Thursday, October 06, 2011

Today's Headlines

  • EU Urges Coordinated Bank Aid as Merkel Says Help Should Be a Last Resort. The European Commission is pushing for a coordinated capital injection for banks to shield them from the fallout of a potential Greek default as Germany urges each country to prepare its own blueprint. “We are determined to do everything necessary to ensure that Europe’s banks are able to play their essential role in lending,” the commission’s president, Jose Barroso, told reporters in Brussels today. “Close coordination at European level is essential.” Financial shares continued their advance after German Chancellor Angela Merkel fed speculation that euro policy makers are working on plans to boost bank capital. In Brussels yesterday, Merkel made her most explicit comments yet on banks’ role in fighting the crisis, saying that the European rescue fund should only be relied upon as a last resort. “If a country cannot do it using its own resources and the stability of the euro as a whole is put at risk because the country has difficulties, then there’s the possibility of using the EFSF,” the European Financial Stability Facility, she said. Using the EFSF rescue fund is “always tied to a certain conditionality.”
  • ECB Holds Rate at 1.5% at Trichet's Final Meeting. The European Central Bank resisted calls to cut interest rates at President Jean-Claude Trichet’s final policy meeting today and may opt to use other tools to stem the sovereign debt crisis. ECB officials meeting in Berlin left the benchmark rate at 1.5 percent, as predicted by 41 of 52 economists in a Bloomberg News survey. Five forecast a cut to 1.25 percent and six expected a reduction to 1 percent. With Greece on the brink of default, the ECB is under pressure to step up efforts to stop contagion by shoring up the euro region’s bond markets and helping banks weather the storm.
  • Bank Default Risk Declines in Europe on Recapitalization Wagers. Credit-default swaps insuring European bank debt fell to the lowest in five weeks on speculation policy makers will inject more capital into lenders so they can withstand government bond losses. The Markit iTraxx Financial Index of swaps linked to senior debt of 25 banks and insurers declined 17.5 basis points to 252 at 12 p.m. in London, while the subordinated gauge was 24 basis points lower at 488, according to JPMorgan Chase & Co. “More bank capital is good, but solving the sovereign debt crisis would go a long way in improving the outlook for Europe’s banks,” Gary Jenkins, head of fixed income at Evolution Securities Ltd. in London, wrote in a note to investors. Default swaps on sovereign bonds also dropped, with the Markit iTraxx SovX Western Europe Index of contracts tied to 15 governments declining eight basis points to 331.5, according to index administrator Markit Group Ltd. Swaps on German sovereign debt tumbled 11.5 basis points to 96.5, CMA prices show. The cost of insuring European corporate bonds fell, with the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropping 31.5 basis points to 814, according to JPMorgan. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was down 9.5 basis points at 189.5.
  • Crude Rises for a Second Day. Crude for November delivery rose as much as $1.47 to $81.15 a barrel in electronic trading on the New York Mercantile Exchange. It was at $80.19 at 1:29 p.m. London time. The contract gained 5.3 percent yesterday. Prices are down 12 percent this year.
  • Jobless Claims Climb Less Than Expected. Claims for U.S. unemployment benefits rose less than forecast last week to a level that shows companies may be starting to slow the pace of dismissals. Applications for jobless benefits increased by 6,000 in the week ended Oct. 1 to 401,000, Labor Department figures showed today. Economists projected 410,000 claims, according to the median estimate in a Bloomberg News survey. The four-week moving average of claims, a less-volatile measure, fell to 414,000, the lowest since Aug. 27, from 418,000. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 2.9 percent in the week ended Sept. 24, from 3 percent, today’s report showed.
  • U.S. Comfort Index Caps Worst Quarter Since '09. Consumer confidence last week capped the worst quarterly performance in more than two years, when the U.S. economy was still in a recession. The Bloomberg Consumer Comfort Index rose to minus 50.2 in the week ended Oct. 2, from the prior period’s minus 53 that was the second-lowest level on record. The gauge averaged minus 48.4 from July through September, the third-worst quarterly reading of all time and the weakest since minus 49.9 in the first three months of 2009. Ninety-two percent of those surveyed had a negative opinion of the economy, underscoring the concerns of Federal Reserve Chairman Ben S. Bernanke, who this week said the central bank can take further steps to sustain a recovery that’s “close to faltering.” An ailing housing market, stagnant payrolls and stock-price declines have reduced Americans’ ability to spend.
  • Company Pension Deficit Jumps Most Ever as Stocks, Yields Plunge. Company pensions in the U.S. fell behind future payouts to retirees by the most ever in September, as stocks fell and the slowing economy and Federal Reserve policy drove down bond yields, according to actuarial and consulting firm Milliman Inc. The deficit between the assets of the 100 largest company pensions and projected liabilities widened by a record $124 billion in September to $439 billion, Seattle-based Milliman said today in a statement, based on data going back to 2000. Investment assets fell $31 billion to $1.175 trillion, while obligations to retirees rose $93 billion to $1.614 trillion.
  • FedEx's(FDX) Sees Slow-Growth Economy. FedEx Corp. (FDX) doesn’t see a recession or contraction, rather a slow-growth economy, Chief Executive Officer Fred Smith said. Although holiday season shipments probably won’t increase as much as in 2010, they will still rise, Smith told an audience of chief executives at a General Electric Co (GE).-Ohio State University event for middle-market companies in Columbus, Ohio. “Our tax policy, our trade policy, our energy policy, and our regulatory policy are almost optimally designed to impede growth,” said Smith, who was interviewed by GE CEO Jeffrey Immelt as part of the event. Smith called some of the regulations “well-intentioned regulations that are job killers, that impede investment and until we address those things it’s going to be very difficult to get back to a reasonable growth rate.”
  • Retail Sales Topping Estimates, Despite Growing Caution. Amid slumping consumer confidence, shoppers remained resilient, and many retailers posted solid results for the month of September. According to Thomson Reuters, U.S. retailers posted an average gain of 5.1 percent in sales at stores open at least a year, or same-store sales, outpacing the average analyst estimate, which called for same-store sales to rise 4.6 percent.
Business Insider:
Zero Hedge:
  • Obama: Subprime Lending Immoral, Not Illegal. President Barack Obama said Thursday the mortgage finance practices that led to the economic meltdown were "immoral, inappropriate and reckless," but not necessarily illegal, making it difficult to punish key players, specifically in the subprime debacle. Obama made those statements after a reporter asked the president during a news conference why the administration never filed any lawsuits or enforcement actions against corporate leaders who led lending institutions prior to the 2008 crash.
Washington Times:
  • Taxpayers Financed Justice Official's Romantic Travel. First there were $16 muffins and $8 cups of coffee; then came emails suggesting that Attorney General Eric H. Holder Jr. fudged the truth about “Operation Fast and Furious”; and now it’s a Justice Department official using taxpayer funds to “facilitate a physical relationship with a woman in Florida.”
ABC News:
  • Report: Even With A Job, Health Insurance Is No Longer A Sure Thing. Employer-based health insurance is quickly becoming a thing of the past for millions of American workers, a new report says. Workers are losing jobs that offer health insurance and getting part-time or contract jobs that make finding affordable coverage more difficult, researchers say in a report released Wednesday by the nonprofit Iowa Policy Project. "Employer-provided health insurance has become more rare and more expensive, leaving the economically weakest workers to fend for themselves," said Noga O'Connor, co-author of the report, which was funded by the U.S. Department of Labor.
Insider Monkey:
Quinnipiac University:
  • Obama Job Approval Hits New Record Low. American voters disapprove 55 - 41 percent of the job President Barack Obama is doing, an all- time low, and say 77 - 20 percent that the economy is in a recession, according to a Quinnipiac University poll released today. Voters say 44 - 11 percent that the economy is getting worse, not better, while only 29 percent say the economy will improve if the president is re-elected. Voters also disapprove 48 - 34 percent of the way Obama is handling the Israeli- Palestinian dispute. The president should be a strong supporter of Israel, voters say 63 - 20 percent, but they split 39 - 40 percent on whether Obama is a strong supporter, the independent Quinnipiac (KWIN-uh-pe-ack) University survey finds. The Israelis and the Palestinians are equally to blame for the failure to achieve Middle East peace, 64 percent of American voters say, while 22 percent blame the Palestinians and 6 percent blame the Israelis. "The trend isn't good for President Barack Obama. His disapproval has gone up 9 points since the summer, from 46 percent in July to 52 percent in September to 55 percent today," said Peter A. Brown, assistant director of the Quinnipiac University Polling Institute. "Especially troubling for the president is that voters say 49 - 39 percent that Republican presidential contender Mitt Romney would do a better job on the economy.
  • Debt Crisis: Live. Bank of England Governor Mervyn King says financial crisis could be "the most serious we've ever seen," as markets rally for a second day on £75bn quantitative easing plan.
Boersen Zeitung:
  • European firms may face a wave of goodwill wirtedowns if the region's economy slows markedly, citing a study by U.S. investment bank Houlihan Loukey.
  • German lawmakers would not support any attempt to further leverage the European rescue fund or its permanent successor, the European Stability Mechanism, Economy Minister Philipp Roesler was cited as saying in an interview. "Parliament would have to approve that," Roesler was cited as saying when asked if he is against any further increase of the current rescue fund, the European Financial Stability Facility, or its post-2013 successor, the ESM. "I don't see any majority for that in the Bundestag," he said. "Leveraging, for instance via a bank license for the permanent crisis mechanism, the ESM, would exceed the agreed liability risk of 211 billion euros."
Valor Economico:
  • Brazil's President Dilma Rousseff will hold a meeting next week to discuss rising ethanol prices, which she fears may push inflation to above its target ceiling of 6.5% this year.

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