News That Matters

As frequent readers of The Trader know, we have been rather bearish on the markets over the past months. The formation we wrote about during the “topping” out phase, all broke down, and have now reached crucial support levels. We are not suggesting this is the all in bottom, but from a trading point of view, many European indices are reaching support levels and we are probably looking at an aggressive boune to the upside. Our long term view is still with a bearish bias, but in the short term time frame, we expect the support levels to hold. Full chartology here
Shareholders in Europe’s listed companies will be given a binding vote on pay while those who invest in banks will gain powers to set a cap on bonus levels, under plans being drawn up by senior EU officials. The initiative from Michel Barnier, the EU’s top financial services regulator, would hand bank investors the voting power to curb “morally indefensible” pay and limit the gap between the lowest and highest paid. Banks would also be forced to disclose their top 20-30 earners.

Greece is heading for a fresh general election after its political parties failed to form a national unity government because of opposition from the anti-bailout Syriza coalition. President Karolos Papoulias, whochaired three failed meetings with political leaders in as many days, was unable to bridge differences between Syriza and the two pro-euro parties, the centre-right New Democracy and PanHellenic Socialist Movement (Pasok). A caretaker government will be chosen on Wednesday to oversee the election, expected on June 17.

The leaders of France and Germany on Tuesday joined forces to urge Greece to reaffirm its commitment to membership of the eurozone, after François Hollande flew to Berlin for talks with Angela Merkel, German chancellor, within hours of being installed as French president. Both spelt out their concern that Greece should remain a full member of the common European currency, while promising to consider new measures to revive economic growth in the country. But they also agreed that Athens must carry out the austerity programme it has agreed with the European Union and the International Monetary Fund.

Much more reading below.


The US Department of Justice has opened a preliminary investigation into the $2bn trading loss at JPMorgan Chase, adding to the pressure on Jamie Dimon, the bank’s chief executive, as he faced shareholders for the first time since the scandal broke. The DoJ review is preliminary, a person familiar with the matter said, and is being led by the Federal Bureau of Investigation’s New York field office. The Securities and Exchange Commission is already conducting a separate investigation into the bank’s losses.

Up to 20 of Europe’s top banks will on Wednesday discuss a plan to foil the dominance of the much criticised big three credit agencies at a private meeting of finance directors in Frankfurt. Some of the banks want to change the culture of information disclosure to the likes of Standard & Poor’s, Moody’s and Fitch to level the playing field for potential new entrants. “They get privileged information,” said one person familiar with the plan. “In future, maybe they should only get a standard pack, putting everyone on an equal footing.”

Washington and Moscow should agree to an 80 per cent cut in nuclear arsenals over the next decade to help encourage smaller atomic powers to engage in multilateral arms control negotiations, says a former senior US general. Amid signs that President Barack Obama wants to press ahead with a new round of arms talks with Russia, General James Cartwright, the now-retired former vice-chairman of the Joint Chiefs of Staff and former commander of Strategic Command, argues that the US should reduce its arsenal to 900 nuclear weapons by 2022.

Brazil’s cost of sugar production has risen to match that in parts of Europe, illustrating the declining competitiveness of Latin America’s largest economy even in one of its core agricultural industries, according to a key trader of the commodity. Once by far the lowest-cost producers, Brazilian sugar companies are suffering from a stronger currency, inefficient infrastructure and rising labour and overheads, leading traders to consider moving production to new markets, such as Africa, said Alberto Weisser, chief executive officer of Bunge, one of the world’s largest commodities traders.
Asian markets fell Wednesday after Greece failed to form a coalition government and concerns grew over the health of its banks, while major Japanese lenders climbed on better-than-expected profit outlooks. Coalition talks in Greece were finally abandoned, ending more than a week of unsuccessful negotiations, with a new set of elections expected in June. The political gridlock is boosting anxiety, leading depositors to withdraw €700 million ($898 million) from local banks Monday. Wednesday, Australia’s S&P ASX 200 hit a two-month low in early trading, dropping 1.6% to 4193.0. Japan’s Nikkei was down 0.8% while South Korea’s Kospi fell 1%. In Hong Kong, the Hang Seng Index lost 1.6%, while the China Shanghai SE Composite slipped 0.3%.

The euro-zone economy narrowly escaped recession in the latest quarter thanks to a surprising rebound in Germany, which offset deepening downturns in Spain and Italy. Although the region avoided two straight quarterly drops in gross domestic product, the common benchmark for recession, the figures nonetheless reflect a deepening divide between Germany and the rest of the euro zone that complicates the bloc’s efforts to stem its debt crisis.  Without growing economies, Italy and Spain will be hard-pressed to significantly reduce their debt levels and regain the confidence of financial markets, analysts warn, while Germany and other stronger countries could still buckle if contagion from the Greek debt crisis engulfs

Japanese core machinery orders fell for the first time in three months in March, declining 2.8% from February, but the leading indicator of capital investment is expected to resume its ascent in an overall sign of optimism for the economy.  The fall in orders reflected a deterioration from the previous month’s revised 2.8% gain and matched expectations by economists surveyed by Dow Jones Newswires. Helping to drag down the March figure was a sharp decline in orders from the chemical and chemical products sector after a big rise the month before, according to a government official briefing reporters.

The U.K. is being drained of crucial medicines by exporters who sell them elsewhere in Europe at higher prices, putting patients’ well-being at risk, lawmakers said Tuesday. The U.K. Parliament’s All-Party Pharmacy Group called on the coalition government to find effective ways to restrict this so-called parallel trade, which is legal under European Union law but has long been condemned by drug makers. In the past, drug makers have complained about cheap parallel imports flooding into the country. “The parallel export of medicines intended for the U.K. market is undermining the effective functioning of the U.K. medicines supply chain, and

Italian bank earnings in the first quarter relied heavily on trading profits made possible by cheap European Central Bank loans, raising questions about how lenders in a recession-plagued economy can cope without reducing loans to Italian businesses and households. As Intesa Sanpaolo SpA, the country’s largest retail bank by branches, and two other banks reported their results, the country’s banking association lashed out at a decision by Moody’s Investors Service to downgrade the credit ratings of 26 banks, calling it irresponsible and unjustified as well as an “aggression” against Italian companies and families. Intesa reported net profit of €804 million

Australia’s “Big Four” banks face increasing scrutiny from both the International Monetary Fund and ratings firms as Europe’s financial problems drive up offshore funding costs just as domestic growth stutters. IMF officials arrived in Sydney this week for meetings with the fourAustralia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia, National Australia Bank Ltd. and Westpac Banking Corp. The IMF is testing the strength of Australia’s banks as it makes similar assessments in Japan and Brazil.

China is considering setting up a new way for foreign pension funds to invest in its vast capital markets, according to people familiar with the matter, its latest effort to prop up the country’s listless stock market. Chinese authorities are mulling whether to create a new mechanism for foreign pension funds that would be outside the country’s main official investment program for international investors, according to people who have been briefed on the matter. Currently, foreign investors have limited access to Chinese markets except through programs such as the Qualified Foreign Institutional Investor, or QFII, program.
Six months ago, talk of Greece leaving the euro was seen as so unlikely nobody had to think seriously about. Now the ‘Grexit’ as a Greek exit from the euro has been dubbed is increasingly seen as a done deal. Citibank rates the chances as high as 75% that Greece will leave the single currency in the next 18 months. The British bookmaker William Hill regards it as such as done deal it is no longer taking bets.

Greece’s Ministry of Finance confirmed that it would repay approximately 435 million euros ($560 million)of bonds maturing Tuesday as part of debt owed to private creditors, including banks and a hedge fund, that opted not to participate in the European Union and International Monetary Fund-sponsored bailout of Greece’s debt. The Financial Times reported that Greece has sufficient funds to meet the payment following its receipt last week of €4.2 billion as part of its second bailout agreement.

Facebook Inc. plans to increase the size of its initial public offering by 85 million shares to about 422 million, in a move that could raise the size of its upcoming offer to more than $15 billion, Reuters reported Tuesday, citing a source familiar with the matter. The social network website plans to sell the shares in an indicative range of $34 to $38 apiece, having increased it from an earlier range of $28 to $35 a share. At the mid-point of its current range, or $36, the company will raise $15.2 billion
Australian consumer confidence hovered near the weakest level this year and wage growth slowed, underpinning bets the central bank will cut interest rates next month to the lowest level in more than two years. The sentiment index for May rose 0.8 percent to 95.3, a Westpac Banking Corp. (WBC) and Melbourne Institute survey taken May 7-11 of 1,200 consumers showed today in Sydney. The wage price index, which measures hourly pay rates excluding bonuses, advanced 0.9 percent last quarter from the previous three months, when it rose 1 percent, the statistics bureau said.
The United States’ economy could shrink as much as 4 percentage points in the first half of 2013 if Congress fails to address the expiration of $600 billion worth of tax breaks and jobless benefits by the end of this year, according to Goldman Sachs. In a report issued on Tuesday, Goldman said in the worst-case scenario, the “fiscal cliff” facing the U.S. will shave almost 4 percentage points off gross domestic product (GDP) span#ExplainsLink a, in the first half of 2013.
The White House released documents Tuesday that show President Barack Obama and the first family hold assets valued at between $2.6 million and $8.3 million. The disclosure forms, required by the Ethics in Government Act, show the president’s largest asset, by far, is U.S. debt in the form of Treasury notes and bills. In total, the president has between $1.6 million and $6.3 million invested in Treasury debt.
China Gas Holdings Ltd., the utility that began life as an online retailer, has become the industry’s hottest property as China plans to double use of natural gas and replace coal in the biggest-polluting nation. The company, a seller of subsidized gas in canisters and pipelines to 151 cities, gained 38 percent since receiving a hostile bid in December, valuing it at HK$15.3 billion ($2 billion). Some of its biggest Chinese and Korean stockholders increased their stakes after the offer, pushing its market value up to HK$17 billion and creating a contest for control of a utility that last year was mired in an embezzlement scandal and a decade ago sold clothing on the web.
The UK’s trade deficit narrowed in March, driven in particular by stronger exports to the US, China and Russia, official figures have shown. The seasonally adjusted trade deficit in goods and services was £2.7bn, against £2.9bn the month before, the Office for National Statistics said. Car exports in March were worth £200m more than the previous month. The deficit on seasonally adjusted trade in goods was £8.6bn in March, unchanged on February.
Foreign holders of €422bn of Greek debt were warned to brace themselves for “killer losses” as coalition talks in Athens collapsed, threatening Greece’s future in the eurozone.  The euro tumbled to a four-month low and European stock markets dropped as political leaders and economists warned that the next round of elections called in Athens amounted to a vote on Greek membership of the euro. “What’s at stake isn’t just the next Greek government,” said Guido Westerwelle, Germany’s foreign minister. “What’s at stake is the Greek people’s commitment to Europe and the euro.”

The number of Britons claiming jobless benefits is expected to climb to levels not seen since the end of 2009, as the UK’s recession-hit economy continues to struggle through the crisis. Official figures released on Wednesday are expected to show that the number of people claiming job seekers allowance (JSA) grew to a 30-month high of 1.618m in April. Economists polled in a Bloomberg survey also expect the UK unemployment rate to climb to 8.4pc in April, from 8.3pc in March, when the unemployment rate fell by 0.1 percentage points.
Gold fell to a 19-week low as the US dollar rose after Greek Pasok party leader Evangelos Venizelos said new elections will be held after attempts to form a government failed, curbing demand for the precious metal. Gold futures for June delivery slipped 0.2 per cent to settle at $US1,557.10 an ounce at 1:42 p.m. on the Comex in New York. Prices earlier dropped to $US1,546.80, the lowest since Dec. 30. Silver futures for July delivery dropped 1 per cent to close at $US28.08 an ounce on the Comex. The metal fell as low as $US27.895, the lowest since Dec. 30.

Wages grew at a faster pace than economists estimated in the first quarter, led by paychecks for miners. The wage price index, which measures hourly pay rates excluding bonuses, advanced 0.9 per cent from the previous three months, when it rose 1 per cent, the statistics bureau said today. That compares with forecasts for a 0.8 per cent gain. CMC chief market strategist Michael McCarthy said the data showed stronger demand in the labour market compared with the Reserve Bank of Australia’s reading in recent months.

THE real estate sector is in the grips of a ”white-collar” crisis, with more than 200 workers made redundant across the industry as deals collapse and development projects dwindle. Job losses are tipped to swell in the near future as companies look to cut costs to reach earnings forecasts. The losses are not only among back-office staff, but finance directors and senior management. Even chief executives are being forced to take pay cuts and work under tighter incentive pay regimes.
India said on Tuesday it would cut purchases of Iranian oil by 11 per cent following pressure from the United States (US) to join a drive to isolate the Islamic republic over its disputed nuclear programme. Indian refiners expect to import 15.5 million metric tons of crude from Iran in the fiscal year that began April 1, the country’s junior oil minister told parliament in a written reply, down from 17.44 million tons last year.
Singapore’s Minister of State for Trade and Industry Teo Ser Luck will be in China to help pave the way for Singapore’s small and medium enterprises (SMEs) to establish a stronger economic presence in the Central China region. He will meet Chinese officials and key business leaders to gain a deeper understanding of the overall development of Central China, local TV Channel NewsAsia reported on Tuesday.

Australia’s building products maker CSR Limited said on Wednesday that construction market in Australia was likely to remain weak for the foreseeable future. The company estimates that total housing starts in Australia will be around 140,000 houses for the year ended March 31, 2013, down from 148,300 in the previous year. “Excluding the global financial crisis and the introduction of the GST (goods and services tax), this represents the lowest level of housing activity in the past 15 years,” CSR said in a statement on Wednesday.

South Korea’s jobless rate fell to 3. 5 percent last month from a year earlier as job creation kept its solid growth trend in the service industry, a government report showed Wednesday. The unemployment rate stood at 3.5 percent in April, down 0.2 percentage point from the same month of last year, according to Statistics Korea. From a month before, the rate was down 0.2 percentage point. The jobless rate fell last month due mainly to persistent growth of monthly job creation in the service sector, but the figure declined at a relatively slow pace as later-than-planned civil service exam increased the number of people who prepares for job-finding.
If inflation has broken the back of the aam aadmi, the biggest contributor to the pain in the UPA’s term is food prices. Government data on wholesale price index ( WPI) shows that there has been a 63% increase in the price of all commodities between April 2004, a month before UPA took charge, and April 2012, the latest period for which data is available. But when it comes to food products, the index has more than doubled from 98 to 206.4. So, you are now spending at least twice the amount you spent in April 2004 just to meet your basic consumption needs.

As it battles a choppy currency market, the Reserve Bank of India (RBI) is taking a close look at bets that punters, corporates and banks take on dollar-rupee futures that are traded on stock exchanges.
The regulator will meet select banks this week to sense the activity in the futures market and its possible influence on the spot rupee which breached 54 on Tuesday before closing at 53.79 against the dollar, following RBI’s veiled intervention. According to currency dealers’ estimate, the central bank sold as much as $200-300 million on Tuesday, with the rupee touching a low of 54.15. Unlike the over-the-counter (OTC) foreign exchange market, where a corporate needs an underlier like export, import or foreign currency loan, traders can take futures positions that are pure bets. But while the futures market allows higher speculation, it is closely monitored and perceived as more transparent.

Foreign direct investment (FDI) by Indian companies rose by nine-fold to over USD 72.04 billion over five years till 2009-10 from 7.21 billion during 2000-01 to 2004-05. “The increased outward FDI by Indian parties has been primarily driven by resource seeking or market seeking or technology seeking motives,” Minister of State for Finance Namo Narain Meena said in a reply to Rajya Sabha today.
The minister added that the increase in outward investment is a corporate strategy to promote the brand image and utilisation of raw materials available in the host country.

The rising balance of payments risks and the relentless downside pressure on the rupee since the March Budget announcement have led to a slew of measures from the Reserve Bank of India in recent days, along with greater intervention efforts. While the measures announced so far have had limited FX impact, further steps – such as the introduction of a special scheme to attract NRI deposits, similar toResurgent India Bonds (1998) or India Millennium Deposits (2000), and re-introduction of a special dollar-buying window for public-sector oil companies ( special market operations) – are reportedly under discussion. The key question is whether these would be enough to stem the rupee’s slide. This is not the first time that the rupee has come under pressure since the onset of the financial and economic crisis in 2008. India’s dependence on capital inflows to fund the current account deficit makes the rupee a natural target of speculative selling during periods of heightened global risk aversion.
South Korea’s jobless rate decelerated in April thanks mainly to more positions created in the service sector, a government report showed Wednesday. The jobless rate stood at 3.5 percent last month, down from 3.7 percent a year earlier, according to the report by Statistics Korea. Last month’s tally also represents a drop from a jobless rate of 3.7 percent reached in March. A total of 455,000 jobs were added to payrolls in April with 24.75 million people employed in the country overall, the report showed. The employment rate edged up 0.4 percentage points to 59.7 percent.
South Africa launched a multi-billion rand incentive programme on Tuesday aimed at boosting the competitiveness of its manufacturing sector, where a global economic downturn and a volatile exchange rate have hurt exports. Manufacturing contributes about 15% to gross domestic product but contracted during a recession in 2008/09 that slashed one million jobs, a fifth of them in the sector. The three-year Manufacturing Competitiveness Enhancement Programme (MCEP) will offer grants worth to companies that replace obsolete equipment, retain jobs and comply with a black economic empowerment drive among other criteria.
Nine petrochemical projects will be implemented in the current Iranian calendar year (began on March 20), which will boost the country’s output by 8 million tons. The projects will create over 3600 jobs, the Shana news agency reported. Iran has implemented 38 plans to boost its petrochemical output. China and countries in Western Europe are the main recipients of Iran’s petrochemical exports, followed by countries in Southeast Asia, the Middle East, the Indian Subcontinent, Africa, and Latin America