News That Matters
The Spanish situation is now reaching the “ridiculous” phase, where we will be getting conflicting messages on a daily basis it seems. Spain is telling the world it doesn’t need a bail out, but would love to see the ECB step up the bond buying. The “positive” effects from the mighty LTRO has only accomplished one thing, an arbitrage where the Spanish banks have loaded up on Spanish sovereign debt, all financed by the ECB. Despite this fact, some want the ECB to restart buying Spanish bonds. As we wrote earlier this week, we are getting that funny feeling regarding Spain. Maybe after all it is time to bring out those pesetas? From Bloomberg.
Three of the most powerful officials in Angola have held concealed interests in an oil venture with Cobalt International Energy, the Goldman Sachs-backed explorer whose operations in one of the world’s most promising energy frontiers are under investigation by US authorities, the Financial Times has learned.  The recently departed head of the national oil company and an influential general confirmed to the FT last week that they and another general have held shares in Nazaki Oil and Gáz, the local partner in a Cobalt-led deepwater venture launched in early 2010.

A powerful revival of France’s radical left, led by Jean-Luc Mélenchon, a former socialist minister, and with a resurgent Communist party at its core, looks poised to be one of the most striking outcomes of next Sunday’s first round of voting in the country’s presidential election. Mr Mélenchon, who has emerged from relative obscurity to become the most dynamic figure in the campaign, reinforced his dramatic rise at the weekend, drawing tens of thousands of red flag waving supporters from across the country to a rally at the Prado beach in the Mediterranean port of Marseilles on Saturday.

Wall Street banks are resisting a Federal Reserve plan to limit their exposure to individual companies and governments, warning it will cut a combined $1.2tn from credit commitments at Goldman Sachs, JPMorgan Chase, Morgan Stanley, Bank of America and Citigroup. David Viniar, chief financial officer of Goldman, Ruth Porat, chief financial officer of Morgan Stanley and their counterparts at six other banks argued that the plan would harm liquidity at a meeting three weeks ago with Daniel Tarullo, Fed governor, according to people familiar with the talks.

The UK’s largest residential landlords have warned that their industry has been put at risk by the government’s use of punitive stamp duty taxes to curb the practice of buying houses through companies. Institutional property owners, including the Duke of Westminster’s Grosvenor Estate, have said the introduction of a 15 per cent stamp duty levy for houses worth more than £2m and bought through companies will both damage their ability to invest and make the UK less attractive to foreign business.
Asian stock markets fell Monday on growing concerns over rising borrowing costs in Spain, pressuring the euro lower and sending cyclical stocks down across the region. While the early focus in markets was on China’s decision over the weekend to allow the yuan to trade in a wider daily range against the U.S. dollar, the actual impact across regional currencies and equities was negligible.  Japan’s Nikkei Stock Average fell 1.5%, Australia’s S&P/ASX 200 declined 0.5%, South Korea’s Kospi was down 1% and New Zealand’s NZX-50 eased 0.3%. Dow Jones Industrial Average futures were off 21 points in screen trade.  Exporter stocks and financials took a beating amid the general gloom.

Four years after a deflating U.S. housing bubble sparked a global financial crisis, housing worries in the U.S. and other countries are weighing on the world economy. In Spain, the latest euro-zone nation to trigger tremors in global markets, households and banks are struggling with the fallout from the bursting of their own property bubble. Chinese policy makers are trying to cool their country’s housing boom so it doesn’t damage the world’s second-largest economy. And in the U.S., the hobbled housing market continues to hold back the economicrecovery.

Top European Central Bank official Jörg Asmussen called on the rest of the world to pledge more money to the International Monetary Fund’s crisis war chesta view expected to put Europe at odds with other regions at talks in Washington later this week. Europe “has done its part” to help protect the global economy against financial turbulence, Mr. Asmussen said in an interview, pointing to European leaders’ pledges to boost the euro zone’s bailout resources to around $1 trillion and to contribute an extra $200 billion to the IMF.

European banks are bracing for a wave of ratings downgrades in coming weeks that could intensify pressure on the fragile industry and further undercut recent efforts to defuse the Continent’s long-running financial crisis. Under pressure from banks, Moody’s Investors Service said Friday that it is delaying until early May its highly anticipated decision on whether to downgrade the credit ratings of 114 banks in 16 European countries. Moody’s announced the review in February, saying it was needed in light of the banks’ weak conditions and the tough environment in which they’re operating.

China made one of its strongest moves yet to show that it believes the yuan is ready to become a global currency by loosening daily trading limits. The move to widen the currency’s trading range, which went into effect Monday, doesn’t eliminate Beijing’s tight grip on the yuan. China’s central bank still sets a daily reference rate for its currency. On Monday in China, the yuan opened modestly weaker in currency trading, after the central bank set a reference rate for the yuan stronger than Friday’s market close.

North Korean dictator Kim Jong Eun spoke publicly for the first time Sunday, declaring before a giant crowd gathered to commemorate his late grandfather’s 100th birthday that the country will continue putting military matters above the economy and keep trying to unify the Korean peninsula under the North’s leadership. “Let us move forward to the final victory,” Mr. Kim said as he finished the speech with the term associated with his grandfather Kim Il Sung’s oft-stated desire to control South Korea as well as the North.

The son of Bo Xilai, the sacked Chinese Communist Party official at the center of the country’s biggest political crisis in a generation, appears to have left his apartment near Harvard University, escorted by private security guards, according to a person familiar with the matter. Bo Guagua, 24 years old and a postgraduate student at Harvard’s Kennedy School of Government, didn’t normally have a security detail. He was no longer in his upscale apartment in a modern seven-story building in Cambridge, a concierge working there said on Saturday. He left in recent days, but it wasn’t clear where he had gone, how long he was expected to be gone, or whether he planned to return to classes this week.
Goldman Sachs Group Inc. sold a further $2.5 billion worth of shares in Industrial & Commercial Bank of China Ltd. , paring the value of its holding in China’s largest lender to about $3 billion, Reuters reported Monday. Goldman Sachs sold the stake at 5.05 Hong Kong dollars (65 U.S. cents), a 3.1% discount to Friday’s closing price of ICBC shares, the report said. Temasek Holdings will buy $2.3 billion worth of those shares, the report cited the Singapore state investor as saying. The remaining $200 million worth of Goldman Sachs’ stake was sold to other institutional investors, the report cited an unnamed source as saying. Temasek’s purchase gives it a 5.3% stake in ICBC, Reuters added

U.S. technology giant Apple Inc. has agreed to a pollution audit in China, the Financial Times newspaper reported late Sunday. A firm located in China that makes printed circuit boards for Apple will be inspected by auditors, with the undertaking monitored by Apple and the Institute of Public and Environmental Affairs, according to the report. The move is seen as a step toward Apple addressing environmental concerns, according to the report. Apple recently completed an audit of labor conditions at a Chinese supplier, with improvements to pay and other issues promised following the move

South Korea’s central bank on Monday lowered its economic growth forecasts for this year, citing a slowdown in the global economy, fueling market expectations the Bank of Korea will maintain its accommodative monetary stance to underpin growth amid subdued inflation. The South Korean economy–Asia’s fourth-largest–will likely expand 3.5% in 2012, the central bank said in its revised 2012 economic outlook, lower than its projection made in December for growth of 3.7%. Gross domestic product grew 3.6% in 2011.  Headline inflation will likely ease to 3.2% this year, comfortably staying within the BOK’s target band of 2%-4%, from 4.0% last year, the BOK said. The central bank said in December it expected consumer price inflation of 3.3% this year.
The plushest neighbourhoods of central London are attracting increased interest from a new wave of super-rich migrants from France, scared by a rising tide of tax threats from presidential candidates as the election campaign comes to a climax. Upmarket British property consultant Knight Frank said it has seen a 19 percent spike in online enquiries from France about homes located in London’s priciest districts in the first quarter of 2012.

Gold edged down on Monday, extending losses made in the previous session, as the dollar firmed on worries about Spanish debt yields and the pace of Chinese economic growth, while platinum also sank to its lowest level in more than two months. Spot gold lost nearly 1 percent in the previous session, as a selloff in riskier assets spilled over, although bullion still managed to post a 1.7-percent weekly rise — its biggest one-week gains since late February. “Gold is at a crucial point now, as $1,650 is a very important support level. If prices break below the level, we may see a flight to $1,620.” Spot gold lost 0.4 percent to $1,651.26 an ounce by 10:18 p.m. Eastern Time. U.S. gold slid half a percent to $1,652.50.

Brent crude futures slipped towards $120 on Monday after weak growth numbers from China, the world’s No. 2 oil consumer, and a surge in Spanish borrowing costs triggered worries about global economic growth and demand. Front-month Brent crude slipped 1.17 to $120.04 a barrel by 11:11 p.m. Eastern Time, after settling at $121.21 a barrel on Friday. U.S. oil slipped 64 cents to $102.20 a barrel after settling at $102.83.

The U.S.-Colombia free trade agreement will enter into force next month, far earlier than expected, as a result of what the Obama administration called “historic” progress for Colombian worker protections and human rights. The announcement came during the Summit of the Americas in Colombia, where President Barack Obama has been meeting regional political and business leaders including Colombian President Juan Manuel Santos to push for greater access for U.S. exports.
Infosys Ltd. (INFO)
, which sits on the largest cash pile among India’s computer-services providers, is prepared to spend as much as $500 million on a single European acquisition.  Infosys may make another attempt to acquire a company of that size after it walked away from a plan to buy U.K.-based Axon Group Plc for 407 million pounds ($645 million) in 2008, said Chandrashekar Kakal, the company’s global head of business IT services.

As Hong Kong establishes itself as a hub for offshore trade and investment in China’s currency, the city’s family-owned banks can be acquired at some of the lowest valuations since the global financial crisis. Chong Hing Bank Ltd. (1111) is trading at the lowest price to book multiple since the aftermath of Lehman Brothers Holdings Inc.’s collapse, while Dah Sing Banking Group Ltd. (2356) is valued at a 37 percent discount to its net assets, according to weekly data compiled by Bloomberg. With competition pushing Chong Hing, Dah Sing and Wing Hang Bank Ltd. (302) down an average of 28 percent in the past year, the prices of Hong Kong banks are “attractive” for a takeover, according to Mike Smith, chief executive officer of Australia & New Zealand Banking Group Ltd.

For the first time in seven months, traders are testing the Swiss National Bank’s determination to limit the franc’s strength against the euro as Europe’s resurgent debt crisis drives up demand for safer assets. The franc breached the central bank’s cap of 1.20 to the euro on April 5 and April 9, and options investors are predicting even more appreciation. It jumped 1.1 percent versus nine peers in a basket of currencies in March, the biggest gain since July, and is up 1.9 percent from a nine-month low on Jan. 11, according to data compiled by Bloomberg.

The Philippines central bank will gauge the impact of two interest rate cuts this year when it assesses monetary policy at this week’s meeting, Governor Amando Tetangco said. The bank’s policy “remains appropriate, but we need to see how past policy actions are filtering to the economy,” Tetangco said in an e-mail reply to questions before the April 19 meeting. “We will also review our forecasts and make further sensitivity analyses to account for possible second round effects” such as demand for increases in transport fares and wages, he said.  Bangko Sentral ng Pilipinas will keep its overnightborrowing rate at 4 percent this week, according to all 13 economists in a Bloomberg News survey. Inflation (PHC2II) in the Southeast Asian nation unexpectedly slowed to a 30-month low of 2.6 percent in March as exports climbed for a second month and beat estimates in February, the government said this month.

New Zealand house sales in March recorded the best monthly result since November 2007, adding to signs of a real-estate-market recovery that may boost consumer confidence and spending later this year. Sales rose 25.3 percent from a year earlier, the Real Estate Institute of New Zealand said in a report today. Sales reached 7,330 in March from 6,168 in February, according to the figures, which don’t adjust for seasonal variations.
Growth in emerging economies is slowing and the recovery in the United States could be losing some momentum, worrisome developments when European leaders have yet to complete the repairs needed to shore up monetary union.  The situation forms a vulnerable backdrop for finance officials from the world’s leading economies, who gather in Washington this week for the Group of 20/International Monetary Fund/World Bank meetings. The managing director of the IMF, Christine Lagarde, has offered this blunt description: “The risks remain high; the situation fragile.”

Five years after the U.S. housing bust sent sales and prices plunging, the spring home-buying season is pointing to a long-awaited recovery. Reduced prices, record-low mortgage rates, higher rents and an improving job market appear to be emboldening many would-be buyers. Open houses are drawing crowds. A wave of foreclosures is leading investors to grab bargain-priced homes.  And many people seem to have concluded that prices won’t drop much further. In some areas, prices have begun to tick up.

Tensions among some of the world’s leading economies have boiled up over a plan to raise new resources for the International Monetary Fund tocontain the euro zone debt crisis, and a quest by emerging economies to win more say in the global lender. World financial leaders gathering in Washington next week will focus on proposals for countries to contribute more money to the IMF so it is better prepared in case of fallout from any further escalation of Europe’s debt problems. Emerging market countries like China, Brazil and Russia are willing to provide more money for the IMF, but they want something in return: greater voting power.
An analysis of recent labor market data shows that while the number of jobs created in early 2012 exceeds that of a year ago, the jobs added to U.S. payrolls paid less than those created in early 2011. In the first four months of fiscal year 2012, employment and withheld income tax reported by the U.S. Treasury were down $310 million from the same period a year earlier, according to statistics compiled by the Financial Management Survey, a division of the U.S. Treasury.
Natural-rubber imports by India, the world’s third-biggest consumer, may climb as much as 10 percent to a record this year as the highest-ever car sales boost demand for the commodity used in tires. Purchases may climb to about 225,000 metric tons in the year that began on April 1 from 205,050 tons a year earlier, said Rajiv Budhraja, director general of India’s Automotive Tyre Manufacturers’ Association. Rising Indian purchases may help futures in Tokyo extend a 16 percent rally this year and increase costs for tiremakers including MRF Ltd. and Apollo Tyres Ltd. The Society of Indian Automobile Manufacturers estimates that passenger car sales will gain 10 percent to 12 percent this fiscal year, extending record monthly sales in January, February and March. “The growth in Indian tire consumption this year will be around 6 percent to 8 percent as passenger car and commercial vehicle sales improve,” Budhraja said in a phone interview from New Delhi on April 12. “For the economy as a whole, the odds of it going the way of last year’s trend is not there as interest rates are softening, and the monsoon is likely to be normal.”
The US will make a profit from bailing out the nation’s banks and carmakers at the height of the financial crisis, the Treasury Department has said. The bank bailouts may result in a return of $2bn (£1.3bn), the Treasury said in its latest projections for the government’s response to the crisis.  And the recovering auto industry has added 230,000 jobs as a result. The recession was the worst since the Great Depression and $19.2tn of wealth was wiped out, it said.
Britain is close to agreeing a new £10bn commitment to the International Monetary Fund as the Bretton Woods institution seeks to double its war-chest at its spring meeting this week. George Osborne is expected to support the IMF’s calls for greater resources in back-room negotiations, but will only pledge the extra funds if agreement can be struck with all the major non-eurozone nations, bar the US. Tim Geithner, US Treasury Secretary, has made it clear the US will not make any further contributions until the eurozone has bolstered its own bail-out fund sufficiently.

French president Nicolas Sarkozy has lashed out at the hard money policies of the European Central Bank and launched a veiled attack on Germany’s austerity drive, hoping to bolster his flagging re-election campaign. “On the question of the ECB’s role in supporting growth, we French are going to open the debate,” he told a mass gathering in Paris. “Europe must absolutely return to growth if it is not going to lose its footing in the world economy.” Mr Sarkozy criticised the “fixed rules in the Maastricht treaty”, alluding to the ECB’s price stability mandate. The US Federal Reserve has a dual mandate linked to both inflation and jobs.
The British economy is set to stall for the rest of the year as nervous businesses remain reluctant to invest in recovery, an influential economic forecaster warned today. The Ernst & Young ITEM Club reckons the economy will edge ahead by an anaemic 0.4 per cent in 2012, growing at just half the pace predicted by the Office for Budget Responsibility, according to its latest forecasts. ITEM predicts stronger growth of 1.5 per cent next year although this again falls short of the OBR’s 2 per cent prediction. The forecaster blamed sluggish growth in business investment for the shortfall as UK firms stockpile cash balances worth a staggering £754 billion. Despite their cash-rich position, business investment grew by just 1.2 per cent last year.
Standard & Poor’s rating agency on Friday confirmed its top AAA long-term credit rating for Britain and maintained a stable outlook for the country that is not a member of the eurozone. “Standard & Poor’s Ratings Services affirmed its ‘AAA’ long-term and ‘A-1+’ short-term unsolicited sovereign credit ratings on the United Kingdom. The outlook remains stable,” it said in a statement. It said that the ratings reflect Britain’s “wealthy and diversified economy, fiscal and monetary policy flexibility, and adaptable product and labour markets.” S&P added that it believes “the UK government maintains a strong commitment to implementing its fiscal mandate, and has the ability and willingness to respond rapidly to economic challenges.”
After a month of sounding more upbeat, Mark Carney heads into a key week for Canadian monetary policy with the economic outlook almost as murky as ever. The Bank of Canada Governor may well have hoped to use a policy decision this Tuesday, and a quarterly economic forecast the next day, to reshape expectations about when he will lift his main interest rate from the current 1 per cent for the first time since September, 2010.
Japan is considering lending about US$60 billion (S$74.9 billion) to the International Monetary Fund to help strengthen a global firewall against contagion from the European sovereign debt crisis, Kyodo news agency said on Sunday.  Tokyo is talking with some other key members of the IMF such as China and European nations to finalise their possible contributions to the multilateral lender, ahead of the Group of 20 finance chiefs’ meeting later this week in Washington.
Leaders of 31 countries from the Western Hemisphere wrapped up the two-day Sixth Summit of the Americas here on Sunday without issuing a final declaration due to a lack of consensus on controversial issues. “There is no final declaration because there is no consensus,” said Colombian President Juan Manuel Santos at a closing press conference for the hemispheric gathering in this Caribbean resort city. However, Santos said he was still “most satisfied” with the results of the summit, which he called “a summit of dialogue and sincerity.”  In the past two days, the participating heads of state and government discussed a wide range of “hot topics,” something they never did before, and they did so in a “respectful, direct and open” manner, said Santos.

The People’s Bank of China (PBOC), the country’s central bank, has cut the reserve requirements for some county-level financial institutions by 100 basis points, sources familiar with the matter said Friday. The favorable reserve ratios, effective on April 1, will end on March 31, 2013. The financial institutions were rewarded with the one percentage point lower reserve requirements because they managed to lend a certain percentage of loans to local businesses last year. The PBOC has been implementing a differentiated reserve requirement policy for county-level lenders to help boost lending, support local economies and improve rural financial services.

The State Council, China’s Cabinet, on Friday vowed to strengthen the fine-tuning of the economy in a timely manner in order to cope with new circumstances as the first quarter GDP registered the lowest growth rate in nearly three years.  The economy is currently in a generally stable state, but faces many difficulties and challenges. Efforts should be made to leave more room for new policies and prepare for hardships and tests, according to an executive meeting of the State Council presided over by Premier Wen Jiabao.
The government pledged to improve macro-regulation, enhance demand management and make policies more targeted, flexible and forward-looking, according to a statement issued after the meeting. The statement came hours after data showed the GDP of the world’s second-largest economy grew 8.1 percent in the first quarter from a year earlier, the lowest in 11 quarters.
Duvvuri Subbarao’s shoes are something that not many may want to be in right now. The Reserve Bank of India (RBI) Governor is under tremendous pressure from the government to start the interest rate reduction cycle from Tuesday’s policy announcement. Equal pressure, if not more, is being built up by monetary policy hawks who aver that circumstances are still not right to reverse direction on rates. Just sample this. Speaking on Thursday soon after the factory output (IIP) numbers were released, Finance Minister Pranab Mukherjee said: “These figures will have a bearing on the monetary policy announcement… The government, along with the RBI, will take required steps to revive activity in the economy.”
Increased signs of a growth slowdown, coupled with inflation easing towards the 6-7% range, have led to hopes that the RBI will ease monetary policy on April 17, when it next meets. It is argued that a reduction in policy rates will help to lower the cost of capital, which will then boost domestic demand, thereby helping to protect headline GDP growth. However, we believe that there is merit in delaying the rate cuts. While growth has decelerated, we believe that traditional growth indicators such as the index of industrial production have been understating the underlying trend in economic activity. Some of the other indicators such as corporate revenue growth have not corroborated a sharp deceleration in growth. More importantly, we believe that the macro stability indicators warrant a delay in rate cuts.

World Bank has informally told India that its rapidly-growing economy may soon make it ineligible for soft loans, prompting the government to lobby for concessional lending for a few more years. India stands to lose over $2 billion in low-interest funds for many of its welfare schemes, besides missing out on social initiatives spearheaded by the Washington-based lender over the previous decade. “We expect India to move into the middle income category of countries in the next two years. This will mean that the IDA ( International Development Association) funding India got last year was the last cycle of such funding for the country,” said a senior World Bank official.
South Korean companies are bearish on increasing investments this year mainly because they see few viable growth opportunities, a poll conducted by the country’s largest economic organization showed Monday. The Korea Chamber of Commerce and Industry (KCCI) survey carried out on 1,026 local companies showed the investment sentiment index standing at 35.8 in the first half and reaching 49.2 in the July-December period. The two readings are below the break-even 50 mark for the index. A reading above 50 and below 100 means more companies are upbeat about investments, while numbers that fall short of 50 indicate pessimists outnumbers optimists.

South Korea’s import prices rose at their slowest clip in two years last month mainly due to a low base of comparison, the central bank said Monday. In local currency terms, import prices gained 3.5 percent on-year in March, slowing from a 5.2 percent on-year gain in February, according to the Bank of Korea (BOK). Last month’s figure marks the lowest on-year gain since March 2010, when import prices contracted 4.3 percent from a year earlier, the central bank said. The slowdown in the growth of import prices was attributed to sharp increases in raw material costs that drove up numbers early last year.
Iran has launched projects to develop four oilfields, located in Persian Gulf, and raise the total output by 100,000 barrels per day (bpd) in the current calendar year, which began on March 20, said the managing director of the National Iranian Offshore Oilfields Company.  “Some $9 billion worth of contracts were signed last year to develop Salman, Lavan and Forouz B fields,” Mahmoud Zirakchianzadeh told Mehr news agency.  This year, boosting outputs at Reshadat, Forouzan, Hengam and Hendijan fields by 100,000 bpd has been planned, he added.  Iran is planning to boost oil output at the Bahregan oil block in the Persian Gulf to by 35,000 barrels per day (bpd) to reach 175,000 bpd by 2015, an official with the Iranian Offshore Oil Company said in January.

Iran is reportedly masking its crude oil exports by ordering its oil tanker captains to disable their ships’ tracking systems in a further bid to conceal who its customers to counter Western sanctions aimed at diminishing the rogue state’s oil revenues. According to reports citing oil and shipping industry sources, most of Iran’s 39-strong fleet of tankers is now ‘off-radar’ after Tehran ordered captains in the National Iranian Tanker Co (NITC) to switch off their black box transponders, used in the shipping industry to monitor vessel movements. The problem for Malta is that no less than 30 of the NITC’s 39 oil tankers are flying the Maltese maritime flag, according to data on the NITC’s website. Ships are obliged by international law to have a satellite tracking device on board when travelling at sea. However, a ship’s master has the discretion to turn off the device on safety grounds with the permission on the vessel’s flag state.