Wednesday, May 15, 2013

Today's Headlines

  • Euro-Area Recession Deepens as Slowdown Exceeds Estimates. The euro-area economy shrank more than economists forecast in the three months through March, extending a recession to a record sixth quarter and increasing pressure on the currency bloc’s leaders to spur growth. Gross domestic product in the 17-nation euro zone fell 0.2 percent after a 0.6 percent decline in the previous quarter, the European Union’s statistics office in Luxembourg said today. The median of 39 estimates in a Bloomberg News survey was for a 0.1 percent contraction. From a year earlier, the economy shrank 1 percent. The slowdown has spread to the euro core. The German economy, Europe’s largest, expanded less than forecast in the first quarter.
  • France Slips Into Recession, Adding Pressure on Hollande. The French economy fell back into recession, increasing pressure on President Francois Hollande to adopt policies to revive growth. Gross domestic product shrank 0.2 percent in the three months through March, following a revised 0.2 percent contraction in the previous quarter, national statistics office Insee said today. Economists expected a 0.1 percent drop, the median of 25 forecasts gathered by Bloomberg News showed. 
  • China Banks’ Bad Loans Rise for Sixth Quarter as Economy Slows. Non-performing loans climbed by 33.6 billion yuan ($5.5 billion) in the three months ended March 31, to 526.5 billion yuan, the China Banking Regulatory Commission said in a statement on its website today. Soured debt rose across all lender categories, including state-owned and regional banks.
  • Moody’s Focuses on Emerging Currency Risk Amid Record Bonds. Moody’s Investors Service said it’s assessing the risk of currency depreciation damaging the creditworthiness of emerging-market companies after record foreign bond sales. Companies from 15 emerging markets sold a record $130 billion of bonds in dollars and euros last year, Moody’s said in an e-mailed report. Total corporate and government international issuance may soar to a peak of $600 billion this year from $430 billion last year, and reach $1 trillion in three years, Hakan Wohlin, global head of debt origination at Deutsche Bank AG in London, said in an interview yesterday. “The amount of U.S. dollar and euro debt outstanding has increased considerably year-by-year, and with it the risk of currency mismatch,” Moody’s analysts including Philip Robinson in London said in the report
  • EU Oil Manipulation Probe Shines Light on Platts Pricing. Two weeks after Royal Dutch Shell Plc (RDSA) and Platts changed the way more than half of the world’s crude is valued, the companies along with BP Plc (BP/) and Statoil ASA (STL) are being probed by European antitrust regulators about potential manipulation of oil prices.
  • Iron Ore Tumbles Into Bear Market on China Growth Concerns. Iron ore slumped into a bear market on concern that slowing economic growth in China, the world’s biggest buyer, will reduce demand as global supplies increase. Ore with 62 percent iron content delivered to the Chinese port of Tianjin fell 1.3 percent to $126.40 a ton today, according to The Steel Index Ltd. The benchmark price has lost 20 percent since Feb. 20, when it reached a 16-month high of $158.90, meeting the common definition of a bear market. 
  • Copper Declines to One-Week Low on Slowing Growth, Ample Supply. Copper fell to a one-week low in New York amid signs that economies are weakening in countries that are the world’s biggest consumers of the metal, contributing to a surge in stockpiles that are the highest since 2003. Germany expanded less than forecast in the first quarter, government statistics showed today. Bank of America Merrill Lynch cut its estimate for growth this year in China, following JPMorgan Chase & Co. by a day. U.S. industrial production declined in April by the most in eight months, the Federal Reserve said. The three nations are the largest copper users. “Every bit of data lately seems to be showing less industrial production, and less manufacturing is going to be a problem for copper,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “The buyers just aren’t there, and we’re seeing a buildup in inventories.” Copper futures for delivery in July fell 1.4 percent to $3.2415 a pound by 10:57 a.m. on the Comex in New York, after touching $3.224, the lowest since May 3. Prices tumbled 2.1 percent yesterday and are down 11 percent this year.
  • New York Area Manufacturing Unexpectedly Contracts. The Federal Reserve Bank of New York’s general economic index declined to minus 1.4 this month from 3.1 in April. Readings less than zero signal contraction in New York, northern New Jersey and southern Connecticut. The median projection in a Bloomberg survey called for an increase to 4.
Wall Street Journal:
  • Lawmakers Press Holder on AP, IRS. Attorney General Testifies Before House Committee; Chairman Calls for 'Answers and Accountability'. Members of Congress expressed concern Wednesday about the Justice Department's subpoena of Associated Press phone records at a hearing where Attorney General Eric Holder faced questions over his record.
Zero Hedge:
Business Insider: 
New York Times:
  • Why Hedge Funds’ Criticism of the Fed May Be Right. This prebubble euphoria only undermines the Federal Reserve’s fragile credibility. It reinforces the notion that it seems to know only two things: how to inflate bubbles and how to studiously not recognize them.
Chicago Tribune: 
  • Deere(DE) cuts outlook for the year; shares fall. Deere & Co. on Wednesday said its second quarter profit inched higher, beating analysts expectations, but warned that global financial pressures and the cool, wet weather North America could affect sales the rest of the year. The stock gave up almost 5 percent.
Hedge Fund Alert:
  • Dow 15,000 Is Boon for Long-Only Strategies. As long/short equity funds continue to underperform the stock market, increasing numbers of managers and investors alike are betting on long-only vehicles. “The long side of the portfolio is what clients are demanding,” said an investment professional who researches hedge funds for a $1.6 billion endowment. “They just want those longs.”
Financial Times:
  • Spanish banks face fresh hit from bad loans. Spanish banks are bracing themselves for a fresh financial hit, amid rising pressure from the Bank of Spain on lenders to write down the value of their €200bn portfolio of restructured loans to the country’s troubled companies and struggling households. The move is likely to trigger a further rise in bad loan ratios across the system and reduce earnings at a time when most Spanish banks are already suffering from low profitability. Analysts believe the crackdown could also shine a harsh new light on the capital position of some of the weaker banks, forcing them to sell assets to avoid the need to raise fresh capital.

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