Wednesday, June 12, 2013

Today's Headlines

  • ECB Crisis-Plan Judges Focus on Limits to Monetary Policy. German top judges examining the European Central Bank’s plan to buy bonds of crisis-torn countries asked whether the operation crosses the line from legitimate monetary policy to illicit state financing. Witnesses at the second day of hearings before the Federal Constitutional Court in Karlsruhe faced queries from the panel on whether the central bank’s Outright Monetary Transactions program oversteps the mark beyond the ECB’s mandate to conduct monetary policy. Judges also asked whether the rules underpinning that mandate should be revamped
  • Turkish Police Retake Square Amid Clashes. Turkish protesters urged people to return to Taksim Square this evening, after they were driven out by police last night. The Taksim Solidarity group, which says it represents protesters, called in an e-mailed statement for people to return to the square from 7 p.m. It reiterated demands including the preservation of the park, the dismissal of governors and police chiefs in cities where demonstrators have been attacked, and the release of those detained during the rallies.
  • Citigroup(C) Pushes Back Brazil Stock Rebound Call After Selloff. Citigroup Inc. (C) tempered its projections for a recovery in Brazilian stocks after the Ibovespa plunged into a bear market, predicting that the benchmark won’t rebound until next year. The 71-stock index has plunged more than 22 percent in 2013 from its peak of 63,312.46 on Jan. 3. Citigroup analysts Stephen Graham and Nicolas Riva, who had forecast a return to a level of 63,000 by the end of this year, now project that the measure will rebound by mid-2014, according to a research note dated yesterday. The bank had already cut its year-end Ibovespa target twice this year, according to the note. “The second half is only three weeks away, and things have just gotten uglier,” the analysts wrote. “Growth expectations around 4 percent are a distant memory.” The Ibovespa fell 0.9 percent to 49,304.44 at 3:13 p.m. in Sao Paulo today.
  • India’s Slower Industrial Growth Adds Policy-Change Pressure. India’s industrial-output growth slowed in April, adding pressure for more government steps to spur the economy as elevated consumer-price inflation threatens to limit the central bank’s room to extend monetary easing. Production (INPIINDY) at factories, utilities and mines rose 2 percent from a year earlier after a revised 3.4 percent gain in March, the Central Statistical Office said in New Delhi today. Another report showed consumer prices climbed 9.31 percent in May from a year earlier, exceeding the median 9 percent estimate in a Bloomberg News survey. Asia’s third-largest economy expanded at the weakest pace in a decade in the year ended March, hurt by an uneven global recovery and moderating investment. The rupee fell to a record low this week, a drop that may make imports costlier and stoke price increases that have narrowed the Reserve Bank of India’s scope for a fourth straight interest-rate cut on June 17. “This reaffirms that demand remains weak,” said Shubhada Rao, chief economist at Yes Bank Ltd. in Mumbai.
  • Emerging-Market Anxieties Jump by Most Since ’08: Credit Markets. The biggest drop in perceived creditworthiness for emerging-market borrowers since the credit crisis is deepening as speculation intensifies that central banks will scale back record stimulus. Prices on the Markit CDX Emerging Markets index, a credit-default swaps benchmark for debtor nations from Latin America to the Middle East and Asia, have tumbled 4 cents in the two weeks through yesterday to 107 cents on the dollar. The decline is the biggest since the failure of Lehman Brothers Holdings Inc. reverberated across financial markets and caused the index to plunge 6.7 cents in the period ended Nov. 18, 2008
  • Grain Prices Tumble as U.S. Sees Bigger Corn Supply, Wheat Crops. Corn futures tumbled the most in five weeks, leading declines in wheat and soybeans, after the U.S. said inventories will be bigger than analysts’ forecast as global production rebounds from a drought last year. Record domestic corn output of 14.005 billion bushels this year will more than double inventories before the harvest in 2014, and soybean production will be 3.39 billion bushels, the most ever, the U.S. Department of Agriculture said today in a report. While drought damage late last year will reduce the 2013 U.S. wheat harvest, global output will rise 6.1 percent.
  • Protectionism Surges to Worst Since Crisis as G-8 Nears. Global trade protectionism has surged to its highest since the financial crisis began in a threat to economic growth, according to Global Trade Alert. Four-hundred-thirty-one new protectionist measures were imposed from June 2012 to this month compared with 141 steps taken to liberalize commerce, said GTA, which was created in 2009 by University of St. Gallen professor Simon Evenett in Switzerland. Another 183 practices aimed at restricting trade are in the pipeline. With trade on the agenda for the upcoming U.K. meeting of Group of Eight leaders, the report said such nations were responsible for almost a third of protectionist measures over the past year.
  • Obama Quietly Raises 'Carbon Price' as Costs to Climate Increase. Buried in a little-noticed rule on microwave ovens is a change in the U.S. government’s accounting for carbon emissions that could have wide-ranging implications for everything from power plants to the Keystone XL pipeline. The increase of the so-called social cost of carbon, to $38 a metric ton in 2015 from $23.80, adjusts the calculation the government uses to weigh costs and benefits of proposed regulations. The figure is meant to approximate losses from global warming such as flood damage and diminished crops. With the change, government actions that lead to cuts in emissions -- anything from new mileage standards to clean-energy loans -- will appear more valuable in its cost-benefit analyses. On the flip side, approvals that could lead to more carbon pollution, such as TransCanada Corp. (TRP)’s Keystone pipeline or coal-mining by companies such as Peabody Energy Corp. (BTU) on public lands, may be viewed as more costly. “As we learn that climate damage is worse and worse, there is no direction they could go but up,” Laurie Johnson, chief economist for climate at the Natural Resources Defense Council, said in an interview. Johnson says the administration should go further; she estimates the carbon cost could be as much as $266 a ton.
  • IBM(IBM) Said to Start U.S. Job Cuts Today Amid Global ReductionInternational Business Machines Corp. (IBM) began cutting U.S. jobs today as part of a plan announced in April to spend $1 billion globally to trim its workforce, according to a person familiar with the move. The reduction targets employees with a range of seniority, from rank-and-file workers to executives, said the person, who asked not to be named because the information is private.
  • Traders Said to Rig Currency Rates to Profit Off Clients.
  • Budget Deficit in U.S. Widened in May as Spending Increases 10%. The U.S. budget deficit widened in May from a year earlier on a 10 percent increase in spending, the Treasury Department said. Outlays exceeded receipts by $138.7 billion last month compared with a $124.6 billion shortfall in May 2012, the Treasury said today in Washington.
Fox News: 
  • Byron Wien Expects ‘Trouble Ahead’. (video) The stock market is beginning to sense headwinds unrelated to quantitative easing, Blackstone Advisory Vice Chairman Byron Wien said Wednesday.  "I think while valuations are still fair, I think the market's made a lot of progress, and I think there's some trouble ahead," he said. "The trouble is that profit margins, in my opinion, have peaked and that earnings are going to be disappointing in the second half, and that's what the market is beginning to sense."
Zero Hedge: 
Business Insider: 
New York Times:
  • French Air Controller Strike Spreads to Other Countries. Air travel disruptions intensified across Europe on Wednesday as a strike led by French air-traffic controllers broadened in its second day to include smaller labor actions in other countries. Unions are protesting a plan by the European Union to accelerate the integration of air traffic management systems across the Continent
  • Indian Tire Maker to Buy Cooper Tire(CTB) for $2.5 Billion. One of India’s largest tire makers, Apollo Tyres, announced a deal on Wednesday to acquire the Cooper Tire and Rubber Company for $2.5 billion in cash. The acquisition would give Apollo a major foothold in the United States, the world’s second-largest auto market after China. Cooper, which focuses on passenger and light- and medium-truck replacement tires, is the fourth-largest tire maker in North America. Its brands include Cooper, Mastercraft, Starfire, Chengshan, Roadmaster and Avon.
Index Universe: 
  • Shiller: Housing Rebound Could Be Flaky. Shiller told Managing Editor Olly Ludwig that between the housing market’s clear dependence on the Federal Reserve’s ultra-easy monetary policies and signs the public’s enthusiasm about home ownership may be waning, there are clear grounds to wonder if the price gains in the past year may halt or even reverse.
Washington Post:
Financial Times:
  • Bundesbank’s Jens Weidmann backs legal curbs on ECB. The head of Germany’s Bundesbank said on Wednesday he would support a clarification of the European Central Bank’s room for manoeuvre in how it conducts monetary policy. Although Jens Weidmann did not explicitly call for EU treaty change, any attempt to change the ECB’s mandate would require such a move, a prospect likely to be greeted with alarm in European capitals.

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