Tuesday, April 12, 2011

Today's Headlines

  • U.S. Deficit to Rise to Largest Among Major Economies, IMF Says. The U.S. is set to have the largest budget deficit of major developed economies this year and should narrow it now rather than face tough adjustments in the next two years, the International Monetary Fund said. The U.S. shortfall will reach 10.8 percent of its gross domestic product this year, ahead of Japan and the U.K., the Washington-based IMF said in a report released today. It estimates that President Barack Obama will need to cut the deficit by 5 percentage points of GDP in the next two fiscal years, the largest adjustment in “at least half a century,” to meet his pledge of halving it by the end of his four-year term. “Market concerns about sustainability remain subdued in the U.S., but a further delay of action could be fiscally costly, with deficit increases exacerbated by rising yields,” the IMF wrote in its Fiscal Monitor report, published several times a year to analyze public finance development.
  • Budget Deficit in U.S. Increased to $188.2 Billion in March. The U.S. government, on course to reach a record annual budget deficit, posted a monthly shortfall of $188.2 billion in March, wider than a year earlier, Treasury Department statistics showed today. Last month’s deficit was up from a $65.4 billion gap in March 2010. “It has a long way to go to zero at this rate,” said Michael Englund, chief economist at Action Economics in Boulder, Colorado. The agreement to cut $38 billion from the 2011 budget is “pocket change,” although “it’s certainly a number that breaks in the right direction.” This year’s federal budget is projected to reach $1.5 trillion deficit, according to a Congressional Budget Office estimate released Jan. 26. The previous record, $1.4 trillion, was reached in fiscal 2009. For the fiscal year to date, the budget deficit totaled $829.4 billion compared with $717 billion the prior fiscal year to date, according to the Treasury’s statistics. In fiscal 2010, the government reported a budget deficit of $1.3 trillion, the second largest on record.
  • Libyan Rebels Ask for Help From NATO to Break Qaddafi's Siege of Misrata. Libya rebels appealed for NATO to use “all necessary measures” to avert an “anticipated massacre of men, women and children” in the city of Misrata, which is under attack by Muammar Qaddafi’s forces. The Interim Transitional National Council, the main opposition group, called for the United Nations to declare the besieged city an “internationally protected zone,” and said in a statement that “the Qaddafi regime is accelerating attacks on Misrata, using Grad missiles, in preparation for a potentially devastating assault on the city.” The appeal reflects the dire situation in Libya’s third largest city as NATO has been unable to stop the artillery attacks and sniper fire out of concern that air strikes in the city would inadvertently kill civilians. France and the U.K. are calling for the North Atlantic Treaty Organization to do more, exposing rifts within the alliance about how to respond to the crisis.
  • IEA Says Oil Prices Above $100 Hurt Economy, Keeps Demand Outlook Stable. The International Energy Agency maintained its outlook for global oil demand in 2011, while warning that prices above $100 a barrel are starting to hurt the global economy. Worldwide oil consumption will increase by 1.4 million barrels a day, or 1.6 percent, this year to average 89.4 million a day, the Paris-based adviser said today in its monthly Oil Market Report. Still, preliminary data “already show signs of oil demand slowdown,” and global supplies are starting to look “thin” as the conflict in Libya strains OPEC members’ spare production capacity, the IEA said. “There are real risks that a sustained $100-plus price environment will prove incompatible with the currently expected pace of economic recovery,” the agency said. “The surest remedy for high prices may ultimately prove to be high prices themselves.”
  • Crude Oil Plunges as Higher Prices Are Forecast to Curb Growth. Oil fell in the biggest two-day drop in almost 11 months after the International Energy Agency and International Monetary Fund said that prices above $100 a barrel are starting to hurt the global economy and Goldman Sachs Group Inc. forecast a “substantial” correction. Oil plunged as much as 4.1 percent after the IEA reported signs of an oil-demand “slowdown” in its monthly Oil Market Report today. The IMF cut its growth forecasts yesterday for the U.S. and Japan, two of the top three oil-consuming countries. Brent oil may drop more than $15 to $105 a barrel, Goldman said in a note to clients today. “Right now, we’re in free-fall range,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “We have a market condition that was way overbought, so now its length is getting stomped out of the market. There could be a ways to go in this selloff.” Crude oil for May delivery fell $3.43, or 3.1 percent, to $106.49 a barrel at 12:58 p.m. on the New York Mercantile Exchange. Prices have tumbled 5.6 percent since April 8, the biggest two-day retreat since May 14 and 17, 2010. Futures have risen 26 percent in the past year.
  • Cisco(CSCO) to Close Flip Video-Camera Business as Part of Revamp. Cisco Systems Inc. (CSCO), the world’s biggest maker of networking equipment, will close its Flip video-camera unit and cut about 550 jobs as it reorganizes its consumer businesses.
  • Greece, Ireland, Portugal Will Probably Need to Restructure, Kashhari Says. Europe’s most-indebted countries will probably need to restructure their borrowings as bailouts fail to solve their fundamental challenges, Pacific Investment Management Co.’s Neel Kashkari said. “Greece, Ireland, Portugal, simply have too much debt, more debt than their economies can afford,” Kashkari, head of new investment initiatives at Pimco, said today in an interview on “InBusiness with Margaret Brennan.” “It’s likely they’ll need to restructure or default. The question is, how do you do that in an orderly manner without causing contagion to Spain and other countries and causing chaos?”
  • Syria Vows to Crush Protests as Human Rights Watch Criticizes Use of Force. Syrian authorities vowed to crush what they called a conspiracy against the regime as Human Rights Watch said at least 130 people have been killed in a crackdown against protests and urged authorities to stop using force. The National Progressive Front said in a statement that it “distinguishes between the reform aspirations of citizens and their legitimate demands” and conspirators who are exploiting protests. “There is no room for complacency in dealing with these gangs,” it said.

Wall Street Journal:
  • Fed's Hoenig: New Bank Capital Rules Inadequate. The largest U.S. banks are still not adequately prepared for the next financial crisis, despite new capital rules requiring lenders to raise billions of dollars to buttress against future losses, Kansas City Fed President Thomas Hoenig said on Tuesday.
  • Import Prices Jump on Oil, Food Spike; Trade Gap. A Labor Department report showed imported petroleum prices jumped 10.5 percent in March, the most since June 2009, after rising 4.0 percent in February. Along with a 4.2 percent rise in imported food prices, which was the most since July 1994, that pushed overall import prices 2.7 percent higher, their largest increase in more than 1-1/2 years, the report said.
Business Insider:
Zero Hedge:
New York Times:
  • Saudis Adjust Oil Production as Demand Fluctuates. Saudi Arabia, the world’s oil producer of last resort, ramped up production at the beginning of the year, but cut output after Japanese demand fell in the wake of the devastating March 11 earthquake and tsunami, the International Energy Agency said Tuesday. Saudi oil had been expected to make up for a fall-off in Libya, where output slid nearly 70 percent in March amid a NATO-led air campaign to stop forces loyal to Col. Muammar el-Qaddafi
  • Senator To Propose New Internet Sales Tax. The second most senior Democrat in the U.S. Senate, Dick Durbin, will propose a new scheme that would force online retailers like Amazon(AMZN) and iTunes to collect local taxes for each and every transaction. He’s expected to make the proposal the day after Tax Day, and it’s expected to be controversial within two seconds of having been announced.
CNN Money:
  • Gbagbo Offered U.S. Professorship to End Crisis. Laurent Gbagbo was offered the chance to teach at Boston University in the United States if he would renounce his claim to be president of Ivory Coast and end the country's civil war, sources familiar with the negotiations told CNN Tuesday. The United States gave permission for him to lecture at the university and teach anywhere else in the country as a visiting professor, a senior African diplomat told CNN Tuesday.
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 21% 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 -18 (see trends).
  • Microsoft(MSFT) Launches New Assault on Business Apps. Microsoft Corp is making its strongest push yet into the steadily growing business software market in the hope that it can create another multibillion-dollar business. The world's biggest software company, which still gets the majority of its sales from its Windows and Office franchises, is hoping it can wrestle market share from heavyweights SAP AG(SAP) and Oracle Corp(ORCL), and upstart online vendor Salesforce.com Inc(CRM).
  • Fear of State Takeover Hangs Over Detroit Budget. Detroit must cut $200 million in spending or face a takeover by the state of Michigan, Mayor Dave Bing said on Tuesday. With the city's population dropping to a 100-year low, while its budget deficit is projected to climb to $1.2 billion by fiscal 2015, Bing outlined a plan to the city council to balance Detroit's finances over five years. That plan includes cuts in personnel costs, a one-year suspension of a payment to employee pensions, and a temporary gambling tax increase. "If we are unable or unwilling to make these changes, an emergency financial manager will be appointed by the state to make them for us. It's that simple," Bing said in his budget address.
  • Small Business Confidence Ebbs in March: NFIB. The National Federation of Independent Business' overall optimism index slipped 2.6 points to 91.9 as owners anticipated a slowdown in economic activity over the next six months and few saw higher real sales growth. Small businesses grew less optimistic about the economy in March but raised prices for a second straight month, a potential warning sign about inflation, a survey showed on Tuesday. Although businesses were pessimistic about sales, a net nine percent reported raising prices, up from 5 percent in February -- when the price gauge swung into positive territory for the first time in 26 months. "The bad news for the Fed is that price pressures continue to mount," the NFIB said in a statement. "It is not clear why owners expect a deterioration in the economy over the next six month. GDP and employment growth have not been spectacular, but have maintained positive momentum."
  • Banks should be allowed to fail and taxpayers' money shouldn't be used to save them, Michel Barnier, the European Union's financial services commissioner, said in an interview.
  • China should focus on solving home price problems while curbing inflation, citing Yun Xiaosu, vice minister of land and resources.
  • China is concerned about discharges of nuclear waste into the ocean by Japan and urges the country to give accurate updates on the situation, citing premier Wen Jiabao.
Jerusalem Post:
Al Shorouk:
  • An Egyptian military court has jailed a blogger, Michael Nabil, for three years for "spreading false news" about the army, citing the court. Nabil was arrested on March 28 for writing that the army had tortured demonstrators on March 9.

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