Friday, December 07, 2012

Today's Headlines

Posted by Gary .....at 3:35 PM
Bloomberg: 
  • Bundesbank Slashes 2013 German Growth Forecast to 0.4% on Global Growth Slowdown. The Bundesbank sliced more than 1 percentage point off its forecast for economic expansion in Germany next year after the sovereign debt crisis pushed the euro area into recession and global growth slowed. The Bundesbank cut its 2013 projection to 0.4 percent from the 1.6 percent predicted in June and said the economy, Europe’s largest, will grow 0.7 percent this year, down from its previous forecast of 1 percent. Separately, the German Economy Ministry said industrial output fell 2.6 percent in October as investment goods production and construction activity slumped. “With today’s industrial production data, a contraction of the economy in the fourth quarter has almost become inevitable,” said Carsten Brzeski, an economist at ING Group in Brussels. “Even a technical recession of two consecutive quarters cannot be excluded entirely. However, the German economy should be able to pick up speed relatively quickly.”
  • Euro Declines. The shared currency fell to the lowest in more than a week against the dollar after the Bundesbank lowered its 2013 forecast for economic expansion in Germany, following the ECB’s euro-area downgrade. The yen briefly extended gains after a magnitude 7.3 earthquake hit Tokyo, fueling haven demand for the Japanese currency.
  • HSBC Rating Cut One Step by Fitch on Regulation, Compensation. HSBC Holdings Plc (HSBA), Europe’s biggest bank, had its Long-term Issuer Default Rating downgraded by Fitch Ratings to AA- from AA as it braces itself for stiffer regulation and additional compliance costs. The ratings company also downgraded the lender’s HSBC Bank Plc unit to AA- from AA and its Hongkong and Shanghai Banking Corp. Ltd. unit to AA- from AA, it said in a statement today.
  • Whale’s Trade in Comeback as Junk Fervor Fades: Credit Markets. Nine months after the JPMorgan Chase & Co. (JPM) trader known as the London Whale amassed credit- derivatives bets that sparked $6 billion in losses for the bank, rivals from Bank of America Corp. (BAC) to Morgan Stanley are recommending one of his main strategies. Morgan Stanley analysts included among their top 13 trades for 2013 a bet that the cost of credit derivatives protecting against losses on junk bonds will get more expensive relative to investment-grade debt as sluggish growth fuels more corporate defaults. After the difference between the measures plunged to a 14-month low in September, Bank of America credit trader Kavi Gupta wrote in an e-mail to clients last month that the so- called decompression trade was his favorite strategy. 
  • Let’s All Jump Off the Fiscal Cliff By Bradley Belt, Jared Bernstein, William Gale & Phillip Swagel. With less than four weeks left, reaching an agreement to avoid the negative short-term economic impact of the so-called fiscal cliff might be beyond the ability of the strained U.S. political system. Just kicking the can down the road, averting the more than $600 billion in automatic spending cuts and tax increases scheduled to take effect in January, requires one side to give ground on a core belief. 
  • Fed Exit Plan May Be Redrawn as Assets Near $3 Trillion. A decision by the Federal Reserve to expand its bond buying next week is likely to prompt policy makers to rewrite their 18-month-old blueprint for an exit from record monetary stimulus. Under the exit strategy, the Fed would start selling bonds in mid-2015 in a bid to return its holdings to pre-crisis proportions in two to three years. An accelerated buildup of assets would also mean a faster pace of sales when the time comes to exit -- increasing the risk that a jump in interest rates would crush the economic recovery.
  • Gross May Shift to Lower 2013 Risk Profile: Tom Keene. Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, said the investment company may reduce its risk profile in 2013 after posting higher-than-average returns this year. With interest rates so low and corporate spreads so tight, “you have to be leery of prices going the other way,” Gross said in a radio interview on “Bloomberg Surveillance” with Tom Keene. Newport Beach, California-based Pimco “might begin a shift toward something safer, and something more clean in terms of those dirty-shirt investments.” 
  • Financial Puts Drop to 19-Month Low: Options. Implied volatility for three-month contracts with an exercise price closet to the Financial Select Sector SPDR Fund was 21% higher than for the SPDR S&P 500 ETF Trust yesterday. That's the smallest gap since May 2011.
Wall Street Journal: 
Business Insider:
Economic Policy Journal:
  • Joe Weisenthal's Amazing Don't Sweat the Debt Chart. Warren Buffett, Sheldon Adelson and other oligarchs may have total net worth in the trillions, but what exactly does this have to do with most Americans, who if they have any substantial wealth, have a large part tied up in a house? In other words, if the government needs to pay off its debt, and it goes to the average American to do so, it is a big problem, especially since the oligarchs are part of the "protected rich," which means they will always have legislation that will protect them from, among other things, severe taxation.
Reuters:
  • S&P sees Italy GDP contracting in 2013, political risk on reform. Ratings agency Standard & Poor's said on Friday it sees a significant risk that Italy's recession-hit economy will not recover in the second half of 2013, and instead will continue to contract. "We expect the Italian economy will contract in 2012 and 2013 before returning to a weak annual GDP growth rate of no more than one percent," the agency said in a statement. "We believe the key near-term constraints on growth include tight credit conditions and fiscal drag, as well as uncertain external demand." S&P has an negative outlook for Italian sovereign debt, and rates the country at BBB+. The agency said that political uncertainty was another factor that clouded the outlook for Italy's public finances. "We note, in particular, the uncertainty around whether the next government coalition would remain committed to the structural reform agenda initiated by the current government," the agency said. Italy is due to have a national election in 2013. If the economy does not recover in 2013, as the agency believes, it said the resulting risks could create an increase in Italy's debt burden which could result in S&P cutting Italy's credit rating.
  • California November revenue misses budget estimate by $806.8 mln. California's November revenue came in $806.8 million below projection in its budget, a disappointing development in light of signs that the most populous U.S. state's economy is on the mend, State Controller John Chiang's office said on Friday. The office said in a statement that revenue from personal income taxes, the state's most important source of revenue, missed budget estimates by $842.5 million and revenue from corporate taxes missed projections by $187.8 million. Revenue from sales taxes, the state's third key source of revenue, exceeded expectations by $99.0 million.
  • Global Warming ‘Damages’ Spur Rift at UN Climate Treaty Talks. The world’s richest and poorest countries are divided over whether to create a new fund to help vulnerable nations such as Bangladesh, Kenya and the Philippines cope with loss and damage caused by climate changes. Developing nations at United Nations climate treaty talks in Doha are seeking aid through a mechanism that would insure against conditions the countries say they can’t adapt to, including extreme storms, erosion, floods and drought. The U.S. says there are already initiatives in place to deal with such issues, including a recently created UN adaptation committee. “The issue with the big guys is whether there should be a new mechanism at all or we use existing mechanisms,” said Tony de Brum, head of the delegation of the Marshall Islands and representative of the Alliance of Small Island States, or AOSIS, a bloc of 43 island nations pushing for a loss-and-damage fund. 
  • US extends waivers on Iran sanctions to China, India and 7 others. The United States will grant 180-day waivers on Iran sanctions to China, India and seven other countries on Friday in exchange for those economies cutting purchases of oil from the Islamic Republic, a congressional aide said. President Barack Obama's administration is renewing waivers for all of Iran's major oil buyers, after granting them to Japan and 10 countries in the European Union in September.
  • Italy president says to speak to Monti about political crisis.
  • Brazil inflation defies easing trend in Latin America. 
  • Spain's bad bank swerves critical questions. Spain has left major questions unanswered in its rush to set up a "bad bank" to manage toxic loans built up by the country's lenders, creating a detail vacuum that is keeping potential investors at arm's length.
Telegraph:
Le Figaro:
  • The French government has introduced an annual tax on vacant secondary properties in dense areas in the 2013 draft budget bill. The new tax will affect the Paris, Lyon and Toulouse areas, as well as regions such as the French Riviera, finance committee lawmaker Gilles Carrez said. The French govt has also introduced a tax surcharge that will hit capital gains on sales of secondary properties from 2014.

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