Thursday, May 13, 2010

Today's Headlines

  • Volcker Says Crisis Threatens Euro 'Disintegration'. Former Federal Reserve Chairman Paul Volcker said he’s concerned that the euro area may break up after the Greek fiscal crisis that sparked an unprecedented bailout by the region’s members. “You have the great problem of a potential disintegration of the euro,” Volcker, 82, said in a speech in London today. “The essential element of discipline in economic policy and in fiscal policy that was hoped for” has “so far not been rewarded in some countries.”
  • Euro Trades Near Lowest in 14 Months on Concern Over Growth. The euro fell for a third day versus the dollar as Portugal announced deficit-cutting measures that will extend until the end of 2011, spurring concern that fiscal tightening across Europe will limit economic growth. The 16-nation currency fell against nearly all of its most- traded counterparts as a Spanish union called for strike a day after austerity measures were announced, increasing concern that governments may not be able to cut budgets fast enough. “Portugal announced some pretty aggressive austerity measures and you can bet that the next thing we hear is a public union calling for a strike,” said Andrew Busch, a global currency strategist at Bank of Montreal in Chicago, who expects the euro to drop as much as 12.5 percent in the next four months. “That creates additional uncertainty for the euro zone.”
  • Euro May Test Parity With Dollar in 'Hard Landing', RBS Says. The euro “can easily head through parity” with the U.S. dollar under a “hard landing” recovery scenario from the European deficit crisis, according to Royal Bank of Scotland Group Plc. The shared currency’s forecast was reduced to $1.14 for the middle of next year, Alan Ruskin, head of foreign-exchange strategy at RBS Securities in Stamford, Connecticut, wrote in a note today.
  • Mortgage Rates on 30-Year U.S. Loans Fall to 4.93%. U.S. mortgage rates fell for the third straight week as investors filled a void left by the end of a Federal Reserve program to purchase bonds backed by home loans. Rates for 30-year fixed loans dropped to 4.93 percent in the week ended today from 5 percent last week, Freddie Mac said in a statement. The average 15-year rate was 4.3 percent, the McLean, Virginia-based mortgage finance company said.
  • Crude Oil Tumbles to 12-Week Low as Dollar Climbs Against Euro. Crude oil tumbled to a 12-week low in New York as the strengthening dollar curbed the appeal of commodities as an alternative investment. Oil slipped as much as 2.7 percent as the U.S. currency climbed against the euro after Portugal announced austerity measures, spurring concern that fiscal tightening across Europe will limit economic growth. Stockpiles of crude at Cushing, Oklahoma, where the New York-traded West Texas Intermediate oil grade is stored, rose 784,000 barrels to 37 million, the second straight week supplies reached the highest level since the department began reporting on inventories at the hub in April 2004. “What we’re seeing today is mostly a Cushing story,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The weakness in the June crude-oil contract confirms that there’s no shortage of crude oil.” “The big build in Cushing is having a big impact on WTI, it is now trading at a discount to everything,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “It’s also becoming clear that the economy isn’t roaring back. There will be issues in countries such as Greece, which limit growth.”
  • Jobless Claims in U.S. Declined to 444,000 Last Week. The number of Americans filing claims for jobless benefits dropped for a fourth straight week, a sign that employers are retaining more workers as the economy expands. Initial jobless claims fell by 4,000 to 444,000 in the week ended May 8, higher than the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The four-week moving average of initial claims, a less volatile measure than the weekly figures, dropped to 450,500 last week from 459,500, today’s report showed. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.6 percent in the week ended May 1.
  • PIMCO Says Europe Shows World Caught in 'New Normal'. Pacific Investment Management Co. said the debt crisis in Europe shows its outlook for an extended period of below-average economic growth remains valid, even after global markets rebounded from the financial crisis. “What is happening in Europe is a vivid illustration of an underlying theme of the new normal,” Mohamed El-Erian, the chief executive officer of Pimco, said in an interview. There are “structural forces overwhelming traditional cyclical ones,” he said.

Wall Street Journal:
  • Financial News: Blackstone(BX) to Raise Largest Private Equity Fund($14 Billion) for 15 Months. The Blackstone Group (BX) is close to completing the largest private equity fundraising for 15 months, providing additional firepower to its recent return to the mega buyout market. The listed US firm, founded by Stephen Schwarzman and Peter Peterson, is set to raise the funds imminently, three people familiar with the situation said.
  • CFTC Documents Reveal Internal Debate on Position Limits. Commodity Futures Trading Commission Chairman Gary Gensler is pushing for speculative trading curbs in the energy marketplace, but newly released documents suggest there is still internal debate on whether new limits will damp price volatility. The documents include memos, emails and a draft economic analysis never viewed by CFTC commissioners containing recent findings from agency economists concerning the effect of speculators and commodity-index traders on prices.
NY Post:
  • Obama to Cut NYC Anti-Terror Funding Even After Times Square Bombing Attempt. The Obama administration will announce tomorrow it has slashed anti-terror funds for New York City, despite the attempted Times Square bombing less than two weeks ago that underscored the enormous threat to the city. The Department of Homeland Security informed New York officials yesterday that grants to the city were cut 27 percent for mass transit security and 25 percent for port security. The mass transit funds dropped $42 million, from $153 million last year to $111 this year. Port security funds suffered a $11.2 million cut, from $45 million to $33.8 million, officials said. The timing of the announcement drew howls from New York lawmakers on Capitol Hill, whose recent pleas for increased anti-terror spending in the Big Apple – along with the same plea from Mayor Bloomberg – fell flat. They said the Times Square bomb attempt shows that New Yok remains the top target for terrorists and that the city deserves the lion’s share of federal spending on security. "For the administration to announce these cuts two weeks after the attempted Times Square bombing shows they just don’t get it and are not doing right by New York City on anti-terrorism funding," Sen. Chuck Schumer (D-NY) said. Rep. Pete King (R-LI), the ranking Republican on the House Homeland Security Committee, said the cuts were "dangerous and unconscionable." "The threat against New York City, the top target of al-Qaeda, is increasing, not decreasing," he said, noting that the city has been the target of at least 11 foiled terror plots since 9/11. "The Times Square attempt served as a wake-up call for many, but apparently not for the Obama Administration, which should be dramatically increasing New York City’s homeland security funding, not decreasing it." It is not the first time President Obama has short-changed the city on homeland security dollars. Obama has moved for the second year in a row to eliminate a $30 million program called "Securing our Cities." It would create a ring of radiation detectors around the city to monitor for nuclear and dirty bombs.
  • FBI Searches LI, NJ and Boston-Area Homes in Times Square Bomb Plot, 4 Arrested. An army of FBI agents executed search warrants at several locations on Long Island, New Jersey and in the Boston suburbs this morning in connection with the failed Times Square car bombing, authorities said. Four people were being held on immigration-related charges. Attorney General Eric Holder told a Congressional panel today that “several people” had been taken into custody in connection with the Times Square case. "They do not relate to any known immediate threat. ... This is part of an ongoing investigation," he said.
Business Insider:
  • U.S. Online Ad Revenues Hit Nearly $6 Billion in First Quarter. Internet advertising revenues in the U.S. hit $5.9 billion for Q1 2010, representing a 7.5 percent increase over the same period in 2009, according to numbers released moments ago by the Interactive Advertising Bureau in tandem with PricewaterhouseCoopers. This marks the highest first-quarter revenue level ever for the industry.
L.A. Times:
  • Square Launches, Enables Cellphones to Take Credit Card Payments. The newest start-up called Square from Twitter creator Jack Dorsey launched Tuesday. The San Francisco company makes a thumb-size plastic gizmo that can plug into an iPhone, a smart-phone running Google's Android, an iPod Touch or an iPad, unlocking the ability to conduct credit card transactions. The Square gadget is free, available online at Because it's designed to be plugged into the headphone jack, the company can manufacture one device to work with many phones and consumer electronics. The gadget will eventually support phones from Palm and Research In Motion's BlackBerry.
  • Climate Bill's Fate Down to Business. In an ornate Senate hearing room, Sen. John Kerry (D-Mass.) and Sen. Joe Lieberman (I-Conn.) unveiled their energy measure Wednesday before an audience packed with both environmentalists and industry titans. The presence of traditionally warring opponents reflected the attempt by Kerry, Lieberman and co-author Sen. Lindsey Graham (R-S.C.) to craft one of the first major bills to deal with climate change that wasn’t instantly viewed as anathema by the business community. And the fate of the bill is likely in business’s hands. While the green lobby is already firing up grass-roots support and running ads to advance the bill, getting the 60 Senate votes needed to pass it will require help from corporate lobbying shops with deep ties to conservative Democrats and Republicans.
Real Clear Politics:
  • Crony Capitalism: From GM to Greece, the Lies Keep Growing. To understand the pertinence to America of events in Greece, notice General Motors' most recent misbehavior. A television commercial featuring CEO Ed Whitacre demonstrates the institutional murkiness and intellectual dishonesty that result when the line between public and private sectors disappears. In the commercial, Whitacre says GM has "repaid our government loan in full." Rep. Paul Ryan, R-Wis., noted that GM used government funds to pay back the government: It "simply transferred $6.7 billion from one taxpayer-funded TARP account to another." The government still owns 60.8 percent of GM's common equity, and the Congressional Budget Office projects that the government will lose about $34 billion of the $82 billion of TARP funds dispersed to the automotive industry.
Lidove Noviny:
  • The European Commission's proposal to control and approve individual EU members' budgets before they are put up for a vote should not be taken seriously, citing Czech President's advisor Ladislav Jakl. Big EU members are sure to reject the proposal which would mean a complete loss of sovereignty of their governments, citing Jakl.
Financial Post:
  • Investors Pour $2.3 Billion into Gold ETFs in 6 Days. Gold exchange-traded funds, including the popular SPDR Gold Shares, have seen more than US$2.3-billion in net inflows in the six trading days ended Monday. TrimTabs Investment Research said on Wednesday that the net inflows into gold ETFs are the highest in 12 months. Last Thursday during the near 1,000-point plunge in the Dow Jones industrial average, gold ETFs saw net inflows of US$1.1-billion, TrimTabs said.
El Economista:
  • Spanish trade union UGT called a public sector strike for June 2, citing the union.

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