Tuesday, October 08, 2013

Today's Headlines

  • IMF Cuts Global Outlook. Growth worldwide will be 2.9 percent this year and 3.6 percent next year, the IMF said in a report released today in Washington, compared with July predictions of 3.1 percent for 2013 and 3.8 percent for 2014. It sees emerging economies growing 4.5 percent this year, 0.5 percentage point less than three months ago, as projections were reduced for China, Mexico, India and Russia. “Advanced economies are gradually strengthening” while “growth in emerging-market economies has slowed,” IMF chief economist Olivier Blanchard wrote in a foreword to the World Economic Outlook report. “This confluence is leading to tensions, with emerging-market economies facing the dual challenges of slowing growth and tighter global financial conditions." 
  • German Factory Orders Unexpectedly Fall on Weak Recovery. Orders, adjusted for seasonal swings and inflation, dropped 0.3 percent from July, when they fell a revised 1.9 percent, the Economy Ministry said today in an e-mailed statement. Economists forecast an increase of 1.1 percent in August, according to the median of 40 estimates in a Bloomberg News survey
  • European Stocks Fall. Telecom Italia SpA (TIT) lost 1.8 percent as Standard & Poor’s said it may downgrade the phone company’s debt to non-investment grade. TGS Nopec Geophysical Co. (TGS) tumbled the most in two years after reducing its revenue forecast. Celesio AG jumped to a three-year high on a report that McKesson Corp. may buy the German drug distributor. The Stoxx Europe 600 Index slipped 0.8 percent to 306.84 at the close in London.
  • Treasury Bill Rates Surge to Highest Since 2008 at 1-Month Sale. Treasury one-month bill rates surged the highest since 2008 and yields on three-year notes rose as the U.S. prepares to sell $30 billion of the debt in the first auction of coupon securities since the government shutdown. The Treasury sold $30 billion of one-month bills today at a rate of 0.35 percent, the highest since 2008 and more than double the rate on comparable one-month securities yesterday. Rates on Treasury bills due on Oct. 24 climbed to the highest since they were issued in April, after being negative as recently as Sept. 27.
  • Plosser Says Delay in QE Tapering Undermined Fed’s Credibility. Federal Reserve Bank of Philadelphia President Charles Plosser, an opponent of additional stimulus, said the Fed’s decision last month not to taper its asset purchases undermined the central bank’s credibility. “To delay tapering of our current asset purchase scheme without clear and significant departures from prior guidelines suggested the FOMC was changing the goalposts and deviating from June’s forward guidance,” Plosser said today in a speech in Johnstown, Pennsylvania, referring to the policy-setting Federal Open Market Committee. He doesn’t vote on the panel this year. “This undermines the credibility of the committee and reduces the effectiveness of forward guidance as a policy tool.” The Fed’s decision to press on with stimulus “contributes to additional uncertainty regarding the future course of monetary policy” and may be interpreted as a sign of decreased confidence in the economic outlook, Plosser said. “The decision not to begin tapering our asset purchases was also read in some quarters as a sign that the FOMC had become much less confident that growth would be sustained in the manner the Committee envisioned in June,” Plosser said. “Thus, we undermined our own credibility as well as the public’s confidence in the economy.” “These were not the messages that I wanted to send,” Plosser said in his remarks to the Greater Johnstown Cambria County Chamber of Commerce. “Thus, I disagreed with the decision not to go forward with a modest reduction in the pace of our asset purchases.Fed presidents rotate voting on monetary policy with Plosser voting next year.  
  • Fed’s Pianalto Says Fed Should Be ‘Cautious’ in Bond Buying. Federal Reserve Bank of Cleveland President Sandra Pianalto, who has supported record Fed stimulus, said she favored a reduction in bond buying last month because of the potential costs of the program. “While to date the risks have mostly remained theoretical, I remain convinced that we need to be cautious in our expansion of asset purchases,” said Pianalto, who doesn’t vote on monetary policy this year and plans to retire early next year. “For me the improvement in labor markets seemed substantial enough to support a scaling back of the asset-purchase program at last month’s” policy meeting, she said.
Wall Street Journal:
  • Parties Diverge in Bid to Break Fiscal Deadlock. House Republicans Urge Budget Talks; Senate Democrats Plan Debt-Limit Vote. The House and Senate headed down separate tracks Tuesday in their efforts to break the stalemate that has led to a week-old partial government shutdown. House Republicans, stepping up calls for face-to-face negotiations, planned to pass legislation that would set a framework for wide-ranging budget talks. Senate Democrats were planning a vote this week to extend the country's borrowing authority through 2014, after next year's midterm elections. The efforts lacked a key component for ending the budget stalemate: endorsement from the other side
Fox News:
  • NFIB small-business optimism eases in September. Small-business sentiment edged lower in September on a big drop in the percentage who expect the economy to improve, the National Federation of Independent Business said Tuesday. The NFIB small-business optimism index fell to 93.9 from a corrected 94.1 in August.
  • No end in sight for debt addiction: Paul Singer. Billionaire hedge fund manager Paul Singer holds a pessimistic view of the global financial system, saying he believes the Federal Reserve easing back on its asset-purchasing program is "off the table" even though investor confidence could sour quickly.
Zero Hedge:
  • Dozens of Allegations Against Warren Buffett’s Company. (video) The Scripps National investigative team has uncovered dozens of allegations that a company that is part of Warren Buffett’s empire intentionally delays paying insurance money to victims of asbestos and toxic health hazards.
Business Insider:
Institutional Investor: 
Real Clear Politics:
  • Obama phones Boehner, repeats he won't negotiate - Boehner aide. President Barack Obama called Speaker John Boehner on Tuesday about the government shutdown and a looming deadline to raise the debt ceiling, and restated his position that he would not negotiate, said a spokesman for Boehner, the top Republican in the U.S. House of Representatives.
  • Euro zone bonds wilt as U.S. deadlock drags on, Portugal bucks trend. Spanish and Italian bond yields rose on Tuesday along with almost all other European sovereigns, as the U.S. budget stalemate and looming debt deadline continued to weigh on bond markets worldwide. Plans in both Rome and Madrid to sell bonds via syndication also put their debt under pressure, halting the recent relief rally following last week's confidence vote in Italy for Enrico Letta's government. Italy plans to issue its first ever seven-year bond on Wednesday, and Spain will also offer investors the first chance to get 30-year paper since 2009. Spanish 10-year yields ended up 10 basis points at 4.31 percent while their Italian equivalents were 6 bps higher at 4.35 percent.
  • Investors take profits in high-flying Nasdaq names. Shares of some of the Nasdaq's strongest performers this year tumbled on Tuesday as investors took profits in high-flying names amid growing uncertainty over the impasse in Washington. Companies in the technology sector were the hardest hit, with Yahoo Inc, TripAdvisor Inc and Netflix Inc all among the day's biggest losers, but investor favorite Tesla Motor Inc also dropped in heavy volume. The Nasdaq Composite Index was trading down 1.3 percent midday.

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