Thursday, April 18, 2013

Today's Headlines

  • Italy Fails to Elect President as Bersani Coalition Fractures. Italy's Parliament failed to elect a president today as Democratic Party leader Pier Luigi Bersani faced a revolt from his allies after he sought to compromise with former Prime Minister Silvio Berlusconi. Bersani was deserted by allies on the first ballot as Franco Marini, the candidate he backed with Berlusconi forces received 521 of 1,007 possible votes, less than the necessary two-thirds majority. With no path to a Marini victory, both the Democratic Party and Berlusconi’s forces cast blank ballots on the second vote. The election continues at 10 a.m. tomorrow. “It’s another manifestation of how deeply divided Italy has become and how much resentment and mistrust there is among the leading politicians,” said Georg Grodzki, head of credit research at Legal & General Investment Management in London.
  • Recession May Double Spain's Banking Bailout Needs: Euro Credit. A Spanish economic slump now in its sixth year is stocking concern the nation needs more than the 41 billion euros that it sought from European partners to bail out its banks. "The more the economy worsens, the more the capital base of the banks will get eroded and there is still a lot of cleaning up to be done," said Cesar Molinas, a partner at private equity firm CRB Inverbio in Madrid. Spanish lenders had 162 billion euros of bad loans in February, equivalent to 10.4% of the credit in the economy, according to Bank of Spain data published today. Losses make it harder for banks to bolster the economy by lending to businesses.   
  • Germany Backs Cyprus Aid as Schaeuble Cites Default Risk. German lawmakers approved a rescue for Cyprus as Finance Minister Wolfgang Schaeuble warned that refusing aid to a fifth crisis-ravaged state risked triggering a sovereign default and contagion to other euro nations. The lower house, or Bundestag, backed German participation in the 10 billion-euro ($13 billion) financial lifeline by 487 votes to 101 with 13 abstentions in Berlin today, almost three years after the euro-area debt crisis first required lawmakers to act in May 2010. Lawmakers also approved extending aid terms for Ireland and Portugal. “We must avoid turning the problems in Cyprus into new problems for other euro countries,” Schaeuble told lawmakers in a speech before the vote. “Cyprus is in a dramatic situation. If we don’t help Cyprus, then Cyprus inevitably faces sovereign default.” 
  • U.K. Retail Sales Drop More Than Forecast. Sales including fuel fell 0.7 percent from February, when they increased 2.1 percent, the Office for National Statistics said today in London. The median forecast of 23 economists in a Bloomberg News survey was for a 0.6 percent decline. From a year earlier, sales declined 0.5 percent. Weak wage growth and accelerating inflation are squeezing household budgets, hitting sales on Britain’s high streets and at shopping malls.
  • Leading Index’s Decline Points to Slower U.S. Growth: Economy. The index of U.S. leading indicators unexpectedly declined in March, and manufacturing in the Philadelphia region slowed this month, adding to evidence the economy will cool. The Conference Board’s gauge of the outlook for the next three to six months fell 0.1 percent last month, the first drop since August, the New York-based group said today. The Federal Reserve Bank of Philadelphia’s factory index eased to 1.3 in April from 2 the prior month, another report showed.
  • Copper Poised to Enter Bear Market as Industrial Metals Slide. Copper plunged through $7,000 a metric ton in London for the first time in almost 18 months and headed for a bear market on concern that demand from China to the U.S. and Europe may falter. Tin was also poised to enter a bear market. Copper for delivery in three months on the London Metal Exchange slumped as much as 4 percent to $6,800 a ton, the lowest level since October 2011, and was at $6,850.50 at 2:56 p.m. Seoul time. A close at the current level would be more than 20 percent below the metal’s last bull market peak in February 2012. Aluminum, nickel, zinc and lead also declined. 
  • Morgan Stanley(MS) Shares Fall as Trading Revenue Declines. Morgan Stanley (MS) fell to a three- month low in New York after the firm reported the biggest drop in trading revenue among the largest U.S. banks. Shares of the company slumped 4.5 percent to $20.51, the biggest decline on the 81-company Standard & Poor’s 500 Financials Index. (S5FINL) Bond-trading revenue fell 42 percent in the first quarter and stock-trading revenue declined 19 percent, New York-based Morgan Stanley said today in a statement.
  • Gold Climbs in New York on Signs Physical Demand Is Rebounding. Gold prices climbed in New York on signs that demand is rebounding among consumers and investors.
Wall Street Journal:
  • Texas Fertilizer Plant Explosion: Live Updates.
  • Credit Crunch Broadens European Business Rifts. Central banks around the world are flooding the market with liquidity in order to spark growth in the global economy. But that hasn't helped Spaniard José Blasco. Banks have cut credit lines to Mr. Blasco's sofa-bed maker Confortec SL to €100,000 ($131,000), compared with €500,000 several years ago. And while the Spanish state now borrows at around 5%, the 22-employee company would need to pay as much as 14% to get a bank loan—an option Mr. Blasco rejected.
  • U.S. Probes Suspicions Syria Used Chemical Weapons. American intelligence agencies are reviewing what some officials see as the first credible indications that Syrian forces used small amounts of chemical weapons in recent fighting, said senior U.S. and European officials.
  • Dr. Copper Catches a Cold.
Dow Jones:
  • Lower Euro-Zone Rates May Not Spur Growth, Kranjec Says. Failure of transmission mechanism in euro area reflects fragmentation of financial markets, ECB Governing Council member and Slovenian central bank Gov. Marko Kranjec said.
Fox News: 
  • New Study Finds China Manufacturing Costs Rising to US Level. The cost of manufacturing in China is going up and rising quickly. "It's something that we anticipated when we went to China, we just didn't know how quick it would happen," said Mark Miller, CEO of Prince Industries
  • If I Were 'Dictator,' QE Would End Now, Fed's Lacker Says. Richmond Fed President Jeffrey Lacker told CNBC on Thursday that if you made him "dictator," the Federal Reserve would stop its massive bond purchases. He added that evidence is "sketchy" on whether the quantitative easing program has actually helped the nation's job picture. "I wouldn't have gone down this asset-purchase path. I'm in the camp that we should taper and stop right now," Lacker said in a "Squawk Box" interview from the 2013 Credit Markets Symposium in Charlotte, N.C. "You have to prepare markets, if it was up to me, if you made me dictator, that's what I would do."
  • Rising Bank Profits Tempt a Push for Tougher Rules. Banks have been reporting steady growth in earnings since soon after the financial crisis. With the latest reports rolling in, analysts think the banks' first-quarter profits will be their best ever. But as welcome as such profits are to the banks, they may also become a source of discomfort. The ballooning bottom lines could embolden the lawmakers and regulators who want to introduce additional measures to overhaul the banking system.
    After the financial crisis, many officials involved in the regulatory revamp feared that tougher rules, like caps on bank assets, could destabilize the financial system and harm economic growth. It is a view that prominent bankers and lobbyists have also voiced.
Zero Hedge: 
Business Insider: 
  • Diabetes, bone, pain drugs may face German price cuts. Drugs from Novo Nordisk , Amgen, Bayer and other companies could face price cuts in Germany as the country's medical cost-benefit agency widens a review into the value offered by medicines. The Federal Joint Committee, or G-BA, said on Thursday it would review the cost-effectiveness of a range of drugs in different treatment areas.
  • Paulson fund hurt by sharp drop in gold -source. John Paulson's Advantage Fund, one of the hedge fund manager's biggest portfolios, is down 2.4 percent in April, largely due to the sharp selloff in gold, a source familiar with the numbers said on Thursday. 
  • U.S. jobs, factory data point to slowing economy.
  • In Spain, Catalan stand-off risks budget backslide. A stand-off between Spanish Prime Minister Mariano Rajoy and Catalonia, one of the country's wealthiest regions, risks the central government losing control of regional finances as Madrid seeks a softening of deficit targets from Brussels. Catalonia, which accounts for around a fifth of Spain's economy, has yet to present a 2013 budget to parliament and wants more control over the collection of its taxes.
  • Fed's Tarullo says focused on big bank reliance on wholesale funding. Federal Reserve Board Governor Daniel Tarullo said on Thursday that U.S. banks were in better shape now than prior to the financial crisis, but he remained worried by the vulnerability of the very big firms to reliance on fickle market liquidity. "My concern in particular is the intersection of 'too big to fail' with very large institutions, with very large wholesale funding markets that are subject to runs, and eventually then to liquidity freezes," he told Bloomberg Television in an interview.
Open Europe Blog:
  • Is the IMF turning bearish on Spain? It’s been a busy week for the IMF, releasing their latest iterations of the World Economic Outlook, Global Financial Stability Report and the Fiscal Monitor. We’ve been poring over the reports and will continue to do so (see here for some initial thoughts on the WEO). One forecast in particular caught our eye – Spain's. The IMF seems to have turned significantly more pessimistic on the prospect of a Spanish recovery. The charts below provide a comparison with the previous WEO forecasts (highlighting how these forecasts tend to be overly optimistic) - which very much confirms what we have noted before about the real risks in Spain.
Yonhap News:
  • South Korea to Discuss Weak Yen's Impact at G-20. Spillover impact from weak yen will be discussed at G-20 meeting in Washington, citing South Korean Finance Minister Hyun Oh Seok.
  • China Detains 3 People for Spreading Bird Flu Rumors. Three people were detained in northern Chinese province of Shaanxi for spreading H7N9 bird flu rumors, citing the local government.
  • China Orders Halt to Wild-Bird Sales Due to H7N9. State Forestry Administration also tells local authorities to step up epidemic surveillance, bank close contact between humans and animals in zoos, citing emergency notice from the govt agency.

No comments: