Friday, December 20, 2013

Today's Headlines

  • EU Loses AAA Rating at S&P as States’ Creditworthiness Falls. The European Union lost its top credit rating from Standard & Poor’s, which cited the deteriorating creditworthiness of the bloc’s 28 member nations. S&P cut its long-term rating on the EU to AA+, with a stable outlook, from AAA and maintained its short-term rating at A-1+. The downgrade came after S&P last month lowered its AAA rating on the Netherlands
  • Spain Markets Splinter as Europe Builds Bank Union: Euro Credit. Spanish Prime Minister Mariano Rajoy is faced with a splintering of domestic financial markets, just as European governments move closer to a banking union. In the coming months, the country’s 17 semi-autonomous regions will be allowed to create a levy on bank deposits, Budget Minister Cristobal Montoro said on Dec. 18 after a meeting with local budget chiefs. The government decided to comply with a ruling by the Constitutional Court saying that the tax is within the regions’ powers, he said. “Banks will suffer from the tax more than the regions will benefit from it,” said Santiago Carbo-Valverde, an economist at Spain’s saving banks’ association Funcas, who also teaches banking and finance at Bangor University in the U.K. “The tax isn’t justified from an economic point of view and will penalize banking liquidity when it’s most needed.” 
  • Prada Says 2014 Sales May Miss Estimates on China, Italy. Prada SpA (1913) said it may fall short of analysts’ predictions for fiscal-year revenue after unfavorable currency moves and slowing demand for luxury goods in Europe and Asia weighed on third-quarter profit. “Consensus at the moment is challenging,” Chief Financial Officer Donatello Galli said, without specifying a figure, during a conference call after Milan-based Prada reported quarterly profit today. Before the announcement, analysts were predicting that sales in the year through January would rise to 3.71 billion euros ($5.1 billion) from 3.3 billion euros, according to the average of 32 estimates compiled by Bloomberg. Prada, whose products include $2,950 leather handbags, joins European luxury-goods makers including LVMH Moet Hennessy Louis Vuitton SA (MC) and Gucci owner Kering SA (KER) in reporting slowing revenue growth as Chinese demand wanes and the euro strengthens against currencies including the Japanese yen. Fewer Chinese consumers are shopping in Europe, preferring instead to go to the U.S., while domestic consumption remains under pressure in Italy and Spain, Chief Executive Officer Patrizio Bertelli said on the call. “Unfavorable exchange rates and softening consumption patterns in some regions could weigh on results, and thus will require increasing attention by the management in order to ensure profitability and continue the retail expansion,” Prada said in a statement. 
  • European Stocks Post Biggest Weekly Advance Since April. European stocks posted their biggest weekly rally since April as the Federal Reserve’s decision to reduce its monthly bond purchases increased investors’ confidence in the strength of the U.S. economic recovery. Cable & Wireless Communications Plc (CWC) surged 16 percent after U.K. newspapers named it as a potential acquisition target. Carnival Plc jumped 10 percent after the world’s largest cruise-ship operator posted quarterly sales (CCL) that beat estimates. CGG SA slumped 15 percent after the world’s biggest seismic surveyor of oilfields cut its earnings forecast for 2013. The Stoxx Europe 600 Index rose 3.7 percent to 321.14 this week, trimming its decline from the beginning of the month to 1.2 percent.
  • China’s Stocks Extend Slump in Longest Streak Since 1994. China’s stocks fell, with the benchmark index posting longest losing streak in almost two decades, as targeted fund injections by the central bank failed to alleviate the worst cash crunch since June. China Construction Bank Corp. sank 6.2 percent after touching its lowest level in almost five years. China Everbright Bank Co. slid 4 percent in its debut in Hong Kong. Ping An Insurance (Group) Co. dropped 4.7 percent. The People’s Bank of China conducted short-term liquidity operations recently, it said on its microblog yesterday, without giving details of the recipients, amount or rate charged. The Shanghai Composite Index (SHCOMP) dropped 2 percent to 2,084.79 at the close in a ninth straight day of losses and capping a 5.1 percent weekly decline. The seven-day repurchase rate, a gauge of liquidity in the financial system, increased 100 basis points to 7.60 percent, according to a daily fixing by the National Interbank Funding Center. It jumped 328 basis points this week, the most since January 2011. 
  • WTI Oil Rises to 2-Month High. WTI for February delivery increased 20 cents to $99.24 a barrel at 1:32 p.m. on the New York Mercantile Exchange. Futures touched $99.40, the highest intraday level for a contract closest to expiration since Oct. 22. The volume of all futures traded was 32 percent below the 100-day average.
Wall Street Journal:  
  • China Money Market Interest Rates Jump. Interbank Rates Hit Highest Since the Summer Despite Central Bank's Cash Injection.  A cash squeeze is rippling through the Chinese financial system despite three days of liquidity injections by the country's central bank, as borrowers scramble to secure funds before the end of the year. The situation worsened Friday as the interest rate banks charge each other for short-term loans jumped to 8.2%, the highest level since a crippling liquidity shortage in the summer. The stress in the banking system is starting to spread: Stocks in Shanghai fell for a ninth consecutive day to the weakest level in four months, while government bonds dropped, pushing the 10-yield near to its highest level in eight years.
  • All-cash home sales reach new high. Why the Fed tapering may help drive more all-cash buyers. More Americans are buying homes in all-cash deals, according to a new report. But real-estate experts say this increase may not be a good sign for the health of the housing market, which may also be impacted by the Federal Reserve’s decision to pull back on its bond-buying program.
Business Insider: 
Washington Post:
  • Obamacare's Radicalism Exposed. The lie of the year, according to Politifact, is “If you like your health care plan, you can keep it.” But the story of the year is a nation waking up to just how radical Obamacare is — which is why it required such outright deception to get it passed in the first place.
Financial Times: 
  • Short-focused fund to launch in Canada. Investors in Canada are to get the chance to bet against their own real estate market as one of the first short-focused funds is set to launch in the country, where concerns have grown that there is a housing bubble ready to burst.
  • GCHQ and NSA targeted charities, Germans, Israeli PM and EU chief. British and American intelligence agencies had a comprehensive list of surveillance targets that included the EU's competition commissioner, German government buildings in Berlin and overseas, and the heads of institutions that provide humanitarian and financial help to Africa, top secret documents reveal.

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