Wednesday, January 04, 2012

Today's Headlines

  • Euro Weakens Amid View Crisis Is Worsening. The euro fell from almost a one-week high against the dollar after a European report showed inflation slowed and Italy’s biggest bank said it needs to raise more capital, fueling bets the region’s debt crisis is worsening. The 17-nation currency dropped toward an 11-year low against the yen after UniCredit (UCG) SpA’s plan to sell shares spurred concern European banks may struggle to raise more capital. The euro slid versus most major peers after El Pais newspaper said the Spanish government helped the Valencia region make an overdue payment to Deutsche Bank AG. The pound climbed to a 15-month high versus the shared currency. “Sentiment overall in the euro is still pretty negative,” said Mark McCormick, a currency strategist at Brown Brothers Harriman & Co. in New York. “It does look as if Spain could be the problem child for Europe in the months ahead.”
  • Financial, Corporate Bond Risk Rises, Credit-Default Swaps Show. The cost of insuring against default on European financial and corporate debt rose, according to traders of credit-default swaps. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers climbed 7.5 basis points to 272 and the subordinated index jumped 13 to 501, according to JPMorgan Chase & Co. at 9 a.m. in London. An increase signals deterioration in perceptions of credit quality. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings rose three basis points to 741.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was two basis points higher at 171.25 basis points. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose two basis points to 362.5.
  • Papademos Says Greece Faces Default in March Without Troika Deal. Greek Prime Minister Lucas Papademos told business and union leaders today that a disorderly default in March was possible if his government didn’t secure agreement with international creditors on a new economic plan. “In mid-January, talks begin with the troika which focus on shaping a credible economic adjustment plan for 2012 to 2015,” Papademos said, according to an e-mailed transcript of his statements. “The implementation of the agreement to reduce the debt and continuation of financing of the country depends on that. Without this agreement with the troika and subsequent financing, Greece in March faces the immediate risk of a disorderly default.”
  • Forint Hits Record Low as Default Swaps Soar on IMF Aid Concern. The forint dropped to a record low against the euro and credit default swaps reached an all-time high after Citigroup Inc. said an International Monetary Fund deal is unlikely in the next six months. The forint fell to 321.1 against the European common currency at 5 p.m. in Budapest. The previous record was 317.92 on Nov. 14. The cost of insuring Hungarian bonds using credit- default swaps climbed to a record 708 basis points from 650 yesterday, data provider CMA said. A delay in the IMF talks may necessitate rate increases of as much as 300 basis points from the current 7 percent rate to defend the forint, Citigroup’s Gargyan said. Ten-year note yields (GHGB10YR) climbed 38 basis points to 10.75 percent, the highest since April 2009, extending the jump in the past three days to 85 basis points, according to generic prices compiled by Bloomberg.
  • Spain May Request EU, IMF Loans to Help Banks, Expansion Says. Spanish Prime Minister Mariano Rajoy’s government is considering applying for loans from the European Union’s rescue fund and the International Monetary Fund to finance the restructuring of the country’s financial industry, Expansion reported, citing unidentified people with knowledge of the matter.
  • Demand for Factory Goods Rises Most In 4 Months. The need to rebuild depleted inventories may supersede spending on business equipment as the catalyst propelling gains in U.S. manufacturing in early 2012. Orders (CGNOXAI%) for non-defense capital goods excluding aircraft, a measure of future corporate investment, dropped 1.2 percent in November, the biggest decline in 10 months, according to Commerce Department data today.
  • China Cuts Television Programs That Contradict Hu's Party Line. China’s government said broadcasters must cut the number of entertainment shows during prime time by more than two-thirds, culling a format that exposed a widening wealth gap that contradicts the Communist Party’s core dogma. The total number of entertainment shows, including dating programs, game shows, talk shows and “emotional stories” airing from 7:30 p.m. to 10 p.m. was cut to 38 as of Jan. 1, from 126 at the end of last year, the official Xinhua News Agency reported late yesterday, citing the State Administration of Radio, Film and Television, or SARFT.
Wall Street Journal:
  • Coal India Expects International Prices to Stabilize or Fall. Coal India Ltd., the world's largest producer of the fuel, expects international prices to remain stable or fall in the next six months due partly to sluggish domestic demand. However, any decline in international rates may not be reflected in Coal India's pricing because of the appreciating U.S. dollar, the state-run company's chairman Nirmal Chandra Jha said Wednesday.
  • Hong Kong Banks Start Push to Create Yuan 'Libor'. Hong Kong's banking association this week began widely disseminating yuan-lending rates offered by three of the city's biggest banks to their peers, marking an important step toward the development of benchmark rates that could spur growth in the market for offshore yuan loans.
  • Kodak Preparing for Chapter 11 Filing.
  • Romney Turns Focus to New Hampshire. The Republican race for president moved to New Hampshire Wednesday with one fewer contender as Minnesota Rep. Michele Bachmann dropped her bid after a dismal finish in Iowa.
  • Chrysler's Sales Jump as Industry Posts Solid Gains. Auto makers capped 2011 with a strong December and forecast the recovery in U.S. sales would intensify as long as a stabilizing economy and improved job gains continue to encourage shoppers. All three Detroit auto makers reported increases in vehicle sales for December, with Chrysler Group LLC posting a 37% rise, Ford Motor Co. a gain of 10%, and General Motors Co. up 4.6%. For the full year, Chrysler's sales rose 26%, Ford's 11% and GM's 13%.
Fox News:
  • President Obama to Appoint Consumer Watchdog While Congress Is Out of Town. President Obama will appoint Richard Cordray to be head of a controversial consumer consumer financial protection agency despite the fact that Congress is not officially in recess. The Constitution does not expressly forbid such an appointment, which would technically come as an intrasession posting. But the defiant move is sure to raise questions of executive power and whether the administration is overstepping its authority. the move outraged Republican lawmakers. "This is a very grave decision by this heavy-handed, autocratic White House," said Sen. orrin Hatch, R-Utah. "Circumventing the Senate and tossing out decades of precedent to appoint an unaccountable czar to appease its liberal base is beneath the Office of the President." House Speaker John Boehner called it "an extraordinary and entirely unprecedented power grab by President Obama that defies centuries of practice and the legal advice of his own Justice Department." But Democrats praised the president's bravado.
  • European Banks Hoard Record $591 Billion at ECB. Commercial banks' overnight deposits at the European Central Bank hit a new record high of 453 billion euros ($591 billion), data showed on Wednesday, underscoring the ongoing fear banks have about lending to each other in the current debt crisis.
  • Mortgage Demand Fell at Year-End, Purchases Sag: MBA. Demand for loans to buy homes and refinance mortgages slid in the final week of 2011, even as mortgage rates dipped, an industry group said on Wednesday. Applications for U.S. home mortgages fell 4.1 percent in the week ended Dec. 30, weighed down by a 9.6 percent drop in purchase loan requests and a 2.5 percent decline in refinancing requests, seasonally adjusted data from the Mortgage Bankers Association showed.
  • Germany and France Eye the End of Triple-A Era.
  • 'True Revolution' Ahead for US Fiscal Future: Greenspan. The United States faces a "true revolution" in the choices it will have to make to secure its fiscal future now that the welfare state has run up against a "brick wall of economic reality," former Federal Reserve Chairman Alan Greenspan said Wednesday.
Zero Hedge:

Seeking Alpha:


  • Syrian Rebels Eye 'Huge Operations'. The Free Syrian Army plans to kick off "huge operations" this week against "vital interests" of President Bashar al-Assad's regime, the force's commander said Wednesday. "We prepared ourselves for this stage," Col. Riad al-Asaad told CNN in Turkey. "We can't force him off with the peaceful demonstrations, so we are going to force him by arms to leave."
  • Europe's Ticking Time Bomb: Credit Default Swaps. In the midst of the eurozone meltdown, a new crisis has gone unnoticed: a shaky derivatives market.
  • Obama's Financial Fraud Enforcement Task Force to investigate for-profit education, identify theft, issues around third-party payment processors, citing an interview with Michael Bresnick, new executive director of the task force.
  • Gold Jumps After Preliminary EU Deal On Iran Oil Ban. Gold was set for its strongest two-day rally in 2-1/2 months on Wednesday after an agreement in principle among European leaders to ban Iranian oil imports boosted the crude price and catapulted bullion to two-week highs. European Union governments reached a preliminary agreement to ban imports of Iranian crude but have yet to decide when such an embargo would be put in place, EU diplomats said on Wednesday.
  • China Shares Off to Weak 2012 Start, Shanghai Dips Below 2,200. China shares started the new year weaker on Wednesday, dragged down by more cyclical sectors after the Chinese premier warned of difficult economic conditions in the first quarter, hinting there will not be another massive fiscal stimulus programme. The Shanghai Composite Index closed down 1.4 percent at 2,169.4 points, again slipping below a long-term resistance level seen at 2,200 in weak A-share turnover.
  • Copper Drops on Euro Zone Debt Worries.
Financial Times:
  • China Moves to Foster Short-Selling. China’s latest attempt to allow fund managers to short stocks while other countries are grappling with their more negative aspects underscores Beijing’s desire to further develop its capital markets and foster its domestic asset management industry.


  • The fear of recession is growing in the European Union, citing an interview with Germany's Economy Minister Philipp Roesler. Roesler said the worsening economic situation in Europe will likely be reflected in the German government's annual economy report due to be published later this month.
  • German banks are hesitant to fund energy projects including offshore wind parks and power plants fired with gas turbines, as the European debt crisis complicates rules to finance large, long-running projects, citing experts including Thomas Kresser, finance chief of Alstom SA in Germany.
  • More Trade Friction Expected As Protectionism Surges. Chinese exporters are likely to encounter more trade barriers in 2012 as trade protectionism resurges globally against the backdrop of a volatile recovery, the Ministry of Commerce (MOC) said Wednesday. Trade protectionism in developed nations has far exceeded the level seen at the beginning of 2009, following the onset of the global financial crisis in 2008, the MOC's Bureau of Fair Trade for Imports and Exports said. In developing economies, some industries that are traditionally inclined toward trade protectionism have begun to ask for government intervention to restrict foreign capital and products, an official with the bureau said on condition of anonymity. "Trade restrictions will increase further in 2012," the official said. The statement came after MOC data showed that China suffered rising trade friction last year. The country faced 67 trade investigations in 2011, involving 5.9 billion U.S. dollars. Both the number of the investigations and value involved were at high levels, the official said, adding that most cases touched upon the country's steel industry, as well as mechanical and electrical products.
Shanghai Daily:
  • New Housing Sales in Shanghai Fall to 6-Year Low. NEW home sales in Shanghai last year fell to the lowest in six years despite a rebound in December while the average price continued to climb. The sales of new homes, excluding government-funded affordable housing, totaled 7.3 million square meters across the city last year, an annual drop of 22.2 percent, according to a research released yesterday by Shanghai Deovolente Realty Co. But the average price rose 2.1 percent from a year earlier to 22,012 yuan (US$3,494) per square meter, extending its increase for the sixth straight year.

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