Tuesday, April 23, 2013

Today's Headlines

  • Euro-Area April Manufacturing, Services Contract. Euro-area services and factory output shrank for a 15th month in April as the currency bloc struggled to emerge from a recession, adding to pressure on the European Central Bank to do more to boost growth. A composite index based on a survey of purchasing managers in both industries held at 46.5, London-based Markit Economics said today. That’s in line with the median of 26 economists’ forecasts in a Bloomberg News survey. A reading below 50 indicates contraction. The euro area’s woes were compounded today by concern global growth may falter after a report showed Chinese manufacturing expanding at a slower pace this month. “Added weakness in activity indicators and continued easing in inflation indicators will raise the pressure on the ECB to provide more stimulus,” said Jonathan Loynes, an economist at Capital Economics Ltd. in London. “What form that will come in -- interest rate cuts, LTROs or even bolder steps - - remains to be seen. The hurdles to the ECB undertaking some form of QE are a lot lower than some people would suggest.”
  • Paris Hit by Property Freeze as Taxes Deter Buyers. At least one in four Paris apartments listed by realtor Agence Etoile can’t be sold, even with mortgage rates at record lows, as buyers and sellers fail to agree on price, the company’s director said. “I have some inventory that’s too expensive and sellers don’t want to lower prices,” Christine Perrissel said in an interview. “Buyers are just much more selective.” Across France, an economy that’s stalled for two years, joblessness at a 15-year high, property prices near record highs and new taxes have made households reluctant to borrow to buy homes.
  • Government Bonds Surge as Italian, Irish Yields Drop to Records. European government bonds rose, with Italy’s two-year yields falling to a record, as euro-area output contracted for a 15th month in April, boosting speculation the region’s central bank will lower interest rates. The yield on Italian 10-year government bonds fell below 4 percent for the first time in almost 2 1/2 years, while Spanish and Portuguese yields dropped to the least since 2010. Borrowing costs in France and Ireland declined to the lowest on record as a purchasing managers’ index showed German services and manufacturing unexpectedly shrank. Benchmark German 10-year bund yields slid to the lowest since July. 
  • Euro Declines as Weak Data Fuel ECB Rate-Cut Bets. The euro fell to a two-week low against the dollar as a report showed weakening services and manufacturing in the region, adding to speculation the European Central Bank will lower interest rates to spur economic growth.
  • Abe Vows to Protect Isles as Shrine Visits Hurt Japan-China Ties. Japanese Prime Minister Shinzo Abe vowed to use force if necessary to defend islands also claimed by China as tensions rose over visits by his fellow lawmakers to a Tokyo shrine seen in Asia as a symbol of wartime aggression. China and Japan each issued formal protests today over the presence of each other’s vessels in waters around the islands, which lie in an area rich in resources including fish and oil. Abe today told a parliamentary committee that the government would not allow any Chinese boats to land on them. “In the unlikely event that they were to land, it would be natural to expel them by force,” he said.
  • Goldman Cuts Commodity Outlook as It Exits Bet on Gold Drop. Goldman Sachs Group Inc. cut its “near-term” outlook for commodities and reduced forecasts for oil and coffee amid prospects for weak demand from China to Europe. The bank also exited a bet on lower gold prices. Goldman Sachs lowered its three- and 12-month return forecasts for the Standard & Poor’s GSCI gauge of 24 commodities to 2.5 percent, from 6 percent in three months and 3 percent in 12 months, and cut its near-term outlook on commodities to neutral from overweight, according to the report, dated today. It exited its bet on lower gold prices, with a potential gain of 10 percent, while saying bullion may fall even more. “Commodity returns have dropped sharply so far in April as weaker-than-expected macroeconomic data releases in the U.S., Europe and China furthered concerns around global economic growth,” New York-based analyst Samantha Dart said in the report. “The negative sentiment in the market has weighed on cyclical commodity prices in particular.” The GSCI index slid as much as 1.1 percent today as a report showed Chinese manufacturing expanded at a slower-than- expected pace, providing more evidence of a pullback in the country’s economic growth. Commodities, which touched a nine- month low on April 18, are down 6.4 percent this year.
  • Zell Sells as Washington Faces Glut of Apartments: Real Estate. Washington is poised to be one of the only major U.S. cities with a decline in apartment rents this year after a surge in construction outpaced job growth, leaving the nation’s capital with a glut of properties. The Washington metropolitan area, including the suburbs of Maryland and Virginia, will see average rents decrease as much as 2 percent, making it only market other than Detroit to have a drop among the top 20 U.S. cities, according to Delta Associates. Rents will fall further in 2014, data from the Alexandria, Virginia-based property-research firm show.
  • Too-Big-to-Fail Bill Increases Big Banks’ Capital Standards. Banks with more than $500 billion in assets would face higher capital standards meant to reduce risk and end an implied subsidy for the biggest lenders under a bill to be introduced tomorrow by two U.S. lawmakers. Senators Sherrod Brown, an Ohio Democrat, and David Vitter, a Louisiana Republican, said in a roundtable discussion in Washington today that their “too big to fail” legislation will focus federal assistance on core commercial banking activities while granting regulatory relief to community banks.
Wall Street Journal:
  • The Boston Bombings: Live Updates.
  • Republicans Say Fed ‘Willfully’ Withholding Documents. Two House Republicans have threatened to subpoena the Federal Reserve for nonpublic documents on how the central bank plans to wind down its more than $3 trillion bond portfolio without harming the nation’s economy.
  • What to Watch for in Apple’s(AAPL) 2Q Earnings
  • Germany Spurns Calls to Loosen Austerity Stance. Germany on Tuesday rebuffed growing calls for the euro zone to ease its austerity drive and urged member states to stick to fiscal consolidation and structural overhauls, a sign that the gulf between Berlin and its partners on how to pull Europe out of its crisis is widening. The German finance ministry said continuing current policies is the only way out of the crisis, despite recent calls from France, the U.S., the International Monetary Fund, and the European Commission to stem front-loading austerity and increase efforts to boost growth. "Through continuing our policies of growth-friendly consolidation we are systematically building up the trust of international investors lost in the crisis," the finance ministry said
Fox News:
  • Israeli military official says Assad has used chemical arms in civil war. A senior Israeli military official says Syrian President Bashar Assad has used chemical weapons in his battle against insurgent groups trying to topple him. Brig. Gen. Itai Brun, the head of research and analysis in Israeli military intelligence, told a security conference on Tuesday that Assad has used chemical weapons "in a number of incidents."
  • China’s PMI Miss: Is It Downhill From Here? "It's a big miss. Confidence in the outlook for China has really diminished, particularly after first quarter growth data," said Tim Condon, head of research for Asia at ING. "People are now reforming their views on economy. The new view is that growth will be stagnant," he added.
Zero Hedge: 
Business Insider: 
Washington Post:
  • GLOBAL ECONOMY-Manufacturing data stokes fears of global spring swoon.
  • German April Manufacturing PMI 47.9, MNI Says
  • Bank of Spain forecasts Q1 GDP to fall 0.5 percent on quarter. The Bank of Spain said on Tuesday it estimated first quarter gross domestic product would fall 0.5 percent from the previous quarter and 2 percent from the year-ago period, due to sluggish consumer demand. "The Spanish economy will prolong a contraction of economic activity during the first quarter of 2013, although at a lesser pace than that seen at the end of last year," it said in its quarterly economic report.
  • Factory data a new sign of slowing U.S. economic growth. U.S. factory activity expanded at its slowest pace in six months in April, the latest sign that economic growth continued to lose momentum early in the second quarter, though the recovery has not been derailed. 
  • Copper falls to fresh 1-1/2 year low on weak China data.
  • UN lowers Latin America 2013 growth view on Brazil, exports. A downward-revised projection for growth in regional powerhouse Brazil, and easing demand for the commodities-dependent region's exports are seen weighing on growth this year. 
  • Mid-sized companies less likely to spend to expand-survey. Fewer mid-sized companies expect to make additional investments in their businesses or seek more loans than a year ago, according to a survey in the United States by banking giant JPMorgan Chase & Co. Only 35 percent of executives at the companies said they anticipate increasing capital spending in the next 12 months, down from 44 percent a year earlier, according to the survey released on Tuesday by the bank. It found that 16 percent said they will likely cut back on business investments, up from 13 percent who last year expected to retreat.
  • Merkel defiant as austerity criticism mounts. Angela Merkel tried to contain her irritation when asked at a podium discussion in Berlin this week whether southern European countries could take much more German-ordered austerity. But the frustration in her voice was clear enough after a week in which several European allies broke ranks, and in a public challenge to Germany, effectively declared the era of deficit reduction in Europe to be over. "I call it balancing the budget," the German chancellor told her audience at a book presentation. "Everyone else is using this term austerity. That makes it sound like something truly evil." Merkel's appearance in Berlin this week, and the reaction of her closest allies to suggestions by the European Commission that euro member states loosen their fiscal reins, shows Germany will not soften its position. "Declaring an end to consolidation is absolute nonsense," Michael Fuchs, deputy leader for Merkel's Christian Democrats (CDU) in parliament, told Reuters. "In truth no one is really saving anyway, they're just issuing less debt than before."
USA Today: 
  • Retail Sales Up Slightly in Week. U.S. retail receipts rose 0.8 percent in the week ending Saturday, a U.S. trade group said. The International Council of Shopping Centers-Goldman Sachs weekly sales report said sales climbed 0.8 percent week to week and 1.9 percent compared to the same week a year earlier. The trade group said it was a strong week for staples. Sales of basic items "seemed to perform best over the past week with notable improvement at grocery stores and discounters." Business was weaker at a broad range of stores, including electronics, office supply, clothing, department stores and drug stores, the weekly consumer tracking survey found.
Financial Times: 
  • OECD sounds fresh warning on Japan. The OECD has warned Japan that taming its vast debts remains the country’s “paramount policy challenge”, as prime minister Shinzo Abe goes all out to reflate the sluggish economy via aggressive fiscal and monetary stimulus.
  • Italy's Five-Star Movement leader Beppe Grillo says state will run out of revenue in September or October, in an interview. "It will have difficulty paying out pensions and wages," he said. Re-election of Giorgio Napolitano to presidency amounts to a "cunning coup d'etat," he said.
Finanz und Wirtschaft:
  • Pimco is Reducing Risky Assets in Portfolios. PIMCO is slowly and globally selling risky assets that have developed "exceptionally well" until recently, CEO Mohamed El-Erian said in an interview. Says assets include bank bonds, high-yield corporate bonds. Says Pimco concentrates on robust balance sheets and success stories that are based on real growth. Says Pimco avoids "artificial" liquidity-assisted growth.
El Pais:
  • EC May Allow Spain 2013 Budget Deficit at 6.5%. The new target compares with current target of 4.5%, citing people familiar with the matter. Spain will have until 2016 to reduce budget deficit to 3% compared with 2014 current deadline. France and Portugal will have one additional year to meet their budget deficit targets.

No comments: