News That Matters (August 11, 2011)

via The Trader,
The flagship fund of Paulson & Co, the world’s third-largest hedge fund, lost more than 10 per cent of its value in the first week of August alone, the FT reports. At Friday’s close, the Advantage Plus and unleveraged Advantage strategies were down 31 per cent and 21 per cent respectively for the year

George Osborne is to tell MPs on Thursday that he has drawn up contingency plans to deal with the fallout of a new European banking crisis, amid renewed market turmoil and speculation about the health of the French banking sector. The FT reports Mr Osborne will tell an emergency session of the Commons that there is no immediate threat to financial stability

French president Nicolas Sarkozy gave his finance and budget ministers a week to devise new measures to cut France’s budget deficit as shares in the country’s banks plummeted in the latest bout of financial markets turmoil

Groupon has abandoned a controversial accounting measure in a revised prospectus for its initial public offering filed on Wednesday. The FT reports the Chicago-based online coupon company was criticised after its initial filing in June for using a metric called “adjusted consolidated segment operating income”,

Shares in Cisco Systems rose as much as 13 per cent in late trading after profit and sales beat analysts’ estimates, Bloomberg reports. It was the first time in six quarters that the shares gained after results. Profits of 40 cents per share in the fourth quarter exceeded average analysts’ estimates of 38 cents

Trading in equities and derivatives has hit record levels this week, the FT reports, as investors traded frantically in response to a tumult of factors such as the US Federal Reserve’s decision to stick with near-zero interest rates until 2013,

The yuan strengthened beyond Rmb6.4 per dollar for the first time in 17 years, Bloomberg reports, supported by the Federal Reserve’s pledge to keep interest rates at a record low and signs China will
Asian shares hit the skids again Thursday amid another battering for global markets, while the euro was choppy as investors remained cautious. Japan’s Nikkei Stock Average fell 1.6%, Australia’s S&P/ASX 200 lost 1.4%, South Korea’s Kospi Composite dropped 1.8% after slumping over 4.0% on the opening bell, and New Zealand’s NZX-50 was 0.1% lower.

France is preparing new measures to ensure it meets its deficit-reduction targets, French President Nicolas Sarkozy said Wednesday, as the country gears up to fight to retain its top-notch triple-A credit rating. Mr. Sarkozy, who unexpectedly came back to Paris from his holiday retreat on the Côte d’Azur to call a meeting with key cabinet ministers and Bank of France governor Christian Noyer, said the deficit-reduction goals are “imperative,” and tasked the finance and budget ministers to make proposals so that they can be safeguarded.

The euro rebounded from early session lows in Asia trade on Thursday, led by a rally in regional stocks that caught many analysts by surprise given investors globally remain downbeat on the prospects for world growth. Catching the eye of traders was the daily fix of the yuan against the U.S. dollar after the Chinese central bank guided its currency to a stronger-than-expected level

Bank of England Governor Mervyn King said Wednesday he won’t commit to any particular path for monetary policy as the central bank cut its forecasts for both inflation and economic growth in the U.K. Mr. King told reporters it is “very dangerous” for policy makers to make a public commitment around future interest rates and that monetary policy should instead react to changes in economic conditions as they arise. “Monetary policy has to be able to respond to changing circumstances,” Mr. King told reporters following the publication of the BOE’s quarterly inflation report. Mr. King’s reluctance

Greece’s ambitious reform program suffered a double setback Wednesday after it emerged that talks with the country’s creditors on a bond swap plan have stumbled and fresh data showed a sharp increase in the budget deficit. Citing poor private sector participation, officials said that a plan to swap Greek government debt maturing by 2020 into new, longer-dated securities, might be extended to include bonds falling due in 2022 or even 2024.

The Bank of Korea kept its benchmark interest rate on hold for a second straight month as it opts to tread cautiously in normalizing policy amid global market turmoil and increasing concerns about the health of Korea’s major export markets. The BOK, as expected, held its policy rate at 3.25% at its monthly rate review on Thursday.  “The Korean economy appears on track for steady growth. However, the downside risk to growth is likely to increase due mostly to the momentum of recoveries in the U.S. and other major countries slowing, and to signs of sovereign debt problems in the euro area spreading,” the BOK said.

Financial stocks took another thumping Wednesday, adding to the pressure building on Bank of America Corp. Chief Executive Brian Moynihan. BofA shares led a financial rout for the second time this week. They slid 11% to $6.77 in heavy trading even as Mr. Moynihan struck a contrite tone in an unusual public conference call, in his latest effort to win over skeptical investors.

South Korea returned fire twice toward North Korea Wednesday after it said artillery shells fired from the North landed on the southern side of the countries’ sea border near an island Pyongyang attacked last year. The flare-up underscores how any progress in talks over the North’s nuclear program could be derailed by armed  confrontation.

After three decades of serial reorganizations, Eastman Kodak Co. is struggling to stay in the picture. The 131-year-old company lost much of its film business to foreign competitors, then mishandled the transition to digital cameras. Now it is quickly burning through its cash as it remakes itself into a company that sells printers and ink.
The Australian unemployment rate rose 0.1 percentage points to 5.1% in July, according to data compiled by the Australian Bureau of Statistics. Economists had been expecting an unemployment rate of 4.9%. The number of people unemployed increased by 18,000 to 611,600 while the number of employed remained broadly unchanged at 11.45 million, the ABS data showed. The country’s participation rate remained steady at 65.6%

Japan’s core machinery orders, a key leading indicator for capital spending, rose 7.7% in June, the Cabinet Office reported Thursday, widely beating a 1.7% forecast from a Dow Jones Newswires survey of analysts. Core machinery orders, which strip out volatile power-utility and shipping orders, rose 3.0% in May. However, the data set is generally volatile, and the June release included a forecast for the orders to rise just 0.9% during the July-September quarter.

Oil prices have been thumped as concerns about global growth keep investors sidelined, but analysts say the fundamentals in Asia remain strong enough to reinvigorate energy demand. Demand has weakened in light of the struggling world economy. This week, the International Energy Agency (IEA) cut its global outlook for 2011. The IEA now estimates for 2011 global oil demand will be 60,000 barrels a day less than previously projected, with the agency citing the impact of high crude prices and slowing economic growth.
Brent slipped on Thursday, reversing the previous session’s gain of 4 percent, on worries over demand as the European debt crisis spilled in to France amid a weaker economic outlook for the United States.Brent crude fell as low as $105.00 a barrel and traded 40 cents lower at $106.28 by 0228 GMT, after gaining $4.11 to settle at $106.68 a barrel. U.S. oil slumped as low as $81.14 and traded down 17 cents at $82.72.

Concerns about S&P’s downgrading of the U.S. credit rating and the resulting global stock sell-off are sparking urgent calls for investigations and reinvigorating ongoing efforts to reform the ratings agencies, which have been under fire since the Enron scandal of 2001. Representative Maxine Waters, a California Democrat, on Wednesday called for the House Financial Services Committee to hold a hearing on the implications of the S&P downgrade.
Google Inc. (GOOG) , the largest Internet- search provider, lost share among U.S. online searches in July while Yahoo! Inc. gained, researcher ComScore Inc. (SCOR) said. Google’s share of the U.S. Web-search market declined to 65.1 percent last month from 65.5 percent in June, while Yahoo’s rose to 16.1 percent from 15.9 percent, according to Reston, Virginia-based ComScore. Microsoft Corp. (MSFT)was unchanged at 14.4 percent.

Economic miracles sometimes need course corrections, even in Singapore, which last year was home to more U.S. dollar-millionaire households per capita than any other country, according to Boston Consulting Group Inc. As non-Singaporean workers and companies have poured into what the World Bank says is the easiest place on earth to do business, some Singaporeans have been left behind. Theincome gap between richest and poorest has widened in recent years, according to the government statistics department.

Societe Generale (GLE) SA, France’s second-largest bank, denied “all market rumors” and asked the nation’s market watchdog for an investigation after speculation France’s creditworthiness was in doubt sent the shares tumbling. The lender’s performance in July and early August shows it will be able to post “solid” results in the future, Paris- based Societe Generale said in a statement after the market closed yesterday. The bank asked France’s Autorite des Marches Financiers to open a probe into the origin of speculation that is “extremely harmful to the interests of its shareholders.”

Bill Gross was right after all, though that hasn’t helped his investors this year. Former White House economic adviser Lawrence Summers and Christina Romer, the former chairman of the U.S. Council of Economic Advisers, were among critics who challenged a view promoted by Gross’s Pacific Investment Management Co. that the U.S. economy may be headed for a long period of below-average growth and high unemployment, a scenario known as “new normal.” Money manager Kenneth Fisher called the concept “idiotic.”

Central bankers are racing to shield their economies from fiscal tightening and lopsided currency swings that threaten a new global recession. In the 72 hours after a Group of Seven conference call on Aug. 7, the Federal Reserve pledged to keep interest rates near zero through at least mid-2013, the European Central Bank intervened in bond markets and the Bank of England indicated it’s ready to add more stimulus if needed. Japan signaled renewed concern about the yen and Switzerland yesterday stepped up its fight to curb an “overvalued” franc.
Gold eased on Thursday from record highs struck earlier in the session after the CME Group raised margins on COMEX gold futures, but turmoil in the global financial markets and fears of slower growth will buoy sentiment. Spot gold hit an all-time high of $1,813.79, and U.S. gold rose to a record high of $1,817.6 early in the day. Both eased after the CME Group raised margins on U.S. gold futures by 22.2 percent, driving spot gold down to $1,790.29 an ounce by 0337 GMT, off 0.2 percent from the previous close.

Goldman Sachs on Wednesday reviewed its position on further monetary stimulus, saying that further quantitative easing had a greater than ever chance of being implemented in the United States. “We now see a greater chance that the FOMC (Federal Open Market Committee) will resumethis year or in early 2012. We’ve changed our call because the committee’s reaction to incoming economic data is more dovish than previously thought,” Jan Hatzius, chief U.S. economist Goldman Sachs said in a note.

Extreme market turmoil is forcing a marked shift in central bank policy, pushing the lenders of last resort to go places they would rather not. Finance ministers and central bankers of the G7 held emergency talks over the weekend. While they pledged to take action in the currency market to tackle disorderly movements if necessary, there was no other mention of joint action
It feels eerily familiar: Stocks are plummeting. The economy is slowing. Politicians are scrambling to find solutions but are mired in disagreement. Many Americans are wondering whether they are in for a repeat of the financial crisis of 2008. The answer is a matter of fierce debate among economists and market experts. Many say the risks are lower today — at least in terms of an immediate crisis — because the financial system over all is healthier and there are fewer hidden problems. But the experts add that there are reasons to worry, and they do not rule out a quick downward spiral if politicians in the United States and in Europe cannot calm investors by addressing fundamental financial threats.
The United States is running a $1.1 trillion budget deficit to date in the current fiscal year, the Treasury Department said on Wednesday, as lawmakers began to seek extra cuts in public spending to rein in debt. The budget deficit, 10 months into the government’s fiscal year, was $69 billion lower than the same period a year earlier, said the Treasury Department.  The U.S. budget deficit is forecast to reach $1.4 trillion, according to the Congressional Budget Office. In July, the government posted a budget deficit of $129 billion — the 34th consecutive month of budget shortfalls
When the unexpected strikes, most Americans aren’t prepared to pay for it. A majority, or 64%, of Americans don’t have enough cash on hand to handle a $1,000 emergency expense, according to a survey by the National Foundation for Credit Counseling, or NFCC, released on Wednesday. Only 36% said they would tap their rainy day funds for an emergency. The rest of the 2,700 people polled said that they would have to go to other extremes to cover an unexpected expense, such as borrowing money or taking out a cash advance on a credit card. “It’s alarming,” said Gail Cunningham, a spokeswoman for the Washington, DC-based non-profit. “For consumers who live paycheck to paycheck — having spent tomorrow’s money — an unplanned expense can truly put them in financial distress,” she noted.
Government agencies reported positive outlooks for the job market and the wholesale industry this week. U.S. employers posted more job openings in June and layoffs fell, a sign that hiring could improve a bit in the coming months. The number of available jobs rose to 3.1 million, up from 3 million in May, the Labor Department said Wednesday. It was the highest total since March. Still, 14 million Americans remain unemployed. The weak economy is not generating enough jobs to rapidly reduce that figure. And the total number of job openings is far below healthy levels seen before the recession.
Switzerland’s central bank warned that it is ready to act to curb the “massive overvaluation” of the Swiss franc after safe-haven investors pushed the currency near parity with the euro and triggered its biggest single-day rise against the dollar.

Waeker eurozone members face the prospect of being left with no domestic banks in future as market resistance to funding lenders in peripheral countries grows.  “We envisage that banks operating on a more EU-wide basis, alongside an ECB with appropriate powers, would be an important part of a sustainable euro project,” said Tony Silverman, a financial analyst at S&P.  “This may mean peripheral countries should not necessarily expect to have their own domestic banks,” he added.

The 100pc mortgage is back. After becoming extinct in the wake of the credit crisis, one bank is now offering borrowers the chance to buy a property without a deposit. Northern Bank, which operates in Northern Ireland, is offering the loans subject to affordability, although it is understood that borrowers do not have to belong to a special group, such as professionals who can expect to earn high salaries in future, in order to be considered.
Finance Minister Jim Flaherty is vowing to stay the course on spending cuts and planned hikes to Employment Insurance premiums, while acknowledging Canada’s economy faces “obvious risks” from financial troubles in the United States and Europe. Having repeatedly urged his G20 colleagues to move more aggressively on debts and deficits, it’s no surprise that Canada’s Finance Minister isn’t backing down from his own pledge to balance the books by 2014-15. Yet meeting that goal is shaping up to be a far more difficult task as economists downgrade their assumptions for Canadian growth in light of world events.
U.S. President Barack Obama and Federal Reserve Chairman Ben Bernanke met in the Oval Office on Wednesday to discuss the U.S. and global economic situation. According to a White House statement, they were joined by Treasury Secretary Timothy Geithner, White House chief of staff Bill Daley and top White House economist Gene Sperling. It was the third time Obama has met with Bernanke this year. On Tuesday, the Fed announced that it would keep the historic low interest rates at least through mid-2013. The news had boosted the stock market but the gains were wiped out on Wednesday as investors are worrying about U.S. economic prospect.
There is a possibility Singapore could experience a technical recession, though the growth prospects remained good at the moment, local daily Straits Times quoted a senior official with the Ministry of Trade and Industry as reporting Thursday. Kwek Mean Luck, deputy secretary for industry at the ministry, said the ministry was holding its growth forecast for Singapore at 5-6 percent. “I think the possibility (of a technical recession) is there,” he said.

Chilean President Sebastian Pinera said Wednesday the country’s economy maintains stable growth despite the U.S. and European debt crises. “Chile is well prepared,” he said at a public event in Santiago. “It is one of the few economies in the world that has steady growth. We grew 8 percent during the first six months of this year.” But Pinera also cautioned that Chile is not immune to the impact of the sluggish world economy, event it is strong enough to deal with the crisis.
Country’s biggest petroleum products retailer Indian Oil Corporation (IOC) on Wednesday reported a higher loss of Rs.3,719 crore against Rs.3,388 crore in the corresponding quarter in the previous year as the government covered only a third of the losses it made on selling petroleum products at subsidised rates. Addressing a press conference here, IOC Managing Director R. S. Butola said, “The major reason for widening of net loss has been that we have had a higher number of unmet under-realisation on diesel, domestic LPG and kerosene and increase in interest outgo.”

The Reserve Bank of India panel to review facilities for individuals under FEMA (Foreign Exchange Management Act) on Wednesday said the concept of ‘non-repatriation basis’ or ‘non-repatriable funds’ was outdated and all the relevant regulatory guidelines especially with reference to ‘investments’ needed to be amended forthwith to indicate limited repatriability in accordance with the directions and up to the limits as may be specified by the RBI from time-to-time. “Since non-residents have been given the freedom to remit $1 million annually, it makes little sense to maintain procedures under FEMA that continue to treat these two categories, (repatriable and non-repatriable funds) separately,” it said.
It seems a sustained above 9% growth is out the grasp for India in the medium term. The Planning Commission is likely to lower its growth target for the next Plan period (2012-17) to 8.5-8.7% from an earlier range of 9-9.5%. India’s economy is expected to expand only about 8% in the current 2011-12 fiscal, the terminal year of the eleventh Plan. The downgrade in the growth target for the next Five-Year Plan is largely due to grim prospects of global economic growth coupled with uncomfortable domestic fiscal deficit and balance of payments situation.
Import prices of major agricultural goods surged last month from a month earlier, adding to South Korea’s already skyrocketing consumer prices, a report said Thursday. According to the report by the Korea Customs Service, the average import price of pumpkins jumped 59.4 percent from a month earlier to 1,207 won (US$1.11) per kilogram. The price also marked a 38 percent spike from the same period last year. Import prices of carrots and ginger also jumped 23.1 percent and 41.5 percent, respectively, from the previous month.
India is looking to acquire a 20 percent to 25 percent stake in Belarus-based Belaruskali, one of the world’s largest producers and suppliers of potash, in a deal that could be worth $6 billion to $7 billion, the Mint reported Wednesday.  The proposal is likely to be discussed at a meeting chaired by Prime Minister Manmohan Singh on Wednesday, the report said, citing two officials of the federal ministry for chemicals and fertilizers.
Johannesburg – South Africa has a huge advantage as an investment destination, although the nationalisation debate is off-putting, India’s High Commissioner Virendra Gupta said on Wednesday. “At the moment South Africa has a huge relative advantage… but the nationalisation debate does detract investors,” he said on the sidelines of a seminar in Johannesburg on Indian-South African business relations.

Previous Article

U.S. Markets - Life After AAA: What Does This Mean For Investors?

Next Article

Chart of the Week – Copper's Weak Supply Growth

Related Posts
Subscribe to notifications
Watch. Listen. Read. Raise your average.