Wednesday, February 19, 2014

Today's Headlines

  • Ukraine Moves Toward Martial Law as Western Region Splits. Ukrainian President Viktor Yanukovych moved to quell a growing insurgency by granting sweeping powers to the army and police after a region declared independence from his government, risking wider conflict. Reeling from the bloodiest clashes in a three-month standoff, the Russian-backed leader’s security service said today it’s undertaking a nationwide anti-terrorism operation to restore public order and protect state borders. That gives the army the right to search, detain and even fire on Ukrainians in the course of the operation, the Defense Ministry said in a statement posted on the government’s website.
  • Russia Cancels Bond Auctions as Ruble Slides, Yields Climb. Russia canceled its bond auctions for the third time in less than a month as the ruble’s slide to a record low drove up borrowing costs.  The Finance Ministry pulled the sales of 10 billion rubles ($280 million) of January 2028 securities and the same amount of May 2020 notes because “bids didn’t adequately reflect the credit quality of the bonds,” it said in website statements. The yield on the 2028 debt rose 18 basis points to 8.62 percent by the close in Moscow, the highest on record
  • IMF Warns G-20 of Risks of Deflation, Emerging-Market Turmoil. Risks of prolonged market turmoil in emerging markets and of deflation in the euro area are threatening the world’s improved economic prospects, according to the International Monetary Fund staff. In a note prepared for central bankers and finance ministers from the Group of 20, the IMF said the recovery is still weak and “significant downside risks remain.” A January global growth forecast of 3.7 percent for this year, from 3 percent in 2013, hinges on recent market volatility from Turkey to Brazil being short lived, staff wrote.
  • Merkel Joins Developed Nations Backing Fed Taper Before G-20. Developed nations are voicing support for the withdrawal of U.S. monetary stimulus and signaling emerging markets will have to cope with the fallout as best as they can. German Chancellor Angela Merkel’s administration sees U.S. monetary normalization as necessary, a government official told reporters in Berlin overnight. The comment echoes Australian Treasurer Joe Hockey, who in a Feb. 13 interview likened Federal Reserve bond purchases to a drug that the world can’t rely on forever. 
  • European Stocks Little Changed as Tenaris, Vallourec Drop. European stocks were little changed, erasing their decline in the final 90 minutes of trading, as Tenaris SA (TEN) and Vallourec SA (VK) slid after the U.S. failed to impose anti-dumping duties on South Korea in a preliminary decision. Tenaris and Vallourec, which make steel tubes, slid at least 4.5 percent. Wolters Kluwer NV slid 4.6 percent after saying restructuring costs will reduce its profit margin in 2014. Lafarge SA (LG) and Carlsberg A/S (CARLB) each rose more than 3 percent after posting fourth-quarter profits that beat estimates. The Stoxx Europe 600 Index added 0.1 percent to 334.94 at the close after earlier dropping as much as 0.6 percent.
  • U.S. Steel Drops After U.S. Rules Korea Isn’t Dumping. U.S. Steel Corp. (X), the nation’s largest producer of the metal by volume, fell the most in 17 months after the Department of Commerce rejected its claim that South Korea is selling steel tubing into the U.S. below cost. U.S. Steel fell 5.8percent to $25.18 at 10:52 a.m. in New York, after declining as much as 7.3 percent, the biggest intraday drop since Aug. 23, 2012
  • Fed to Change Rate Guidance as Unemployment Falls, Minutes Show. Federal Reserve policy makers plan to soon change their guidance for the path of interest rates as unemployment declines toward a threshold for considering an increase in borrowing costs, minutes of their January meeting showed. “Participants agreed that, with the unemployment rate approaching 6.5 percent, it would soon be appropriate for the Committee to change its forward guidance in order to provide information about its decisions regarding the federal funds rate after that threshold was crossed,” according to the record of the meeting, the final one led by Ben S. Bernanke before the end of his term as central bank chairman. “Several” Fed policy makers also said that in “the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace” of the Fed’s bond purchases $10 billion at each meeting.
  • Einhorn Says Don’t Be Fooled by Companies Beating Estimates. Hedge-fund manager David Einhorn cautioned against betting on the extension of a U.S. stock-market rally that he said was fueled by conditions that are difficult to sustain. The Standard & Poor’s 500 Index surged 30 percent last year. The rally strengthened in the fourth quarter as 74 percent of companies beat analysts’ estimates during the earnings season that ended in November. The equity benchmark is little changed this year after recovering from January declines.
Wall Street Journal:  
  • FCC Plans to Issue New 'Net Neutrality' Rules. Agency Seeks to Prevent Blocking or Slowing Down of Websites by Internet Providers. The Federal Communications Commission said Wednesday that it will craft new rules to prevent Internet service providers from charging companies like Netflix Inc. NFLX -0.68% or Google Inc. GOOG -0.40% a toll to reach consumers at the highest speeds.
Fox News:
  • Lockhart: It would take a lot to knock tapering plan off course. The Federal Reserve will likely end its bond-buying program by the fourth quarter unless the economy takes a serious turn for the worse, a top official at the central bank said Wednesday. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said he expects the economy to grow as much as 3 percent this year and that it was too early to know if a spate of weak data signaled fundamental troubles or the temporary effects of a particularly cold winter. He added that he's still comfortable with the Atlanta Fed's forecast for a rate hike in the second half of 2015.
  • Natural gas soars on threat of another polar vortex in March. Natural gas futures spiked on forecasts of another arctic air blast descending on North America and unseasonably cold temperatures in March. March futures soared 10 percent, to more than $6 per million BTUs—a more than four-year high. Natural gas is up nearly 44 percent since Jan. 1, after unusually cold weather sparked record demand and forced a massive draw-down in storage. 
Business Insider: 
LA Times:
ABC News:
  • Shock investment slump and no Sochi surge deepens Russia's economic woes. A dramatic slump in capital investment by Russian companies in January pointed on Wednesday to Russia's ailing economy continuing to deteriorate fast. There was no sign in data of a boost from preparations for the Sochi Olympics as investment fell by 7 percent compared with a year earlier, a huge undershoot compared with analysts' forecasts in a Reuters poll of a 0.5 percent rise. "It's terrible. It's like in 2009," said Natalia Orlova, an economist at Alfa Bank, referring to the year when Russia's economy shrank by 8 percent as the global financial crunch wreaked havoc on corporate finances. The unexpected plunge in investment last month comes after a year of stagnation. It fell by 0.3 percent in 2013, according to official estimates - a major factor behind lacklustre economic growth of 1.3 percent last year.

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