Tuesday, June 07, 2011

Today's Headlines


  • Job Openings Fall First Time in Three Months. Job openings in the U.S. decreased in April for the first time in three months, showing companies started to lose confidence in the expansion’s durability even before hiring slumped in May. The number of positions waiting to be filled fell by 151,000 to 2.97 million, the fewest since January, the Labor Department said today in a statement posted on its website. The number of people hired and the number of workers fired also decreased. The unemployment rate rose to 9.1 percent in May while employers added the fewest workers in eight months, Labor Department data showed last week. “We’ve got a very weak, very mild recovery, which does not create enough demand for labor,” said Henry Mo, an economist at Credit Suisse in New York. “Even if all the open positions were filled overnight, we’d still have almost 11 million workers without jobs.”
  • OPEC to Raise Oil Output Target Tomorrow, Gulf Delegate Says. OPEC will raise its oil output target tomorrow for the first time since 2008 to help replace lost Libyan supplies and meet growth in demand later this year, according to a Gulf delegate with knowledge of the matter. The Organization of Petroleum Exporting Countries is producing 2 million barrels a day above its official ceiling, the delegate said, declining to be named because he isn’t authorized to speak publicly. All the group’s ministers agree on the need to raise output, the person said, amid rising speculation that Saudi Arabia, OPEC’s largest producer, wants to add as much as 1.5 million barrels a day to global supply. Oil prices at current levels could derail a global economic recovery, the International Energy Agency’s Chief Economist Fatih Birol told reporters today in Oslo. Crude for July delivery slid as much as 90 cents to $98.11 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.46 at 8:51 a.m. local time. “Saudi Arabia and other key members of OPEC, with the usual exceptions of price hawks Iran and Venezuela, appear to be leaning toward a quota increase because they are concerned about the negative impact of high prices on GDP growth and, ultimately, on oil-demand growth,” New York-based Wittner said in a note. Morgan Stanley echoed his view in an-e-mailed report forecasting an increase of 1.5 million barrels a day this summer.
  • Eurozone Crisis Has Global Implications, Rogoff Writes in FT. If the euro survives and subsequently achieves a status equivalent to that of the dollar as a reserve currency, it will provide an impetus toward currency consolidation elsewhere, said Kenneth Rogoff, an economics professor at Harvard University. Writing in the Financial Times, Rogoff said that if, on the other hand, the eurozone is pulled apart, many decades could elapse before any other region adopts a similar program. At present it looks as though the euro, which was meant to give greater resilience in the face of financial crisis, amplifies shocks rather than otherwise, for Europe’s peripheral countries are in weak competitive positions and no currency depreciation mechanism is available to them, Rogoff wrote. European leaders’ plans to achieve effective devaluation through wage adjustment seem fanciful; the only clean rescue would be if European growth far exceeded expectations, which is unlikely, he said. The question now is whether the common currency is sustainable politically; if the global economy doesn’t soon resume rapid growth, an answer won’t be long delayed, Rogoff concluded.
  • U.S. Late Boomers Poorer Than Depression Kids: Chart of the Day. The last of the U.S. baby boomers have ended up poorer than the prior two generations, including those born during the Great Depression and World War II.
  • Talbots(TLB) Falls on 'High Levels' of Markdowns. Talbots Inc. (TLB), the U.S. clothing chain that targets women 35 and older, fell the most since its 1993 public offering after saying fiscal second-quarter sales will decline “significantly” and profit margins will narrow on price markdowns and fewer customer visits.
  • Biogen(BIIB) Seeks Deals to Build Up MS Drugs. Biogen Idec Inc. (BIIB), the world’s largest maker of multiple sclerosis medicines, is on the hunt for new compounds to treat MS and other neurodegenerative diseases, and may purchase companies outright or partner with them, the company’s research chief said.
  • World Food Prices Linger Near Record as Meat and Dairy Costs Gain, UN Says. Global wheat production will lag behind demand, helping to keep food prices high and volatile at least through next year, the United Nations’ Food and Agriculture Organization said.
Wall Street Journal:
  • Fed's Evans Shaves Growth Forecasts. Charles Evans, president of the Federal Reserve Bank of Chicago, is marking down his growth forecasts for 2011 and 2012, but says he isn’t prepared to call for new Fed actions to support the economy. In an interview with The Wall Street Journal, Mr. Evans said he now expects the economy to grow by 3% to 3.25% in 2011 and 3.5% and 3.75% in 2012, compared to the 4% growth rate he was expecting before a recent string of disappointing economic data.
  • Wall Street Probe Illustrates Levin's Clout. When U.S. Senator Carl Levin declared that Goldman Sachs Group Inc. (GS) “clearly misled their clients and misled the Congress,” few analysts predicted his allegations would still be reverberating two months later. The firm’s shares have fallen 16 percent in New York trading since April 13, when Levin’s investigative panel released an exhaustive report on the roots of the 2008 economic meltdown. The Justice Department and Securities and Exchange Commission are examining the findings. The Manhattan District Attorney last week joined in with a subpoena to Goldman Sachs.
Business Insider:
Zero Hedge:
Washington Post:
  • Obama Loses Bin Laden Bounce; Romney On The Move Among GOP Contenders. The public opinion boost President Obama received after the killing of Osama bin Laden has dissipated, and Americans’ disapproval of how he is handling the nation’s economy and the deficit has reached new highs, according to a new Washington Post-ABC News poll. The survey portrays a broadly pessimistic mood in the country this spring as higher gasoline prices, sliding home values and a disappointing employment picture have raised fresh concerns about the pace of the economic recovery. By 2 to 1, Americans say the country is pretty seriously on the wrong track, and nine in 10 continue to rate the economy in negative terms. Nearly six in 10 say the economy has not started to recover, regardless of what official statistics may say, and most of those who say it has improved rate the recovery as weak. Among all Americans, Obama and Romney are knotted at 47 percent each, and among registered voters, the former governor is numerically ahead, 49 percent to 46 percent. Overall, about six in 10 of those surveyed give Obama negative marks on the economy and the deficit. Significantly, nearly half strongly disapprove of his performance in these two crucial areas. Nearly two-thirds of political independents disapprove of the president’s handling of the economy, including — for the first time — a slim majority who do so strongly.In another indicator of rapidly shifting views on economic issues, 45 percent trust congressional Republicans over the president when it comes to dealing with the economy, an 11-point improvement for the GOP since March.
The Detroit News:
  • GM's Akerson Pushing for Higher Gas Taxes. General Motors Co. CEO Dan Akerson wants the federal gas tax boosted as much as $1 a gallon to nudge consumers toward more fuel-efficient cars, and he's confident the government will soon shed its remaining 26 percent stake in the once-bankrupt automaker. And while he is eager to say goodbye to the government as a part owner of GM, Akerson would like to see it step up to the challenge of setting a higher gas tax, as part of a comprehensive energy policy. A government-imposed tax hike, Akerson believes, will prompt more people to buy small cars and do more good for the environment than forcing automakers to comply with higher gas-mileage standards. "There ought to be a discussion on the cost versus the benefits," he said. "What we are going to do is tax production here, and that will cost us jobs." For the years 2017-25, federal officials are considering 3 percent to 6 percent annual fuel efficiency increases, or 47 mpg to 62 mpg. That could boost the cost of vehicles by up to $3,500. "You know what I'd rather have them do — this will make my Republican friends puke — as gas is going to go down here now, we ought to just slap a 50-cent or a dollar tax on a gallon of gas," Akerson said. "People will start buying more Cruzes and they will start buying less Suburbans."
  • China has lifted a price cap on retail vegetable oil prices, citing industry sources.
  • Moody's: Greek Rollover Would Likely Be Credit Event. The head of Moody's sovereign ratings group said on Tuesday it was hard to see how a private sector rollover of Greek debt would be truly voluntary and it would therefore likely constitute a default. European officials are striving to arrange a private sector rollover as a key part of a new rescue plan for Greece, to help justify to their taxpayers the burden of fresh financial aid for the struggling euro zone member. Bart Oosterveld, head of the sovereign risk group at Moody's Investors Service, said the ratings agency could classify a debt rollover as a default if it believed that bondholders had only taken part because they feared the consequences of not participating. "It's hard to imagine in the current circumstances that people would voluntarily do this," he told reporters in Paris. "Our default definition contemplates that for something to be voluntary it has to be truly voluntary ... More likely than not this would be a credit event in our view."
Financial Times:
  • Fed Wary of QE3 After Latest Jobs Data. Federal Reserve officials have signalled no appetite for further monetary easing in response to the latest weakness in US economic data, meaning the second round of large-scale asset purchases introduced in November will come to an end as planned at the end of this month.
  • Greek Restructuring Is Almost Inevitable. (video) George Magnus, senior economic adviser to UBS, the investment bank, tells John Plender that the size of Greece's public sector debt is simply too big for ongoing austerity measures to fix and that its economy is uncompetitive and in need of fiscal reform.
  • IMF Warns on UK Banks Masking Bad Debts. British banks’ lenience to struggling customers may be disguising the dangers the institutions face, the International Monetary Fund warned as it delivered its latest verdict on the UK economy.
Daily Yomiuri Online:
  • The melted fuel at Tokyo Electric Power Co.'s Fukushima Dai-Ichi nuclear power station may have leaked through the pressure vessels of the Nos. 1 to 3 reactors. The Japanese government will submit a report to the IAEA that raises the possibility the fuel dropped through the bottom of the pressure vessels, a situation described as a "melt through" and considered more serious than a "meltdown," citing the document.
Study Times:
  • Global stagflation may force nations to raise interest rates if an asset bubble and inflation pressure continue to grow, citing China Banking Regulatory Commission Chairman Liu Mingkang.

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