News That Matters
When the VIX recently slid below 20.00 for an extended period, I sensed a noticeable unease about the state of the market in many traders and investors. Clearly a sub-20 VIX was underestimating the risks in the current and future market environment, they thought. When the VIX dipped below 18.00 that unease intensified  and now with the VIX hovering around the 15.00 range and I can sense that quite a few are ready to grab the nearest pitchfork and riot about the inhumanity of the wayward VIX.
Big US banks are set to return money to shareholders after the Federal Reserve released the results of “stress tests” on 19 financial groups showing that all but four including Citigroup had passed the exercise. Results of the test, which were rushed out two days early after the Fed said it was concerned about information leaking, sparked a rally in US bank stocks. The S&P financials index rose 3.9 per cent and is now more than 18 per cent higher for the year, withJPMorgan Chase,Wells Fargo and Bank of America leading the way. Citigroup rose 6.3 per cent before the market close, but fell close to 4 per cent after hours as it became clear the bank had failed.

The US Federal Reserve kept policy on hold and gave a more optimistic outlook for the economy, in a statement that gave no hint further monetary easing is on its way. In the crucial line of its regular post-meeting statement released on Tuesday, the rate-setting Federal Open Market Committee upgraded its expectation for the pace of growth in coming quarters to “moderate”, stronger than the “modest” speed it expected in January.

The UK chancellor aims to launch an “Osborne bond” a 100-year debt issue or even a perpetual gilt that never matures to take advantage of the country’shistorically low interest rates. The plan echoes similar bonds issued to finance debts after the 18th century South Sea Bubble and the first world war. George Osborne will say in next week’s Budget that he wants to “lock in” the benefits of Britain’s low borrowing costs, which he says reflect market confidence in his fiscal plans


Rapidly rising wages may be a headache for manufacturers and the Communist leadership in China, but they are good news for people like Ngo Truong Chinh in Vietnam. Mr Chinh recently took a job as a quality control manager at a factory that XP Power, the UK-listed electronic components manufacturer, has just opened in Binh Duong province, part of Vietnam’s main industrial belt near Ho Chi Minh City. “Labour costs are cheaper in Vietnam but the workers’ skills are good,” says Mr Chinh, a 35-year-old electronics graduate. “That’s why many foreign manufacturers are investing in Vietnam.”

India’s ruling Congress party faces a crucial test this week as it tries to convince critics and investors of its fiscal credentialsafter suffering defeats in state elections last week Economists say Manmohan Singh, the prime minister, and his government, must use Friday’s budget to undertake urgent fiscal consolidation to rein in borrowing. Some claim the budget is one of the last opportunities for Mr Singh, 79, to push forward a stalled reform programme.
Asian stock markets were higher Wednesday as positive economic data in the U.S. and favorable stress test results for a number of major U.S. banks boosted investor sentiment, with South Korean shares hitting a new high, while Japanese exporters rallied on a weaker yen. South Korea’s Kospi Composite climbed 1.5% to 2056.03 after hitting 2057.28, its highest level in over seven months. Japan’s Nikkei Stock Average rose 1.9%, breaking the 10000 mark again intraday. Australia’s S&P/ASX 200 gained 1.0% and New Zealand’s NZX-50 tacked on 0.8%. Dow Jones Industrial Average futures were down nine points in screen trade.

Chinese Premier Wen Jiabao offered a pushback to critics of China’s trade and currency policies on Wednesday, citing the country’s shrinking trade surplus with the rest of the world as well as gains in its currency in recent years. But he also pushed for increased cooperation on trade issues with the U.S., its single largest trading partner, in an apparent attempt to address rising tensions over the matter between Beijing and Washington as the U.S. presidential election approaches. Speaking before reporters at his once-a-year news conference at the end of the National People’s Congress, China’s rubber-stamp legislature, Mr. Wen said China has already achieved basic balance in international payments, as the current account surplus has fallen below 3% of gross domestic product.

European finance ministers agreed to suspend European Union funds destined for Hungary because of its failure to hit budget targets while, under pressure from other euro-zone governments, Spain agreed to deeper budget cuts than it had planned for this year. The two developments on Tuesday are signs of how the tougher policing of government budgets introduced since the onset of the sovereign-debt crisis is likely to generate tensions within the EU. A meeting of EU finance ministers agreed to suspend transfers to Hungary of its share of funds earmarked for the 27-nation bloc’s poorer countries. But in a compromise to overcome objections to the suspension from countries including the U.K., Austria and Poland, the funds could be reinstated in June if Europe determines that the government is working to bring its budget policies in line with EU rules.

Rick Santorum won the Republican presidential primaries in Alabama and Mississippi Tuesday, solidifying his claim to be the favored candidate of the party’s conservative base and the main challenger to front-runner Mitt Romney. Mr. Santorum’s victories will bring new clarity to a race so far marked primarily by the inability of Mr. Romney to overcome resistance from the party’s most conservative voters. A nominating contest that has lasted longer than most expected may enter a new chapter in which Messrs. Romney and Santorum go head-to-head. Mr. Romney was hoping that he could prove his ability to consolidate the party behind him by scoring an upset win in the Deep South. His campaign argued Tuesday night that the losses wouldn’t diminish Mr. Romney’s lead in the delegate count or ease Mr. Santorum’s path to winning the 1,144 delegates needed to claim the nomination.

German economic expectations beat forecasts in March, strengthening to a level last seen at the start of the Greek debt crisis, and suggesting that Germany is set to avoid a full-blown recession, unlike many other parts of the euro zone.  Strong German industrial production boosted the reading Tuesday from the Center for European Economic Research, or ZEW, with growth set to receive a fillip from robust domestic demand.

Even as pressure mounts on Newt Gingrich to drop out of the Republican presidential contest, the former House speaker is preparing to stick it outwith a new short-term goal of keeping Mitt Romney from securing the nomination.Mr. Gingrich faced crucial primary tests Tuesday in Alabama and Mississippi, states where he campaigned hard to jump-start his flagging campaign. He lost both to former Sen. Rick Santorum, though he appeared on track to finish a respectable second in both. Even if he had realized his dream of winning both, though, some Republican officials doubt that would have generated enough momentum to win the nomination.

Greece, at the center of Europe’s two-year-old debt crisis, is facing intensifying criticism from other European governments over the way it polices its land border with Turkeypresenting Europe’s passport-free Schengen area with what could be its most serious test since it began functioning in 1995. A majority of the illegal immigrantsmost from the Middle East, Pakistan and Afghanistanenter into the European Union through Greece, whose northern, mountainous region of Evros is the bloc’s most porous external border. Most don’t stay in Greece with its weak economy but try to travel to other countries within the EU. Under Schengen rules, once in Greece, travelers shouldn’t need to show a passport to enter any of the other 25 states in the Schengen area.
China raised the dollar-yuan parity on Wednesday, further weakening the local currency against the greenback, amid easing inflationary pressures and after posting a big trade deficit in February.  The dollar exchange rate was set at 6.3328 on Wednesday, compared with 6.3259 on Tuesday. The People’s Bank of China allows the dollar to move 0.5% in either direction from the parity level on a given day.  Data released over the weekend showed China posted a trade deficit of $31.5 billion in February, its biggest monthly negative trade balance in at least 12 years, amid weak exports growth and a jump in imports.

Rising home prices over the past decade, combined with mounting household debts, have fed concerns that Canada’s housing market has formed a bubble that’s about to burst.  “We call it a tug of war,” said Sonya Gulati, economist in regional economies, housing and government finance at TD Economics, an affiliate of Toronto-Dominion Bank. “Low interest rates make people want to participate in the housing market, but with modest growth, not strong job creation, we can see a negative repercussion on the horizon.”
Brent crude steadied above $126 on Wednesday as expectations for a build in U.S. crude inventories offset improving economic sentiment in the world’s top oil consumer. Brent crude eased two cents to $126.20 a barrel by 0446 GMT, after settling at an 11-month high of $126.22 on Tuesday. U.S. crude rose 12 cents to $106.83.

Gold regained some strength on Wednesday on bargain hunting after prices dropped about 2 percent in the previous session, but a firmer U.S. dollar is likely to cap gains after the Federal Reserve vowed to keep interest rates low until 2014. Gold added $1.21 to $1,675.96 an ounce by 0330 GMT after falling to a low of $1,661.99 on Tuesday, its weakest since late January. Gold rose to a record of around $1,920 in September on fears the euro debt crisis could stall global growth.

For the first time since early July, more Americans approve of the job President Barack Obama is doing than disapprove, according to a new Reuters/Ipsos poll that shows his approval rating now at 50 percent. The poll, taken March 8-11 on the heels of reports that 227,000 jobs were added to the U.S. economy in February, indicates that Obama’s rating has risen by 2 percentage points during the past month. The percentage of Americans who disapprove of the Democratic president was 48 percent, down from 49 percent in February.

Greece will have to slash a further 5.5 percent of GDP in government spending in 2013 and 2014 to meet agreed fiscal targets underpinning the second international bailout for Athens, a European Commission report said. The ComplianceReport by the European Union’s executive describes the progress of Greek reforms necessary for the release of new euro zone money to Athens and recommends the first disbursement be made as soon as possible. The report, obtained by Reuters, said a package of savings adopted by Greece in early 2012 worth 1.5 percent of gross domestic product should allow Athens to meet the target of bringing the primary deficit down to 1 percent this year.
South Korea
’s workforce swelled in February as the economy’s resilience to a Europe-induced export slump helped spur more people to look for jobs, pushing up the unemployment rate by the most in two years. The number of employed people increased by 51,000 to 23.8 million last month from January, the first monthly gain since October, Statistics Korea said in Gwacheon today. The jobless rate jumped to 3.7 percent from 3.2 percent, the biggest increase since January 2010 and higher than the median estimate for 3.2 percent in a Bloomberg News survey of 11 economists.
Greece is no longer in default but the slow pace of reforms, political uncertainty and recession could push it back towards bankruptcy, Fitch Ratings said on Tuesday after Athens completed the largest debt restructuring in history. Fitch assigned Greece a speculative B- rating, becoming the first major rating agency to lift the country out of default territory after the debt swap cut Athens’ debt mountain by about 100 billion euros, or close to a third. It was the first time Greece’s rating had been upgraded since the debt crisis erupted at the end of 2009 and the first Fitch upgrade since 2003, but the B- rating still places Greek government bonds firmly in “junk” territory.
Americans stepped up spending on retail goods in February, evidence that a stronger job market is boosting the economy. And a second report Tuesday said companies restocked at a faster pace in January, a sign that businesses expect stronger job growth to fuel more sales. The Commerce Department said business stockpiles rose 0.7% in January after a 0.6% gain in December. The increase pushed stockpiles up to $1.57 trillion, 19.1% above the recession low in September 2009.
China risks facing another Cultural Revolution unless it presses ahead with political reforms, Premier Wen Jiabao told a briefing in Beijing today. “China is seeking gradual political reform to establish socialist democracy and it won’t be an easy process,” Wen said at his final press conference to close the annual National People’s Congress before he leaves office next year. Economic reform could be lost if the country doesn’t succeed with political reform, Wen said, echoing comments he made in 2010 that reversing policies of reform and openness would be a “dead end” for development. Wen’s remarks follow growing protests in China over illegal land grabs and a widening wealth gap as the Communist Party seeks to defuse unrest ahead of a leadership transition later this year.
Trade figures came out much rosier than expected yesterday as Britain’s exports to regions outside the EU hit a new record, thanks in part to car makers such as Jaguar Land Rover and Rolls-Royce selling more to the US, Russia and China. The figures, released as Jaguar Land Rover announced it is expanding its Halewood plant on Merseyside to meet global demand, will also be seen as good news for the Chancellor’s hopes of a “march of the makers” to rebalance the economy away from financial services. Jaguar Land Rover is set to take on 1,000 new staff at Halewood and increase shifts.
A reading on the future pace of construction dived more than expected in the final three months of last year. Dwelling starts tumbled 6.9 per cent in the fourth quarter of 2011, accelerating on a revised 5.8 per cent drop in the third quarter, according to the Australian Bureau of Statistics. Economists polled by Bloomberg expected a 3 per cent fall for the December quarter. “It was quite a shock drop, reflecting that residential construction is quite weak,” said St George Bank Economist Janu Chan. “It definitely remains one of the weak areas of the economy.”
China Financial Futures Exchange (CFFEX) is mulling resumption of treasury bond futures trading, but a timetable has not been set, Zhu Yuchen, general manager of the CFFEX said Tuesday. The CFFEX has completed the initial design of the futures contracts tracking a four-to-seven-year medium-term bond, Zhu said on the sidelines of the country’s annual parliamentary session. The bourse has finished the design of trading rules, including systematic risk prevention, according to Zhu. CFFEX is currently seeking opinions on the new system and some institutions have been invited to participate in test trading.

China`s local pension funds are considering boosting its portfolio style of investment, especially those have more than 50 billion yuan assets under management, some members of the “Two Session” told China Securities Journal recently. Some anonymous principals with local governments said, the regulator should issue detailed rules concerning the investment of local pension funds, providing a safe, stable and guaranteed investment frameworks. An official from Hubei Province told China Securities Journal that the Central China province is researching the projects of pension fund investment. The province might choose some cities to carry out related investment pilots, But he is not sure to launch pilot programs in this year.
The shale gas policy is proposed to be announced tentatively by the end of next fiscal, Union Minister of Petroleum and Natural Gas Jaipal Reddy informed the Rajya Sabha on Tuesday.  Based on the findings of studies on the potential of resources, the policy is to be finalised after incorporating views of the ministries/departments concerned, he said in a written reply. “Therefore, the announcement of shale gas policy will depend on the completion of the consultation process with the authorities concerned, including environmental safeguards required to be put in place under the regulatory regime for shale gas exploration and production,” the minister said.
Information technology
services provider Wipro Technologies is pursuing contracts worth around $3.5 billion, senior management of the company told investors during a recent road show in Europe.
The Bangalore-based company is pursuing 15 $100-million deals and another 40 deals worth at least $50 million each.  Selective disclosure to groups of investors is seen a pro-active effort by firm, which underwent a management restructuring almost a year ago, to instill confidence among the investors community.

Companies in distress are rushing to restructure loans before the close of the fiscal to ensure working capital flows next year, and help banks dress up financial ratios when they present annual earnings in a year that will set a record for restructured loans since they were introduced in 2001. The Corporate Debt Restructuring Cell, a group comprising representatives from banks, will in the next two weeks take up as many as 20 cases to approve easier principal and interest repayment schedule after near-defaults, said a person familiar with the plan. It is not certain that all these cases aggregating about Rs 8,000 crore will be approved, he said.
South Africa hopes to have a plan by the end of May for replacing Iranian crude that currently makes up a quarter of its crude imports, Energy Minister Dipuo Peters told Reuters on Tuesday. The United States has pressured many of Iran’s biggest oil buyers in Asia to reduce their purchases in a Western push to starve Tehran of funds for its disputed nuclear programme.  Iran is South Africa’s leading crude supplier and makes up about 29% of imports by Africa’s biggest economy, according to the US Energy Information Administration.