Wednesday, April 27, 2011

Today's Headlines


  • Fed Says Recovery is 'Moderate'; Bond Buying to End in June. Federal Reserve policy makers said the economy is recovering at a “moderate pace” and a pickup in inflation is likely to be temporary, as they agreed to finish $600 billion of bond purchases on schedule in June. “The economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually,” the Federal Open Market Committee said today in its statement after a two-day meeting in Washington. “Increases in the prices of energy and other commodities have pushed up inflation in recent months,” and the Fed expects “these effects to be transitory,” the statement said. The Fed, discussing its securities portfolio, said it “is prepared to adjust those holdings as needed to best foster maximum employment and price stability.” “The Fed’s view of the world hasn’t changed very much,” Gary Stern, former president of the Minneapolis Fed, said in an interview with Bloomberg Radio. “They continue to emphasize the transitory nature of inflation” and “continue to talk about the economy improving at a moderate pace.” The Fed left its benchmark interest rate in a range of zero to 0.25 percent, where it’s been since December 2008, and retained a pledge in place since March 2009 to keep it “exceptionally low” for an “extended period.” “The unemployment rate remains elevated, and measures of underlying inflation continue to be somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate” for stable prices and maximum employment, the Fed said. The “depressed” housing industry remains a weak spot in the economy, it said. The Fed repeated that it will “pay close attention to the evolution of inflation and inflation expectations.” Food and beverage prices rose in the first quarter by the most since 2008, based on the Labor Department’s Consumer Price Index, while the cost of regular-unleaded gasoline has increased by 26 percent this year to $3.88 a gallon as of yesterday. The increases helped slow U.S. growth to a 2 percent pace in the first quarter, according to the median estimate of analysts surveyed by Bloomberg News, from 3.1 percent in the prior period. Since the Fed announced the second round of asset purchases on Nov. 3, yields on 10-year Treasuries increased to 3.31 percent as of yesterday from 2.57 percent. The dollar weakened by 3.5 percent to the lowest since August 2008 against an index of six currencies. Bernanke is still seeing objections from politicians within the U.S. and abroad almost six months after the Fed began the unprecedented second round of asset purchases. Senator Mark Kirk, a first-term Republican from Illinois, sent Bernanke a letter on April 25 expressing concern about inflation. He called for an early end to asset purchases should Bernanke “also find the trends that I have now heard widely about.” Russian Prime Minister Vladimir Putin said last week that compared with the U.S., his country doesn’t have the “same opportunity to make trouble.” The U.S. is “financing the government by using a printing press,” he said.
  • U.S. Durable-Goods Orders Rise for Third Month as Equipment Is Replenished. Demand for U.S. durable goods rose in March for a third consecutive month, indicating business investment will pick up. Bookings for equipment meant to last at least three years climbed 2.5 percent after a 0.7 percent gain the prior month that reversed a previously reported drop, the Commerce Department said today in Washington. The increase reflected growing demand for machinery, computers and automobiles. Orders excluding transportation equipment rose 1.3 percent, the best performance so far this year. Orders for non-defense capital goods excluding aircraft, items like computers and communications gear, increased 3.7 percent after increasing 0.5 percent the prior month. Shipments of such goods, used in calculating gross domestic product, increased 2.2 percent after increasing 0.4 percent.Demand for machinery rose 4.2 percent, increased 10 percent for computers and related products and rose 3.7 percent for autos. Economists may mark up forecasts for first-quarter gross domestic product after the report showed inventories jumped. Stockpiles grew by 1.3 percent in March, the same as in the prior month.
  • Gold Futures Surge to Record on Outlook for Sagging Dollar, Low U.S. Rates. Gold futures rose to a record $1,524.20 an ounce on speculation that the Federal Reserve will be slow to raise U.S. borrowing costs, weakening the dollar and boosting the appeal of the precious metal as an alternative asset. The dollar fell to the lowest since December 2009 against the euro after the Fed kept borrowing costs at a record low and said it would continue $600 billion in bond purchases through June. Gold futures for June delivery rose $13.60, or 0.9 percent, to settle at $1,517.10 at 1:48 p.m. on the Comex in New York. After the close, the metal reached the all-time high. The price has gained 31 percent in the past year.
  • Crude Oil Futures Increase After Report Shows U.S. Fuel Stockpile Decline. Crude oil increased after a U.S. Energy Department report showed that gasoline stockpiles tumbled to the lowest level since August 2009. Futures climbed as much as 0.8 percent after the department said gasoline inventories fell 2.51 million barrels to 205.6 million last week. “Gasoline supplies are definitely on the light side,” said Kyle Cooper, director of research for IAF Advisors in Houston. “With gasoline supplies falling and prices climbing, refiners can pay more for oil. They are going pay more to take delivery of extra barrels of crude because they know they will make money processing it into gasoline.” Crude oil for June delivery rose 41 cents, or 0.4 percent, to $112.62 a barrel at 1:31 a.m. on the New York Mercantile Exchange. Prices are up 37 percent from a year ago. Regular gasoline at the pump, averaged nationwide, increased 1 cent to $3.879 a gallon yesterday, the highest level since Aug. 3, 2008, AAA said on its website. Gasoline demand rose 0.8 percent to 9.06 million barrels a day over the past four weeks, 1.6 percent lower than a year earlier, according to the report. Refineries operated at 82.7 percent of capacity, up 0.2 percentage point from the prior week. That’s down from 89 percent of capacity a year earlier.
  • Radiation Readings at Stricken Japanese Plant Rise to Highest in Crisis. Radiation readings at Japan’s Fukushima Dai-Ichi station rose to the highest since an earthquake and tsunami knocked out cooling systems, impeding efforts to contain the worst nuclear crisis since Chernobyl. Two robots sent into the reactor No. 1 building at the plant yesterday took readings as high as 1,120 millisierverts of radiation per hour, Junichi Matsumoto, a general manager at Tokyo Electric Power Co., said today. That’s more than four times the annual dose permitted to nuclear workers at the stricken plant. “Tepco must figure out the source of high radiation,” said Hironobu Unesaki, a nuclear engineering professor at Kyoto University. “If it’s from contaminated water leaking from inside the reactor, Tepco’s so-called water tomb may be jeopardized because flooding the containment vessel will result in more radiation in the building.”
  • Greek, Portuguese Yields, CDS Reach Records as El-Erian Sees 'Lost Decade'. Greek, Irish and Portuguese bonds slumped and costs to insure the securities against default climbed to all-time highs as concern deepened that the nations will need to restructure their debts. Greek two-year yields rose above 25 percent for the first time, while 10-year yields advanced to euro-era highs for the ninth consecutive day. Portuguese two- and 10-year and Irish 10- year yields also reached records. German two-year notes slid as a report showed inflation in Europe’s largest economy accelerated in April and the nation sold 10-year bonds. “The talk about restructuring or rescheduling of Greek debt is not going away,” said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London. “As long as no one can offer the market reassurance that there isn’t going to be a rescheduling or a restructuring, then the market will keep on pricing in more and more.” Greek two-year yields surged as much as 171 basis points to 25.95 percent and were at 25.53 percent as of 4:17 p.m. in London. Ten-year yields soared as much as 101 basis points to 16.34 percent. Portuguese 10-year yields rose as much as 10 basis points to 9.71 percent, while two-year yields climbed 19 basis points to 11.87 percent, also records. The cost of insuring debt sold by Greece, Ireland and Portugal rose to records today, according to traders of credit- default swaps. Contracts on Greece jumped 21 basis points to 1,376 basis points, according to CMA. Contracts on Irish debt added 11 basis points to 685, while Portuguese swaps climbed seven basis points to 688. Greece faces the risk of a Latin American-style lost decade as a result of its debt crisis, Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., the world’s biggest manager of bond funds, told Germany’s Handelsblatt. The extra yield, or spread, investors demand to hold Greek 10-year bonds instead of similar-maturity German bunds widened 81 basis points to 1,289 basis points, after reaching 1,305, the most since at least March 1998, when Bloomberg started collecting the data.
  • CFTC Proposes Protecting Swaps User Margin From Peer Default. The Commodity Futures Trading Commission approved a proposal to allow swaps users who post collateral to a clearinghouse to have their margin protected against another investor’s bankruptcy, a move that may increase trading costs.
  • PetroChina Profit Misses Estimates on State Fuel-Price Curbs. PetroChina Co., Asia’s biggest company by market value, posted a 14 percent gain in first- quarter profit, missing estimates, after increases in state- controlled fuel prices lagged behind gains in crude oil costs. China’s government raised fuel prices by less than 11 percent so far this year to contain inflation even as New York crude averaged 20 percent higher in the quarter from a year earlier. The higher price of oil increased PetroChina’s operating costs by 46 percent, according to the statement.
  • Apple(AAPL) Denies Tracking iPhone Locations. Apple Inc. (AAPL), facing scrutiny from consumers and lawmakers over data collection on its iPhone, said it isn’t tracking customers’ location and plans to retain less information on the device. “Apple is not tracking the location of your iPhone,” the Cupertino, California-based company said in a statement today. “Apple has never done so and has no plans to ever do so.”
Wall Street Journal:
  • White House Releases Obama Birth Certificate. The White House on Wednesday released President Barack Obama's original "Certificate of Live Birth" from Hawaii amid persistent questions about his citizenship from some of his political opponents. Mr. Obama said he has watched the debate over his birthplace with "bemusement." Lawmakers from both parties, investigative reporters and others have probed his birthplace and confirmed "that yes, in fact, I was born in Hawaii on Aug. 4, 1961, in Kapiolani hospital."
  • Amazon's Bezos Defends Spending; Stock Tops High. Shares of Inc. shares jumped to a record high Wednesday following strong first-quarter sales growth, as well as a letter from Chief Executive Jeff Bezos that defended the company’s massive investments in technology and infrastructure. By early afternoon, Amazon(AMZN) stock was up more than 6% to $193.43. The shares have risen more than 20% in the last six weeks
Business Insider:
New York Times:
  • Lobbyist Fires Warning Shot Over Donation Disclosure Plan. After a brief truce of sorts between the White House and business leaders, the top lobbyist at the U.S. Chamber of Commerce took aim at President Obama on Tuesday over an as-yet unannounced plan to force government contractors to disclose their political giving. The lobbyist, R. Bruce Josten, said in an interview that the powerful business bloc “is not going to tolerate” what it saw as a “backdoor attempt” by the White House to silence private-sector opponents by disclosing their political spending. Mr. Josten said the chamber was concerned about a variety of Obama administration policies that it considered potentially damaging to businesses in a time of economic uncertainty. Those concerns include the efforts to carry out last year’s health care plan, a vast expansion of business regulations under the Dodd-Frank measure passed by Congress and the slow pace of new trade agreements with foreign nations. American businesses “are losing market share” globally to countries like Canada that have enacted new trade pacts, Mr. Josten said. “The rest of the world — while we’re sitting around doing nothing — is racing ahead.”
Washington Post:
  • Trump's Donation History Shows Democratic Favoritism. Billionaire Donald J. Trump, an early presidential favorite among tea party activists, has a highly unusual history of political contributions for a prospective Republican candidate: He has given most of his money to the other side. Recipients include Senate Majority Leader Harry M. Reid (Nev.), former Pennsylvania governor Edward G. Rendell, and Rahm Emanuel, a former aide to President Obama who received $50,000 from Trump during his recent run to become Chicago’s mayor, records show.
San Francisco Chronicle:
  • Circumcision Ban a Step Closer to the Ballot. The ban would outlaw circumcision in the city on any male under 18 years old - even for religious reasons. Breaking the law would count as a misdemeanor punishable by a fine of up to $1,000 and jail time for up to a year. Opponents say the ballot measure would never stand up in court because it violates the freedom of religion clause of the U.S. Constitution.
Boston Herald:
  • Jack Welch: Fed's Free Money Policies Court Disaster. Former General Electric CEO Jack Welch is warning that the Federal Reserve’s easy-money policies will eventually cause a major economic “blowout.” Speaking at the Massachusetts Institute of Technology yesterday, Welch slammed the Fed’s decision to keep the interest that banks pay for money at essentially zero percent since Wall Street crashed in 2008. “We’re at this point now where money is (interest) free,” Welch said in a speech at the Sloan School of Management. “With free money ... something’s going to blow here — and blow big. Because you can’t have free money and (Wall Street) risk-taking all in the same culture and not expect a blowout.”
  • China to Keep Family Planning Policy. China will stick to its current family planning policy and maintain a low birth rate, citing Chinese president Hu Jintao.
  • Pakistan Government Expects $981 Million From US by June. ISLAMABAD: Expecting a disbursement of $981 million by the US by June this year under the coalition support fund and Kerry-Lugar-Berman Act, Finance Minister Dr Abdul Hafeez Shaikh on Tuesday identified five major challenges of the next year’s budget.

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