Wednesday, October 12, 2011

Today's Headlines

  • Euro Strengthens to Three-Week High as Barroso Seeks Coordinated Debt Plan. The euro rose to three-week highs against the dollar and yen as European Commission President Jose Barroso called for a “coordinated approach” to recapitalize the region’s banks. The 17-nation currency extended gains after policy makers in Slovakia, the only nation yet to approve a retooled bailout fund, reached an agreement on another vote to ratify the plan. “The market has priced in a lot of the good news from the constructive proposals,” said Aroop Chatterjee, a currency strategist at Barclays Plc in New York. “The question remains whether actions will meet expectations. If the euro hovers around here, there will be less urgency from European politicians.”
  • Sovereign, Corporate Credit-Default Swap Indexes Fall in Europe. The cost of insuring against default on European sovereign and corporate debt fell, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments declined five basis points to 320 at 3:30 p.m. in London. A decrease signals improvement in perceptions of credit quality. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased 23 basis points to 746, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 5.5 basis points to 173.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased eight basis points to 233 and the subordinated index declined 16 to 468.
  • Hungary's IMF Need May Hinge on Euro Crisis, Jarai Tells TV2. The outcome of the euro crisis may determine whether Hungary will need to resort to another International Monetary Fund loan, said Zsigmond Jarai, a former central bank president and head of the state Fiscal Council. “Nothing is unimaginable on this front and it depends on what happens in the world economy,” Jarai told TV2 late yesterday, according to a video posted on the commercial station’s website. “It’s unforeseeable what will happen in the world economy, and only that could push Hungary into a situation where the financing of the state debt becomes uncertain.” Hungary may be “part of a group of countries” whose economies would be most affected by a potential Greek default, said Jarai, who is an ally and former finance minister of Prime Minister Viktor Orban.
  • EU Needs Treaty Change for Euro, Westerwelle Tells Tagespiegel. European Union governments must change the treaties governing the bloc to restore its financial stability, German Foreign Minister Guido Westerwelle said in a commentary published in the Tagesspiegel newspaper. Deficit controls at EU level must be strengthened and the union must be given the power to intervene in the budgets of countries that “stray from the path of fiscal virtue,” Westerwelle said, according to an e-mailed advance copy of his opinion piece. Article 126 of the EU treaty, which determines deficit procedures against overspending members, should be altered, a move that could be accomplished within a year, Westerwelle said.
  • Default Swaps on Greece's Debt May Pay Out If Losses Exceed 21% Threshold. Credit-default swaps insuring Greek government debt may pay out should proposals to increase losses on the bonds exceed the 21 percent already agreed, according to analysts. Deeper cuts would likely have to be imposed on bondholders, triggering a credit event on the swaps contracts, analysts at Barclays Capital, Evolution Securities Ltd. and Credit Agricole SA said.
  • Some Federal Reserve Officials Sought to Retail Option of QE3, Minutes Say. The Federal Reserve said some officials last month wanted to keep further asset purchases as an option to boost the economy as policy makers saw “considerable uncertainty” that U.S. growth will pick up. Most participants favored giving additional information on the central bank’s goals and how they influence the Fed’s decisions, and most “saw advantages” in tying the Fed’s near- zero interest rates to more-specific developments in the economy, the Fed said in minutes of the Sept. 20-21 session, released today in Washington. Such changes may be expressed in ways other than the post-meeting statement, the Fed said.
  • Job Openings Fell in August, Hiring Climbed. Job openings in the U.S. fell in August for the first time in four months, signaling a sustained labor market recovery will take time to unfold. The number of positions waiting to be filled dropped by 157,000 to 3.06 million, according to Labor Department figures issued today in Washington. Hiring increased by 38,000 to 4.01 million. Payrolls climbed by 103,000 workers in September, a better- than-forecast outcome that included 45,000 returning Verizon Communications Inc. strikers. With unemployment hovering above 9 percent, the economy slowing and concerns of a European default mounting, employers may be slow to further boost hiring. “Companies don’t want to risk making additional hires with the outlook so uncertain,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “Corporations are playing it very close to the vest and keeping payrolls lean.” Job openings decreased 4.9 percent in August from a revised 3.21 million in July that were smaller than initially reported, the data showed. The drop in vacancies was led by trade, transportation and utilities.
  • Ex-Goldman(GS) Traders' Hedge Fund Shuts as Macro Strategy Falters. Global Trading Strategies, a Sydney- based hedge fund founded by three former Goldman Sachs JBWere Pty. traders, has returned investors their money after its strategy of betting on global economic trends faltered. The fund, which peaked at $1.2 billion in 2008 after starting in 2005, finished trading July 31 after more than a year of negative returns, Chief Operating Officer Murray Chatfield said in a telephone interview yesterday.
  • Harrisburg Files for Bankruptcy on Debt. Harrisburg, Pennsylvania, facing a state takeover of its finances, filed for bankruptcy protection after failing to pay the debt on a trash-to-energy incinerator. The council made its 4-3 decision against the advice of a city attorney who said the panel did not follow proper procedure. It’s the ninth bankruptcy filing this year by a municipal-bond issuer, and the first by a U.S. state capital since 1980 when the municipal bankruptcy laws were overhauled, said James Spiotto, a partner at Chapman & Cutler in Chicago who tracks such cases.
  • Obama Watchdog Said to Have Known About Bank Debit Fee Plan. The Obama administration’s new consumer watchdog knew about Bank of America Corp. (BAC)’s plan to impose a $5 monthly debit-card fee at least two weeks before the firm’s announcement ignited a public firestorm, said people briefed on the discussions. The lender met with Consumer Financial Protection Bureau officials on Sept. 16 to inform them of the fee, Susan Faulkner, head of consumer banking products, told employees yesterday at a gathering in Delaware, said two people who attended. They asked for anonymity because the event was private. Faulkner said the regulator didn’t oppose the fee, according to one of the people.
  • RIM(RIMM) Races 'Against Clock' as BlackBerry Disruption Spreads. Research In Motion Ltd. (RIM)’s BlackBerry service was disrupted for some users in North America, as a snag that is halting messaging for a third day across Europe, the Middle East and Africa spread to its largest market. Subscribers in the Americas may experience “intermittent service delays,” RIM said on its website today. The company said it is working to resolve the issue and apologized to users.
Wall Street Journal:
Business Insider:
Zero Hedge:
Apple Insider:
Rasmussen Reports:
  • Bank Sovereign Debt to Be Marked Down in Tests - EU. The sovereign debt of banks is likely to be marked down to its market value in an ongoing assessment of bank strength by the European Banking Authority, an EU source said on Wednesday. The banking authority is also likely to apply a hurdle of a core Tier 1 capital ratio of 9 percent when deciding whether banks need more capital, the source said.
  • German Banks Say EU Proposals for Banks Unsuitable. Earlier on Wednesday the EU Commission's President Jose Manuel Barroso called for "a fully coordinated approach to strengthen Europe's banks", based on a stricter assessment of bank health using a "temporary significantly higher capital ratio of highest quality capital". German Banking Association BdB on Wednesday said proposals from the president of the European Commission to accelerate capital raising at European banks are unsuited for addressing the causes of the sovereign debt crisis. The BdB said the proposals are unsuited because they fail to address the causes of the sovereign debt crisis. Banks have already used the past months to strengten capital, the BdB said in a statement. Efforts to consider banning dividend payouts as a way to accelerate capital accumulation could hinder efforts to raise capital on the market, the BdB said.
Les Echos:
  • French Prime Minister Francois Fillon is seeking to increase the country's supplementary tax on high earners. The extra tax will be increased to 3% for households with individuals earning 250,000 euros each year, and 4% for households where the individuals earn at least 500,000 euros each year.
Arab News:
  • Saudi Arabia wants to strengthen its political and economic ties with China, citing the kingdom's Deputy Foreign Minister Prince Abdul Aziz bin Abdullah.

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