Thursday, December 05, 2013

Today's Headlines

  • ECB Cuts Inflation Forecast as Draghi Pledges Low Rates. European Central Bank President Mario Draghi re-affirmed that interest rates will stay low for the foreseeable future, after officials cut their inflation forecast for next year. “We may experience a prolonged period of low inflation,” Draghi said at a news conference in Frankfurt today, echoing language he used last month after the ECB unexpectedly cut interest rates. Today, the ECB kept its main rates unchanged.
  • Draghi Hints Any New LTRO-Style Operations Will Be Conditional. European Central Bank President Mario Draghi said any new long-term refinancing operations will be targeted at the economy to prevent banks from exploiting such measures to enhance their balance sheets. “If we do operations similar to LTRO, we want to make sure this is being used for the economy,” Draghi said today after the ECB kept interest rates unchanged at a record low. “And we want to make sure that this operation is not going to be used for subsidizing capital formation by the banking system under these carry trade operations.” 
  • Deutsche Bank(DB) Cuts 200 as Commodities Jobs Fall to 2009 Low. Deutsche Bank AG, Europe’s biggest investment bank, will cut about 200 jobs in commodities as it shrinks its trading business at a time when headcount at commodities units at the top 10 banks is already at the lowest since 2009 amid tighter regulations and sliding revenue.
  • Russian Inflation Jump to Three-Month High Exceeds Estimates. Consumer prices rose 6.5 percent from a year earlier after a 6.3 percent increase in October, the Federal Statistics Service in Moscow said today in a statement. Economists predicted an increase of 6.4 percent, according to the median of 19 estimates in a Bloomberg survey. The rate has held above the target range of 5 percent to 6 percent for 15 months. 
  • European Stocks Post Longest Losing Streak in Five Months. European stocks slid, posting their longest losing streak in five months, as European Central Bank President Mario Draghi said that financial-market developments and low domestic demand may hurt the euro area’s economy. FLSmidth (FLS)& Co. A/S retreated 1.9 percent as the Danish mining-equipment maker cut its earnings margin forecast. Vienna Insurance Group AG (VIG) declined 5.2 percent as an unidentified investor sold 2.29 million shares in the company. AZ Electronic Materials SA surged the most since its initial public offering in October 2010 after Merck KGaA agreed to buy the company for about 1.6 billion pounds ($2.6 billion). Merck rose 4.9 percent. The Stoxx Europe 600 Index lost 0.9 percent to 314.41 at the close of trading in London.
  • Keynesians Revive a Depression Idea by Caroline Baum. The “it” is secular stagnation, which seems to be the New New Thing or the new new normal: a way to describe the persistent state of subpar economic growth plaguing developed nations. Think of it as Japan’s lost decade gone global.
  • Budget Talks Target One Year Deal as Lawmakers Protest. U.S. budget negotiators are narrowing a possible deal to ease automatic spending cuts to just one year amid objections from affected groups and lawmakers in both parties, said people familiar with the talks. A compromise being crafted by the two leaders of a 29-member panel is drawing protests from Democrats and groups including federal employees, who could contribute more to their pensions under the proposal, and airlines, which could face higher fees. Some Republicans are concerned a bipartisan deal will replace spending cuts set in law with promises of future savings that might not be realized.
Wall Street Journal: 
  • Fed's Fisher Says Unemployment Rate Still Not Good Enough. U.S. Economic Growth Just 'Modest to Moderate'. Asked whether the stock-market highs were sustainable given the chance that the Fed will change policy, Mr. Fisher said they may not be. He pointed to the stock market's reaction to fears of possible Fed tapering during the summer as evidence of the influence of Fed policy on the markets and economy. "We had a discussion about whether" to dial back purchases of Treasurys and it "sent a shiver up the spine of the economy," Mr. Fisher said. "That tells me people are way too dependent on the Federal Reserve," Mr. Fisher said. "One has to take into account whether on a nominal basis or a inflation-adjusted basis, we're a few points off all-time highs" on the stock market, Mr. Fisher said. "I believe markets are manic-depressive mechanisms…they overshoot on both sides," he said. "We're at least a standard deviation above the norm on an inflation-adjusted basis. Is that sustainable? You know your math; it's rarely sustainable."
  • Edward Lampert's Hedge Fund Shrinks as Investors Pull Money. Clients of Goldman Sachs Make Redemption Requests. Clients of Goldman Sachs Group Inc. who invested about $3.5 billion in Edward Lampert's hedge fund through a 2007 deal have asked for their money back, according to people with knowledge of the matter. The redemption requests were submitted last year in advance of the expiration of the five-year lockup of the investors' money. 
  • 30-Yr Mortgage Rate Hits 10-Week High 4.46%. With Treasury yields creeping higher lately, mortgage rates rose in the latest week as well, with the average 30-year fixed-rate mortgage rate jumping to 4.46% – the highest reading since the week ending Sept. 19 – from 4.29% a week earlier, according to Freddie Mac’s (FMCC) latest Primary Mortgage Market Survey. A year ago that rate stood at 3.34%, just off its all-time low 3.31%.
Fox News:
  • NSA reportedly collects 5 billion cell phone location records a day. The NSA collects nearly 5 billion records a day on the locations of cell phones overseas to create a huge database that stores information from hundreds of millions of devices, including those belonging to some Americans abroad, the Washington Post reported Wednesday.
Zero Hedge:
Business Insider: 
Real Clear Politics:
  • Obamacare's Next Problem: Doc Shock. Meet Chico, Calif., attorney Kenneth Turner. His wife found out that she has breast cancer two days before they received their cancellation notice. She's scheduled for surgery Dec. 20 and will hear the prognosis Dec. 30. Two days later, she loses the doctor who will have operated on her, as well as other doctors she has seen for decades.
  • Latin America poverty decline slowing as economies cool - U.N. Weaker macroeconomic performance and rising food costs have put the brakes on the rate of poverty decrease in Latin America, the United Nations' economic body for the region said on Thursday. An annual survey by the Economic Commission for Latin America and the Caribbean shows 27.9 percent of Latin Americans live in poverty, while 11.5 percent are in extreme poverty. The number of poor - about 164 million - has remained stable compared to 2012, falling slightly in percentage terms. The numbers in extreme poverty rose slightly to 68 million.
  • Bargain-hunting dents U.S. retailers' November sales. Several major U.S. retailers posted disappointing sales for November after shoppers remained cautious about spending, the latest sign that the holiday season is shaping up to be the toughest in years. Some companies that reported sales gains had to offer more bargains to attract shoppers. The need to keep discounting, which stems from sagging consumer confidence and shoppers trained to wait for bargains, will persist through the remainder of the season, said Edward Jones analyst Brian Yarbrough.
  • METALS -Nickel, tin up on Indonesia ban, copper down on Fed fears. Nickel and tin rose on Thursday after Indonesia reiterated it would impose an export ban on ore, while copper dipped on worries the Federal Reserve could curtail monetary stimulus following strong U.S. economic data. Copper was last bid at $7,068, down 0.4 percent, after failing to trade in closing open outcry activity. It reached a nine-day high in the previous session. 
  • Fed should define a clear path to end of QE3: Fisher. The Federal Reserve should lay out a clear plan for the end of its current round of quantitative easing, a top Fed official who has never supported the bond-buying program said on Thursday. "We should define a very clear path," Dallas Federal Reserve Bank President Richard Fisher told reporters after a talk here, reducing the Fed's $85 billion-a-month bond buying program by a set amount until it reaches zero.
Echoing fears that European policymakers remain in a state of cognitive dissonance – recognizing the need for root-and-branch overhaul of peripheral banks, but backtracking on joint liability plans – Christopher Flowers, the legendary FIG investor who now runs the £2.3 billion ($3.5 billion) private equity group JC Flowers, sounded the alarm over the negative sovereign-bank feedback loop. In a shot across the bows of market bulls, who cite the return of capital flows to weaker eurozone states, Flowers issued a stark warning: "There is a scenario where we have a Lehman-type event: we wake up some Thursday and a big country is in trouble. "And the ECB will have to decide to support banks x, y, z. And then the ECB will, in fact, decide to own bank x, y, z.

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Japan Times:
  • Japan-ASEAN draft implies China’s new ADIZ is a security threat. Japan and the Association of Southeast Asian Nations will express their concern in a joint statement that any abuse of power in international civil aviation could pose a security “threat,” a Japan-ASEAN diplomatic source said Thursday, in an implicit reference to China’s new air defense zone.

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