Wednesday, September 04, 2013

Today's Headlines

  • Russia Boosts Mediterranean Force as U.S. Mulls Syria Strike. Russia is sending three more ships to the eastern Mediterranean to bolster its fleet there as a U.S. Senate panel will consider President Barack Obama’s request for authority to conduct a military strike on Syria. Russia is sending two destroyers, including the Nastoichivy, the flagship of the Baltic Fleet, and the Moskva missile cruiser to the region, Interfax reported today, citing an unidentified Navy official. That follows last week’s dispatch of a reconnaissance ship to the eastern Mediterranean, four days after the deployment of an anti-submarine ship and a missile cruiser to the area, which were reported by Interfax. Syria hosts Russia’s only military facility outside the former Soviet Union, at the port of Tartus.
  • Obama’s Syria Policy Adrift, Republican Royce Tells Panel. The Republican chairman of the House Foreign Affairs Committee criticized President Barack Obama’s Syria policy today as “adrift,” without saying whether he would support a military strike in response to chemical weapons use by Syria’s regime. “The administration’s Syria policy doesn’t build confidence,” Representative Ed Royce, of California, said at the start of a committee hearing on Obama’s request for congressional authorization of military action. “For over two years, U.S. policy has been adrift.” “There are no easy answers,” Royce said. “Syria and much of the Middle East are a mess.” Royce raised questions about the the complications of a U.S. military strike against Syrian President Bashar al-Assad’s regime during a civil war, without broad international backing. “What are the chances of escalation?” Royce asked. “Are different scenarios accounted for? If our credibility is on the line now, as is argued, what about if Assad retaliates?” 
  • Italy’s Bonds Fall as Services Output Shrinks More Than ForecastItaly’s 10-year government bonds declined after a report showed the nation’s service sector, based on a survey of purchasing managers, shrank more last month than economists forecast. Italy’s 10-year yields approached a six-week high as the Repubblica newspaper reported former Prime Minister Silvio Berlusconi may consider withdrawing his support for the coalition government before a vote on whether to oust him from the senate following his conviction for tax fraud. Portugal (GSPT10YR)’s 10-year yield reached a six-week high as a report said European Union and International Monetary Fund officials are discussing a precautionary program for the country.
  • Merkel Recalls East German Collapse as Warning for Europe. Chancellor Angela Merkel said the economic collapse of East Germany should serve as a lesson for Europe, since there’s no alternative to hard work to remain globally relevant. Merkel, addressing a campaign rally yesterday in the eastern town of Finsterwalde, south of Berlin, flaunted her credentials as a fellow one-time citizen of the former German Democratic Republic as she presented her vision for a more competitive Europe to the crowd of about 3,000. To sustain Europe’s high level of social expenditure relative to the rest of the world, Europeans must innovate, “be better than the others” and “exert ourselves,” Merkel said. “Everyone who lived in the GDR knows that: Whoever is not economically productive, whoever can’t sell products, will get into difficulties.” 
  • Merkel’s Frugal Stance on Greece Aid No. 1 Vote-Winner, CDU Says. German Chancellor Angela Merkel’s bearing as a frugal “housewife” on Greece and other troubled euro nations is a campaign vote-winner that won’t change after election day, a regional leader of her party said. “The Swabian housewife, who doesn’t spend money without getting something in return, is seen by voters as the right leader for Germany in the crisis,” Michael Schierack, who heads Merkel’s Christian Democratic Union in the eastern state of Brandenburg, said yesterday in an interview in the capital, Potsdam. People who think Merkel will loosen aid terms to Greece and other countries after elections “are fooling themselves.” 
  • European Stocks Are Little Changed as Vodafone Advances. European stocks were little changed as Vodafone Group Plc led telecommunications shares higher and as investors waited for a U.S. Senate committee to vote on a resolution enabling President Barack Obama to attack Syria. Vodafone added 2.2 percent as it rebounded from yesterday’s biggest drop in two months. Ryanair slumped the most in more than five years after Europe’s largest discount airline said full-year profit may fall short of its forecast range. ProSiebenSat.1 Media AG lost 5 percent after a holding company for investments owned by KKR & Co. and Permira Advisers LLP said it is selling shares in the broadcaster. The Stoxx 600 added 0.2 percent to 302.34 at the close of trading, after earlier declining as much as 0.7 percent.
  • China Record Drop in Credit Growth Puts Momentum at Risk. China’s leaders are extending a clampdown on credit, prompting analysts from JPMorgan Chase & Co. to Societe Generale SA to caution that the economy is vulnerable to weakening after the pickup so far this quarter. New yuan loans were probably little changed in August, after aggregate financing, the broadest measure of credit, posted a fourth straight drop in July, the longest streak in 11 years of data. Analysts’ median estimates point to the fastest industrial-output gain since December and the slowest producer-price decline in six months. 
  • Russia Joins India to Taiwan in Missing Debt Auction Targets. Russia failed to raise as much money as planned at a government bond auction, joining nations from India to Taiwan in missing borrowing targets as investors keep away from emerging-market assets. The Finance Ministry in Moscow sold 6.07 billion rubles ($182 million) of its so-called OFZ notes due May 2016 after offering 13.6 billion rubles, according to a statement on its website. Russia canceled an auction last week as only one bidder took part. The ministry issued today’s bonds at a 6.5 percent average yield, the top of its proposed range. Developing nations are scaling back as the prospect of the U.S. paring financial stimulus measures and tensions over Syria curb investor appetite for riskier assets.
  • How the Bank Lobby Loosened U.S. Reins on Derivatives. Lew insisted that Gensler coordinate better with the Securities and Exchange Commission, whose new chairman, Mary Jo White, was also present. Gensler, who was deep into negotiations with his European counterparts, was surprised by Lew’s demand. He’d been hearing the same request from lobbyists seeking to slow the process, and he told the Treasury chief it felt like his adversary bankers were in the room, the people said
  • Pimco Total Return Fund Lost 14% of Assets in Four Months. The world’s biggest mutual fund keeps getting smaller.Bill Gross’s Pimco Total Return Fund shed $41 billion, or 14 percent of its assets, in the past four months through losses and investor withdrawals. The fund suffered $7.7 billion in net redemptions in August, Chicago-based researcher Morningstar Inc. (MORN) said today in an e-mailed statement, the fourth straight month of withdrawals.
Wall Street Journal:
  • Australian Economic Boom Tempered by Slowing Demand From China. Some Australians Question Whether Mining Boom Has Ended. As China's economic engine slows, sending prices for iron ore and coal sharply lower, Australia is facing an economic dislocation, with unemployment rising to a 12-year high and growth slowing rapidly.
  • Nasdaq reports another problem with its data feed. The Nasdaq had yet another problem Wednesday with the main data feed that was at the center of its unprecedented outage nearly two weeks ago. According to the exchange, a system called the "Securities Information Processor," or SIP, experienced an outage between 11:35 a.m. and 11:41 a.m. The outage affected the exchange's ability to transmit quotes in stock symbols PC through SPZ. But other market participants said the outage was worse than that. NYSE Arca said
  • Saving habits backslide. Some people, it seems, never learn. After the financial crisis exposed the flaws in many consumers' spending and saving habits, many tightened the reins significantly, pushing the savings rate up from 3.8 percent in August 2008 to as high as 8.7 percent in December 2012, according to U.S. Commerce Department data. As of July of this year, the national consumer savings rate stood at 4.4 percent, the Commerce Department reported.
  • Looking for a raise? Good luck with that. Here's another sad truth of the "new normal" after the Great Recession: Wages have flatlined and are unlikely to revive even though the job market is improving.
Zero Hedge: 
Business Insider: 
  • Fed's Williams says he's open-minded on cutting bond buys this month. San Francisco Federal Reserve President John Williams said Wednesday he still has not made up his mind as to whether he believes the U.S. central bank should begin paring its massive bond-buying stimulus when policymakers meet two weeks from now. "I'm going into this meeting with an open mind," he said, adding that his view will depend not only on how the economic data comes in between now and then but also on what his colleagues say at the discussion. Williams said the most important thing is that the Fed has an overall plan for ending its bond-buying program, rather than the exact timing of when the Fed begins trimming it. 
Financial Times:
Echoing fears that European policymakers remain in a state of cognitive dissonance – recognizing the need for root-and-branch overhaul of peripheral banks, but backtracking on joint liability plans – Christopher Flowers, the legendary FIG investor who now runs the £2.3 billion ($3.5 billion) private equity group JC Flowers, sounded the alarm over the negative sovereign-bank feedback loop. In a shot across the bows of market bulls, who cite the return of capital flows to weaker eurozone states, Flowers issued a stark warning: "There is a scenario where we have a Lehman-type event: we wake up some Thursday and a big country is in trouble. "And the ECB will have to decide to support banks x, y, z. And then the ECB will, in fact, decide to own bank x, y, z.

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  • Berlusconi Mulls Pulling Plug on Govt, New Vote. Silvio Berlusconi may consider withdrawing his support for Letta's government and calling for elections this year.
  • BOJ's Kuroda Sees Big Risk in Postponing Tax Hike. Postponement may trigger sell-off of JGB's, Kuroda said.

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