Wednesday, April 13, 2011

Today's Headlines

  • Crude Oil Rises on Bigger-Than-Forecast Decline in U.S. Gasoline Supplies. Crude oil and gasoline rose after a U.S. government report showed inventories of the motor fuel plunged the most in 12 years as demand climbed and refineries idled units. Futures advanced as much as much as 1.1 percent after the Energy Department said gasoline supplies dropped 7 million barrels to 209.7 million last week. Stockpiles were forecast to decline by 1 million barrels, according to the median of 17 analyst estimates in a Bloomberg News survey. Crude oil for May delivery increased 31 cents, or 0.3 percent, to $106.56 a barrel at 2:11 p.m. on the New York Mercantile Exchange. Prices are up 27 percent from a year ago. The drop in gasoline inventories was the largest on a per- barrel basis since Oct. 9, 1998. Gasoline supplies have slipped 31.4 million barrels, or 13 percent, in the past eight weeks, the report showed. It’s the longest stretch of declines since the summer of 2008. Refineries operated at 81.4 percent of capacity, down 3 percentage points from the prior week, the report showed. It was the lowest level since February. An 0.5 percentage-point increase was forecast in the Bloomberg news survey. Stockpiles at Cushing, Oklahoma, the delivery point for New York-traded West Texas Intermediate crude oil, gained 26,000 barrels to 41.9 million, the highest level since at least 2004 when the department began tracking stockpiles at the hub.
  • Small Businesses Balk at 'Piggy Bank' Role in Tax Code Rewrite. Small companies such as Arc Abrasives Inc. in Troy, Ohio, may end up as a roadblock to President Barack Obama’s drive to revamp the corporate tax code. A manufacturing business with 82 employees, Arc changed its tax status from a standard C corporation to a hybrid S corporation about a decade ago. The reason, says the company’s president, Anthony H. Stayman: to avoid paying taxes twice, at both the corporate and individual levels. Now he is worried that his tax bill could grow if a corporate overhaul makes its way through Congress. Other companies structured like his are concerned, too. The Obama administration has “created a firestorm in the business community,” says Neal Weber, managing director of the Washington national tax office of RSM McGladrey Inc., a tax and consulting firm. C corporations face what economists call double taxation.
  • China's Banks Said to Need $131 Billion of Capital to Meet Stricter Rules. Chinese banks may have to raise about 860 billion yuan ($131 billion) of stock over six years to meet stricter capital rules, according to estimates from the industry regulator, a person with knowledge of the matter said. Lenders are likely to need an additional 1.26 trillion yuan in supplementary capital by the end of 2016, the person said, declining to be named because the calculations aren’t public. The estimates, compiled in January, assume economic growth of 8 percent a year and 15 percent credit expansion, the person said. Chinese lenders including Industrial & Commercial Bank of China (1398) Ltd. sold a combined $70 billion of shares last year after record credit expansion fueled concern that their assets might be eroded by bad debts. Banks’ dependence on loan growth to increase profits means they’ll likely have to raise more equity capital, according to Fitch Ratings. “Capital erosion is a long-term issue facing Chinese banks because they don’t really have the motivation to reduce reliance on loan expansion,” said Wen Chunling, a Beijing-based analyst at Fitch.
  • China Will Say March Inflation Jumped Above 5%, Brokerages Say. The Chinese government will probably announce this week that inflation jumped above 5 percent last month, according to Haitong Securities Co. and Central China Securities Co., citing market speculation. “Investors are speculating March inflation will be 5.3 percent and that’ll justify the government’s continuing stance towards tightening,” said Li Jun, a strategist at Central China Securities in Shanghai. The statistics bureau is due to release the latest inflation number on April 15, with economists forecasting a 5.2 percent annual rate for March, the fastest pace since July 2008. Property developers and some banks fell today on speculation the central bank may order lenders to set aside more money in reserves as early as this week.
  • Cuomo Scores Highest Approval Among Governors in Quinnipiac Poll. New York Governor Andrew Cuomo has the highest approval rating among his peers around the nation, with New Jersey’s Chris Christie coming second, according to a Quinnipiac University poll released today.Cuomo’s score among registered voters rose to 64 percent from 56 percent in February, higher than governors in five other states polled by the Hamden, Connecticut-based college. Christie, a first-term Republican, has the next highest rating at 52 percent, according to a Feb. 9 survey. “Cuomo comes out of the budget vote -- usually a punishing time for politicians -- with impressive job-approval numbers,” said Maurice Carroll, director of the Quinnipiac University Polling Institute, in a statement. New York lawmakers approved the state’s first on-time budget in five years March 31. Cuomo, a 53-year-old Democrat, pushed lawmakers to close the budget gap with $9.3 billion of spending cuts, including reductions in education and health care that were opposed by a majority of voters, according to earlier surveys. The governor has threatened to fire almost 10,000 workers unless they agree to $450 million in concessions.
  • Bernanke Urges Republicans to 'Deal With' Debt, Lawmaker Says. Federal Reserve Chairman Ben S. Bernanke urged Republicans during a dinner meeting yesterday to find a way to “deal with” the rising U.S. national debt without endorsing a specific plan, lawmakers who attended said. “He said we have to deal with the debt,” Representative Steve Pearce, a Republican from New Mexico, said in an interview after leaving the session with the central bank chief on Capitol Hill. “So far the market seems to be forgiving of the fact that we haven’t,” Pearce said, adding that Bernanke told lawmakers that “we need to deal with it.”
  • JPMorgan(JPM) Profit Up 67% on Lower Credit Costs, Tops Estimates.
  • BRICs Said to Seek End to U.S., Western Europe Monopoly of World Bank, IMF. Five of the largest emerging nations will push the U.S. and Europe to end their 65-year monopoly on leadership positions at the World Bank and International Monetary Fund, according to two diplomats who helped negotiate a statement by the countries. The management structure of the institutions needs to reflect changes in the world economy, the draft statement by Brazil, Russia, India, China and South Africa says, according to the diplomats, who asked not to be identified because the final text isn’t public. The section calls for a bigger role for developing countries in global institutions, a reference to concerns with how leaders are chosen at the World Bank and IMF. “We will insist on the fact that governance at the IMF and the World Bank cannot be a systematic rotation between the U.S. and Europe, with the other countries excluded,” Brazilian President Dilma Rousseff told reporters in Beijing April 12. “There is no reason for that.
  • Buy Bullish Google(GOOG) Options Before Earnings, Goldman Sachs(GS) Says.

Wall Street Journal:
  • Obama Lays Out Deficit Plan. President Calls for 'Across-the-Board' Spending Cuts, Tax Increases to Tackle Debt.
  • Engineer Sentenced for Stealing Ford(F) Secrets. An engineer who stole trade secrets from Ford Motor Co. has been sentenced to almost six years in prison. Xiang Dong Yu, also known as Mike Yum, admits copying thousands of documents with details on engine-transmission systems and electrical-power supply before leaving to work for a Chinese competitor in 2008.
  • Incoming ECB Executive Board member Peter Praet said Europe's sovereign debt crisis won't be helped by "looser monetary policy," citing an interview. Paraet said the "biggest contribution" a central bank can make is keeping inflation expectations anchored at a time of commodity-price increases.
  • The euro will need to be restructured in three to four years, John Taylor, chairman and founder of FX Concepts LLC, said.
  • Beige Book: Economic Growth Moderate but Widespread.
  • Retail Sales Start to Show Some Slowing in Spending. U.S. retail sales rose modestly in March as auto sales plunged and consumers stretched to pay for pricey gasoline.
Business Insider:
Free Republic:
  • Bullard: Fed Exit May Mix Asset Sales, Rates. The U.S. Federal Reserve has yet to decide how it will start to reverse its unprecedented rescue of the U.S. economy and is likely to take several months before making its first moves, a top Fed official said on Tuesday. In an interview with Reuters Insider, St. Louis Federal Reserve Bank President James Bullard said the Fed was looking at launching its exit strategy by raising its near-zero interest rates or selling some of the nearly $2 trillion in bonds it has amassed. Doing both at the same time was possible too, he said. "The debate about how to exit this loose, uber-easy monetary policy is again coming to the fore." Bullard, a non-voter this year on the Fed's policy-setting panel but whose views are often representative of its middle ground, has all but conceded he won't persuade his peers to cut short the Fed's $600 billion bond buying initiative. Instead, the easing program will probably be completed in its full amount through June. "If things are as strong as I think they'll be through 2011, the presumption is the next move after that will be some kind of tightening, and that tightening could be either on the balance sheet side or on the interest rate side." "Both things will be going on at once at some point," he said. His position points to an intense debate over exit strategy at the Fed's next meeting on April 26-27 and in coming months. Divisions have emerged between policymakers about the speed of the Fed's next steps amid signs of higher inflation.
  • Federal Reserve Bank of Dallas President Fisher said he sees a risk of inflation getting out of control, according to a guest commentary. "I see the risk that we won't be able to keep inflation under control," Fisher wrote. "After the Fed completed its job, I now see above all the risks of a too-expansive monetary policy." It is not the Federal Reserve's task to dilute the debts of "an irresponsible government," he wrote.
  • The Greek government, which owes German companies about 500 million euros, is unable to pay suppliers like Siemans AG, Bayer AG and Hochtief AG.
  • Committing Germany to Europe's permanent rescue fund for debt-strapped euro countries risks breaching the constitution, citing a report by the German parliament's research service. The study, prepared for lawmakers in Berlin, warns that German loan guarantees under the planned European Stability Mechanism would set off a process that might force Germany to make payments that push the deficit beyond constitutional limits without giving parliament a say.
  • S&P said that a restructuring of Greek sovereign debt could involve haircuts of between 50% and 70%, according to an interview. The head of S&P's European debt evaluation team, Mortiz Kraemer, said that the risk of a Greek debt restructuring was "almost one in three."
Die Welt:
  • German Finance Minister Wolfgang Schaeuble said Portugal will have to undertake "stringent' austerity measures in order to receive financial aid from the European Union. Schaeuble also said that further measures could be required for Greece if the country isn't able to manage its debt.
  • The BRICs countries of Brazil, Russia, India and China still face economic heating issues including inflationary pressures and asset bubbles, citing Chinese Commerce Minister Chen Deming.
  • China will implement a "prudent" monetary policy and ensure basically stable consumer prices, the State Council said in a statement posted on the central government's website. The country will keep consumer price growth at an "acceptable" level. It will also consolidate and expand macro control over the property market, the council said after a meeting chaired by Permier Wen Jiabao.

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