News That Matters

China’s foreign direct investment rose 18.4 per cent year-on-year to $60.89bn in the first half of the year, the Ministry of Commerce said. In June alone, Xinhua reports, China’s FDI rose 2.83 per cent from one year earlier to $12.86bn

Capital One Financial and Wells Fargo are among the bidders for HSBC’s US credit card portfolio, Reuters says, citing sources familiar with the situation.First Niagara Financial Group, KeyCorp, and M&T

The publication of European banks’ stress test results today could lead to a wave of distressed debt deals, the FT says. The results of the stress tests – due at 5pm UK time – are expected to see about 10 of the 91 banks tested fall short of having the required 5 per cent core tier one capital

Investigators probing Wednesday’s bomb blasts in Mumbai which killed at least 18 people are focusing in on the likely involvement of the Indian Mujahideen, a domestic terrorist group that has been responsible for attacks in other Indian cities in recent years

Europe’s debt crisis has stoked tension in its interbank lending markets as some financial institutions find it harder to raise money ahead of bank stress tests due on Friday. UniCredit and Intesa Sanpaolo, Italy’s two biggest commercial banks, have been asked to pay higher premiums for lending, according to brokers, as the crisis has hit Italian government bonds amid growing fears of contagion.
Most Asian stock markets were modestly higher Friday, though caution prevailed amid another ratings agency warning on U.S. government debt, while BHP Billiton shares fell in Sydney after announcing a US$15 billion-plus deal to buy U.S. shale gas producer Petrohawk Energy. Japan’s Nikkei Stock Average rose 0.4%, Australia’s S&P/ASX 200 fell 0.4%, South Korea’s Kospi Composite gained 0.1% and New Zealand’s NZX-50 climbed 0.1%. Dow Jones Industrial Average futures were up 10 points in screen trade.

Italy, caught in the cross-hairs of financial markets, is renewing its push for common European bonds as the answer to a growing loss of confidence in European governments’ ability to contain a crisis that is engulfing 40% of the euro zone’s economy.  In an interview on Thursday, Italian Economy Minister Giulio Tremonti said the stalemate over how to provide more aid to debt-laden Greece underscored deeper discord that has hampered the euro-zone for months.

A crucial barometer of global banking health is losing its clout as a macroeconomic indicator, but the move is benefiting some consumers and others whose low interest-rate loans still are pegged to it. Known as the London interbank offered rate, or Libor, the barometer helps price trillions of dollars of derivatives and home and corporate loans. Calculated daily, Libor is supposed to measure borrowing costs for a panel of banks globally. The rate “floats,” or ebbs and flows depending on how much banks charge one another.

When China announced a flagship program to make its currency more international in the summer of 2009, it cited “the growing call” from Chinese trading partners to use the yuan in cross-border transactions. More than a year later, the People’s Bank of China touted the program as a “breakthrough,” citing a surge in the amount of trade in the currency. Not everything went according to plan.  The move had important, unintended side effects, including giving companies and investors a way to profit from the difference in interest rates between China and other countries, and opening a path for “hot money”

The International Monetary Fund warned Thursday that Europe’s banks remain insufficiently funded, a day before officials release details about how well the banks can withstand financial shocks. It is “critically important to put in place and immediately publicize credible plans” to deal with failing banks, the IMF said. The comments are made in a paper prepared for a meeting of deputy ministers from the Group of 20 industrialized and developing nations last week. The paper was published by the IMF Thursday.

A backup plan to cut the federal deficit and keep the U.S. government from default gained momentum Thursday even as President Barack Obama and congressional leaders paused their negotiations to determine if they can reach a deal. Ratcheting higher the pressure on Washington to strike a deal, Standard & Poor’s for the first time said there was a 50% chance it would downgrade its rating of long-term U.S. debt within three months because the chances of default were “increasing” and the political debate about deficit reduction and the debt ceiling had “only become more entangled.” The U.S. has had a AAA bond-rating from S&P for 70 years.

Google Inc. posted a 36% jump in quarterly profit, sending its shares surging and wresting back the attention of investors who lately have doted on newer Internet darlings. The Internet search company, which continued to spend heavily on new projects and staff, logged a 32% jump in revenue for the second quarter. The growth was driven by Google’s core search engine advertising.

The Bank of Korea Friday cut its economic growth forecast and lifted its inflation projection for this year, highlighting the challenge the central bank faces in ensuring high inflation doesn’t derail a fragile domestic-consumption recovery. The revisions, which come a day after the BOK kept its policy rate unchanged at 3.25%, bring the central bank’s outlook broadly in line with that of the government, which has shifted its focus to reining in prices from pushing for

Japan’s finance minister escalated his rhetoric about the yen’s rising value, while a senior ministry official said the government could intervene to fight the advance at any time. Having described the yen’s move as “a little one-sided” on Wednesday, Finance Minister Yoshihiko Noda told reporters Thursday morning that the yen’s value is “far out of line with real fundamentals and is one-sided.  “It would be troubling if this trend takes hold, so we will continue to watch the markets carefully.”
Gold took a breather on Friday, after setting record highs for two consecutive sessions, as dashed hopes for additional U.S. stimulus measures took some heat off, although the euro zone debt crisis and uncertainties on U.S. deficit talks continued to support sentiment. Spot gold edged down 0.3 percent to $1,581.66 an ounce by 11:25 p.m., after a nine-session winning run pushed the price to an all-time high of $1,594.16 on Thursday. Spot gold was on track for a weekly gain of 2.4 percent. U.S. gold fell 0.4 percent to $1,582.50 an ounce.

U.S. crude, up 58 cents at $96.27 a barrel by 0229 GMT, fell more than $2 on Thursday and was poised to end the week little changed after tumbling below $94 on Tuesday and topping $99 on Wednesday. Brent crude for September added 29 cents to $116.55 after the expiry of the August contract on Thursday at $118.32. The dollar weakened by about 0.3 percent against a basket of currencies.

Ratings agency Standard & Poor’s has warned there is a one-in-two chance it could cut the United States’ prized AAA credit rating if a deal on raising the government’s debt ceiling is not agreed soon. Putting the U.S. on negative watch, S&P warned that it could cut the rating as soon as this month if talks between the White House and Republicans remain stalemated. Any cut would be by one or more notches, it added.

Federal Reserve Chairman Ben Bernanke warned on Thursday that overzealous cuts to government spending in the short term could derail a shaky recovery and said a debt default could wreak financial havoc. “I only ask … as Congress looks at the timing and composition of its changes to the budget, that it does take into account that in the very near term the recovery is still rather fragile, and that sharp and excessive cuts in the very short term would be potentially damaging to that recovery,” Bernanke told the Senate Banking Committee.

President Barack Obama told top lawmakers on Thursday he believes a $2 trillion debt deal is possible if all sides bend a little, a Democratic official familiar with the White House talks said. “The president made clear that a big deal remains his strong preference,” the official said. The official said a deal of approximately $2 trillion would be possible if all sides were “willing to give a little.” Obama will hold a news conference at 11:00 a.m. ET on Friday and may call back lawmakers for weekend talks if he does not hear from them within 24 to 36 hours about a “plan of action” to get to a debt ceiling deal, the official said.
Treasury Secretary Timothy F. Geithner warned lawmakers there’s no possible extension to the time limit to raise the federal debt ceiling as Standard & Poor’s put the U.S. sovereign rating on watch for a downgrade. There’s “no way to give Congress more time” on lifting the debt limit, Geithner said after meeting with Democratic lawmakers on Capitol Hill in Washington. He has repeatedly said U.S. borrowing authority will end on Aug. 2 without congressional action.

China, the world’s biggest supplier of rare earths, almost doubled its export quota for the second half of 2011, a change the European Union said actually adds restrictions to overseas shipments. Less than two weeks after the World Trade Organization said Chinese limits on raw-material exports break global trade rules, the country yesterday raised the quota for 26 companies to 15,738 metric tons. That compares with 7,976 tons a year earlier and brings the limit to 30,184 tons for 2011, little changed from 30,258 tons in 2010, government figures show.

Minnesota Governor Mark Dayton agreed to a bond issue instead of higher taxes, and Republican legislative leaders endorsed higher spending in a deal to end a budget impasse that has closed state government for 15 days. The shutdown was the longest of six in U.S. states since 2002, according to the National Conference of State Legislatures. The deal to end it came after Dayton sent a letter yesterday to legislative leaders agreeing with conditions to an offer they made June 30. They negotiated three hours at the Capitol in St. Paul.

Australia’s central bank may push back its next interest rate rise by three months as languishing consumer spending gives it time to assess Europe’s debt crisis and whether a mining investment boom will stoke inflation. The Reserve Bank of Australia will raise the official cash rate a quarter of a percentage point to 5 percent in November, according to the median estimate of 18 economists surveyed by Bloomberg News this week. A survey three weeks ago showed the median estimate was for a rate increase in August.
Central banks have bought more gold in the first half of this year than in all of 2010 as a long-anticipated reversal in so-called “official sector” sales gathers pace, a gold group reported on Thursday. The World Gold Council provided no specific figures, but the rise will be little surprise after the so-called “official sector” became net buyers of bullion last year for the first time in two decades as a means to diversify their dollar holdings, a trend that has aided a long price rally.

If Congress fails to reach a debt agreement by Aug. 2 and triggers a U.S. default, Treasurys could actually end up being the beneficiaries, traders and strategists said. The shock from the default by the world’s largest economy— and home of the globe’s reserve currency—could send investors fleeing to the safety of the very securities being downgraded, which would still be rated just one notch below triple-A. Plus, a default may spur Congress to finally enact a strict— and bond-friendly—deficit reduction plan.

Red-hot food inflation that has vexed policy makers around the world seemed to take a breather last month, when corn and wheat prices tumbled on reports that crop shortages were easing. But prices are climbing again, and have already made up half of June’s losses. The sell-off masked an unnerving reality: The world remains just one Midwest heat wave or global crop disaster away from another damaging price run-up that could revive concerns over food security.
China, one of the United States’s biggest creditors, urged American policy makers on Thursday to act to protect investors’ interests, highlighting rising concerns around the globe about the protracted budget talks taking place in Washington.
Fixed mortgage rates fell this week, and the rate on the 15-year loan dropped to its lowest point of the year.The average rate on the 30-year loan decreased to 4.51% from 4.60% a week ago, Freddie Mac said Thursday. It reached its yearly low a month ago, at 4.49%. The average rate on the 15-year fixed mortgage, popular for refinancing, fell to 3.65% from 3.75%. Its previous low this year was 3.67%, reached three weeks ago. Rates typically track the yield on the 10-year Treasury note. Yields fell sharply last week after dismal jobs data pushed investors into the safety of government bonds.
Economic growth in Latin America and the Caribbean is set to be 4.7% this year, the UN’s regional economic body, ECLAC, says. The growth is being fuelled by strong domestic demand with more people in work and able to access credit.  But ECLAC warns that the region faces the risk of worsening inflation, and capital inflows could produce bubbles in financial and property markets.  The fastest-growing economy will Panama on 8.5%

Italy has successfully sold its latest issue of government bonds, but it had to offer the highest returns on record to ensure they were all purchased. The new 15-year bonds offer a yield of 5.9%, an all-time high for Italian bonds of that duration. Five-year bonds were also released, with a yield of 4.9%, the biggest since June 2008. Demand for these was double the release. The sale raised a total of 2.97bn euros ($4.2bn; £2.6bn).
Britain’s key proposal for banking reform still misses the “overriding question” of how to cope with financial failures, Paul Volcker has warned. The eminent American economist, who is advising President Barack Obama on financial regulation, delivered a withering assessment of Britain’s plans to “ring-fence” retail banking operations.  He described the idea, which is the central proposal of the Coalition government’s Independent Commission on Banking (ICB), as “different and seemingly more sweeping” – but warned that it faced tough hurdles in practice.

The Bank of England made £9.8bn last year on its £200bn “money printing” programme of quantitative easing to prop up the battered UK economy. The Bank bought £200bn of gilts, corporate bonds and commercial paper between February 2009 and February 2010 to provide further monetary stimulus after slashing rates to 0.5pc. The gain reverses the £1.8bn deficit in the previous annual accounts, when gilt prices had fallen slightly.
Mortgage approvals surged in June – but only so that the banks could meet their half-year lending targets, according to a new report by one of the country’s leading surveying firms. The underlying picture, says e.surv, is one of continuing weakness, and indeed a mortgage market growing even tougher for first-time buyers.
Pumping more than 900,000 barrels of barrels of crude each day, Colombia is poised to become a major oil producer in coming years, experts say. “At present, there are only five countries in the world whose production of oil is actually rising, and one of those is Colombia,” said John Francis Scott, director of the Canadian company Petrominerales. “By contrast, the others are on the decline,” he said at a conference on the flourishing energy production sector in the Andean region of South America. Advertisement: Story continues below Colombia’s oil production has increased steadily over the past few years, from 588,000 barrels per day to 930,500 barrel per day as recently as June of this year.
Growth in consumer credit debt in Canada is no longer outpacing income, and is rising at its slowest pace in a decade.  Excluding mortgage debt, the rate at which Canadians are borrowing money for consumer goods has slowed so much, it is on the verge of entering negative territory, CIBC said in a report on household credit released Thursday.
About 32.21 million Chinese mainland residents made overseas trips in the first half of this year, up 19.9 percent year-on-year, according to the Ministry of Public Security. China’s Hong Kong, China’s Macao, the Republic of Korea, China’s Taiwan, Thailand, Malaysia, Japan, the United States, Vietnam, and Cambodia were the 10 most visited destinations by Chinese mainland residents, said a statement released Thursday by the ministry’s Bureau of Exit-Entry Administration.

Philippine foreign portfolio investments, more known as “hot money”, posted a net inflow of 9.1 billion U.S. dollars in the first half of the year, the local central bank said Thursday. This is more than twice the 4.4 billion U.S. dollars recorded a year ago. The central bank said favorable rates boost investments in peso-denominated government securities. For the month of June, however, foreign portfolio investment slightly declined to 354 million U.S. dollars from the 364 million U.S. dollars recorded in the pervious month.
Russia has said India would continue to enjoy the waiver it received in 2008 from the Nuclear Suppliers Group’s export ban and Moscow wants New Delhi’s full participation in the 45-nation grouping that regulates the global atomic commerce. Russia’s assurance came after India objected to the new guidelines adopted last month by the NSG on the export of nuclear enrichment and reprocessing equipment which include membership in the Nuclear Non-proliferation Treaty (NPT) as a condition for supply.

Tata Consultancy Services (TCS) has reported a 26.7 per cent growth in net profit for the first quarter of 2011-12 at Rs.2,415 crore over the same period last year. Revenues were up 31.4 per cent at Rs.10,797 crore. Operating profit grew 25.6 per cent at Rs.2,820 crore and operating margins were 26.1 per cent. The company declared an interim dividend of Rs.3 per share.

Union Commerce and Industry Minister Anand Sharma on Thursday said both Government and industry need to work collectively to restore investor confidence and announced that steps were in the pipeline to tackle the problem of rising interest rates. The continued rise in interest rates has had a negative impact on the industrial growth and factory output. The industrial growth rate stood at a nine-month low of 5.6 per cent in May. “I am concerned about the cost of credit for exporters and industry. I have already discussed the matter with the Finance Minister and we are sure of addressing it,” Mr. Sharma told reporters here after a meeting with a Federation of Indian Chambers of Commerce and Industry (FICCI) delegation.

In keeping with the rising trend, headline inflation inched up further to 9.44 per cent in June from 9.06 per cent in May, driven mainly by higher prices of fuel and manufactured goods, to give a clear indication that there may not be any respite from another round of key policy rate hike by the Reserve Bank of India later this month. With this, overall inflation, as measured by the Wholesale Price Index (WPI), has remained above the 9 per cent mark since December last year as the April, 2011, figure also stands revised up to 9.74 per cent from the provisional estimate of 8.66 per cent.
Household loans extended by South Korean financial firms grew by the largest amount in five months in May, the central bank said Friday, underscoring concerns about snowballing household debt. Household lending handled by local banks and non-bank institutions totaled an outstanding 612.3 trillion won (US$579.3 billion) as of the end of May, up 5.4 trillion won from the previous month, according to the Bank of Korea (BOK).
Moscow is unhappy with safety guarantees provided by the German federal veterinary service and may impose restrictions on meat imports, the Federal Veterinary and Phytosanitary Inspection Service said Thursday. “In the last three years, the quality of the federal veterinary service’s work in Germany has significantly deteriorated,” said agency head Sergei Dankvert. Russia imports about 500,000 tons of German meat and meat products per year. During recent inspections, veterinarians from the customs union of Russia, Belarus and Kazakhstan found that more than 60 percent of German meat plants did not meet their standards, he said.