Thursday, March 06, 2014

Today's Headlines

  • Crimea Makes Move to Join Russia as EU Clashes on Sanctions. Crimean lawmakers called a March 16 referendum to return Ukraine’s Black Sea peninsula to its former Soviet-era master as European Union leaders quarreled over how to tame Russia for its military actions there. As the region’s leaders pushed for a split away from Ukraine, The U.S. banned visas for officials it said were complicit in violating the sovereignty of the ex-Soviet state of 45 million. A summit in Brussels started with eastern EU states calling for a tough line on the Kremlin and their western counterparts offering Russia more time to pull back its forces in Crimea before imposing sanctions. “This so-called referendum has no legal grounds,” Ukrainian Prime Minister Arseniy Yatsenyuk said in Brussels after meeting EU leaders. “We urge the Russian government not to support those who claim separatism in Ukraine. Crimea was, is, and will be an integral part of Ukraine.”
  • Republicans Seek Quick Congress Action on Russia Sanctions. Citing what they call a pattern of foreign policy failures by Obama, Republicans yesterday said it was imperative for Congress to respond quickly to persuade Russian President Vladimir Putin to loosen his grip on the Crimea region. Putin is “counting on the United States to sit back and watch him do and take whatever he wants,” House Speaker John Boehner, an Ohio Republican, said today.
  • EU Halts Russian Trade, Visa Talks With Threat of More Curbs. European Union governments halted trade and visa negotiations with Russia and prepared sanctions against selected Russian officials to protest the Kremlin’s assertion of control over Ukraine’s southern Crimea region. EU leaders sent the diplomatic signals at a summit in Brussels today that pitted western European countries keen to offer Russia more time to pull back its forces before imposing sanctions against eastern countries demanding retribution now. 
  • Draghi Says Deflation Danger Should Abate as Economy Revives. European Central Bank President Mario Draghi signaled that deflation risks in the euro region are easing for now after new forecasts showed that inflation will approach their target by the end of 2016. “The news that has come out since the last monetary policy meeting are by and large on the positive side,” he told reporters in Frankfurt today after the central bank kept its main interest rate at 0.25 percent. He also indicated that money markets are under control at the moment, lessening the need for emergency liquidity measures. 
  • China Bond Sales Axed as Looming Default Boosts Junk Yields. Four companies pulled domestic bond sales and yields on speculative-grade debt jumped the most since November after Shanghai Chaori Energy Science & Technology Co. warned of what would be China’s first onshore default. The yield on five-year AA- notes rose eight basis points to 7.77 percent yesterday, the biggest increase since Nov. 15, ChinaBond data show. The spread over similar-maturity government bonds widened seven basis points to 356 basis points. Ratings of AA- or below are equivalent to non-investment grades globally, according to Haitong Securities Co., the nation’s second-biggest brokerage.
  • Brazil Signals Additional Tightening on Persistent Inflation. Brazil’s central bank signaled today it will continue tightening monetary policy as above-target inflation remains persistent. Swap rates rose. Policy makers led by bank President Alexandre Tombini voted unanimously on Feb. 26 to slow the pace of rate increases, raising the benchmark Selic rate to 10.75 percent from 10.5 percent after six straight half-point increases. The central bank’s monetary policy will help offset inflationary pressure from a currency depreciation, officials said in the minutes of their Feb. 25-26 meeting published online today
  • Gold Futures Advance on Outlook for U.S. Rates, Europe Inflation. Gold futures rose for the second straight day amid forecasts that U.S. borrowing costs will hold at a record low and European inflation will pick up gradually. Through yesterday, gold climbed 11 percent this year on demand for a haven amid turmoil in Ukraine and concern that the U.S. is faltering.
  • World Food Prices Jump Most in 19 Months as Oils and Grains Rise. World food prices rose 2.6 percent in February, the biggest jump in 19 months, as prices for cooking oils, grains, dairy and sugar all rose, the United Nations’ Food & Agriculture Organization said. An index of 55 food items rose to 208.1 points from a restated 202.9 in January, when it dropped to the lowest level since June 2012, the Rome-based FAO wrote in an online report today. The gauge is still down 2.1 percent from a year earlier.
  • Banks Enriched by Junk Resist U.S. Regulator Standards. More than five months ago, the Federal Reserve and Office of the Comptroller of the Currency told some of the biggest banks to improve underwriting standards for non-investment-grade loans. The market is showing few signs of tightening as lenders chase lucrative fees. Banks are arranging junk-rated deals that leave companies with debt levels exceeding guidelines set by regulators. Bank supervisors are insisting on minimum standards as they seek to avoid a repeat of the losses that occurred during the credit crisis, which sent the global speculative-grade default rate to more than 13 percent in 2009, the highest since the Great Depression. The persistence of deals with questionable terms shows that, so far, regulators are having trouble deterring excessive risk-taking simply by asking. “Jawboning rarely works if there’s money to be made,” said Mark Calabria, director of financial regulation studies at the Washington-based Cato Institute, a research group that espouses limited government. “History doesn’t repeat itself but sometimes it rhymes -- I certainly have those concerns.”
Wall Street Journal:    
Fox News:
  • Fox News poll: Obama's approval hits new low. For the first time in a Fox News poll, fewer than four voters in ten -- 38 percent -- approve of President Obama’s job performance. Fifty-four percent disapprove. Before now Obama’s worst job rating was 40-55 percent in November 2013. Last month 42 percent approved and 53 percent disapproved (February 2014).
Business Insider: 
  • European stocks lose steam as ECB sits on its hands. European stock markets gave up their gains on Thursday after the European Central Bank chose not to take action to inject more liquidity into the region's financial system, disappointing some investors.
  • Patience wearing thin with French reform results. France is facing pressure to deliver on long-promised, deep budget savings in the next couple of weeks to keep the increasingly strained faith of its EU partners, bond markets and ratings agencies.

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