Tuesday, April 16, 2013

Today's Headlines

  • SNB’s Danthine Says Economy Vulnerable to Credit Bubble. The Swiss economy is vulnerable to instability in the banking sector caused by an unsustainable rise in mortgage debt, the central bank’s vice president said.
  • Peugeot Bank Cut to Junk at Moody’s on Europe Car Market. PSA Peugeot Citroen (UG)’s wholly owned bank was cut to one level below investment grade by Moody’s Investors Service, which said the auto-financing unit can’t escape the European car-market contraction plaguing its parent. The long-term rating on Banque PSA Finance’s debt was lowered by one step to Ba1 from Baa3, Moody’s said in a statement today. The outlook is stable, indicating the rating won’t be reduced again soon.
  • European Stocks Slide as German Confidence Falls. European stocks fell for a third straight day as German investor confidence declined more than forecast and the International Monetary Fund cut its global growth outlook. Michael Page International Plc (MPI) slumped the most in 11 months after the U.K. recruiter reported lower profit. LVMH Moet Hennessy Louis Vuitton SA (MC) retreated to a five-month low as sales of fashion and leather goods slowed. Danone (BN) rallied to the highest in five weeks as the food company posted first-quarter sales growth that beat analysts’ estimates. The Stoxx Europe 600 Index (SXXP) sank 0.8 percent to 288.16 at the close of trading, extending the decline over the past three days to 2.3 percent. “The ZEW and other data shows that Germany is facing a slowdown,” Soeren Steinert, who helps manage about $24 billion as associate director for equities trading at Quoniam Asset Management GmbH in Frankfurt, wrote in an e-mail. “That will affect Europe for sure.”
  • China Cities Fail to Resist Out-of-Control Property: Mortgages. All real estate markets are local, says the industry axiom, one that China’s central government is painfully aware of as its efforts to rein in home prices are undermined by uncooperative municipal authorities. Former Premier Wen Jiabao, in his final endeavor to make housing affordable, set an April 1 deadline for higher down payments and interest rates for second-home loans in cities with “excessively fast” price gains and ordered stricter enforcement of taxes on sales. Thirty-five provincial-level cities responded with measures insufficient to curb prices that climbed 150 percent from 2003 to 2012. “The local governments are just making a gesture to show they are following the orders,” said Ding Shuang, a senior China economist with Citigroup Inc. in Hong Kong. “Some of the targets are almost like jokes. The government’s enforcement of policies will be compromised.” Local officials lack the resolve to cool the market because proceeds from land sales contribute about a quarter of their fiscal income and are needed to fund infrastructure and other spending. Their reluctance to act decisively poses a challenge to Premier Li Keqiang, who replaced Wen on March 15 and inherited rising prices that aggravate social unrest by putting homes out of the reach of many Chinese.
  • LDK Delinquency Flags Chance of Another Solar Bust: China Credit. LDK Solar Ltd. (LDK)’s failure to fully pay notes this week has raised the prospect of China’s second solar-industry failure this year as the company needs to repay a loan 10 times larger by June.
  • Commodities Seen by IMF Dropping 2% This Year Amid Higher Supply. Commodity prices are set to fall 2 percent this year from 2012 amid increased supplies of raw materials from crude oil to grains, the International Monetary Fund said. Energy prices probably will decline almost 3 percent as supply rebounds from outages last year, the Washington-based IMF said today in an online report. Food prices will drop more than 2 percent on increasing world harvests, while metals may climb more than 3 percent on recovering world economies and increasing demand in China, the report showed. An IMF index of commodity prices is down 9 percent from a peak in April 2011 while still “elevated compared with historical levels,” according to the report. The GSCI has dropped 6.2 percent this year, compared with a 5.2 percent increase for the MSCI All-Country World Index of equities and Treasury returns of 0.5 percent, according to a Bank of America Corp. index.
  • Gold Advances as Plunge Seen as Overdone, Central Banks May Buy. Gold rebounded as some investors deemed a 13 percent plunge over two days to be excessive and an Asian central banker said that policy makers may take the opportunity to buy. Silver also advanced. The two-day drop for gold was the biggest since January 1980, and prices reached the lowest since January 2011 earlier today.
  • Carbon Falls Most Ever After EU Parliament Rejects Fix. European carbon permits declined by the most on record to an unprecedented low after lawmakers rejected an emergency plan to address a surplus of allowances. Carbon for December fell as much as 45 percent to 2.63 euros a metric ton on the ICE Futures Europe exchange in London, and German power prices for next year dropped to the lowest since at least 2007. Ireland, which holds the European Union presidency, vowed to continue talks on the plan after the bloc’s Parliament sent the draft back to its environment panel. The rejection may render Europe’s 54 billion-euro ($71 billion) cap-and-trade program “completely toothless,” leaving prices near zero for several years, said Patrick Hummel, an analyst at UBS AG in Zurich. Opponents of the plan, including the Polish government and the European People’s Party, the biggest political group in the Parliament, have argued it would raise energy costs and artificially boost prices.
  • Goldman Shares(GS) Fall as Trading Revenue Misses Estimates. Goldman Sachs Group Inc. (GS), the Wall Street bank that generates the highest percentage of revenue from trading, dropped as much as 3 percent after revenue from that business fell more than its rivals. The shares slumped 2.5 percent to $142.80 in New York at 10:58 a.m., the largest decline in the 81-company Standard & Poor’s 500 Financials Index (S5FINL).
Wall Street Journal: 
  • FBI Probe Heats Up in Deadly Boston Marathon Bombings. The FBI-led investigation into the bombings at the Boston Marathon that killed three and wounded more than 170 intensified Tuesday, with authorities interviewing witnesses and processing what one official called the "most complex crime scene" the city had ever dealt with. President Barack Obama in a brief statement Tuesday called the bombings an act of terrorism, though he added that authorities still don't know the identity or motive of the perpetrators.
  • Boston Bombings: Live Coverage.
  • IMF: Euro Zone at Risk of Long Stagnation. The euro zone could suffer an even more prolonged period of economic stagnation that would make the task of reducing government and private sector debt levels more difficult, particularly if "adjustment fatigue" stalls needed changes, the International Monetary Fund said Tuesday. In its twice-yearly World Economic Outlook, the Fund said the euro zone remains the weakest part of the global economy, and warned that a long period of low growth in the currency area would weaken the potential for expansion in the neighboring economies of central and Eastern Europe, as well as further afield. The Fund said that in the near-term, the euro zone still poses the greatest threat to a recovery in the global economy, citing "the fallout from events in Cyprus" and political stalemate in Italy, as well as "vulnerabilities" among the weaker members of the currency area. "What you have is weak banks, weak governments, low growth…and there is always a danger that they build on each other and things go from bad to worse." 
  • Germany's Debt in 2012 Rises on Bailout Payments, Building Reserves. Contributions to European rescue efforts and the building of social insurance fund reserves helped to drive up Germany's benchmark debt level, data provided by the country's central bank showed Tuesday. German general government debt reached 2.17 trillion euros ($2.84 trillion) at the end of 2012, the Deutsche Bundesbank said in a statement. This equated to 81.9% of the country's economic output, putting it well above the European Union's upper limit of 60% as defined in the Maastricht Treaty, the 1992 agreement which helped pave the way for the common currency. Government debt rose by EUR81 billion last year, despite the fact that the general government balance actually recorded a surplus of EUR4 billion last year. "Of particular significance here were measures in connection with the European sovereign debt crisis, which accounted for EUR45 billion," the bank wrote. That amount included a EUR9 billion capital contribution to the euro zone's permanent rescue mechanism, the ESM, and EUR36 billion in loans via the temporary bailout fund, the EFSF. The EUR45 billion figure counts as debt but is not included in the country's annual budget deficit figure under European rules. This is because "in parallel with the increase in debt, an expansion in financial assets in the same amount is recorded," the bank wrote. Germany's contributions to bailout programs in troubled euro-zone states are technically loans, which, in theory at least, should be repaid in full, plus interest. As the largest contributor to euro-zone bailouts, German lawmakers are growing increasingly frustrated with being asked to prop up the currency zone's wobbliest states.
  • The Best Indicator of U.S. Health is Wage Growth (or Lack Thereof).
  • How and When Apple May Return More Cash to Shareholders.
Fox News: 
  • Marathon bombs likely made from pressure cookers, shrapnel, sources say. Pressure cookers – possibly activated remotely by a cellphone – are believed to have been used to make the crude bombs that sent deadly shrapnel hurling into a crowd of onlookers and competitors at Monday’s Boston Marathon, experts told Fox News. Doctors treating some of the 176 injured victims believe the explosives were packed with deadly shrapnel, including pellets, nails and sharp metallic objects – with some patients having “40 or more” such fragments embedded in their bodies. “Many of them have severe wounds mostly in the lower part of their body – wounds related to the blast effect of the bomb, as well as small metallic fragments that entered their bodies – pellets, shrapnel, nails – that these bombs had,” George Velnahos, chief of trauma surgery at Massachusetts General Hospital, said Tuesday. “I wouldn't exclude completely the possibility that some of these fragments are environmental, but my opinion is that most of them were in the bomb,” Velnahos said. “They are numerous,” he added. “There are people who have 10, 20, 30 or 40 of them in their body or more.
  • Drastic security changes coming to large-scale public events, experts say.
  • Target(TGT) Shares Slip After Warning 1Q Profit will Miss Forecasts. Shares of Target narrowed marginally on Tuesday after the retailer said it would likely miss expectations during the quarter due to softer-than-expected sales trends. Target, which is expected to report first-quarter earnings on May 22, saw shares slump 1% on the news in early trade.
  • Redbook: U.S. Retail Sales Down 2.7% in First Week of April Vs. March. National chain store sales fell 2.7% in the first week of April from March, according to Redbook Research's latest indicator, released Tuesday. The index's fall compared with a targeted 2.1% decline. The Johnson Redbook Index also showed seasonally adjusted sales for the period were up 2% from last year, compared with a 2.6% targeted gain.
  • Fed's Evans Optimistic, Dudley Less So on Jobs Outlook. Two top Federal Reserve policy doves offered clashing views on the U.S. economic outlook on Tuesday, although both agreed the job market has not yet improved enough to merit any cuts to the central bank's bond-buying program.
Zero Hedge:
Business Insider:
  • Moody's still sees negative outlook for most US state, local governments. Moody's Investors Service said on Tuesday that most U.S. public finance sectors, such as state and local governments, still face a negative outlook and will likely continue to do so until fiscal and economic conditions strengthen. 
  • France warned on growth goals, fiscal targets in doubt. France's economy could shrink this year and miss future government forecasts, the country's budget watchdog and the IMF warned on Tuesday, casting doubt on Paris's pledge to cut its deficit below 3 percent of output. 
  • Italy's temporary layoff scheme runs out of cash, sparks protests. Thousands of idled Italian workers staged a sit-in in front of parliament on Tuesday and trade unions threatened strikes unless the government steps in to back a temporary jobless scheme which is running out of funds. Italy's often divided union confederations united to call on Mario Monti's caretaker government to find around 1.5 billion euros to guarantee payments due to some 700,000 workers sent home on reduced pay under the "cassa integrazione" scheme.
  • China Tightens Control of News Organizations' Social Media Use. State Administration of Radio Film and Television recently issued new rules banning reuse of news products from overseas media and websites without permission, according to a commentary. Editorial staff must obtain permission to set up microblogs for work purposes. Editorial staff mustn't release any information they acquire when on duty without permission.

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