Monday, November 19, 2012

Today's Headlines

  • Spain's $264 Billion Debt Will Defeat Aid Reticence. The 207 billion euros ($264 billion) of debt Spain needs to sell next year will force it to request a bailout, according to investors from Pioneer Investments and BlueBay Asset Management. "Spain will ask for aid in January," said Tanguy Le Saout, who helps oversee 153 billion euros as head of European fixed income at Pioneer Investments in Dublin. "The sooner they ask for help, the sooner the cost of their debt will reduce." "You would probably need to have a widening of spreads for Spain to apply," said Lorenzo Pagani, head of Pacific Investment Management Co.'s European government bond and rates desk in Munich. "I don't think spreads will need to widen out to where they were in July, but somewhere in between where we are now and that level."
  • European Stocks Advance Amid U.S. Budget Talks Optimism. European (SXXP) stocks climbed the most in more than two months as U.S. President Barack Obama expressed confidence that he will strike a deal with Congress on a new budget to avoid the so-called fiscal cliff. HSBC Holdings Plc (HSBA) added 3.8 percent after the bank said it has held talks to sell its $9 billion stake in Ping An Insurance (Group) Co. BP Plc (BP/) gained 3.6 percent following a report that the oil company plans a 3.7 billion-pound ($5.9 billion) buyback. ING Groep NV (INGA) advanced 3.7 percent after the European Commission granted it more time to sell its insurance operations in the region. The Stoxx Europe 600 Index rose 2.2 percent to 268.58 at the close, rebounding from its lowest level since Aug. 3.
  • Red-State Senate Democrats May Be Hard to Corral on Cliff. Senate Democrats, optimistic about prospects for a deficit-reduction deal, may have to contend with wariness from seven members who face 2014 re-election campaigns in states Mitt Romney won Nov. 6. Some of those seven Democrats, including North Carolina’s Kay Hagan and Louisiana’s Mary Landrieu, say they aren’t ready to commit to President Barack Obama’s proposals for boosting tax revenue. Instead, Hagan isn’t ruling out support for extending the George W. Bush-era tax cuts for top earners. Landrieu said she opposes eliminating tax breaks for oil companies. 
  • Commodities ‘Super Cycle’ Is Over, Citigroup’s Morse Says. The “super cycle” of commodity prices gains has ended as China’s economy shifts to slower growth and supplies increase, according to Citigroup Inc. (C) Prices won’t move “sharply” higher even as stimulus measures from global central banks lift growth and demand rebounds by the end of 2013, analysts led by New York-based Edward L. Morse, the bank’s global head of commodities research, said today in an e-mailed report. Returns will be more “differentiated” among raw materials depending on supply- demand balances, Citigroup said.
  • Oil Rises to Two-Week High on Middle East Conflict. Oil rose to the highest level in almost two weeks amid concern that Middle East unrest will disrupt supply and on optimism that a deal can be reached to avoid automatic U.S. spending cuts and tax increases. Prices advanced for a second day as Israeli ground forces are poised to invade the Gaza Strip for the first time in almost four years if cease-fire efforts fail.
  • Existing-Home Sales in U.S. Increase to 4.79 Million Rate. Sales of previously owned U.S. homes climbed in October, indicating gains in the real estate market are being sustained by cheap borrowing costs. Purchases of existing houses, tabulated when a contract closes, increased 2.1 percent to a 4.79 million annual rate, exceeding the median forecast of economists surveyed by Bloomberg, figures from the National Association of Realtors showed today in Washington.
Wall Street Journal: 
  • Why Obama Pushes Higher Rates vs. Deduction Limit. Republicans have basically thrown in the towel on changing the tax code to bring in more revenue, but resist raising rates and, instead, want to curtail deductions, credits, exclusions and loopholes to get Americans to pay more to the Treasury to avoid what they see as the growth-retarding effects of higher tax rates.
  • Spain’s Banking Problems Are a Global Reality. Spain’s banks are struggling with €182 billion ($232 billion) of bad debts, some 10.7% of their loan books. Until these debts are restructured and the Spanish banking sector’s bondholders are forced to eat their losses — including the sovereign and the various multi-national agencies like the European Central Bank, which holds considerable amounts of Spanish collateral — not much is going to be resolved. But Spain is merely a microcosm of the widespread problem of too much debt having been accumulated in the good times, now unable to be paid back. 
  • Germany floats idea of Greek 25-cent-on-euro debt buy-back. Germany wants Greece to buy back half of its outstanding bonds from private investors at 25 percent of their value as one way to reduce its unsustainable debt, a source familiar with preparations for this week's euro zone talks said on Monday. The voluntary proposal would leave private sector holders of Greek debt who have already seen most of their investments wiped out with just cents per euro, even while euro zone countries demand 100 percent of their principal back for official loans. Euro zone ministers are due to meet on Tuesday to discuss efforts to ease the debt burden from Athens.
  • Lowe's(LOW) efforts to cut costs, spur sales paying off. Lowe's Cos Inc's reported a higher-than-expected quarterly profit on Monday in a sign its efforts to cut costs and improve its selection of home improvement items are working. 
  • Cliffs Natural(CLF) idles production due to weak iron ore prices. Cliffs Natural Resources Inc, the largest North American producer of iron ore pellets used in steel making, said it will delay a planned mine expansion in Quebec and idle some production at two U.S. iron ore operations due to weak prices.
  • Washington weighs moving climate politics beyond UNFCC. EXCLUSIVE / The US is considering a funnel of substantive elements of the Doha Climate Summit away from the UN framework and into the Major Economies Forum (MEF), a platform of the world’s largest CO2 emitters, EurActiv has learned. Since 1992, the United Nations Framework Convention on Climate Change (UNFCCC) has provided an umbrella for talks to curb global greenhouse gas emissions, and on 26 November, will host the COP18 Climate Summit in Qatar. But it has been confirmed to EurActiv that Washington is increasingly looking to shift policy action to the MEF whose members account for some 85% of global emissions, and which the US views as a more comfortable venue for agreeing climate goals.

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