Wednesday, January 18, 2012

Today's Headlines

  • IMF Seeks $500B Boost to Lending Resources. The International Monetary Fund is proposing to raise its lending capacity by as much as $500 billion to insulate the global economy against any worsening of Europe’s debt crisis. The Washington-based lender is aiming to increase its resources after identifying a potential need for $1 trillion in financing in coming years, an IMF spokesman said in a statement. The IMF is studying options and will not comment further until it has consulted its members, the fund said. To incorporate a cash buffer, the lender is seeking a total $600 billion. IMF Managing Director Christine Lagarde said yesterday her staff is looking at ways to expand the fund’s war-chest, which currently has about $385 billion available. While euro-region nations have already pledged to contribute 150 billion euros ($192 billion), the U.S. has said it has no plans to make new bilateral loans and leaders of Group of 20 nations ended last year at odds over the issue.
  • Fitch May Cut Six EU Countries on Review by 1 or 2 Levels. Fitch Ratings may cut six euro-area countries currently on review by one or two levels by the end of this month, Managing Director Edward Parker said. “We would expect the review will lead to downgrades of one to two notches for all the countries under review,” Parker said today in Milan. Fitch placed Spain, Italy, Ireland, Cyprus, Belgium and Slovenia on review in December for possible downgrades, citing Europe’s failure to find a “comprehensive solution” to the region’s debt crisis. Fitch also lowered the outlook on France’s AAA rating at the same time, though executives this month said France’s rating would not likely be cut this year. Italy is “absolutely critical to the euro zone future as a whole,” Parker said today. “The new government has to deliver on fiscal reforms and go ahead with reforms to increase growth. We’re quite encouraged by the steps that Monti’s government has made.” “We do expect Greece to default as it has an unsustainable debt, the question is how,” Parker said. “The private sector involvement voluntary scheme would be a default as well. The key issue is to avoid the disorderly default.”
  • Greek Debt Talks Resume With Agreement Seen by End of This Week. Greece and its private creditors are beginning a final push to renegotiate debt as a member of the investor group said they are likely to get cash and securities with a market value of about 32 cents per euro of government bonds. “I’m highly confident the deal will get done,” Bruce Richards, chief executive officer of New York-based Marathon Asset Management LP, said in a telephone interview yesterday with Bloomberg Businessweek. The government may forge a deal by the end of this week after talks resumed in Athens today, a finance ministry official told reporters in the Greek capital. He declined to be identified.
  • World Bank Sees East Europe Crunch Risk, Burns Tells Wiener. Western European banks’ deleveraging may make credit in eastern Europe scarcer, the World Bank’s Andrew Burns was quoted as saying in Austrian newspaper Wiener Zeitung. “Europe’s banking sector needs to reduce risks, raise capital and increasingly set aside risk provisions,” Burns, who heads the World Bank’s global macroeconomics team, told the Vienna-based newspaper. “All of this could impact the credit provision to the private sector.” “The problem is especially virulent in eastern Europe and central Asia because those countries strongly depend on loans from developed countries,” Burns added.
  • Obama Admin Said to Reject Keystone Pipeline. The Obama administration will announce rejection of TransCanada Corp. (TRP)’s Keystone XL pipeline as soon as today, according to two people familiar with the matter. The rejection will probably come from the State Department which has been charged with reviewing the project, and a joint statement will come from some unions and environmental groups in support of the decision, according to the person who spoke on the condition of anonymity before an announcement. Andrew MacDougall, spokesman for Canadian Prime Minister Stephen Harper, said he had no immediate comment on the reports. “President Obama is about to destroy tens of thousands of American jobs” by not approving the Keystone pipeline, Brendan Buck, a spokesman for U.S. House Speaker John Boehner, an Ohio Republican, said in an e-mailed statement. Labor unions and Republican lawmakers have urged President Barack Obama to approve the pipeline, which would carry 700,000 barrels of crude oil a day from Canada’s Alberta oil sands to refineries along the U.S. Gulf of Mexico coast, because they argue that it will create jobs and help the nation become more energy independent. Wendy Abrams, who raised from $50,000 to $100,000 for Obama in 2008, according to the Center for Responsive Politics, had said rallying her friends around the president would be hard if he approved the pipeline. She said Obama has since shown that he’s not “in the pocket of Big Oil.”
  • Germany Cuts 2012 Economic Growth Forecast as Crisis Dims Export Outlook. The German government cut its forecast for economic expansion this year as the debt crisis dims the outlook for sustaining record exports, leaving domestic demand as the main motor for growth. Europe’s biggest economy will grow 0.7 percent in 2012, less than the 1 percent estimated in October and just above the projected average for the euro-area, the Berlin-based Economy Ministry said today in its annual report. Economic growth, which reached 3 percent last year, will be weak in the first half before growing faster later in the year, it said. Demand from China and other Asian countries fueled an export boom in Germany as weaker growth or economic contraction dogged its euro-area allies. Slowing demand in Europe and other countries buffeted by the debt crisis will cut German export growth to 2 percent this year, a quarter of 2011’s expansion of 8.2 percent, the report said.
  • Factory Production in U.S. Climbed by Most in a Year Last Month: Economy. Factories in the U.S. churned out more computers, cars and construction material in December as manufacturing remained at the center of the expansion. Output (IPMGCHNG) climbed 0.9 percent last month, the biggest gain since December 2010, according to Federal Reserve data issued today in Washington. Other reports showed homebuilder confidence jumped and wholesale prices unexpectedly dropped. Confidence among U.S. homebuilders rose in January to the highest level in more than four years as sales and buyer traffic improved, according to a report from the National Association of Home Builders/Wells Fargo. The sentiment gauge increased to 25 this month, exceeding the median forecast of economists surveyed and reaching the highest level since June 2007, the Washington-based group said.
  • Google(GOOG) Rallies Opposition to Anti-Piracy Bill. Internet companies led by Google Inc. (GOOG) are using their online clout to stoke opposition to Hollywood-backed anti-piracy measures in the U.S. Congress that they say will encourage censorship and chill innovation.
  • Obama Considering Summers for World Bank. President Barack Obama is considering nominating Lawrence Summers, his former National Economic Council director, to lead the World Bank when Robert Zoellick’s term expires later this year, according to two people familiar with the matter. Summers has expressed his interest in the job to White House officials and has backers inside the administration, including Treasury Secretary Timothy Geithner and the current NEC Director, Gene Sperling, said one of the people. Secretary of State Hillary Clinton is also being considered, along with other candidates, said the other person. Both spoke on condition of anonymity to discuss internal White House deliberations.
  • Oil Little Changed on U.S. Output Gain, Expected Rejection of Keystone XL. Oil fluctuated in New York after U.S. industrial output rebounded in December and as the Obama administration was said to be planning to announce rejection of TransCanada Corp. (TRP)’s Keystone XL pipeline.
Wall Street Journal:
  • Campaign Renews Scrutiny of Growing Food-Stamp Program. Newt Gingrich’s labeling of President Barack Obama as the “best food stamp president in American history” drew a sharp rebuke from the White House, underscoring how the federal food assistance program has again become a political flashpoint. About 44.7 million Americans on average were enrolled in the Supplemental Nutrition Assistance Program, known as food stamps, in fiscal 2011, the year that ended Sept. 30. That’s up from 28.2 million people in fiscal 2008. Benefits paid through the program more than doubled during the period, to $71.8 billion in 2011 from $34.6 billion in 2008.
  • Federal Officials Charge Seven in Insider Probe. Federal authorities on Wednesday announced charges against seven people in an expanding insider-trading investigation that directly involves some of Wall Street's most prominent money managers. Four people were arrested in New York, Boston and California early Wednesday and charges against three others were unsealed. Wednesday's announcement reflects a broadening of the government's long-running investigation of employees of public companies sharing confidential information with hedge-fund analysts and traders. The government has monitored hundreds of conversations on wiretaps, and has sought cooperation from a wide range of public-company employees and money managers as the probe has widened.
  • Greece, Creditors Discussing 3%-4.5% Coupon For Haircut - Source. Greece and its private creditors are negotiating a lower coupon that will range from 3% and climb to 4.5% on the new bonds Athens will issue after a haircut, a person with knowledge in the talks said Wednesday.
  • Time to Exploit America Inc.'s Home Advantage. Not long ago, a lot of investors' preferred strategy for investing in U.S. stocks was to pick companies that didn't have all that much exposure to the U.S. economy. That now is looking precisely like the wrong approach.


  • Home-builder Gauge Hits 4.5-year High. A measure of builder confidence in the market for newly built single-family homes rose in January to the highest point since June 2007, according to a closely-followed index released Wednesday. The National Association of Home Builders/Wells Fargo housing market index rose 4 points to 25, the fourth consecutive rise. Economists polled by MarketWatch had expected only a 1-point improvement to 22. Every region rose, including a 9-point surge in the Northeast and a 5-point advance in the West, and each component — current sales conditions, sales expectations in the next six months and traffic of prospective buyers — rose 3 points.
  • Germany's Credit Rating Is Lowered by Egan Jones. Egan-Jones said on Wednesday it lowered its credit rating on Germany to double-A minus from double-A, citing the nation's potential liabilities to Europe's rescue fund, the European Financial Stability Facility. "One of the main underlying reasons is the potential liabilities that Germany is going to face with more and more European bailouts. Look at the relationship between Germany and the EFSF stabilization fund and Germany is slowing down. The prospects for Germany are not very good going forward," said Bill Hassiepen, vice president and senior analyst at the Haverford, Pennsylvania-based ratings firm.
  • The Twilight of the Goldman Sachs(GS) Trading Gods.
Business Insider:
Zero Hedge:
Boy Genius Report:
  • iPad Sales May Approach 50 Million in 2012. In a note to investors on Wednesday morning, Sterne Agee analyst Shaw Wu suggested that calendar 2012 iPad sales could come in at approximately 48 million units, and he calls that a conservative estimate.
Wall Street All-Stars:
  • French Banks to Boost Greek Debt Provisions. French financial-sector regulator ACP is preparing to tell the country's main banks to raise their writedowns on Greek debt to 70 percent or 75 percent from 60 percent, daily Le Monde reported on Wednesday.
  • ASML Bookings Signal Chip Uptick. Rising demand for smartphones, tablets and the latest super-thin personal computers is driving strong sales and new orders at Dutch group ASML, the world's dominant chip equipment maker. ASML shares hit an 11-year high on Wednesday after it forecast demand in the early part of 2012 would top the previous quarter. The company, which has between a 75-80 percent market share, counts Samsung Electronics, Taiwan Semiconductor Manufacturing and Intel among its customers. "We expect a healthy start for 2012, as we plan Q1 2012 bookings at a level above that of Q4 2011 and a first-half sales level of about 2.4 billion euros," Chief Executive Eric Meurice said. "Our customers are indeed continuing their introductions of advanced chip designs," said Maurice.
Financial Times:
  • Oil Demand Falls for First Time Since 2009. Oil demand has fallen for the first time since the 2008-09 global financial crisis, a result of the weakening economy, a mild winter and high crude prices, according to new estimates from the International Energy Agency.


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