Wednesday, January 25, 2012

Today's Headlines

  • Germany Backs ECB's Opposition to Taking Loss on Greek Debt. A senior member of Chancellor Angela Merkel’s government rejected suggestions that the European Central Bank take losses on its Greek debt holdings, backing the ECB in a dispute with the International Monetary Fund. “I can’t imagine that European politicians would allow third parties to make such an indecent claim on our central bank,” Michael Meister, the deputy floor leader for Merkel’s Christian Democrats and the party’s ranking finance spokesman, said today in an interview. “That contradicts our philosophy.” While the ECB faces pressure to join private-sector investors in accepting losses on Greek debt, the central bank sees any participation as risking damaging confidence in the institution, two people familiar with the Governing Council’s stance said. The debt was acquired for monetary policy purposes and the ECB is firmly opposed to any restructuring, they said on condition of anonymity because the matter is confidential. Christine Lagarde, a former French finance minister who is the IMF’s managing director, told reporters in Paris today that European governments and other public holders of Greek debt may have to increase support if private creditors don’t go far enough. Talks on a Greek debt swap that must be resolved to free up more aid for the debt-wracked nation have yet to be concluded. “The risk is that by putting the ECB on board, as the IMF asks, this could result in debt-swap negotiations restarting from scratch, which could mean additional delay to an already over-stretched timetable,” said Thomas Costerg, an economist at Standard Chartered Bank in London.
  • Spanish Cleanup Plan May Backfire on Banking System: Euro Credit. Spanish Prime Minister Mariano Rajoy's proposal to force banks to recognize further losses from real estate holdings may backfire by saddling healthy lenders with the bill. "The plan is for a massive effort in provisioning of real estate and consolidation, and that has to be paid for," said Daragh Quinn, a Madrid-based analyst at Nomura International. By refusing to use public funds to help purge a system burdened with 176 billion euros ($228 billion) of what the Bank of Spain calls "troubled" assets linked to real estate, Rajoy may not do the job properly or he may hurt solvent banks by leaving them with the costs, said David Moss, director of European equities at F&C Investments in London.
  • Sovereign, Corporate Bond Risk Rises in Europe, Debt Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose two basis points to 331 at 11 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed seven basis points to 643, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 1.5 basis points to 151.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 8.5 basis points to 234 and the subordinated index rose nine to 414.
  • Nebraska's Governor Plans to Urge Obama to Proceed With Keystone. Nebraska Governor Dave Heineman said he will urge President Barack Obama to reverse his decision denying a permit for TransCanada Corp.’s Keystone XL pipeline and let construction begin in segments in U.S. border states.
  • Thousands of Egyptians Rally to Mark Anniversary of Uprising. Tens of thousands of Egyptians poured into the capital’s Tahrir Square, many to protest against the ruling generals, others to celebrate the anniversary of the start of the uprising that ended Hosni Mubarak’s rule. “I took part in the revolution a year ago and had high hopes that change would be swift,” said Ahmed al-Keelani, a 41- year-old hotel worker who came with his wife and two daughters to Tahrir Square. “Instead, we got stuck in a drawn-out plan that kept the military council in power.”
  • Crude Oil Increases After Fed Says Interest Rate Will Stay Low Until 2014. Oil rose as Federal Reserve officials said the U.S. benchmark interest rate will stay low until at least 2014 and the Energy Department reported that U.S. fuel demand increased last week. Futures advanced above $100 a barrel after the Federal Open Market Committee extended its previous pledge to keep rates low at least until the middle of 2013.
  • Gold Futures Jump Most in Three Weeks on Fed's Interest-Rate Announcement. Gold climbed the most in three weeks after the Federal Reserve said it sees “exceptionally low” interest rates through at least late 2014. Silver, platinum and palladium also advanced. “The Committee expects to maintain a highly accommodative stance for monetary policy,” the Federal Open Market Committee said in a statement in Washington today. “Economic conditions - - including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.” “We saw an immediate reaction in gold,” said Michael A. Gayed, the chief investment strategist who helps oversee $150 million at New York-based Pension Partners LLC in a telephone interview. “People are betting that at some point the economy will face inflationary pressures because of the low interest rate.” Gold futures for February delivery climbed 2 percent to $1,700.80 an ounce at 1:18 p.m. on the Comex in New York. Earlier, prices had dropped as much as 0.9 percent.
  • Contracts to Purchase Existing U.S. Homes Hold Near 19-Month High: Economy. The number of Americans signing contracts to buy previously owned homes in December held near a 19-month high, showing the stabilization in the market that began in late 2011 will extend into the new year. The index of pending home sales decreased 3.5 percent last month after jumping a combined 18 percent in October and November, figures from the National Association of Realtors showed today in Washington. It was the best back-to-back reading since a buyer tax credit boosted demand in early 2010.
Wall Street Journal:
  • Hedge Funds Scramble to Unload Greek Debt.
  • Fed Sees Slower Growth But Offers No Hint Of More Easing. The Federal Reserve, ending a two-day policy meeting on Wednesday, repeated its view that the economy faces "significant downside risks'' but it offered little to suggest it was close to launching another round of bond-buying to prop up growth.
  • GE(GE) Now Part of Dogs of the Dow. The Dogs of the Dow – those high-yielding stocks that are supposed to represent the bottom of the blue-chip barrel – have some unlikely company. General Electric once stood as the bellwether of American industry but now sits among the 10 Dow stocks that produce the highest yield and, theoretically at least, represent the most risk for investors.
  • Printing Money to Lead to 'Uglier' End-Game: Rogoff. The euro zone is nowhere near finding a solution to the debt crisis plaguing it and needs deep restructuring as well as a new constitution as part of an effective long-term remedy as printing money will not solve its problems, Kenneth Rogoff, Professor at Harvard University told CNBC on Wednesday.
Business Insider:
Zero Hedge:

Cult of Mac:

  • Portugal CDS Hits New Record Amid Ongoing Greek Tensions. The cost to insure Portuguese debt against default climbed to another new record on Wednesday as worries over Greece’s delayed debt restructuring continued to increase market pressure on Lisbon. Portugal’s 5-year credit default swaps rose above the 1300-level for the first time, climbing 31 basis points to 1,310. That level is about the same where Greek CDS were quoted last spring. In the bond market, yields on 10-year Portuguese government debt climbed by 43 basis points to 14.62%. Investors worry that Portugal could be next in line for a second bailout and that the haircuts in Greece now being forced on private creditors by official lenders could be repeated for Portuguese debt. “Just the way we are now talking about private sector involvement in a second bailout for Greece, the fear is we could soon be talking about the same thing for Portugal,” said Chris Scicluna, an economist at Daiwa Capital Markets in London.


  • German EconMin Plans Death of Solar Industry - Bosch. A plan to cap solar panel installation at 1,000 megawatts (MW) annually proposed by Germany's economy minister would spell the end for the domestic solar energy industry, German manufacturer Bosch said late on Tuesday. "Should we do that, then photovoltaic is dead in Germany," Bosch Chief Executive Franz Fehrenbach told reporters in Stuttgart. New solar installations reached a record 7.5 gigawatts (GW) in Germany in 2011, playing into the hands of advocates for steeper cuts in tariff subsidies and forcing industry execs to support some form of reduction in state aid that they hope will only be mild.



  • Former Treasury Secretary Larry Summers said at a conference in Copenhagen that Europe could be harming a recovery by betting on consolidating public finances to resolve its economic crisis. "You're risking making the serious situation worse if fiscal consolidation is the primary focus to solve the crisis," Summers said. The current policy response will only lead to a "collective stagnation," he said.

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