning to spill oil into the Strait of Hormuz as revenge for Western sanctions, according to Der Spiegel
Zero Hedge:
Business Insider: 
New York Times:
  • Obama-Backed Green Electric Battery Maker Files for BankruptcyAn electric car battery maker that President Obama touted as part of a vanguard of a new American electric car industry has filed for bankruptcy and is selling its major assets, the company announced on Tuesday. A123 Systems(AONE), which produces lithium ion batteries for the electric car maker Fisker and the truck manufacturer Navistar, received a $249 million Department of Energy grant that was financed by Mr. Obama’s stimulus program. The company has been struggling as electric vehicles have failed to gain a foothold in the American domestic car market. Another battery maker that received federal support, Ener1, filed for bankruptcy earlier this year. The company’s troubles could provide new ammunition for Mitt Romney, the Republican presidential nominee, who has criticized the Obama administration’s green energy grant and loan programs as a distortion of the marketplace and rife with political favoritism. Mr. Obama called A123’s chief executive, David Vieau, and Jennifer Granholm, then Michigan’s governor, in September 2010 to celebrate the opening of a battery manufacturing plant in Livonia, Mich., that was built partly with federal funds.

Washington Times:
  • Crowley Says She Will 'Cull' Town-Hall Questions. CNN's Candy Crowley, moderator for the second presidential debate, said Monday that she and a small team of assistants will "cull" questions from a town-hall audience in advance to decide which queries are posed to President Obama and Republican nominee Mitt Romney.

  • Bin Laden driver's conviction reversed by court. A U.S. appeals court on Tuesday overturned the conviction of Osama bin Laden's former driver and bodyguard, Salim Hamdan, on charges of supporting terrorism, in a long-running case emerging from the American military trials at Guantanamo Bay, Cuba. The U.S. Court of Appeals for the District of Columbia Circuit concluded that providing support for terrorism was not a war crime at the time of Hamdan's alleged conduct from 1996 to 2001 and therefore could not support a conviction. Human rights activists hailed the ruling as a blow to the legitimacy of the military commission system
  • US gasoline demand dips as prices rise. Gasoline demand last week fell 3.9 percent from a year earlier, on top of its 2.4 percent decline, year-over-year, in the previous week, MasterCard's report showed. On average, demand over the two weeks ending Oct. 12 fell 3.1 percent lower than a year ago. The average price of a gallon rose 4.00 cents-a-gallon to $3.82, 11.7 percent higher than in the same week last year
  • Overcapacity to edge out 180 solar panel makers by 2015 - report. Overcapacity in the solar industry is likely to result in at least 180 panel makers either going bust or being acquired by 2015, according to a research report released on Tuesday. GTM Research estimates that global solar products supply will exceed demand by 35 gigawatts on average annually over the next three years. The largest number of casualties will occur in high-cost manufacturing markets such as the United States, Europe and Canada, GTM said
  • Greek leftist party leader says doesn't accept troika demands. "The troika demands feed recession and galloping unemployment," said Fotis Kouvelis, leader of the Democratic Left party, after a meeting among party leaders. He said Greece needed more time to impose a new austerity package demanded by the so-called troika of International Monetary Fund, European Commission and European Central Bank lenders in exchange for funds to keep Athens afloat
  • Omnicom cautious on looming fiscal cliff, China transition. Omnicom Group Inc, the largest U.S. advertising company, said the looming "fiscal cliff" in the United States and the leadership transition in China are creating uncertainty among clients, making it difficult to forecast the next few quarters. However, the company said it was benefiting as customers spread their advertising budgets among fewer agencies. "With China being off a little bit, Europe not solved yet and the uncertainty with the fiscal cliff as people await the election, there's conservatism," Chief Executive John Wren said on a conference call with analysts. "We're not certain yet what the outcome is going to be in the fourth quarter or into the first quarter of next year.
  • China's Cui warns of risks from U.S. stimulus. The U.S. Federal Reserve's latest round of quantitative easing is adding to financial market instability and inflationary pressure in emerging markets, China's Vice Foreign Minister Cui Tiankai warned on Tuesday. The frank remarks, directed at the U.S. central bank's announcement of a fresh round of bond-buying to stimulate the economy, dubbed QE3, is the latest in a round of increasingly pointed criticism between China and the U.S of the other's economic policy. Speaking to reporters at a briefing in Brussels, Cui spelt out his concerns about the programme that will see $40 billion of mortgage debt purchased each month until the outlook for jobs improves substantially. "We are affected by the external environment," Cui said. "We are feeling the pain brought about by the situation in the United States and in Europe." "For instance, the recent so-called QE3, I think, is adding to the instability on the international financial markets, is adding to the imported inflationary pressure for developing economies, including China, and is adding to the uncertainty in the commodity market and this would in turn affect food security for many countries.
  • Germany to Lower Economic Growth Forecast for 2013. GDP growth next year forecast to be 1%, down from forecast earlier this year of 1.6%, government officials say. The German Economy Minister Philipp Roesler will present new forecasts tomorrow.
  • Deputy Bank of Spain Governor Fernando Restoy says there's "very limited" scope for a solution for retail investors who lost money buying preferred shares in banks. The European Commission is imposing "very rigorous demands" for the recapitalization of banks, and haircuts demanded will be "very substantial."
La Vanguardia:
  • The contraction of Spain's economy will be similar in 3Q as in 2Q, citing comments by Economy Minister Luis de Guindos.
  • Apple(AAPL) Supply Chain Looking to Raise Prices. Apple's upstream supply chain partners including Foxconn Electronics (Hon Hai Precision Industry) and Foxlink, have reportedly demanded the brand vendor accept a price rise, as their labor costs in China have been rising, according to sources from the upstream supply chain.
  • Investment Slows. Fixed-asset investment in Shanghai expanded 5.2 percent from a year earlier to 337.9 billion yuan (US$53.6 billion) in the first three quarters, with the growth pace slowing 0.3 percentage point from the first eight months, the Shanghai Statistics Bureau said. Investment in urban infrastructure construction dropped 6.9 percent during the period, but investment in property jumped 12.2 percent, buoying the total volume together with investment in the manufacturing sector which rose 1.2 percent.

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