Monday, June 20, 2011

Today's Headlines


  • EU's Juncker Says Progress Made on New Greek Aid Package. The following are comments by Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers, on prospects for further aid payments to Greece. He spoke after a meeting of euro-region finance chiefs in Luxembourg. On the role of private investors in a new aid program for Greece: “We have agreed that there should be a private-creditor participation, which should really be voluntary because we want to avoid any credit default or credit event. But it also has to be clear that Greece has to bring about a situation where all the expected commitments are taken charge of. We depend very much that all legal processes are approved before the end of this month. Beginning of July we will have to continue to discuss the private creditor participation, which will be voluntary and we will have to check whether Greece has fulfilled all its obligations.” “Voluntary participation has to be voluntary which means that no pressure whatsoever can be exercised on the private sector and this has to be checked at the beginning of July. My objective is to call another euro group to Brussels in the first days of July where we will discuss these questions in detail.” “We agreed today that the participation of private creditors has to be voluntary, but Greece also has to deliver.” “With a voluntary contribution by private creditors, one can’t predict in advance the size of this participation. This has to be discussed also with the private creditors.”
  • Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show. Banks led an increase in the cost of protecting European corporate bonds from default amid concern Greece may reject austerity measures demanded for a bailout. The Markit iTraxx Financial Index of credit-default swaps on the subordinated debt of 25 banks and insurers jumped 8.5 basis points to 298, according to JPMorgan Chase & Co. at 9 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings rose 9 basis points to 419. “There only seem to be two stories in town right now,” CreditSights Inc. analysts led by Simon Adamson wrote in a note today. “Greek sovereign debt restructuring -- or not -- and Irish banks’ debt haircuts -- maybe.” The Markit iTraxx SovX Western Europe Index gained, rising 6.2 to 228.5. Default swaps on Greece jumped 40 basis points to 1,967 and contracts on Italian government debt climbed 12 basis points to 182.5, the highest since March 10, according to CMA. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2.5 basis points to 113.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers climbed 3.25 basis points to 167.24.
  • China 1-Day Shibor Rises Most in 5 Months as Redemptions Drop. China’s one-day Shanghai interbank offered rate, or Shibor, surged the most in five months on speculation cash supplies will become tighter as redemptions of central bank bills decline this week. The seven-day repurchase rate, a gauge of interbank funding availability, rose for a fourth day as an increase in bank reserve ratios, announced last week, took effect. Some 88 billion yuan ($13.6 billion) of central bank bills and repurchase agreements will mature this week, compared with 115 billion yuan the week before, said Wee-Khoon Chong, a fixed- income strategist at Societe Generale SA in Hong Kong. “The cash squeeze worsened today because it’s the reserve ratio payment day,” said Guo Caomin, a Shanghai-based bond analyst at Industrial Bank Co. “Due to the small amount of maturing bills we probably won’t see an obvious easing of the liquidity shortage this week.” The one-day Shibor jumped 297 basis points, or 2.97 percentage points, to 6.96 percent, according to a fixing rate published at 11:30 a.m. in Shanghai by the National Interbank Funding Center. That was the biggest increase since Jan. 20. The seven-day repo, which measures interbank funding availability, jumped 80 basis points to 7.51 percent as of 4:20 p.m. in Shanghai, the highest level since Jan. 31, according to a weighted average rate compiled by the Interbank Funding Center.
  • Oil Drops to Four-Month Low, Trades Below 200-Day Average on Europe Crisis. Oil fell to the lowest in four months in New York, bringing its loss from this year’s peak to 20 percent, on speculation a weakening global economy and Greece’s debt crisis will lead to reduced fuel demand. Futures slid as much as 2 percent, erasing this year’s gains, as European governments failed to agree on releasing a loan payout to spare Greece from default and Japan’s exports dropped in May more than forecast. Crude traded for a second day below its 200-day moving average, a major technical-support level. Today’s low marked a 20 percent decline from its 2011 settlement high in April, the sign of a bear market. Oil in New York is trading below its 200-day moving average, currently at $92.30 a barrel, according to data compiled by Bloomberg. Hedge funds and other speculators boosted wagers on crude rising in the seven days ended June 14, the U.S. Commodity Futures Trading Commission said in its weekly Commitment of Traders report. Net-long bets climbed by 3,398 futures and options combined, or 1.8 percent, to 194,372. That was the first increase in three weeks.
  • Barclays(BCS), BofA(BAC) Can't Block Flyonthewall.Com Reports on Stocks, Court Rules. Barclays Plc (BARC), Bank of America Corp. (BAC)’s Merrill Lynch and Morgan Stanley can’t use New York law to block, an online financial news service, from issuing immediate reports about changes in their stock ratings, a federal appeals court ruled.
  • Saudi Women Ask Clinton Why She Hasn't Supported Female Drivers. A group campaigning for the right of Saudi women to drive sent a letter to U.S. Secretary of State Hillary Clinton asking why she hasn’t expressed support for those who defied a ban on driving last week. More than 50 women got behind the wheels of their cars on June 17, according to Saudi Women for Driving, a group of women’s-rights activists, bloggers and academics challenging the world’s only ban on female drivers. No arrests were reported. In a letter released today, the group said it asked Clinton in a June 3 letter to “make a public statement supporting our right to drive.”
  • Dollar to Gain as Asian Interest Rates Rise, Morgan Stanley Says. The US dollar will rebound through 2011 as Asian central banks raise interest rates to curb inflation, damping economic growth and demand for the region's assets, according to Morgan Stanley. Investor appetite for the dollar will rebound as central banks from China to India raise interest rates, Ian Stannard, head of European foreign-exchange strategy, said. The end of the Fed's $600 billion asset-purchase program this month will also renew demand for the U.S. currency. The dollar may also benefit from less selling pressure linked to the carry trade, based on less demand for assets in the Asian nations.
  • BofA(BAC) Weighs Sale of CCB Stake. Bank of America Corp. (BAC) may sell part of its $21 billion stake in China Construction Bank Corp. (939) to bolster capital before new international standards take effect, said three people briefed on the plans. Bank of America, the biggest U.S. lender by assets, may try to keep about half its CCB shares because it intends to remain a strategic investor in the Chinese bank, said two of the people, who declined to be identified because the plans are private. The sale may take place later this year, they said.
Wall Street Journal:
  • EU Urges Greece to Back More Austerity. European Union leaders expressed confidence Monday at a meeting in Luxembourg that Greece will concede on implementing economic reforms in exchange for the next tranche of aid to help it avoid default. A formal decision to disburse €12 billion ($17.17 billion) to Greece should be taken by early July, after the Greek government commits to a new austerity package, said Eurogroup President Jean-Claude Juncker, who also serves as prime minister of Luxembourg, and European Union Economic Affairs Commissioner Olli Rehn. The Eurogroup will convene on July 3 for an extraordinary session to tackle the issue.
  • The Regulator Down the Hall. Fed and Comptroller of Currency Bolster the Ranks of Staffers 'Embedded' at Nation's Biggest Banks. Much like reporters assigned to a military unit during war, these regulatory "embeds" get unprecedented access to financial firms such as Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley. They file through the same security turnstiles, eat lunch at the company cafeteria and press top executives for answers to questions about mortgage-documentation procedures and exposure to European debt and municipal bonds.
  • Wal-Mart(WMT) Wins Supreme Court Sex-Bias Case Ruling. The Supreme Court ruled Monday that a sweeping gender-discrimination lawsuit against Wal-Mart Stores Inc. can't proceed as one large class action, a significant victory for the discount retailer and other corporations.
  • Insider Trading Probe Sparks Paranoia in Traders. “These days, if you aren’t wearing a wire, you have to assume someone nearby or on the other end of the phone is,” he said. He went on to explain that many traders who regularly met with others for drinks or dinner were become increasingly fearful of “talking shop.” “You mention a rumor. Or something you heard secondhand, and everyone wonders: Is this inside information? Which one of us at the table is taping this?” he said.
Business Insider:
  • US Top Court Rejects Global Warming Lawsuit. The U.S. Supreme Court on Monday rejected a global warming lawsuit against five big power companies, its most important environmental ruling since 2007 and a victory for the utilities and the Obama administration.
Market News International:
  • China should continue to raise banks' reserve requirement ratios to curb inflation, citing a person familiar with the thinking within the National Development and Reform Commission. An increase in the reserve requirement ratios will help prevent the country's economy from having a hard landing, citing the person.
Financial Times:
  • Equity Shorts in Disguise. Synthetic prime – a.k.a — the art of transforming client exposures. But, we wonder, could there be more to it than meets the eye?
  • Hedge Funds Vs Bank of Ireland. More hedge funds than pensioners in the lawsuit filed against Bank of Ireland over the weekend:
  • Boris Johnson: Let Greece Go Bankrupt and Leave the Euro. Britain should refuse to contribute to a second bail-out of Greece and the country should be allowed to default on its debts and leave the euro, Boris Johnson has said. Writing in The Daily Telegraph, the Mayor of London claims that the euro's recent troubles have "exacerbated" the financial crisis and challenges George Osborne, the Chancellor, to "stop chucking good money after bad".
The Economic Times:
  • India's Economy Skids as Leaders Sleep at the Wheel. Critics would have preferred Mukherjee focus more on dealing with a confluence of worrying economic trends -- accelerating inflation, declining foreign investment and slower growth and domestic investment -- that policy inertia will only make worse.

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