Tuesday, December 17, 2013

Today's Headlines

  • Spain’s Regions Can’t Endure More Budget Cuts, Andalusia Says. Spanish regions can’t endure more spending cuts, Andalusia’s budget chief said, as she defended levying a tax on bank deposits. Maria Jesus Montero Cuadrado, budget chief of Spain’s most populous region, is resisting central government demands for more cuts through 2015. Undermining health or education is a “red line” for Andalusia, which has a 36 percent jobless rate, she said in an interview in Seville yesterday.  
  • China Shibor Jumps Most in Seven Weeks on Year-End Cash Demand. The Shanghai interbank offered rate, or Shibor, for one-month yuan loans climbed 68 basis points to 6.24 percent in the biggest jump since Oct. 25, according to the National Interbank Funding Center. The seven-day repurchase rate, a gauge of cash supply in the banking system, rose the most in more than a month as the central bank refrained from injecting money for the fourth auction in a row, according to a trader at a primary dealer required to bid at the auctions.
  • Emerging-Market ETF Declines Before Fed as Turkey Tumbles. The iShares MSCI Emerging Markets Index exchange-traded fund fell, snapping a two-day advance, ahead of the Federal Reserve’s policy statement tomorrow. Turkey’s stocks led world losses amid corruption arrests. The developing-nation ETF slipped 0.4 percent to $41.07 at 10:48 a.m. in New York. The Borsa Istanbul National 100 Index sank 5.2 percent after the sons of two cabinet ministers and the chief executive officer of Turkey’s largest state-owned bank were arrested as part of a corruption probe.
  • European Stocks Drop Before Fed Meeting; CGG, Rexel Fall. European stocks retreated, following their biggest rally in two months, as investors awaited the outcome of a two-day Federal Reserve meeting starting today. CGG SA, the largest seismic surveyor of oilfields, fell the most on the benchmark index after cutting its 2013 earnings target. Rexel (RXL) SA lost 1 percent as Ray Investment SARL sold a 7 percent stake in the company. Zurich Insurance Group AG (ZURN) climbed 1.9 percent after naming Swiss Re Ltd.’s George Quinn as its new chief financial officer. The Stoxx Europe 600 Index dropped 0.7 percent to 311.31 at the close of trading.
  • Corn Plummeting Spurs Talk of ’80s U.S. Farmland Bust: Mortgages. American farmers have prospered during a three-year boom in corn and cropland prices. As values have soared since 2011, farmers bought more acres and upgraded their harvesters to produce a record corn crop of almost 14 billion bushels in 2013. Now, as corn prices start to decline, bankers and agricultural economists are predicting a slowdown in farmland prices that could turn into a bust. “I can see the fear in farmers’ eyes when they think of all the moving pieces around the world gutting the value of next year’s crop,” said David Kohl, an agricultural economist and president of consulting firm AgriVisions, who last week spoke at several farming conferences in northern Nebraska. “Most of them know the boom in corn prices and farmland prices is coming to a screeching halt.”
  • Riskiest U.S. Borrowers Expand to Six-Month High: Credit Markets. The number of U.S. companies with the lowest credit ratings has jumped to the highest level in six months after speculative-grade borrowers obtained a record amount of bonds and loans in 2013. Some 15 borrowers are rated B3 with a "negative" outlook, up from 148 three months ago and the most since reaching a high for the year of 160 in June, according to Moody's Investors Service. Riskier borrowers are benefiting from the Fed's decision to hold interest rates near zero for a fifth year, spurring investor demand for higher-yielding assets. Junk-rated companies in the U.S. have raised about $377 billion of bonds and $310.8 billion of new loans this year, according to Bloomberg.
  • Fed’s $4 Trillion in Assets Draw Lawmakers’ Scrutiny. The Federal Reserve’s balance sheet is poised to exceed $4 trillion, prompting warnings its record easing is inflating asset-price bubbles and drawing renewed lawmaker scrutiny just as Janet Yellen prepares to take charge. The Fed’s assets rose to a record $3.99 trillion on Dec. 11, up from $2.82 trillion in September 2012, when it embarked on a third round of bond buying. Policy makers meet today and tomorrow to decide whether to start curtailing the $85 billion monthly pace of purchases. Among Fed officials, “there’s discomfort in the sense that the portfolio could grow almost without limit,” former Fed Vice Chairman Donald Kohn said last week during a panel discussion in Washington. Kohn said there was “discomfort in the potential financial stability effects” and added: “There’s some legitimacy in those discomforts.” 
  • High-Speed Trading, Interest Rates Pose Risks, Treasury Says. The U.S. financial system’s vulnerabilities include a sudden spike in interest rates amid greater risk-taking and high-frequency trading, the Treasury Department said. While threats to stability have “generally abated” from a year ago, they remain in markets for short-term funding and credit, interest rates and volatility, and in automated, high-speed trading that represents a significant portion of daily equity and foreign exchange volumes, the Treasury’s Office of Financial Research said in its annual report released today in Washington.
Wall Street Journal: 
  • Senate Advances Budget Deal. Two-Year Budget Plan All but Ends Threat of Another Government Shutdown. A two-year budget deal cleared its last major hurdle Tuesday as the Senate voted to advance a compromise designed to ease the impact of impending spending cuts and avoid a government shutdown when funding runs out in mid-January.
  • India Removes Security Barriers Around U.S. Embassy. Move Follows Arrest of Indian Diplomat in New York. India retaliated for the arrest of one of its diplomats in New York by dismantling security barriers on streets around the U.S. embassy in New Delhi and revoking some privileges given to American consular officials.
  • Dollar Lower Against Yen as Possible Fed Tapering in Focus. The dollar fell against the yen amid profit taking during Asian trading Monday as investors adjusted their positions ahead of a Federal Reserve policy decision later this week that could see it start scaling back its massive bond-buying program. The greenback lost some of its gains against the yen as it rose to a five-year high last week on growing speculation that the Fed will begin winding down its monthly $85 billion stimulus at its Dec 17-18 policy meeting.
  • Fed-inflated stocks a 'hall of mirrors': Jim Grant. (video) The stock market is being led by the dangerous "monetary manipulation" of the Federal Reserve's $85-billion-a-month in quantitative easing bond purchases, Jim Grant—founder and editor of Grant's Interest Rate Observer—said Tuesday, as the central bank began its final meeting of the year. "The stock market is now a tool of Fed policy," he said on CNBC's "Squawk Box". "What the Fed is doing is an exercise in price control. This is 'stocks.gov' [and] 'bonds.gov,'" Grant said. "The clear and present risk of the stock market is we're living ... in a hall of mirrors" because the Fed's accommodative policy is distorting the calculations by which the market has been traditionally valued.
Business Insider:
The Blaze:
  • Next Obamacare crisis: Small-business costs? Think the canceled health policies hurt the Obamacare cause? There’s another political time bomb lurking that could explode not too long before next year’s elections: rate hikes for small businesses.
  • UAW wants to eliminate two-tier wage system: official. A top official with the United Auto Workers said the American labor union wants to eliminate the two-tier wage system that pays new automotive workers at a lower rate than veterans. Norwood Jewell, nominated to serve as one of three vice presidents when the union meets next June to ratify its new leaders, said on Monday that the UAW wants to dump the two-tier scale that pays entry-level hires at slightly more than half the rate of veteran workers.
Financial Times: 
  • China accuses US of ‘harassing’ naval vessels. A Chinese newspaper has accused a US navy ship of “harassing” a group of Chinese naval vessels in connection with a maritime incident that occurred as US Vice-President Joe Biden was visiting China.
  • Facebook(FB) tracks everything you type even if you DON'T post the update or comment. Have you ever written a comment, or Facebook status, before deciding not to post it? According to new Facebook research, 70 per cent of us do this regularly. The study found that men are more likely to 'self-censor' their social network posts, compared to women, and this is especially the case if they have a lot of male friends. More surprising, however, is the reason why the site knows this information - because it can track what you type, even if you never post it

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