Monday, April 08, 2013

Today's Headlines

  • Sentix European Investor Confidence Falls After Cyprus Bailout. European investor confidence declined more than economists forecast in April, after the bail- in of Cypriot bank depositors rattled financial markets, the Sentix research institute said today. An index measuring sentiment in the euro-area fell to minus 17.3 from minus 10.6 in March, the Limburg, Germany-based institute said in an e-mailed statement. That’s the second drop in a row and the lowest reading since December. Economists had predicted a decline to minus 12.8, according to the median of 18 estimates in a Bloomberg News survey. A gauge of economic expectations decreased to 0.5 from 8.3, while a measure of current conditions fell to minus 33.5 from minus 27.8.
  • China Export-Data Skepticism Deepens From Goldman to Nomura. China’s unprecedented run of better- than-forecast export growth has spurred deeper skepticism of the data at banks including Goldman Sachs Group Inc., casting doubt on the strength of the recovery. Gains in overseas shipments exceeded forecasts by at least 7.5 percentage points in December, January and February, the first time that’s happened in three straight months in the eight years Bloomberg has compiled analyst estimates for the data. March figures are due to be released tomorrow at 10 a.m. at a briefing in Beijing, giving the customs administration an opportunity to address the issue. Overstated exports would mean China is failing to get the boost from global demand that the data suggest as the new government under Premier Li Keqiang seeks to sustain an economic rebound.
  • Soros Sees China Shadow-Banking Risks Similar to Subprime. Billionaire investor George Soros said China has a “couple of years” to control risks from nontraditional financing whose expansion has parallels with the cause of the global financial crisis. “The rapid growth of shadow banking has some disturbing similarities with the subprime-mortgage market in the U.S. that caused the financial crisis of 2007-2008,” Soros said today in a speech at the Boao Forum for Asia in China. “I’m sure the authorities are aware of the dangers. They have both the skills and the resources to deflate an incipient bubble gradually. The comments add to concerns that the increase in credit risks triggering turmoil that would cause an economic downturn. Aggregate financing, an indicator started by the central bank in 2011 to provide a broader gauge of funding, more than doubled to a record in January from a year earlier
  • VIX Bets Climb to Three-Yera High on Earnings Concern: Options. Wagers that U.S. stock volatility will increase have reached a three-year high on concern American companies are getting ready to report the first slump in profit since 2009. There were 6.54 million calls on the CBOE Volatility Index and 2.34 million puts on April 4, according to Bloomberg. The ratio jumped to 2.93-to-1.0 last month, the highest since March 2010.
  • Fisker Struggles Mark Blow to Obama’s Electric-Car Goal. The possible bankruptcy of Fisker Automotive Inc., which last week fired three-quarters of its workforce, is the latest blow to President Barack Obama’s goal of having 1 million electric vehicles on U.S. roads by 2015. Fisker’s downfall after receiving $193 million in U.S. taxpayer money and producing 2,500 cars may complete the U.S. government’s transformation from electric-vehicle promoter and financier to debt collector, two years after it approved its last loan. Obama’s goal was “misguided” in the first place, putting the administration’s eagerness to rush out loans and grants while money was available ahead of due diligence, said Menahem Anderman, president of Total Battery Consulting Inc., in Oregon House, California. “The timing was based on the government’s spending schedule rather than the schedule of the market and the readiness of the technology,” Anderman said. “You had a very complex vehicle to produce, a questionable market, in terms of demand, with a team that hadn’t proven it could build it or sell it.
Wall Street Journal:
  • Former British Prime Minister Margaret Thatcher Dies. 'Iron Lady' Was Among Most Influential Global Leaders of Postwar Period. Margaret Thatcher, the former British prime minister who became one of the most influential global leaders of the postwar period, died on Monday, three decades after her championing of free-market economics and individual choice transformed Britain's economy and her vigorous foreign policy played a key role in the end of the Cold War. "It is with great sadness that Mark and Carol Thatcher announced that their mother, Baroness Thatcher, died peacefully following a stroke this morning," said Mrs. Thatcher's spokesman, Timothy Bell. She was 87. "We've lost a great prime minister, a great leader, a great Briton," said U.K. Prime Minister David Cameron, who cut short a Europe trip to return to the U.K. on Monday afternoon. "She saved our country and I believe she will go down as the greatest British peacetime prime minister."
  • Pyongyang Suspends Kaesong Operations. North Korea said it intends to withdraw all its workers from an industrial park jointly run with South Korea and is considering closing the complex permanently. That would leave the last remaining symbol of inter-Korean cooperation close to collapse and mark a significant exacerbation of tensions on the Korean peninsula. The move, coming as Seoul continues to face a barrage of war threats from the North, provides a fresh challenge for new South Korean President Park Geun-hye's pledge to improve ties with Pyongyang. Some 53,000 North Koreans work at the complex. As of late Monday, 475 South Koreans and four Chinese nationals remained on the site.
Zero Hedge: 
Business Insider: 
  • Italy public debt to rise 3 points after companies paid. Italy's public debt will rise by at least three percentage points over the next two years due to government plans to pay some 40 billion euros of debts owed by the state to private suppliers, its economy minister said. Italy's debt hit a record 127 percent of gross domestic product at the end of last year, the second highest in the euro zone after Greece.
  • ECB warns of risks in correspondent banking. The ECB warned on Monday against concentration in the correspondent banking business, which handles payments between smaller banks, saying if a major player failed it could threaten financial stability.
Financial Times:
  • Banks pull back from lending to emerging markets groups. Lending by western banks to companies across emerging markets is falling sharply as the eurozone banking crisis grinds on, new research shows. The value of new syndicated loans made to EM businesses fell 20 per cent to $276bn in 2012 from $343.2bn in the previous year, according to a report given to FTfm by Cordiant, a private debt fund manager based in Montreal. This lending slowdown suggests businesses in the developing world are just as caught out by the dry-up in financing as their western counterparts, and face difficulty growing.
  • Fed warned to rein in QE. One of Wall Street’s biggest money managers has called on the Federal Reserve to rein in its programme of quantitative easing, saying its bond-buying tactics are a “large and dull hammer” that have distorted markets and risk stoking inflation. Rick Rieder, who oversees $763bn in fixed income investments for BlackRock, spoke out as the Fed debates how long to persist with the unorthodox measures it has used to stimulate the US economy. His comments add BlackRock to the growing list of Fed critics who are warning of trouble ahead for the bond market.

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