Monday, December 10, 2012

Today's Headlines

  • Monti Says Markets Shouldn’t Fear Political Turmoil. Prime Minister Mario Monti said that investors shouldn’t expect the imminent demise of his government to lead to a political vacuum that will fuel market turmoil in Italy. Italian 10-year bond yields jumped the most in four months today in their first day of trading since Monti said on Dec. 8 that he planned to resign after former Prime Minister Silvio Berlusconi withdrew support for the government. The yield rose 29 basis points to 4.82 percent, while the benchmark FTSE MIB stock index slumped 2.2 percent, in contrast with gains in Germany, France and the U.K. 
  • Italian Banks Plunge on Monti Resignation Plan: Milan Mover. Italian banks slumped, leading a slide in lenders across Europe, after an announcement that Prime Minister Mario Monti will resign pushed up bond yields and threatened a new front in Europe’s debt crisis. UniCredit SpA (UCG), Italy’s biggest bank, declined 21 cents, or 5.8 percent, to 3.44 euros at 12:54 p.m. in Milan trading, the biggest drop since September. Intesa Sanpaolo SpA (ISP) fell 6.6 percent to 1.20 euros. The European Stoxx 600 Banks Index (SX7P) slid 1.7 percent to 159.52. 
  • French Business Confidence, Industrial Output Decline. French business confidence and industrial production unexpectedly declined as President Francois Hollande grapples with a budget deficit and an economy that is on the verge of recession. Sentiment among manufacturing executives fell to 91 in November from 92 the previous month, suggesting gross domestic product may fall 0.1 percent this quarter, the Bank of France said today. Industrial output dropped 0.7 percent in October, leaving it down 3.6 percent from a year earlier, national statistics office Insee said in a separate release. The declines show the economy is on the edge of its second recession in three years as Hollande struggles to cut the deficit and improve competitiveness. With French car registrations down about a fifth in November, companies including PSA Peugeot Citroen (UG) are cutting thousands of jobs at a time when jobless claims are at a 14-year high and climbing. “Clearly things are not great and the car industry in particular is a disaster,” said Dominique Barbet, an economist at BNP Paribas SA in Paris, who predicts that GDP will decline this quarter and in the first three months of 2013. “Consumer spending is depressed and as long as the labor market remains unfavorable, confidence will remain weak.”
  • Carson Block Goes Short Unafraid as Chinese Gangsters Chase. He stopped trying to bet against Chinese companies this year after government agents hindered his analysts and harassed workers at a storage company he owns in Shanghai. “Tattooed gangsters” came looking for him, he wrote in an e-mail to Bloomberg on Dec. 4, retaliation for his success uncovering financial sleight of hand at companies such as Sino- Forest Corp., which is now bankrupt. “Block has been the most vocal and public about the accounting problems with U.S.-listed Chinese companies,” said Timothy Ghriskey, chief investment officer at New York-based Solaris Group LLC, which manages about $2 billion and sold positions in China last year.
  • Egyptian President Empowers Army Ahead of Referendum on Charter. Egyptian President Mohamed Mursi gave the armed forces temporary powers to arrest civilians as activists warned that pushing ahead with a Dec. 15 vote on a draft constitution could lead to violence. Under the decree, the army will have the power along with police “to preserve security and protect vital state institutions” until the results of the referendum are announced, the state-run Middle East News Agency said. A bloc of opposition groups is calling for protests tomorrow against a charter that “tramples rights and freedoms.” A coalition of Islamist groups backing Mursi has called for counter-rallies on the same day in support of the president and the draft.
  • Climate Treaty Hinges on Obama Making Case, Ex-Aides Say. One of the biggest things President Barack Obama can do to fight global warming is to talk about it. That’s the conclusion of at least seven former U.S. presidential aides and advisers serving in three administrations. Their comments came as envoys from more than 190 countries at a United Nations conference in Doha took steps toward completing a treaty by 2015 that would limit fossil fuel emissions starting in 2020. While Obama is succeeding in shaping the international response to the issue, he hasn’t said enough about it at home, said the officials, led by John Podesta, who oversaw Obama’s transition into office four years ago. Obama’s reticence may make it more difficult to persuade Congress and the public to favor an international deal toward the end of his second term. “The president really has to start talking about climate change again,” Podesta said in an interview in Washington. “He has to engage a national conversation, not just one White House meeting, but a big conversation.” 
  • Fracking Seen Robbing OPEC of Gasoline Pricing Power. The success of American drillers in coaxing fossil fuels from shale rock has the potential to boost production so much that it may deny OPEC the power to set global oil and gasoline prices, an intelligence advisory panel concluded
  • McDonald’s Posts Surprise Monthly Store Sales Gain in U.S. McDonald’s Corp. posted a surprise gain in U.S. same-store sales last month after a decline in October as the world’s largest restaurant chain increased advertising for less expensive items. Analysts projected a drop of 0.6 percent, the average of 14 estimates compiled by Consensus Metrix.
  • Illinois May Face Downgrade If No Pension Fix, Quinn Says. Illinois Governor Pat Quinn said the battle to control employee pension costs “is our fiscal cliff and we need to deal with it” or analysts in “green eyeshades” will lower the state’s credit rating again. Quinn, 63, said there is “a clear and present danger” of another downgrade if state lawmakers don’t act in the closing days of the legislative session in early January to restructure a pension system saddled with $96 billion in unfunded liabilities.
Wall Street Journal:  
  • US and UK Unveil Failing Banks Plan. U.S. and U.K. regulators will unveil the first cross-border plans to deal with failing global banks on Monday, outlining proposals to force shareholders and creditors on both sides of the Atlantic to take losses and to ensure sufficient capital exists in the banks' headquarters to protect taxpayers.
  • Fed Is Killing Economy: John Tamny. 
  • Next Battle on the 'Cliff's' Edge: Estate Taxes. The estate-tax rate is currently 35 percent on estates valued at $5 million or more. But if the United States goes over the fiscal cliff, the rate jumps to 55 percent. More importantly, the exemption drops from $5 million to $1 million – ensnaring tens of thousands of additional taxpayers in the tax.
Zero Hedge:
Business Insider:
  • Italian premier Monti should stay out of the race, Bersani told reporters in Piacenza, Italy. Elections in February are feasible, said Bersani. 
Back-Of-The-Envelope Economics:

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