Monday, April 11, 2011

Today's Headlines

  • Oil-Price Risk Threatens Stronger Global Recovery, IMF Says. The threat of further oil-price increases has become a “key downside risk” for global growth, compounding the difficulties posed by overheating in emerging economies and persistent unemployment in developed nations, the International Monetary Fund said. The IMF stressed an “urgent” need for deficit reduction in the U.S., while recommending that emerging counterparts raise interest rates and let their currencies appreciate amid inflation pressures. In advanced economies, where unemployment remains high and bank credit “is still very sluggish,” monetary policy can remain accommodative, the IMF said. In the U.S. and the U.K. new programs to purchase government bonds “appear unnecessary, given current prospects for activity and developments in inflation expectations,” it said.
  • Oil Drops From 30-Month High as IMF Cuts Growth Forecasts. Oil fell from a 30-month high after the International Monetary Fund cut its growth forecasts for the U.S. and Japan, indicating high oil prices pose a risk to global economic expansion. Crude tumbled as much as 2.9 percent as the IMF predicted in its World Economic Outlook that the U.S. economy will expand at a slower pace than in 2010 amid an unemployment rate above 8 percent and a drop in consumer confidence. Oil for May delivery fell $2.59, or 2.3 percent, to $110.20 a barrel at 1:31 p.m. on the New York Mercantile Exchange. Futures settled at $112.79 a barrel on April 8, the highest closing price since Sept. 22, 2008. Prices have risen 30 percent in the past year.
  • Soros Warns Moral Hazard 'Looms Larger' as Volcker Says Big Banks Can Fail. Moral hazard in the financial system “looms larger than ever before,” even after the Dodd- Frank law gave U.S. federal agencies tools to regulate institutions that may be deemed too big to fail, said billionaire investor George Soros. “The evidence is overwhelming that the first priority of the authorities is to prevent a market collapse, and everything else has to take second place,” Soros, chairman of Soros Fund Management LLC, said yesterday at a conference in Bretton Woods, New Hampshire. Europe’s refusal to allow members of the monetary union to restructure their debt has added to moral hazard in the financial system, Soros said. “Look at the situation in Europe, for instance, where authorities are insisting on no renegotiation or restructuring on outstanding debt because that could possibly provide a financial banking crisis,” Soros said. “At the present we bail out, but in the future we will bail in. It has absolutely no credibility.”
  • Hedge Funds Boost Bullish Bets on Grain, Soy as Demand Rises. Hedge funds boosted their bullish bets on corn and soybeans to the highest in four weeks as demand surged for food, livestock feed and fuel. Bullish bets on wheat jumped the most since early December. The funds and other large speculators increased net-long positions, or wagers on rising prices in corn by 14 percent to 322,069 futures and options contracts as of April 5, according to data from the Commodity Futures Trading Commission. Bullish soybean bets gained 2.9 percent to 118,280 contracts. Holdings for both commodities were the highest since March 8.
  • Endo(ENDP) to Buy American Medical(AMMD) for $2.9 Billion to Trim Pain-Drug Dependence. Endo Pharmaceuticals Holdings Inc. (ENDP) agreed to buy American Medical Systems Holdings Inc. (AMMD), the maker of incontinence treatments, for $2.9 billion to help reduce its dependence on its top-selling painkiller Lidoderm. American Medical shareholders will get $30 a share, Chadds Ford, Pennsylvania-based Endo said today in a statement. That’s 34 percent above the April 8 closing price for Minnetonka, Minnesota-based American Medical. Endo, whose shares jumped 5.8 percent in Nasdaq Stock Market trading, will also assume $312 million of American Medicine Systems debt.
  • Level 3(LVLT) Surges on Deal to Buy Global Crossing(GLBC) for $1.9 Billion. Level 3 Communications Inc. (LVLT), the unprofitable provider of broadband services, jumped the most in almost two years after agreeing to buy Global Crossing Ltd. (GLBC) for about $1.9 billion. Level 3, based in Broomfield, Colorado, will acquire Global Crossing in an all-stock transaction to expand its network over three continents and reduce expenses, the companies said in a statement today. The deal is worth $23.04 a share based on Level 3’s closing stock price on April 8, 56 percent more than Global Crossing’s share price that day.
  • Dollar May Rise Against Euro on Interest-Rate Outlook, UBS Says: Tom Keene. The dollar may gain this year as faster-than-expected growth and inflation in the U.S. force the Federal Reserve to tighten monetary policy, according to UBS AG. Sentiment towards the dollar, especially among Asian investors, will improve once the Fed ends its $600 billion asset-purchase program in June, said Mansoor Mohi-Uddin, Singapore-based chief currency strategist at UBS AG. He declined to say when he expects the Fed to start raising interest rates. The dollar has fallen 7.3 percent against the euro this year. “U.S. inflation numbers keep on printing higher,” Mohi- Uddin said in a radio interview today on “Bloomberg Surveillance” with Tom Keene. “The way the dollar is now against the euro, against the Australian dollar, has not priced in the risk that the Fed can end quantitative easing. It has not priced in the risk that U.S. policy will lead to stronger growth in America.” The euro may decline because the market is expecting more interest-rate increases by the European Central Bank than policy makers are likely to deliver, Mohi-Uddin said. “The European Central Bank may go for a couple more rate hikes this year, but the market is pricing in five rate hikes in the next 12 months,” said Mohi-Uddin. “We think that’s too high and that’s why we are cautious about the euro at this level against the dollar.”
  • Discouraged Workers Complicate Fed's Response to Jobless Fall. The jobs market still isn’t working for many Americans. Some 6.3 million people have been out of work and looking for a job for more than six months. The employment-to-population ratio is lower than it was when the recession ended as companies have been slow to add to payrolls. And big sources of hiring in the past -- government, health care and retailing -- may not be able to reprise that role in the future as lawmakers limit outlays and consumers curb spending. “The trends are a little bit scary,” said Nobel laureate Michael Spence, a professor at New York University. “There’s been a break in an important part of the social contract” for many Americans who are finding they can’t get ahead.
  • Tenet(THC) Sues Community Health(CYH) Over Medicare Billing After Spurning Takeover. Tenet Healthcare Corp. (THC), after rejecting Community Health Systems Inc. (CYH)’s unsolicited buyout offer, said it sued that company for allegedly overbilling Medicare in admitting patients to its hospitals. Community Health Systems shares plunged. Tenet, based in Dallas, fell $1.35 cents, or 18 percent, to $6.20 in New York Stock Exchange composite trading at 10:35 a.m. Community Health fell $14.79, or 37 percent, to $25.51., before trading curves were implemented.
  • Missouri Attorney General Opposes U.S. Health Law in Break With Democrats. Missouri Attorney General Chris Koster said Congress exceeded its authority when it passed a law requiring citizens to obtain health insurance, according to a filing with a federal appeals court. The Obama administration asked the U.S. Court of Appeals in Atlanta to overturn a Jan. 31 ruling by U.S. District Judge C. Roger Vinson in Pensacola, Florida, that the Patient Protection and Affordable Care Act is unconstitutional. The U.S. argued the mandate portion of the law was “a valid exercise of Congress’s commerce power.” Missouri legislators passed measures calling on Koster to oppose the 2010 statute. “The federal courts, in reviewing this aspect of the law, must either expand Congress’ Commerce Clause authority, justify the provision on alternate constitutional grounds, or strike down the individual mandate,” Koster, a Democrat, said in a letter accompanying his so-called amicus, or friend-of-the- court, brief.

Wall Street Journal:
  • Japan Broadens Nuclear Evacuation Zone. An aftershock that shook Japan's northeast region temporarily shut down power supply and makeshift cooling systems at the Fukushima Daiichi plant Monday, highlighting the vulnerability of the crippled facility a month after a massive earthquake triggered the nation's worst nuclear-power crisis. Cooling functions at three of the plant's six reactors were restored 50 minutes after the temblor that rattled Fukushima and surrounding areas. Regulators said the suspension didn't appear to have caused any significant safety issues. Still, the latest quake served as a reminder of how lingering aftershocks and the risk of tsunami could easily upset the delicate efforts to stabilize the problems at the stricken plant.
  • Yellen Says Fed Won't Repeat Mistakes of '70s. The Federal Reserve is unlikely to have to raise interest rates soon because the surge in global commodity prices should have a temporary impact on U.S. inflation, a key Fed official said Monday. However, Fed Vice Chairman Janet Yellen said in prepared remarks that the U.S. central bank will keep a close eye on inflation developments to avoid the mistakes of the 1970s, when high oil prices led to sharp increases in consumer prices.
  • Economists See Growth Accelerating Later in Year. The U.S. economic recovery is expected to gain momentum over the rest of the year, despite a sharp pullback in growth during the just-finished first quarter, according to economists surveyed by The Wall Street Journal. On average, the 56 economists polled downgraded their estimate of first-quarter growth in gross domestic product to 2.7% at a seasonally adjusted annual rate. That is down from an average first-quarter forecast of 3.6% just two months ago. The economy grew at a 3.1% rate in the fourth quarter. The respondents, not all of whom answer every question, cited the still-weak housing market, severe weather, declining confidence and the earthquake in Japan as factors contributing to the pullback. The single biggest factor named by 35 economists was the rising price of oil sparked by Mideast unrest. "High oil prices usurp confidence and erode spending by consumers still struggling with lost wealth," said Sean M. Snaith of University of Central Florida.
  • US Home-Loan Brokers Face New Limits On Pay. New rules governing how mortgage-loan officers get paid are meant to protect consumers and make it clearer how the mortgage professional is making money off the loan--but some in the industry say the rules are creating new problems.
  • Toyota(TM) Says Vehicle Shortage Could Linger. Toyota Motor Corp. has warned its U.S. dealers that the company's supply of new vehicles could become "significantly impacted" by the summer, according to a memo distributed on Sunday. The memo is the clearest statement by Toyota that the shortage caused by the March 11 earthquake and tsunami in Japan will last into the third quarter.
  • Trump: Obama Is To Blame For High Oil Prices. Real estate developer Donald Trump blames President Obama for the rising price of oil, warning, "this country can never, ever recover" if oil prices continue to go up. "That's really the life's blood of the country," Trump told CNBC in a phone interview on Monday. The Trump Organization chairman, who says he's considering running for president, plans to decide "before June" on the matter. He contended that Obama is not a leader and is "in bed with these (OPEC) people. He doesn't speak the way you have to speak to them."
  • Drivers Starting to Cut Back as Gasoline Prices Keep Rising. With the price of gas above $3.50 a gallon in all but one state, there are signs that Americans are cutting back on driving, reversing a steady increase in demand for fuel as the economy improves. Gas sales have fallen for five straight weeks, the first time that has happened since November, according to MasterCard SpendingPulse, which tracks spending at 140,000 service stations nationwide.
Business Insider:
Zero Hedge:
New York Times:
  • Bailout for Portugal Will Put Politicians in a Vise. To secure a bailout worth about €80 billion, Portugal may have to agree to international creditors’ demands that it impose tougher austerity measures than those its own lawmakers rejected less than a month ago. This paradoxical situation is fueling divisions in Lisbon before a June 5 general election that was itself called because of a parliamentary standoff over how to clean up the public finances. In fact, Portuguese politicians may be more concerned about not getting blamed by voters for seeking outside help than about negotiating favorable terms for that rescue, valued at $116 billion.
LA Times:
  • U.S. Venture Funds Raised $7.7 Billion In First Quarter. U.S. venture capital firms raised more money last quarter than in any period since 2001. The total raised for new funds was $7.7 billion, according to Dow Jones LP Source. The capital going into VC funds was up 97 percent from a year ago, when they raised $3.9 billion.
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 19% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Thirty-nine percent (39%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -20 (see trends).
  • NATO to Continue Airstrikes to Aid Libya Civilians. NATO will continue to target Libyan leader Muammar Gaddafi's forces as long as they continue to threaten civilians, a NATO official said on Monday. South African President Jacob Zuma has urged NATO to stop air strikes on government targets to give a ceasefire "a chance", after Gaddafi accepted an African Union roadmap for ending the conflict in Libya including an immediate ceasefire. "We will continue to put pressure on forces threatening civilians and our operations will continue," a NATO official told Reuters, speaking on condition of anonymity. "Our aircraft are still flying and when we see a threat to civilians, we will engage," the official said. The official said Libyan government forces shelled the Libyan city of Misrata on Monday morning. "It does not appear that this indication of a peace deal has any substance at this point," the official said.
  • Nasdaq(NDAQ), ICE(ICE) Not Walking Away from NYSE(NYX) Bid - Sources. Nasdaq OMX Group (NDAQ.O) and IntercontinentalExchange Inc (ICE.N) are not going to walk away from their bid for NYSE Euronext (NYX.N), despite the NYSE board's rejection of the unsolicited offer, according to people familiar with the matter. The two exchanges have been working behind the scenes to rally support from NYSE shareholders for their bid, asking them to press the NYSE board to talk to Nasdaq and ICE about the offer, one of the sources said.
  • Karzai Says West Had Role in Bank Crisis. Afghan President Hamid Karzai accused foreigners on Monday of contributing to a corruption scandal at the country's biggest lender, and vowed to impose Afghan terms on the country's "strategic partnership" with the United States. Politically well-connected Kabulbank lost hundreds of millions of dollars through fraud, bad loans and mismanagement, and the scandal has jeopardised the country's flow of aid, because of disputes with the International Monetary Fund about how to handle it. Karzai warned that those responsible for bad loans would have to repay within a month or face trial, and promised tighter regulations of the sector in future. But he also said foreigners helped plunge the private bank into crisis.
USA Today:
  • Boehner: GOP Not Going to 'Roll Over' on Debt. House Speaker John Boehner today defended the budget deal that kept the government running and expressed low expectations for President Obama's upcoming speech on the deficit. Boeher, speaking this morning on Fox News, warned the Obama administration that the Republican majority in the U.S. House will not automatically vote for an increase to the nation's debt limit. "We are not going to do the typical Washington thing and roll over and increase the debt limit without addressing the underlying problem," Boehner said in his first TV interview since reaching a budget agreement for the rest of fiscal 2011. The United States has about $14.3 trillion in debt. The nation will reach its debt limit -- the amount of money it can legally borrow -- sometime in mid-May.
Financial Times:
  • Junk-bond funds had record inflows last week as retail investors' appetite for high-yield corporate debt reasserted itself after a lull in March, citing EPFR, which tracks fund flows. Globally, $1.47 billion was invested in high-yield funds last week, the highest weekly figure ever; in the U.S., inflows amounted to $933 million.
Kyodo News:
  • Japan may raise its estimate of the severity of the Fukushima Dai-Ichi nuclear plant accident to level 7, the highest on the International Nuclear and Radiological Event Scale. That would put the accident's severity at the same level of the 1986 Chernobyl accident. Japan's current assessment is 5, the same as the 1979 partial meltdown at Three Mile Island in the U.S.
  • China 'Very Concerned' About Unrest, Citing Xi. China is "very concerned" about unrest in West Asia and North Africa, and wants an "early" return to stability, citing remarks by Vice President Xi Jinping to visiting Moroccan Foreign Minister Taieb Fassi Fihri.
China Business Indepth:
  • China's March consumer price index likely rose 5%, citing an official of the National Bureau of Statistics.
  • The Palestinian Authority plans to publish a report this week saying it will be ready to establish an independent state during September, citing Planning Minister Ali Al-Jerbawi. The report is being prepared for presentation to a conference of international donors this week in Brussels.

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