News That Matters

By www.thetrader.se

Ft.com

Banks face paying more to raise finance in traditional bond markets – and some will continue to be locked out completely – as a growing demand for collateral from other lenders is undermining the strength of their balance sheets, http://ftalphaville.ft.com/thecut/2011/12/05/778711/uk-banks-face-higher...

Businesses breaching EU privacy rules will face fines of up to 5 per cent of their global turnover under sweeping proposals to be unveiled next month, says the FT. In the first significant update of data protection legislation since 1995, http://ftalphaville.ft.com/thecut/2011/12/05/778671/eu-eyes-big-fines-fo...

French president Nicolas Sarkozy and German chancellor Angela Merkel meet in Paris on Monday under pressure to align their positions on eurozone budget co-ordination, reports Reuters, ahead of an EU leaders’ summit in Brussels on Thursday and Friday. http://ftalphaville.ft.com/thecut/2011/12/05/778691/little-expected-from...

Australian coal miners Whitehaven Coal and Aston Resources have confirmed they are in discussions over a potential $A4.65bn (US$4.76bn) merger, the WSJ reports. Such a deal would make the combined company one of the country’s biggest coal producers with a combined output comparable to Peabody Energy’s Australian operations. http://ftalphaville.ft.com/thecut/2011/12/05/778441/australian-coal-mine...

Italy’s new technocratic government has approved tough austerity measures and reforms including tax increases, pension changes and spending cuts amount to a savings of €30bn over the next three years,http://ftalphaville.ft.com/thecut/2011/12/05/778461/italys-cabinet-agree...

Germany is prepared to yield on language in the European Stability Mechanism requiring private bondholders share in any losses, says Reuters, citing four sources. The concession, which would be aimed at reassuring private sector investors in sovereign debt, http://ftalphaville.ft.com/thecut/2011/12/05/778451/germany-may-ease-wor...

Russia’s ruling United Russia party was battling to hold on to its majority in the lower house in Sunday’s parliamentary elections, in a huge blow to the Kremlin’s political standing.  With 80 per cent of the vote counted early on Monday, results for United Russia showed it hovering around the crucial 50 per cent barrier with only 50.1 per cent of the vote, down from 64.3 per cent in 2007.http://www.ft.com/intl/cms/s/0/a04eb576-1e75-11e1-a75f-00144feabdc0.html...

Foreign exchange traders are braced for an unusually volatile end to the year, after a sharp fall-off in volumes signalled that many investors have closed their books early.  Trading floors at investment banks are reporting a drop in demand from their major clients – many of which have lost money trading the euro, due to its unexpected strength in the face of deepening debt woes across the region. http://www.ft.com/intl/cms/s/0/eb299a14-1e81-11e1-a75f-00144feabdc0.html...

Wsj.com

Asian stock markets were mixed Monday as investors remained cautious ahead of a series of key meetings in Europe later in the week. News that Italian Prime Minister Mario Monti’s cabinet late Sunday approved a law to eliminate the country’s budget deficit by 2013 as well as a stronger-than expected monthly U.S. jobs report Friday cheered some markets. Japan’s Nikkei Stock Average was up 0.5%, South Korea’s Kospi Composite was flat, Hong Kong’s Hang Seng Index was 0.4% higher, China’s Shanghai Composite Index was down 0.9%, Singapore’s Straits Times Index was off 0.4% and India’s Sensex was 0.6% lower.  Australia’s S&P/ASX 200 finished the day up 0.7%, at 4318.8. http://online.wsj.com/article/SB1000142405297020490380457707906187226619...

The yuan hit the low end of its trading band against the U.S. dollar for the fourth consecutive session Monday, as investors continued to seek the perceived safety of the U.S. currency amid growing worries over China’s slowing economy and weakening exports.  The dollar hit 6.3666 yuan at the opening, the upper limit of its daily trading band. The dollar edged slightly lower to 6.3650 yuan, but was still up from 6.3597 yuan late Friday. http://online.wsj.com/article/SB1000142405297020490380457707919332272465...

Futures firms would be sharply restricted in how they treat their customers’ cash under new rules a federal agency is expected to approve Monday, marking the first regulatory shift in response to the recent collapse of MF Global Holdings Ltd. If approved, the changes would represent a change in course for the Commodity Futures Trading Commission, which set aside the proposal earlier this year amid heavy lobbying by MF Global’s then-chairman, Jon S. Corzine, and others in the futures industry. http://online.wsj.com/article/SB1000142405297020439770457707485201876575...

Japan’s prime minister on Monday voiced support for Defense Minister Yasuo Ichikawa, who is under growing pressure to resign over a series of gaffes by him and a ministry official on the U.S. military presence in Okinawa.  “We have hurt the feeling of people in Okinawa very much, and I am filled with apology,” Prime Minister Yoshihiko Noda said during a budgetary committee session in the lower house of parliament. But “I want Minister Ichikawa to shape up and fulfil his duties,” Mr. Noda added. http://online.wsj.com/article/SB1000142405297020490380457707911250868979...

Marketwatch.com

After a week of key employment and manufacturing-sector data, Wall Street can be forgiven for directing their focus away from the economic reports that come out of the Capitol this week and toward Europe ahead of key meetings there. But Friday’s upcoming report on the trade deficit offers insight into what some believe is restraining the U.S. economy from running at its full potential. http://www.marketwatch.com/story/trade-data-to-hint-at-us-economic-diffi...

Reuters.com

China’s services sector cooled in November to its weakest growth in three months, an HSBC purchasing managers’ index showed on Monday, the latest data portraying an economy slowing quickly and in need of policy support. The index fell to 52.5, a sharp decline given that October’s reading was 54.1 — the highest in four months — though the index remains above the 50 level that separates expansion from contraction in the sector. Expectations for new business dropped to their lowest level in three months too, but remained firmly above 50. http://www.reuters.com/article/2011/12/05/us-china-economy-idUSTRE7B407X...

Iranian media reported on Sunday that their country’s military had shot down a U.S. reconnaissance drone in eastern Iran, but a U.S. official said there was no indication the aircraft had been shot down. NATO’s U.S.-led mission in neighbouring Afghanistan said the Iranian report could refer to an unarmed U.S. spy drone that went missing there last week. The incident comes at a time when Tehran is trying to contain foreign outrage at the storming of the British embassy on Tuesday, after London announced sanctions on Iran’s central bank in connection with Iran’s nuclear enrichment programme.http://www.reuters.com/article/2011/12/04/us-iran-usa-drone-idUSTRE7B30C...

Bloomberg.com

Eight Ferraris and a Lamborghini were part of a 14-car crash in Japan yesterday that wrecked more than a million dollars worth of vehicles. “The accident occurred when the driver of a red Ferrari was switching from the right lane to the left and skidded,” said Mitsuyoshi Isejima, executive officer for Yamaguchi Prefecture’s Expressway Traffic Police unit. “It was a gathering of narcissists.” The drivers were aged between 37 and 60 years old, he said. http://www.bloomberg.com/news/2011-12-05/eight-ferraris-crash-at-gatheri...

India signaled it’s prepared to act against excessive declines in the rupee, as Asia’s worst performing currency this year threatens to exacerbate the fastest inflation among so-called BRIC nations and hurt growth. The recent sharp depreciation isn’t a sign of “helplessness in dealing with the kind of global turbulence we are seeing,” central bank Deputy Governor Subir Gokarn said in Mumbai on Dec. 3. “We do have the instruments to do this in the form of strategic capital controls, which can be used to enhance the supply of foreign exchange.” http://www.bloomberg.com/news/2011-12-04/gokarn-says-rbi-can-support-ind...

Australian homebuilders are responding to declining demand and higher land costs by reducing the sizes of houses and lots. Stockland (SGP), Australia’s biggest listed home builder, has cut the average size of plots in its house-and-land packages by almost 20 percent to 481 square meters (5,177 square feet) over three years. Australand Property Group (ALZ), a unit of Singapore’s CapitaLand Ltd. (CAPL), is redesigning homes as it shrinks them, while Peet Ltd. (PPC), which has 70 housing estates, is building on smaller lots with shared barbecue and exercise areas to compensate. Higher prices for land and materials and increasing wages and taxes are pushing costs higher at a time the prices developers can charge are restrained as the developed world’s most expensive housing market cools. Home prices in Australia’s eight capital cities dropped 4 percent in the year to Oct. 31, according to RP Data, the most since the real estate researcher began compiling the figures in 1999.http://www.bloomberg.com/news/2011-12-04/builders-shrink-great-australia...

Service industries in the U.S. probably grew in November at the fastest pace in six months, a sign the economy is accelerating in the final months of 2011, economists said before a report today. The Institute for Supply Management’s index of non- manufacturing industries, which account for about 90 percent of the economy, rose to 53.8 last month from 52.9, according to the median projection of 67 economists surveyed by Bloomberg News. Factory orders fell in October, another report may show. The services data may indicate the economic expansion is spreading at year-end after reports last week showed manufacturing picked up, consumer pessimism waned and unemployment dropped. At the same time, risks remain that Europe’s debt crisis and slower global growth will prompt U.S. companies to cut back. http://www.bloomberg.com/news/2011-11-03/ism-services-index-falls-slight...

Cnbc.com

India has put a plan to open up its retail industry to foreign supermarkets on hold, a senior government source said on Sunday, an embarrassing turnaround for a beleaguered government fighting to retain the support of key allies. The move to allow global giants such as Wal-Mart  into India’s $450 billion retail market, the first major economic reform since Prime Minister Manmohan Singh’s graft-riddled term began in 2009, has been met with fierce opposition from some who say it will destroy the livelihood of millions of small traders. http://www.cnbc.com/id/45545256

China may channel part of its huge pool of foreign-exchange reserves into investment in U.S. infrastructure, including rail and transportation networks, Commerce Minister Chen Deming said on Friday. “China is unwilling to take on too much U.S. government debt. We are willing to turn that money into investment,” he told U.S. Ambassador to China Gary Locke and U.S. businessmen. Chen did not elaborate on how China might channel some of the country’s war chest of $3.2 trillion foreign-currency reserves to invest in U.S. infrastructure, such as rail and transportation systems. http://www.cnbc.com/id/45524415

Foxbusiness.com

Australian inflation fell 0.1% in November, according to the TD Securities – Melbourne Institute on Monday. On an annual basis, inflation climbed by 2.1%, down from a 2.6% rise recorded in October. Higher prices for household appliances, furniture, and new dwelling purchases by owner-occupiers were more than offset by lower fruit and vegetables prices and petrol prices, according to the survey.http://www.foxbusiness.com/markets/2011/12/04/australia-november-inflati...

Washingtonpost.com

The Bank of England should expand stimulus by 50 billion pounds ($78 billion) this week to bolster the economy rather than wait for its current round of bond purchases to end, the British Chambers of Commerce said. The London-based BCC called on the central bank to increase the target for asset purchases after it was raised by 75 billion pounds to 275 billion pounds in October. The central bank’s Monetary Policy Committee meets this week and will announce its decision at noon on Dec. 8 in London. “With the government persevering with its deficit-cuts, and the problems in the eurozone creating worldwide banking risks, U.K. monetary policy must be as expansionary as possible to protect our economy from any adverse effects,” BCC Chief Economist David Kern said in an e-mailed statement today. http://washpost.bloomberg.com/story?docId=1376-LVKU596TTDS001-135T8S6BLL...

BBC.co.uk

hina’s security chief has warned that the government needs better methods to deal with social unrest due to a slowing economy. Zhou Yongkang, a member of the politburo, asked provincial officials for improved “social management”. China has seen an increase in labour unrest in recent weeks. http://www.bbc.co.uk/news/business-16026607

Telegraph.co.uk

The government will publish new proposals to “get tough” on excessive pay in January, the deputy prime minister said.  Among likely steps is widening the membership of remuneration committees, which set pay, to include workers.  Recent figures showed executive pay at Britain’s biggest firms rose 50 per cent in the last year, taking the average pay for a FTSE 100 director to just short of £2.7m. http://www.telegraph.co.uk/news/politics/liberaldemocrats/8934029/Nick-C...

The ‘blame game’ for the economic crisis in Greece produced new candidates as former leader George Papandreou widened the net to include EU regulators and credit rating agencies. In an interview with CNN, Mr Papandreou suggested he could not be held entirely responsible for the events that have brought Greece to its knees and raised considerable doubts about its future in the eurozone.http://www.telegraph.co.uk/finance/financialcrisis/8934399/Greece-turns-...

One of the many worrying aspects of the debt crisis is that there still appears to be no shared understanding of the problems facing the monetary union. Therefore, ahead of yet another summit, it is very hard to be confident that European leaders are close to agreeing on a credible plan. Even though the crisis has now engulfed France and threatens Germany. Germany’s steadfast focus has been on the need for fiscal discipline and to create institutions to deal with the next crisis. Important goals but Europe’s crisis is not a morality play. It is a story of imbalances within Europe. It is also a story of institutional inadequacies, including a monetary union with inadequate governance that is now being undone. http://www.telegraph.co.uk/finance/financialcrisis/8934421/Eurozone-lead...

Britain’s manufacturing industry is heading for a sharp slowdown as confidence, orders and output tumble, further undermining hopes that the sector can help lead the country’s economic recovery. Industry body the EEF and business advisers BDO today slash their forecasts for 2012 manufacturing growth from 2.2pc to 0.9pc after reviewing reports from 453 members that reflect the gloomy predictions in the Chancellor’s autumn statement last week. After producing a better than expected performance for much of the year the outlook for manufacturing has rapidly deteriorated with the eurozone crisis adding to nervousness. http://www.telegraph.co.uk/finance/economics/8934490/UK-manufacturing-fo...

Smh.com.au

The Reserve Bank has received more ammunition for a rate cut tomorrow, with a private inflation survey showing prices weakened in November. The TD Securities-Melbourne Institute monthly inflation index fell 0.1 per cent in November, following a rise of 0.1 per cent in October and September. The November decline was led by falls in the cost of fresh food, petrol and holiday travel, putting the index at 129.50. On an annual basis, price increases slowed to 2.1 per cent in the year to November, the lowest since February 2010, down from 2.6 per cent in the year to October.http://www.smh.com.au/business/inflation-data-makes-rates-decision-tough...

Gold may drop as Italy moved toward trimming its debt, easing concern that Europe’s fiscal crisis will worsen and damping demand for haven investments. Gold for immediate delivery traded little changed at $US1746.52 an ounce after declining 0.2 per cent earlier. The metal rose 3.8 per cent last week after South Korea bought the metal and holdings in exchange-traded products expanded to a record. February-delivery futures were little changed at $US1750.10 an ounce on the Com ex in New York. http://www.smh.com.au/business/markets/gold-flat-as-italy-plan-damps-hav...

Oil rose for a second day in New York amid European steps to tame a debt crisis that threatens to curb economic growth and weaken demand for commodities. Futures gained as much as 0.8 per cent, after the first weekly increase in three. European leaders and US Treasury Secretary Tim Geithner will hold meetings on the region’s debt crisis this week. Italian Prime Minister Mario Monti yesterday announced 30 billion euros ($US40 billion) of austerity and growth measures. Iran said oil prices wi ll surge if other nations threaten to ban its purchases, according to the Shargh newspaper. http://www.smh.com.au/business/markets/oil-higher-on-european-debt-effor...

A European proposal to channel central bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($US270 billion) to fight the debt crisis, two people familiar with the negotiations said.  At a Nov. 29 meeting attended by European Central Bank President Mario Draghi, euro-area finance ministers gave the go- ahead for work on the plan, said the people, who declined to be named because the talks are at an early stage. The need for a new crisis-containment tool emerged as the effort to boost the 440 billion-euro rescue fund to 1 trillion euros fell short.http://www.smh.com.au/business/world-business/europe-bank-plan-may-chann...

The European Central Bank is expected to cut its key interest rates for the second time in two months next week as EU leaders battle to find a solution to the long-running debt crisis. The ECB’s decision-making governing council is holding its last monthly interest-rate meeting this year on Thursday, the same day as European Union leaders gather in Brussels to find ways out of a crisis that is threatening the very existence of the single currency. http://www.smh.com.au/business/world-business/ecb-expected-to-cut-rates-...

Straitstimes.com

Deputy Economy Minister Vittorio Grilli said on Sunday Italy was set to enter a recession in 2012, with Gross Domestic Product predicted to shrink by 0.4 to 0.5 per cent. Italy’s growth should level out again by 2013, he added during a press conference following the adoption by the cabinet of a draconian package aimed at pulling the country back from the brink of insolvency.http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_741325.htm...

Xinhuanet.com

China’s central bank cut the Reserve Requirement Ratio (RRR) for banks on Wednesday by 50 basis points for the first time in nearly three years to ease credit strains and shore up economy as white-hot inflation is contained. Analysts said the move, implying a fine tuning of macro policy, will contribute to keeping the stable and relatively fast economic growth in the current complex situation, however it does not mean the change will bring about a full-on move toward a looser monetary policy. http://news.xinhuanet.com/english2010/indepth/2011-12/05/c_131288527.htm

Cs.com.cn

Officials from the People’s Bank of China discussed property-market trends and financial-risk management at a meeting recently with the country’s banking regulator,  representatives from 10 commercial lenders and university academics, according to a statement posted to the central bank’s website. The central bank said, China’s property prices are about to reach a “turning point”, with developers facing tighter liquidity.  “The turning point of property prices is emerging,” the statement said. It noted that property investment growth has eased from a “high level” and that developers are facing tighter credit conditions. The statement didn’t suggest any policy changes. http://www.cs.com.cn/english/ei/201112/t20111205_3155649.html

World manufacturing production increased by 5.5 percent in the third quarter of 2011 compared to the same period of last year, said a report released Thursday by the United Nations Industrial Development Organization (UNIDO). Though world industrial output increased only slightly in the third quarter of this year compared to the previous quarter, the consistent growth in major economies indicated that a further worldwide downturn in industrial production is not imminent, according to the report. Growth from developing countries continued to accelerate, which increased by 13 percent in the third quarter, while the manufacturing output of developed countries rose by an average of 3.3 percent. China’s manufacturing increased by 14.5 percent, the United States by 4.1 percent and Japan grew by 4.3 percent.http://www.cs.com.cn/english/ei/201112/t20111202_3153111.html

Yonhapnews.co.kr

China’s automobile exports will likely hit a record high this year thanks to the country’s carmakers’ aggressive move overseas, an industry group said Monday. The China Association of Automobile Manufacturers (CAAM) said China’s overseas shipments of vehicles will likely top 800,000 units by the end of 2011, up 38 percent from 580,000 units last year. In terms of the global market share, the Chinese automakers will hold 4 percent this year, compared to 3 percent in 2010. Last year, the top three auto exporting countries were Germany, Japan and South Korea.http://english.yonhapnews.co.kr/business/2011/12/05/98/0501000000AEN2011...

South Korea’s central bank currently has no plans to tap into its foreign exchange reserves to help the eurozone tackle its debt crisis, the bank’s chief said Monday. “First, it is necessary to watch whether Europe can handle its problems by itself,” Bank of Korea (BOK) Gov. Kim Choong-soo told reporters on the sidelines of an international conference, stressing a wait-and-see approach on possible support measures for the debt-mired region. http://english.yonhapnews.co.kr/business/2011/12/05/72/0503000000AEN2011...

Thetrader.se

Great news out of Italy on Sunday evening. They will tax boats longer than 10 m. While majority still focus on stupidity out of Europe, the tensions in the Middle East are escalating. IEAE has come out with reports claiming Iran is on the path of developing nuclear weapons. While the US and its allies have already pushed for new harsh sanctions against Iran, China, Russia and Turkey are urging for cautiousness. Israel is also shouting out loud. and could set off a nasty situation developing in the Middle East. Is a new power shift developing in the region? Must see video below;http://www.thetrader.se/2011/12/04/mena-region-reviving/

Great reading by Thing that make you go hmmm. As well as highly correlated markets (see the chart, left, courtesy of Soc Gen which dem- onstrates that correlation amongst leading eq- uity markets is at nosebleed levels), we have markets in which the various vested interests are almost completely aligned, we have a brand new Coalition of The Willing (although this one was infinitely simpler to put together than its predecessor) which involves the vast majority of investors, governments, Central Banks and regulatory bodies the world over and, amongst that coalition, we have a common willingness to turn a blind eye to the realities facing the world; namely, too much debt and too few ways to pay it off. After all, a LOT of money would be lost and http://www.thetrader.se/2011/12/04/things-that-make-you-go-hmmm-3/