Oil Set for Longest Rally Since April as Dollar Declines on Fed Stimulus. Oil rose for a fifth day in New York, headed for the longest rally since April, as the dollar declined on the Federal Reserve’s decision to purchase more debt to bolster the U.S. economy. Crude advanced to a seven-month high, approaching $87 a barrel after the Fed said Nov. 3 it will buy about $75 billion of Treasuries a month through June. The greenback dropped to a nine-month low against the euro, boosting the appeal of commodities as an alternative investment. U.S. crude supplies are 14 percent above the five-year average, Energy Department figures show. “The markets have taken off like bottle rockets,” said Richard Soultanian, co-president of NUS Consulting Group, a Park Ridge, New Jersey-based energy procurement adviser. “The Fed action is going to create commodity inflation. A weak dollar is providing impetus to all the commodity trades.”
China Says U.S. Fed Must Explain Bond-Buying or Endanger Global Confidence. China said the U.S. Federal Reserve needs to explain this week’s decision to purchase bonds to pump money into the world’s biggest economy or risk undermining the global recovery. “Many countries are worried about the impact of the policy on their economies,” Vice Foreign Minister Cui Tiankai said at a press briefing in Beijing today. “It would be appropriate for someone to step forward and give us an explanation, otherwise international confidence in the recovery and growth of the global economy might be hurt.” Cui’s remarks echo concerns raised across Asia as countries brace themselves for stronger currencies and possible asset- price inflation. German Finance Minister Wolfgang Schaeuble yesterday said the U.S. was creating problems for the world and the subject would be raised during next week’s Group of 20 leaders’ summit in Seoul.
Portuguese Budget Pact Fails to Cap National Borrowing Costs: Euro Credit. Portugal is suffering higher borrowing costs after agreeing to an austerity package that may do as much to choke an economic recovery as tame its deficit. The extra yield investors demand to hold Portuguese debt rather than German bunds widened for a seventh day yesterday to the highest level in five weeks. The premium rose even after the minority government on Nov. 3 passed a budget plan that features wage and spending reductions to trim the euro region’s fourth- largest deficit from 9.3 percent of 2009 gross domestic product. “There is a bit of a crisis of confidence,” said Filipe Silva, who manages 60 million euros ($85 million), including Portuguese bonds, at Banco Carregosa SA in Oporto, Portugal. “Even with the budget approved, political parties aren’t able to speak with one voice to the external audience. We are seeing volatility that isn’t supposed to exist in the sovereign debt market.”
Chinese Banks Give First Yuan Credit-Default Swap Price Guidance. China Everbright Bank Co. and China Development Bank are the first banks in China offering indicative prices for yuan-denominated credit-default swap contracts, according to data compiled by Bloomberg. China Everbright is indicating it will sell contracts protecting AAA-rated bonds and loans from default for five years for 86 basis points, while China Development Bank Corp. may offer similar contracts for 90 basis points, according to Bloomberg data.
Gasoline Exports to U.S. Decline on 20-Month Low Margins: Energy Markets. The profit from shipping gasoline to the U.S. from Europe slumped to a 20-month low in October as strikes in France caused domestic shortages, cutting exports. U.S. gasoline cost 8.05 cents less than Europe’s on Oct. 19, the lowest level since February 2009, and is still down 9.5 percent from its average of 8.41 cents more than Europe’s in the past year. As the premium disappeared, the number of tankers chartered to ship the motor fuel to the U.S. Atlantic Coast from Europe dropped to 10 last month, from 28 in September, according to data compiled by Bloomberg and Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker.
Fannie Mae, Freddie Mac Fix May Cost U.S. Taxpayers $685 Billion, S&P Says. Fannie Mae and Freddie Mac, the mortgage firms operating under federal conservatorship, may cost taxpayers as much as $685 billion as the U.S. covers losses and overhauls the housing-finance system, Standard & Poor’s said. Costs for resolving the two government-sponsored entities could reach $280 billion, including $148 billion already delivered under a U.S. Treasury Department promise of unlimited support, New York-based S&P said today in a research report. The government may spend another $405 billion to capitalize a replacement for the two companies, which own or insure more than half the U.S. mortgage market. “It appears unlikely in our view that housing and mortgage markets will be able to operate normally without continuing and substantial government involvement,” S&P said, citing the GSEs’ growing portfolio of unsold homes, a sluggish economy, high unemployment, the prospect of rising foreclosures and billions in legacy losses.
U.S. Bank Shares Rise on Report Fed May Allow Dividend Boosts. U.S. bank stocks rose the most in two months after the Wall Street Journal said the Federal Reserve is expected to allow lenders with satisfactory capital levels to increase dividend payments. Bank of America Corp. and JPMorgan Chase & Co., the two biggest U.S. banks by assets, led the KBW Bank Index to a 3.6 percent gain at 4:01 p.m. in New York. The increase was the largest since Sept. 1. Eighty of the 81 companies in the Standard & Poor’s 500 Financial Index also advanced. Regulators are expected to soon provide banks with requirements they must meet to raise the dividends, the Wall Street Journal reported, citing people familiar with the matter.
Comedy Central's Stewart Overtakes Letterman, Leno. Comedy Central’s Jon Stewart has overtaken David Letterman and Jay Leno as the king of late-night U.S. television, at least for a month, the cable network said. “The Daily Show With Jon Stewart” in October averaged 1.3 million viewers ages 18 to 49, a group advertisers target, topping NBC’s “The Tonight Show With Jay Leno” and CBS’s “Late Show With David Letterman,” the Viacom Inc.-owned cable channel said today in an e-mailed statement.
Dubai Needs 20 Months to Eliminate Oversupply, Emaar Chief Alabbar Says. Dubai real-estate prices will continue to drop as the United Arab Emirates’ second-biggest sheikhdom absorbs an oversupply of homes and offices, said Mohamed Alabbar, chairman of Emaar Properties PJSC. “We need 20 months or so to go over the excess supply,” he said during a panel discussion at the Bloomberg Link Real Estate Briefing today in New York. “Rates in Dubai about a year and half ago were a little higher than New York, which is abnormal.” Property prices have dropped by more than half in Dubai and by 30 percent in neighboring Abu Dhabi as banks tightened mortgage lending and speculators fled the market.
Pelosi May Lack Support as Leader, Two Democrats Say. Two House Democrats called on Speaker Nancy Pelosi to prepare to leave the leadership team after their party suffered the biggest loss of seats in more than 70 years and Republicans won control of the chamber. “We need to shake things up,” Democratic Representative Jim Matheson, co-chairman of the fiscally conservative House Blue Dog Coalition, said in an interview today. Matheson of Utah and Democratic Representative Heath Shuler of North Carolina said the party’s loss of at least 60 House seats is too steep to keep Pelosi, of California, at the helm as minority leader when a new session of Congress starts in January. “I’m convinced she realizes this” and will leave, said Shuler. He said House Majority Leader Steny Hoyer of Maryland has the inside track to replace her as top leader should she decide to step aside.
Republican-Led House May Act Next Year on Highway Bill, Panel's Mica Says. The U.S. House may vote early next year on a six-year plan for funding highways, and “raising taxes is off the table,” said Representative John Mica, senior Republican on the Transportation committee. The plan will use public-private partnerships, unspent federal dollars and accelerated release of aid to states to generate cash for projects, said Mica of Florida, in line to lead the House Transportation and Infrastructure Committee as a result of Republicans gaining control in the Nov. 2 election. “We don’t have to spend a huge amount of more money, but we can leverage the money that we have, or better move the funds that we have, and get things done,” Mica said today in an interview.
Wall Street Journal:
Central Bank Treads Into Once-Taboo Realm. The Federal Reserve will print money to buy nearly as much U.S. Treasury debt in the next eight months as the U.S. government will issue. The Fed's decision this week to buy $600 billion more of U.S. Treasury debt is setting off a debate about the risks of a central bank entwining its policies so tightly with the government's fiscal fortunes. The Fed is essentially lending enough money to the government to fund its operations for several months, something called "monetizing the debt." In normal times, this is one of the great taboos of central banking because it is seen as a step toward spiraling inflation and because it risks encouraging reckless government spending.
New Governors to Target Health Law. Newly elected Republican governors are planning to blunt key parts of the federal health overhaul and join lawsuits against it, suggesting states could trump Congress as the hottest front in the fight over the law.
Chicago Delays Bond Sale Amid News of Fiscal Woes. The city of Chicago is delaying a roughly $800 million general obligation bond sale originally scheduled for next week, amid hefty municipal bond supply and a flurry of negative fiscal headlines about the Windy City.
Google(GOOG) Vies for Shoppers. Google Inc. is upgrading its shopping site as it steps up efforts to compete in Web comparison shopping, a move to become a key player in a market dominated by sites like Amazon.com Inc. and eBay Inc.
Pakistan al Qaeda Aids Yemen Plots. Osama bin Laden and other al Qaeda leaders are believed to be providing strategic and philosophical guidance from Pakistan to Yemen-based al Qaeda in the Arabian Peninsula, or AQAP, the group Washington believes was behind last week's attempt to ship bombs in packages to the U.S.
What the Next Speaker Must Do by John Boehner. Secrecy, arrogance, and the abuse of power have shattered the bonds of trust between the people and their elected leaders. Repairing that trust requires sweeping change, beginning with an end to earmarks.
CNBC:
Ron Paul is About to Totally Revolutionize the House Monetary Policy Panel. Ron Paul, the Republican Congressman from Texas, is the ranking member of the monetary policy subcommittee, and when the next Congress takes over he’ll likely be the chairman of the subcommittee. And Congressman Paul has some big plans. “I will approach that committee like no one has ever approached it because we’re living in times like no one has ever seen,” Paul said in an interview with NetNet Thursday. Paul said his first priority will be to open up the books of the Federal Reserve to the American people. “We need to create transparency there. To see what it is they are buying and lending, and who it is they are dealing with,” Paul said.
Tensions Threaten Asia as China Rises. The Asia-Pacific region faces a period of strategic tensions that could damage economic ties as key national players adapt to an increasingly assertive China growing impatient with U.S. efforts to shore up its influence.
Marketwatch.com:
Bank of Japan Details Asset-Buying Plans. The Bank of Japan decided Friday to hold interest rates steady, as widely expected, and released details of funds to be purchased through its latest liquidity-boosting scheme. The policy board decided by unanimous vote at its two-day meeting to keep the overnight call rate in a range of zero to 0.1%. The board also said it would buy exchange-traded funds linked to the Topix index and the Nikkei Stock Average, as well as Japanese real-estate investment trusts rated AA or higher, as part of its new 5 trillion yen ($62 billion) asset-buying scheme. The BOJ said it would begin buying Japanese government bonds under the new plan at the beginning of next week.
Pharma Ramps Up Research On Vaccines To Treat Cancer. On Wednesday, pioneer prostate-cancer vaccine company Dendreon (DNDN) reported sales about 20% below consensus for its 2010 third quarter. Instead of the anticipated $24 million in third-quarter revenue from Provenge, a vaccine to fight prostate cancer, the number was just over $20 million.
Forbes:
Wise Men or Blind Men at the Fed? The Fed's preoccupation with deflation is surreal as we witness price spikes in metals and agricultural commodities.
Reuters:
Iran Says Its Aid to Afghanistan Totals $500 Million. Iran, which the United States and its NATO allies accuse of destabilizing Afghanistan, has provided some $500 million in aid for its conflict-torn neighbor, a senior Iranian official said on Thursday.
Doubts Grow Over Wisdom of Ben Bernanke 'Super-Put'. The early verdict is in on the US Federal Reserve's $600bn of fresh money through quantitative easing. Yields on 30-year Treasury bonds jumped 20 basis points to 4.07pc. It is the clearest warning shot to date that global investors will not tolerate Ben Bernanke's openly-declared policy of generating inflation for much longer. Soaring bourses may have stolen the headlines, but equities are rising for an unhealthy reason: because they are a safer asset class than bonds at the start of an inflationary credit cycle. Meanwhile, the price of US crude oil jumped $2.5 a barrel to $87. It is up 20pc since markets first concluded in early September that 'QE2' was a done deal. This amounts to a tax on US consumers, transferring US income to Mid-East petro-powers.
China Daily:
More than 75% of groundwater in the North China Plain is not safe to drink because of heavy metal, chemical fertilizer and surface water pollution, citing a study by the China Geological Survey. The poor quality of the water is affecting people's health and causing conflicts over supply, the report cited Zhang Zhaoji, an expert at the Chinese Academy of Geological Sciences, as saying at a conference.
China Securities Journal:
China needs "internal tightening" to avoid the formation of an asset bubble after the Federal Reserve's decision to introduce a new round of quantitative easing, the China Securities Journal said in an anonymous editorial today.
Evening Recommendations Citigroup:
Reiterated Buy on (CELL), target $10.
Reiterated Buy on (RIG), target $80.
Night Trading
Asian equity indices are unch. to +1.50% on average.
Asia Ex-Japan Investment Grade CDS Index 93.0 -8.0 basis points.
Asia Pacific Sovereign CDS Index 93.75 -2.25 basis points.
The Change in Non-farm Payrolls for October is estimated at +60K versus -95K in September.
The Change in Private Payrolls for October is estimated at +80K versus +64K in September.
The Unemployment Rate for October is estimated at 9.6% versus 9.6% in September.
Average Hourly Earnings for October are estimated to rise +.2% versus unch. in September.
10:00 am EST
Pending Home Sales for September are estimated to rise +3.0% versus a +4.3% gain in August.
3:00 pm EST
Consumer Credit for September is estimated at -$3.0B versus -$3.3B in August.
Upcoming Splits
None of note
Other Potential Market Movers
The Atlanta Fed Conference, Fed's Plosser speaking, Fed's Hoenig speaking, Fed's Fisher speaking, Fed's Bullard speaking, Fed's Lacker speaking could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by automaker and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 88.20 bps -4.86%
European Financial Sector CDS Index 95.83 bps -5.0%
Western Europe Sovereign Debt CDS Index 162.66 bps +1.88%
Emerging Market CDS Index 184.45 bps -8.18%
2-Year Swap Spread 15.0 -1 bp
TED Spread 17.0 unch.
Economic Gauges:
3-Month T-Bill Yield .11% -1 bp
Yield Curve 216.0 -12 bps
China Import Iron Ore Spot $153.20/Metric Tonne +2.0%
Citi US Economic Surprise Index +12.80 +.1 point
10-Year TIPS Spread 2.08% -11 bps
Overseas Futures:
Nikkei Futures: Indicating +127 open in Japan
DAX Futures: Indicating +13 open in Germany
Portfolio:
Higher: On gains in my Tech, Retail, Ag and Medical long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades near session highs despite recent equity gains, fears over a possible "sell the news" reaction to the election/Fed announcement, a jump in jobless claims and euro sovereign debt concerns. On the positive side, Coal, Alt Energy, Energy, Oil Service, Gold, Steel, Semi, Bank, Hospital, Homebuilding shares are especially strong, rising 3.0%+. (XLF)/(IYR) have been relatively strong throughout the day. (XLF) is surging on block buys into the final hour after the Fed said strong banks will be allowed to raise dividends. Cyclicals and small-caps are also outperforming. Copper is jumping +3.01%. The Eurozone Investment Grade CDS Index is falling -3.16% to 78.23 bps, the Emerging Markets Sovereign Debt CDS Index is declining -4.53% to 175.99 bps and the California Municipal CDS is falling -2.56% to 263.48 bps. Other key CDS indices are showing large declines, as well. The AAII % Bulls fell to 48.23, while the % Bears jumped to 29.79%, which is also a positive. On the negative side, Biotech and Education shares are down on the day. The Portugal sovereign cds is gaining +5.58% to 440.39 bps, the Ireland sovereign cds is gaining +5.59% to 576.70 bps and the Spain sovereign cds is gaining +2.47% to 235.22 bps. The large declines in the yield curve and TIPS spread are a bit odd given today's macro backdrop. I suspect tomorrow's jobs report will have a muted impact on stocks. The major averages are extended short-term, but should move still higher into year-end after a consolidation period. The I expect US stocks to trade mixed-to-higher into the close from current levels on tax policy/election optimism, less economic fear, buyout speculation, investment manager performance angst, diminishing financial sector pessimism, short-covering and earnings optimism.
Obama Administration is 'Open' to Talks on Extending Tax Cuts, Gibbs Says. The Obama administration is “open” to negotiations on extending tax cuts for upper-income individuals in order to win extensions for middle-income families, White House press secretary Robert Gibbs said. Obama is “open to having that discussion” with Democratic and Republican leaders, Gibbs said at a briefing. The president still “does not believe it’s a good idea,” he said. The remarks by Gibbs reinforce statements made by Obama yesterday, following midterm elections in which Republicans gained control of the House and narrowed the Democratic majority in the Senate.
High-Yield Debt Risk Index Drops to Six-Month Low on Stimulus. The cost of insuring against default on high-yield corporate bonds fell to the lowest level in six months in Europe after the U.S. Federal Reserve said it will expand record measures to bolster economic recovery. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly junk credit ratings decreased 17 basis points to 439, the lowest level since May 3, according to JPMorgan Chase & Co. at 3 p.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings decreased 3 basis points to 96.25, JPMorgan prices show. Credit-default swaps on Ireland surged 30 basis points to a record 590, and contracts on Allied Irish Banks Plc’s senior debt jumped 62 to an all-time high 816, according to data provider CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments from Greece to Germany rose 2.5 basis points to 167.5, near to the June 4 record 168.5. The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers held near a one-month high at 129.
U.S. Commercial Real Estate Rents to Rise in 2011, Cushman's Mosler Says. Commercial real estate rents are poised to rise in 2011 after reaching a low this year, according to Bruce Mosler, co-chairman of Cushman & Wakefield Inc., the largest closely held property services company. “The market has bottomed,” Mosler said today at the Real Estate Briefing hosted by Bloomberg Link in New York. “We can expect to see rental appreciation next year.”
Commodities Jump to a Two-Year High on Expanded Federal Reserve Stimulus. Commodities rose to a two-year high after the Federal Reserve said it would expand steps to boost the world’s largest economy, spurring demand for raw materials as a hedge against inflation. The Standard & Poor’s GSCI Index of 24 commodities gained as much as 1.5 percent to 586.046 points, the highest level since Oct. 3, 2008. It was at 585.241 points at 11:47 a.m. in London. Palladium climbed to the highest price since 2001, and white sugar reached a 21-year high. The U.S. Dollar Index fell to the lowest level in almost 11 months. A weaker dollar makes commodities priced in the currency cheaper in terms of other monies and fuels demand for raw materials as an alternative investment. Gold for immediate delivery added $14.72, or 1.1 percent, to $1,363.27 an ounce. Futures for December delivery gained $25.10, or 1.9 percent, to $1,362.70, on course for the biggest closing jump since Sept. 14. Silver for immediate delivery rose 45.5 cents, or 1.8 percent, to $25.315 an ounce, the highest level since March 1980. Futures for December delivery advanced 87.9 cents, or 3.6 percent, to $25.315 an ounce. Immediate-delivery palladium touched $673.25 an ounce, the highest level since May 9, 2001. Wheat for December delivery gained 9 cents, or 1.3 percent, to $6.9925 a bushel on the Chicago Board of Trade. December- delivery corn added 8 cents, or 1.4 percent, to $5.89 a bushel and soybeans for January delivery advanced 17.75 cents, or 1.4 percent, to $12.5525 a bushel. January-delivery rice jumped 25 cents, or 1.7 percent, to $14.795 per 100 pounds. White, or refined, sugar for March delivery added $20.10, or 2.7 percent, to $768.90 a metric ton on NYSE Liffe in London after reaching $774.40, the highest level for a most-active contract for data compiled by Bloomberg going back to 1989.
Ireland Plans 6 Billion-Euro '11 Budget Cut to Stave Off Bailout. Irish Finance Minister Brian Lenihan plans to slash the budget deficit by 6 billion euros ($8.5 billion) in 2011 as he fights to save the nation’s economic independence. The budget shortfall will be reduced to between 9.25 percent and 9.5 percent of gross domestic product next year, the Finance Ministry in Dublin said in a statement today. The underlying deficit this year will be 11.9 percent, or 32 percent when the costs of the bank bailout is included. The savings amount to about 3.6 percent of the economy and Lenihan will publish details on Dec. 7. “It’s ambitious. It’s intended to deliver a clear statement of intent,” said Austin Hughes, chief economist at KBC Bank Ireland in Dublin. “The critical question can it be attained. We need to see a little bit more in terms of the detail.”
Trichet Signals Irish Budget Plans May Calm Investors Over Fiscal Health. European Central Bank President Jean- Claude Trichet signaled that budget plans to be announced later today by the Irish government may calm some investors’ concerns about the country’s fiscal health. “I have no reason to think that observors will be disappointed,” Trichet said at a press conference in Frankfurt. “The front loading of the program is of extreme importance.” The government will publish new economic forecasts for the period through 2014 at 4:30 p.m. in Dublin today, the Finance Ministry said in an e-mailed statement.
BOE Declines to Follow Fed as Officials Keep Stimulus on Hold. The Bank of England kept its emergency stimulus program unchanged as the strength of the U.K. recovery persuaded officials not to join the Federal Reserve in buying more government bonds.
ECB Keeps Rates at Record Low as Fed Embarks on Further Easing. The European Central Bank kept interest rates at a record low after the Federal Reserve embarked on a new round of quantitative easing and tensions increased on Europe’s sovereign-debt markets. The ECB’s Governing Council in Frankfurt set the benchmark lending rate at 1 percent for a 19th month, as predicted by all 55 economists in a Bloomberg News survey. Economists said last night’s decision by the Fed to buy an additional $600 billion of Treasuries may drive the euro higher, undermining Europe’s recovery and forcing the ECB to delay the withdrawal of its own stimulus measures.
GAP(GPS), Limited Brands(LTD) Post October Sales Gains After Discounts. Sales at retailers Limited Brands Inc., the owner of the Victoria’s Secret chain, and Gap Inc.grew more than analysts estimated in October as discounting to clear inventory for the holiday season brought out consumers. Limited said today that sales at stores open at least a year rose 9 percent, exceeding the 6.3 percent average of analysts’ estimates compiled by Retail Metrics Inc. Gap, based in San Francisco, said so-called same-store sales rose 2 percent, while analysts projected a decline of 2.8 percent. Retailers beat predictions in August and September as discounts boosted back-to-school shopping. Promotions lured consumers last month as well, helping some chains such as Gap that had weekly sales, said Brian Sozzi, a retail analyst for Wall Street Strategies Inc. in New York. “The consumer is responding more to promotions,” Sozzi said. “If you had the right promotions, you got the sales.”
Commercial-Mortgage Index Soars as BlackRock(BLK) Loss Estimate Adds Confidence. An index tied to commercial property debt soared to the highest in more than two years after BlackRock Inc. projected losses on the securities won’t be as severe as investors expected. The price of a Markit Group Ltd. CMBX index linked to junior AAA commercial-mortgage bonds, many of which have had ratings cuts, increased as much as 1.75 percentage points to 77.46 yesterday, according to administrator Markit. Credit- default swap contracts on the index, which rise as investor confidence improves, are trading at the highest since September 2008, the data show.
Wall Street Journal:
Milton Friedman vs. the Fed. The Nobel laureate would never have endorsed increasing inflation to stimulate the economy.
CT Scans Aid Lung-Cancer Screening, Study Shows. The use of computed tomography, or CT, scans as a screening tool for lung cancer showed fewer people died compared to those screened with a chest X-ray, according to the results of a large-scale study released Thursday.
Obama Sets Up Bipartisan Talks, Urges Action on Taxes. President Barack Obama said Thursday he wants immediate action on controversial tax cuts and an arms-reduction treaty as he seeks to change the tone in Washington after voters battered his party in congressional elections earlier this week. Mr. Obama, speaking at the White House surrounded by his cabinet members, said voters sent a clear message: "They want us to focus on the economy, on jobs and moving this country forward." Voters also wanted to see a change in tone in how Washington operates, he said. Mr. Obama has invited leaders of both parties to the White House for a meeting Nov. 18 so they can start hammering out how they can lift the economic malaise and work together in the new political climate. The country can't afford "squabbling," he said.
CNBC:
US Debt Reduction Plan 'Essential': IMF Chief Economist. The US Congress should focus on a medium-term plan to cut government debt to dispel fears about the world's biggest economy, Olivier Blanchard, IMF chief economist, told CNBC Thursday.
Risk of Inflation, Potential 'Commodity Shock': Analysts. Rising inflation in emerging markets, coupled with marked increases in commodity prices, could hurt developed economies, as companies struggle to keep input costs down while seeing precious investment dollars heading overseas, analysts told CNBC. "I think it's the single most important issue that we face in the markets today," Philippa Malmgren, president of Principalis Asset Management, told CNBC. "We've got inflation ripping through the emerging markets. That's going to push input costs up for the entire Western manufacturing establishment." The Federal Reserve committed to injecting a further $600 billion into the economy Wednesday, through the purchase of long-dated government bonds, in a bid to stimulate growth. But the liquidity generated by the Fed's quantitative easing does not necessarily mean extra liquidity for the domestic U.S. economy, Hans Redeker, global head of foreign exchange strategy at BNP Paribas, told CNBC. "What is happening is you create dollars, these dollars don't want to say in the United States. So you have a wave of dollar liquidity moving for example into the Hong Kong real estate market," he said. "We are creating U.S. dollar liquidity in the wrong places in the world." That liquidity can have a negative impact in emerging market economies because of its inflationary pressures, Redeker said.
New Applications for Jobless Benefits Rise. Some 457,000 workers filed new applications for unemployment benefits last week, an increase of 20,000, indicating that employers are still reluctant to hire.
New York Times:
Goldman(GS) Sees $26 Billion Potential Losses at Top U.S. Banks. The four largest U.S. banks face potential losses of $26 billion over the next several years from their exposure to private-label mortgages and potential losses from delinquency, analysts at Goldman Sachs said.
GuruFocus.com:
Julian Robertson Likes Apple(AAPL) and Google(GOOG). Hedge fund legend Julian Robertson disclosed that he has ridden the Apple bull as he talked with CNBC's Erin Burnett. Right now, Robertson thinks Apple has further up to go. He said it is very reasonably valued at 18x forward earnings and has everything working for it. He sees Apple fetching a P/E ratio of 25 to 30 which would give it a share price between $400 and $475, sharply higher than where shares are currently trading. (video)
Can Barack Obama Pull a Bill Clinton? A young Democratic president comes into office with big ambitions, gets knocked back on his heels by Republicans in the midterm elections, then makes some deft moves to recapture the center and waltzes to reelection two years later.
John Boehner's Boys: The New Power Club. John Boehner has no plans — or capacity — to rule the House like Nancy Pelosi did. It’s neither his style to centralize power in the speaker’s office like she did nor his strength to win his way through brute force or fear. But make no mistake: Boehner will assume control of the House with his own elaborate plan for running the GOP on his terms. The plan includes fiercely loyal allies placed strategically throughout the House and his potential enemies placed right where he can better control them, according to Republicans close to Boehner.
Reuters:
US Republicans to Attack Healthcare Law Funding. U.S. congressional Republicans will try to repeal President Barack Obama's healthcare law next year but their leader in the Senate acknowledged on Thursday they will likely have to settle for far more modest changes.
Global Economic Activity Accelerates in October - PMI. Activity in the global economy accelerated in October for the first time since April, as rates of expansion improved in both manufacturing and services, business surveys showed on Thursday. The Global Total Output index, produced by JP Morgan with research and supply management organisations, jumped to 54.8 last month from 52.6 in September, spending its fifteenth month above the 50 mark that divides growth from contraction. The Global Services index bounced to 54.6 in October from 52.3 in the previous month.
NDTV:
34 Warships Sent From US for Obama Visit to India.The White House will, of course, stay in Washington but the heart of the famous building will move to India when President Barack Obama lands in Mumbai on Saturday. Communications set-up, nuclear button, a fleet of limousines and majority of the White House staff will be in India accompanying of the President on this three-day visit that will cover Mumbai and Delhi. He will also be protected by a fleet of 34 warships, including an aircraft carrier, which will patrol the sea lanes off the Mumbai coast during his two-day stay there beginning Saturday. Two jets, armed with advanced communication and security systems, and a fleet of over 40 cars will be part of Obamas convoy. Around 800 rooms have been booked for the President and his entourage in Taj Hotel and Hyatt.
