Thursday, January 12, 2012

Today's Headlines

  • Italian One-Year Yield Slides to 2.735% as Bill Sale Matches Target Amount. Italy sold 12 billion euros ($15.3 billion) of Treasury bills, meeting its maximum target for the auction, and its borrowing costs plunged in the country’s first debt sale of the year. The Rome-based Treasury sold 8.5 billion euros of one-year bills at a rate of 2.735 percent. That was the lowest rate paid on one-year debt at an auction since June and less than half the 5.952 percent offered at the last sale on Dec. 12. Italy also sold 3.5 billion euros of 136-day bills at 1.644 percent. Italian bonds extended gains after the sale, with the yield on the country’s benchmark two-year note falling 69 basis points to 4.02 percent at 11:42 a.m. Rome time, the lowest since September. The 10-year yield declined 40 basis points to 6.57 percent, narrowing the difference with similar-maturity German debt to 473 basis points. The result may help ease investor concern about Italy’s ability to finance Europe’s second-biggest debt, which pushed the country’s 10-year bond yield above the 7 percent level that prompted Greece, Ireland and Portugal to seek bailouts. Italy’s auction came after Spain sold 9.98 billion euros of bonds maturing in 2015 and 2016, twice the maximum target of 5 billion euros set for the sale.
  • European Stocks Decline, Led by Tesco, Delhaize, WM Morrizon, J Sainsbury. European stocks declined after reports that showed U.S. retail sales and initial jobless claims missed economists’ forecasts outweighed lower borrowing costs at Spanish and Italian debt auctions.
  • Draghi Says Europe Credit Crunch Averted as Signs of Stabilization Emerge. European Central Bank President Mario Draghi said the bank has averted a serious credit shortage and there are signs the economy is stabilizing, signaling policy makers may resist cutting interest rates further for now. “According to some recent survey indicators, there are tentative signs of stabilization of economic activity at low levels,” Draghi said at a press conference in Frankfurt today after the ECB kept its benchmark interest rate at 1 percent following two straight reductions. While the debt crisis poses “substantial downside risks” to the economic outlook and the ECB remains “ready to act,” Draghi gave no indication that another rate cut is imminent.
  • Credit Risk Falls in Europe After Spanish, Italian Debt Sales. The cost of insuring against default on European sovereign and corporate debt fell after Spain sold almost twice the amount of bonds planned and Italy’s borrowing costs declined at auctions today. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped 14 basis points to 354 at 12 p.m. in London. Contracts on Italy tumbled 32 basis points to 484 and Spain declined 23 to 390, according to CMA. Spain sold 10 billion euros ($13 billion) of bonds while Italy issued 12 billion euros of bills, easing concerns the countries will struggle to finance their debts. The Italian Treasury sold one-year bills at 2.735 percent, less than half the 5.952 percent paid on similar securities on Dec. 12. “It’s good news,” said Elisabeth Afseth, an analyst at Evolution Securities Ltd. in London, “Especially the Spanish auction with double the target amount issued, which is a good start to covering overall issuance requirement for the quarter.” The Markit iTraxx Crossover Index of credit-default swaps linked to 50 companies with mostly high-yield credit ratings decreased 23 basis points to 712, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 5.75 basis points to 170.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 12 basis points to 266.5 and the subordinated index dropped 19 basis points to 481.
  • Spanish Banks Hit Recovery With Discriminatory Loans: Mortgages. Spain's banks, saddled with 329,000 foreclosed homes, are still willing to provide mortgages, as long as the borrower wants to buy one of their properties, according to a consumer-rights group. That's no help to homeowners and developers seeking to sell.
  • Ore-Ship Rents Fall, Extend 2012 Plunge to 64%, as Glut Worsens. Rents for capesize ships that haul iron ore and coal fell for a 13th session, extending this year's plunge to 64%, as port disruptions and closings worsened an oversupply of the vessels. Rates slid 18% to $9,959 a day, the first time since Aug. 9 they dropped below $10,000, citing the Baltic Exchange.
  • U.S. Jobless Claims Rise More Than Forecast. More Americans than forecast filed applications for unemployment benefits last week, raising the possibility that a greater-than-usual increase in temporary holiday hiring boosted December payrolls. Jobless claims climbed by 24,000 to 399,000 in the week ended Jan. 7, Labor Department figures showed today in Washington. The median forecast of 46 economists in a Bloomberg News survey projected 375,000. Hiring by package delivery companies and retailers during the holidays to meet demand for gifts may now be giving way to an increase in dismissals. The four-week moving average, a less volatile measure than the weekly figures, increased to 381,750 last week from 374,000. The number of people continuing to receive jobless benefits rose by 19,000 in the week ended Dec. 31 to 3.63 million. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at to 2.9 percent, today’s report showed.
  • Retail Sales in U.S. Rose Less Than Forecast. Sales (RSTAMOM) at U.S. retailers rose less than projected in December, confirming forecasts for a slowdown in consumer spending at the start of 2012. The 0.1 percent gain in purchases last month followed a 0.4 percent increase in November, according to figures from the Commerce Department released today in Washington. The median estimate in a Bloomberg News survey called for a 0.3 percent rise.
  • Corn, Wheat, Soybeans Plunge Most in Three Months on Bigger World Supplies. Corn and wheat prices plunged the most in three months, while soybeans slid, after an increase in stockpile forecasts by the U.S. government eased concern that shortages will inflate prices for food and biofuels. Inventories of corn in the U.S., the world’s top grower and exporter, may total 846 million bushels before this year’s harvest, 12 percent more than analysts expected, a U.S. Department of Agriculture report showed today. The 2011 crop totaled 12.358 billion bushels, above a December forecast, while global output in the year ending Aug. 31 will be a record for a fifth straight year. World food prices fell 2.4 percent in December, led by declines in grains, sugar and oilseeds, the United Nations Food and Agriculture Organization said today. Global wheat supplies may total 210.02 million metric tons, the most since 2000, as countries from Australia to Russia raised output, the USDA said. U.S. soybean stockpiles may reach 275 million bushels, 20 percent more than forecast last month, as exports slowed. “There is plenty of supply right now, especially wheat on a global basis,” said Alex Bos, a grain strategist at Macquarie Group Ltd. in New York. “Usage for corn and soybeans in the last quarter was much slower than expected by most people.” Corn futures for March delivery tumbled the 40-cent limit, or 6.1 percent, to $6.115 a bushel on the Chicago Board of Trade as of 11:46 a.m. Prices headed for the biggest drop since Sept. 30. Soybean futures for March delivery fell 2 percent to $11.795 a bushel, after touching $11.50, the lowest since Dec. 21. Prices were up 7.3 percent from mid-December.
  • China's Auto-Sales Growth Trails U.S. for First Time in At Least 14 Years. China’s auto sales slowed last year, trailing growth in the U.S. for the first time in at least 14 years, after the government ended stimulus measures and as the nation’s economic expansion showed signs of easing. Total vehicle sales, which include cars, trucks and buses, rose 2.5 percent to 18.5 million, according to data released by the China Association of Automobile Manufacturers today, compared with the 3 percent median estimate of five analysts surveyed by Bloomberg.
  • Tesco Lowers Profit Outlook After Holiday Sales Disappoint. Tesco Plc, the U.K.’s largest supermarket chain, reported Christmas sales that missed analyst estimates and reined back profit expectations after competitors’ promotions proved more popular than its Big Price Drop campaign. Tesco fell 16 percent, the most since at least 1988, after saying profit will be at the “low end of the current consensus range,” while next year will see “minimal” growth in earnings.
  • Mortgage Rates for 30-Year U.S. Loans Fall to Record-Low 3.89%. Rates for 30-year U.S. mortgages fell to the lowest level on record after Federal Reserve Chairman Ben S. Bernanke urged lawmakers to do more to revive housing. The average rate for a 30-year fixed loan decreased to 3.89 percent in the week ended today, the lowest in records dating to 1971, from 3.91 percent, Freddie Mac said in a statement. The average 15-year rate dropped to 3.16 percent from 3.23 percent, according to the McLean, Virginia-based mortgage-finance company.
  • Sears(SHLD) Supplier Loans Are Said to Be Halted by CIT Starting Today. Sears Holdings Corp. (SHLD) declined after two people familiar with the situation said suppliers will no longer be able to get loans or payment guarantees from CIT (CIT) Group Inc. for their shipments to the retailer. Sears fell 4.8 percent to $31.33 at 11:54 a.m. in New York.
  • Williams-Sonoma(WSM) Falls After Cutting Forecast. Williams-Sonoma Inc. (WSM), the owner of the namesake, Pottery Barn and West Elm home-goods chains, fell the most in more than three years after saying profit may be less than it previously forecast because of holiday discounts. The shares dropped 12 percent to $34.58 at 9:49 a.m. in New York, after earlier falling 15 percent for the biggest intraday drop since Nov. 14, 2008.
  • China Gets Cheap Iran Oil as U.S. Picks Up Tab for Hormuz Strait Patrols. China stands to be the biggest beneficiary of U.S. and European plans for sanctions on Iran’s oil sales in an effort to pressure the regime to abandon its nuclear program.
Wall Street Journal:
  • U.S. Debt Nears $15.194 Trillion Ceiling. The Treasury Department has begun maneuvers to avoid hitting the debt ceiling, as the Obama administration waits for Congress to return from the holiday break before it can raise the federal borrowing limit.
  • Fed 2006 Transcript Highlights: Riding Housing Roller Coaster With Eyes Shut. Federal Reserve Chairman Ben Bernanke and most of his colleagues showed little concern when house prices started to decline in 2006, predicting “a soft landing” in the then-strong U.S. economy, transcripts from the central bank released Thursday show.
  • Gingrich Demands Accounting of Aid to Wall Street. Newt Gingrich struck a populist note at a South Carolina campaign event Thursday, saying that as president he would demand an accounting of federal funds that went to Wall Street during the financial crisis.
  • Delta(DAL), TPG Assessing Bids for American Airlines Parent. Delta Air Lines Inc. and private equity firm TPG Capital are separately assessing possible bids for American Airlines parent AMR Corp., with hopes that AMR's troubles present another opportunity for airline consolidation, people familiar with the matter said.
  • Credit Agricole Sells Loans At Deep Discounts. Credit Agricole is trying to unload millions of dollars in Asian loans held on its books at deep discounts, potentially driving up borrowing costs for some of the region's companies. Like many other European lenders, the major French bank is under pressure to shrink its balance sheet as funding has dried up. The banks have already scaled back on lending, squeezing some companies in Asia, and are now selling loans to further shrink their assets.


  • Gold Extends Gains After ECB, Lower Dollar. Gold futures rose Thursday, on track for a third session of gains as a trickle of safe-haven flows returned to the market after the European Central Bank warned of “substantial” downside risks for the euro zone’s outlook and the dollar traded lower. Gold for February delivery GC2G +0.76% added $19.40, or 1.2%, to $1,659 an ounce on the Comex division of the New York Mercantile Exchange. A close around these levels would be gold’s highest since Dec. 13.
Business Insider:
Zero Hedge:
NY Post:
  • Eat Your Salary. So much for being the smartest folks in the room. The move by Wall Street’s top brass to juice bankers’ base salaries to offset a withering tax on bonuses that was being whispered about in Washington back in 2009 is coming back to bite their firms in the rear. While the bonus tax never materialized, banking powerhouses Goldman Sachs and Morgan Stanley, as well as investment banking units at Citigroup, Bank of America and others, have been stuck with the higher salaries. And now, as business has cooled, the firms have been raining down pink slips to cut down on expenses they are guilty of increasing.
  • New Swine Flu Concerns in West Virginia. There is new concern about a new strain of Swine Flu, which has sickened at least 12 Americans. The new strand, called H3N2v, is a mutated version of the original H1N1 Swine Flu virus. The CDC is now investigating whether the virus can be transmitted from human to human.




  • Germany will reduce its 2012 growth forecast to about .75% next week, citing government officials.
Globe and Mail:

No comments: