Friday, April 12, 2013

Today's Headlines

  • Slovenia to Test Debt Appetite as Financing Pressure Mounts. Slovenia’s government failed to raise 100 million euros ($131 million) at a debt sale this week. Now it’s shooting for five times that amount next week. With bond yields approaching levels that prompted bailouts of other euro nations, the government will offer 500 million euros of 18-month Treasury bills on April 17. The International Monetary Fund estimates Slovenia will need to borrow about 3 billion euros this year to repay maturing debt, aid banks and finance the budget. The debt sale will test the willingness of investors abroad to finance Slovenia’s economy as a banking crisis strains the budget, government bonds plunge and soaring default risk threaten to make the country the euro region’s sixth bailout recipient after Cyprus last month. The largest local lenders are state owned and struggling with rising bad debt.
  • Demetriades Says Cyprus Central Bank’s Independence Under Attack. The head of Cyprus’s central bank said the government is attacking his institution’s independence at the same time as his family receives death threats from people who lost money in the country’s recent bailout. “The independence of the central bank of Cyprus is being attacked at this time,” Panicos Demetriades, who is also a member of the European Central Bank’s Governing Council, said in an interview in Dublin today. His ability to manage the situation is being made more difficult by “death threats not only to myself, but toward my children and my wife,” he said.
  • VW Sales Growth Slows in March on Europe Market Declines. Volkswagen AG (VOW), Europe’s biggest automaker, said global sales growth slowed in March and that headwinds in its home region are intensifying. VW eked out a 0.2 percent rise in deliveries last month to 864,400 vehicles as demand in China and North America more than offset shrinking sales across Europe, the Wolfsburg, Germany- based carmaker said today. In the first two months of the year, VW vehicle deliveries rose 8.3 percent to 1.4 million. “The data for March clearly show that the markets are becoming even more difficult,” Christian Klingler, VW’s sales chief, said in the statement.
  • Bank Risk Models to Face Further Basel Probe on Capital Concerns. Banks (BEBANKS) face further scrutiny from global regulators into their risk models amid concerns lenders are underestimating the amount of capital they need to cope with losses. Initial studies of how lenders measure risk on assets they intend to trade as well as those they intend to hold to maturity found “substantial” differences in the amount of capital different banks hold against identical securities, the Basel Committee on Banking Supervision said in a report to finance ministers from the Group of 20 nations and central bank chiefs. Banks’ modeling choices are a “key source of variation,” the group said. “Further analysis is therefore under way, and areas where Basel committee standards might be modified to reduce excessive variation are becoming apparent.” The committee is considering tightening its rules to narrow banks’ freedom to design models and said it’s also weighing the need for tougher scrutiny by supervisors and stronger disclosure requirements.
  • China Said to Plan Replacing Chen at Largest Policy Lender. China Development Bank Corp. Chairman Chen Yuan will step down, handing the reins of the world’s largest policy lender to Bank of Communications Co.’s Hu Huaibang, said two people with knowledge of the matter. CDB is the biggest lender to so-called local government financing vehicles that have accumulated at least 10.7 trillion yuan in debt. Half of the bank’s lending this year will go to urbanization, according to a Jan. 29 notice on its website.
  • Commodities Fall to Lowest Since July on ‘Soft’ U.S. Data. Commodities tumbled to the lowest since July, led by a plunge in precious metals, as U.S. retail sales fell the most in nine months and consumer sentiment unexpectedly declined. The Standard & Poor’s GSCI Spot Index of 24 raw materials dropped 1.6 percent to 621.49 at 12:08 p.m. New York time. Earlier, the gauge touched 617.55, the lowest since July 13. Gold headed for a bear market, and silver plummeted to the lowest since November 2010. Crude oil slumped to a one-month low.
  • Gold Heading for Bear Market Plunges to Lowest Since July 2011. Gold tumbled to the lowest price since July 2011, heading for a bear market, on signs that investors are favoring the dollar and equities as the global economy recovers. Silver dropped more than 5 percent.
  • Wells Fargo(WFC) Uses Cost Cuts to Set Profit Record as Revenue Slips. Wells Fargo & Co., the largest U.S. home lender, said lower expenses helped the company post a record profit in the first quarter even as revenue dropped and lending margins narrowed. Net income advanced 22 percent to a record $5.17 billion, or 92 cents a diluted share, from $4.25 billion, or 75 cents, a year earlier, according to a statement today from the San Francisco-based bank. While the results topped estimates from analysts surveyed by Bloomberg, new home loans and mortgage banking income weakened, and the shares slipped 2.3 percent in New York trading.
Wall Street Journal: 
  • J.P. Morgan, Wells Fargo Struggle With Weak Demand for Loans. Banks Report Higher First-Quarter Profits But See Declines in Mortgage Business, Profit on Lending.
  • EU Lawmaker Sees Fight Over ECB Scrutiny. The European Central Bank must open itself up to greater democratic scrutiny as it prepares to take on major new powers, a senior European lawmaker said Thursday. "The biggest alarm bell I would say has been the attitude of the European Central Bank, [which] is causing the Parliament a lot of concern," Sharon Bowles, chairwoman of the European Parliament's influential economic and monetary affairs committee, said in an interview.
Fox News: 
  • 'Zombie' Buyers Threaten 'Consumer is Back' Meme: Economist. (video)
  • The Euro Zone Crisis Is Back—On Multiple Fronts. Europe's finance ministers meeting in Dublin on Friday are facing a renewed crisis on multiple fronts,with a backlash against austerity acting as a gloomy backdrop for negotiations over bailout extensions for Portugal and Ireland, while tackling Cyprus's botched bailout and growing worries about Slovenia. Investors, increasingly aware of the euro zone's disarray, will be closely watching the results of that meeting.
Zero Hedge: 
Business Insider: 
  • Brazil's Mantega says could raise rates if needed. Brazil's central bank could raise interest rates if needed to control rising inflation, Finance Minister Guido Mantega said on Friday, helping to increase bets that policymakers could tighten monetary policy as early as next week. "We will not hesitate to take measures, even measures that are considered less popular, like for example those related to interest rates," Mantega said during an economic event organized by a magazine in Sao Paulo. Although Mantega has previously said that the central bank is free to raise rates if needed, his latest comments are seen as confirmation that President Dilma Rousseff, as prices continue to rise in Latin America's biggest economy, agrees it is time to increase borrowing costs.
  • Copper drops on growth worries, ample supply.

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