News That Matters

The US justice department says Deutsche Bank knew in 2006 that a mortgage company it was preparing to buy lied to the US government about its mortgages, Reuters reports, yet went ahead with the purchase and should be held financially responsible.

Andy Coulson, the former editor of the News of the World who has been arrested on suspicion of involvement in phone hacking, received significant payments from News International after he took up his role under David Cameron as the Conservative party’s communications chief in 2007.

Goldman Sachs chief executive Lloyd Blankfein has hired high-profile Washington lawyer Reid Weingarten, Reuters says, citing an unnamed government source, as the Justice Department continues to investigate the bank. Goldman Sachs shares fell almost 5 per cent on after the report reignited concerns that the bank’s legal headaches may return

The China Flash PMI index suggests the country’s manufacturing sector could shrink in August, for the second month in a row. Bloomberg reports the HSBC/Markit Economics purchasing managers’ index was 49.8 in August after a final reading of 49.3 for July.

A son of Muammar Gaddafi who rebels said they had captured appeared with cheering supporters in Tripoli, says Reuters, giving a boost to forces loyal to the veteran leader trying to fight off insurgents who say they control most of the capital. Saif al-Islam,

Gold has climbed back to all-time highs as a rally on Wall Street fizzles amid uncertainy about the price of oil, the direction of the Federal Reserve and the pace of economic growth, reports the FT’s global market overview

Angela Merkel, German Chancellor, has repeated her country’s refusal to join other eurozone states in issuing joint “eurobonds” as protection from the debt crisis, the FT reports. “The markets want to force us into doing certain things

Libya could return to the global oil market within weeks after the rebels appeared to be on the brink of victory, but the full resumption of output is months, if not years, away. Libya produced about 1.6m barrels a day of oil before the start of the civil war, but the six-month conflict has reduced the flow to just 50,000 b/d, according to industry estimates.


Rich families around the world face a choice between surrendering privacy around their investments and significant legal risk as a consequence of new US rules designed to improve hedge fund transparency.  Offices established to manage family wealth need only a tenuous connection to the US to be required to register as an investment adviser with the Securities and Exchange Commission. A family that fails to do so runs the risk of punitive damages if sued in US courts by estranged family members or disgruntled employees, lawyers warn.

The European Central Bank bought eurozone government bonds at a brisk pace last week, despite opposition from Germany’s Bundesbank, which on Monday broadened its criticism of steps taken to shore up Europe’s monetary union.  The €14.3bn spent was less aggressive than the €22bn of purchases in the previous seven days but still the third-largest weekly amount since the programme was launched in May last year.
Asian shares were mostly higher, as investors bought beaten down stocks amid a tentative recovery in risk appetite. Tokyo stocks edged up as the high-flying yen appeared to stabilize, as Japanese authorities continued to hint at yen-selling intervention. “Despite the recovery (in risk appetite), the mood remains fragile due to lingering worries about the U.S. economy and the euro-zone debt saga,” said Mike Burrowes, a currency strategist at the Bank of New Zealand. Japan’s Nikkei Stock Average added 0.8%, Australia’s S&P/ASX 200 was 1.1% higher, South Korea’s Kospi Composite advanced 2.1% and New Zealand’s NZX-50 was flat. Dow Jones Industrial Average futures were 20 points higher in screen trade.

Last fall, a group of leading anticorruption activists in India had reached a dead end. Their appeals to authorities to crack down on graft after a wave of high-profile scandals were going unheeded. They needed a figurehead to galvanize the masses and shame the government into action. One of the activists traveled to a rural outpost in western India to enlist Kisan “Anna” Hazare, a military veteran best known for turning a village that was stricken by drought and hooked on alcohol into a model of economic development. In Mr. Hazare, the movement tapped a leader whose austere lifestyle and history of nonviolent protests, including fasts, recalled the spirit and tactics of modern India’s most iconic founding father, Mohandas “Mahatma” Gandhi.

Swiss supermarkets are planning further price cuts to tackle the soaring Swiss franc which is driving food shoppers over the border into Germany and France. Retailers like the cooperatives Migros and Coop, as well as discounter Denner, have already cut prices of food, drinks and household and personal care items by up to 20%. Now they plan further reductions in the coming weeks which will extend to other products.

Portugal is starting to feel the pain of the government’s deficit-cutting drive, raising the prospect of social unrest in a country that has endured three years of austerity with only sporadic and small protests. Compared with other euro-zone countries caught up in Europe’s debt crisis, Portugal has been a haven of calm. Greece has seen violent protests while in Spain, tens of thousands of people took to the streets in May and June demanding political change.

The number of American households that fell behind on their mortgages increased slightly in the second quarter from the previous quarter, according to a survey released Monday, an unwelcome sign for the U.S. economy. After falling for most of the year, the figures offer the latest indication of how the slumping job market threatens to create new problems for housing. Mortgage delinquencies, while still down from their year-earlier levels, have now edged up in two consecutive quarters after hitting a plateau last year, according to the Mortgage Bankers Association.
Gold futures traded over $1,900 in Asia on Tuesday, continuing its record-breaking run, as investors stayed on an alert over sovereign debt troubles in the major developed economies. Gold for December delivery advanced $39.70, or 2.1%, to settle at $1,891.90 an ounce on the Comex division of the New York Mercantile Exchange Monday. Those gains took the metal to its sixth closing gain and fifth settlement record in six trading sessions. The metal traded as high as $1,899.40 an ounce on Monday, an intraday record for the metal. But that record didn’t hold for long, with gold futures at $1,901.80 an ounce in electronic trading on Tuesday, up $10.60.
Brent crude rose toward $109 on Tuesday as fighting in Libya continued and in anticipation of a fall in U.S. crude stockpiles. Remnants of forces still loyal to Libyan leader Muammar Gaddafi fought rebels in Tripoli on Tuesday, extending a conflict that looked close to conclusion on Monday after rebels swept into Tripoli in tandem with an uprising within the city. Continued fighting surprised some in the market, after Brent fell on Monday on hopes for a quick resolution and a speedy restart in exports from the OPEC member.

Altogether, there are now almost 46 million people in the United States on food stamps, roughly 15 percent of the population. That’s an increase of 74 percent since 2007, just before the financial crisis and a deep recession led to mass job losses. At the same time, the cost doubled to reach $68 billion in 2010 — more than a third of the amount the U.S. government received in corporate income tax last year — which means the program has started to attract the attention of some Republican lawmakers looking for ways to cut the nation’s budget deficit.
Vice President Joe Biden said the special congressional committee charged with finding $1.5 trillion in budget savings has a chance at overcoming “very, very difficult” odds to reach an agreement by its deadline. The 12-member panel has “a shot of getting a deal that would be viewed by Wall Street, be viewed by everyone, be viewed by the international community as a significant alteration of a trajectory of long-term debt,” Biden told reporters traveling with him to Japan on the final leg of a three-nation Asia tour.

Japan’s two-year bonds yielded the least relative to overnight lending rates between banks in nine months on speculation the Bank of Japan will add to monetary easing to counter the yen’s advance against the dollar. The spread fell to 4.9 basis points yesterday, the least since Nov. 4. The two-year overnight-index swap rate, an indication of what traders expect the Bank of Japan’s key interest rate will average during the period, sank to 0.05 percent, the least since Oct. 5. The comparable U.S. rate slid to 0.07 percent on Aug. 11, a level not seen since Dec. 2001.

Hong Kong’s inflation surged to the fastest pace since 1995, encouraging workers to press for higher pay even as the economy teeters on the edge of recession. The consumer price index rose 7.9 percent from a year earlier after a 5.6 percent increase in June, the government reported on its website yesterday. Excluding distortions caused by a public housing subsidy, prices rose 5.8 percent.
The aging of the U.S. baby boom generation may slow an already weak recovery as boomers sell stocks to pay for retirement, according to research released Monday from the San Francisco Federal Reserve Bank. Many baby boomers have already sold some assets in preparation for retirement, research adviser Zheng Liu and Mark Spiegel, vice president of economic research, said in the latest San Francisco Fed Economic Letter.

The Federal Reserve will take action if the economy weakens substantially and deflation reappears, a senior Fed official said in an interview with Japan’s Nikkei business daily published on Tuesday. St. Louis Fed President James Bullard said he would support action if that occurred. “If the economy weakens substantially, and especially if the inflation picture starts to deteriorate so that deflation becomes a risk again, then I think the committee would definitely take action,” Bullard told the Nikkei.

Unpopular Prime Minister Naoto Kan will likely resign on Aug. 30, his economics minister said on Tuesday, setting the stage for parliament to pick Japan’s sixth leader in five years as the country confronts a nuclear crisis and a raft of economic woes. The race to succeed Kan was blown wide open on Monday when former foreign minister Seiji Maehara, 49, decided to throw his hat in the ring, dimming the chances that the fiscally conservative finance minister, Yoshihiko Noda, could win.

American consumers have too much debt, not enough savings and are afraid they will lose their jobsif they haven’t lost them already. It might be time for something that hasn’t been done since the 1930s to get Americans spending again: national debt forgiveness, Stephen Roach told CNBC Monday. A stronger dollar or higher interest rates would encourage consumption Roach said, but he prefers the more “direct approach” of coming up with “ways to forgive the excesses of mortgage, installment and revolving credit, as what was done in the 1930s, that will help consumers get through the pain of deleveraging sooner rather than later.”
Vice President Joe Biden said on Monday China’s leaders did not seek reassurances about the weak U.S. economy, and he called Xi Jinping — the man expected to take over as China’s next president — pragmatic and strong. Biden, who kicked off a trip to Asia last week with talks in Beijing, said the United States would continue to press China to let its yuan currency rise, but he made clear he did not expect that to happen quickly in the coming year.
Australian state bond yields are trading at their highest levels since May 2009 relative to sovereign notes as investors shun all but the safest assets on concern Europe’s debt crisis will impair global economic growth. The extra return investors demand to hold states’ debt instead of federal securities held at 74 basis points for a second day yesterday, Bank of America Merrill Lynch indexes show.
The first hurricane of the Atlantic season has gained strength as it passes north of the Dominican Republic. The Dominican Republic closed schools and evacuated coastal communities in preparation for Hurricane Irene. Irene brought high winds and torrential rain to Puerto Rico, cutting electricity to about 800,000 people.

Prosecutors have asked a judge to drop a sexual assault case against former IMF director Dominique Strauss-Kahn. They told a New York judge they were “no longer convinced of the defendant’s guilt beyond a reasonable doubt”. The case – based on an accusation by hotel maid Nafissatou Diallo – crumbled in recent weeks over questions about her credibility and motives.
Bank shares dived on Monday despite a widespread rally across Europe’s major stock markets as questions were raised about their ability to fund themselves. Shares in Royal Bank of Scotland slid below 20p for the first time since March 2009, making it the biggest faller in the FTSE 100 despite the blue-chip index closing up 1.1pc. Barclays and Lloyds Banking Group also saw their shares sink to levels not seen since early 2009, as bank shares made up four of the 10 largest fallers among FTSE 100 companies.

The “Black Death” of the debt crisis across the euro zone will hurt China’s exports, although Beijing’s relatively small holdings of euro assets will limit damage to foreign exchange reserves, the nation’s top official newspaper said on Monday. The bleak diagnosis for the euro appeared in the overseas edition of the People’s Daily, the main newspaper of China’s ruling Communist Party, in a commentary by a former central bank official and an economist for the state-owned China Development Bank.

Greece admits economy will shrink more than expected. Greece’s finance minister has said that the economy will shrink more than expected this year, putting further pressure on the country’s ambitious deficit-cutting effort. Evangelos Venizelos said the ministry forecasts annual output to shrink in 2011 between 4.5pc and 5.3pc of GDP. Venizelos had previously admitted that the recession might be over last year’s 4.5pc, a whole percentage point worse than initially estimated. The government has forecast a timid return to growth in 2012, but that now seems very unrealistic.

Britain has underperformed all the world’s leading economies over the past year except tsunami-hit Japan, figures from the Organisation for Economic Co-operation and Development (OECD) show. The revelation from the international think-tank will pose fresh questions for Chancellor George Osborne, who is already under pressure to bolster his economic strategy in the face of flagging growth. Politicians from his own Conservative Party as well as Labour are demanding more stimulus, predominantly through tax cuts, to help the recovery regain momentum.

Household budgets are deteriorating at a faster rate than during the height of the recession in early 2009, according to an analysis of consumers’ finances. Almost 40pc of households saw their finances deteriorate between July and August, compared to just under 6pc that reported an improvement as Britons were hit by rising prices and a squeeze on take-home pay. The latest Markit household finance index also found consumers suffered the fastest fall in their available cash since the monthly survey began in February 2009.
Bankers have warned that billions of pounds of lending to business could be put at risk if policymakers press ahead with “uncosted” plans to tighten banking regulations. As the industry awaits the final report of the Government’s Independent Commission on Banking with increasing trepidation, the British Bankers’ Association yesterday said it feared that tightening the rules on banks had become Britain’s top priority, ahead of even securing the economic recovery.
The Reserve Bank Australia (RBA) has been torn between low economic growth and high inflation when deciding rates over the past year, a senior central bank official says. Australia’s annual headline inflation rate was 3.6 per cent in the June quarter and 3.2 per cent in the March quarter, well outside the RBA’s target range of two to three per cent. Meanwhile, the non-mining sectors of the economy have been suffering, causing the central bank to slash the economic growth forecast by one per cent to 3.25 per cent in its statement on monetary policy in August.

US prime money market funds are reducing their exposure to European banks, according to a report by the Fitch ratings agency, amid growing concern about their ability to find financing. The funds, which loan cash on a short-term basis to financial institutions, governments and companies, reduced their exposure to European banks in dollar terms at the end of July by nine per cent from the end of June.The reduction was 20.4 per cent from the end of May.

Growth in leading world economies slowed for the fourth consecutive quarter, gaining just 0.2 per cent in the three months to June, an OECD indicator showed. In the April-June period, output of the 33 countries in the Organisation for Economic Cooperation and Development (OECD) grew 0.2 per cent after 0.3 per cent in the first quarter. “This is the fourth consecutive quarter of slower growth,” the OECD said, noting a widespread slowdown in developed economies.
As worries about another U.S. recession mount, Canada’s economy is highly exposed to any downturn and is less equipped to fight a slump than it was three years ago. Heavy government and consumer debt, along with reduced flexibility for stimulus spending and monetary policy mean Canada today has less resilience to a crumbling U.S. economy compared with the global financial crisis of 2008.

In the past three years, the U.S. Federal Reserve Board has ridden to the market’s rescue twice with unconventional measures to stimulate growth. Economists and strategists aren’t convinced that a third time would be a charm. As investors contemplate the possibility of so-called “QE3” a market-buoying third round of quantitative easing by the Fed experts caution that the timing isn’t right. And, they say, another round of monetary stimulus may not improve the conditions that have been undermining the markets in the first place.
Greece will receive the next tranche of EU/International Monetary Fund (IMF) aid package on time this September, Greek Deputy Prime Minister and Finance Minister Evangelos Venizelos said on Monday, rejecting scenarios of potential delays and obstacles due to the ongoing debate within the EU over the loan collateral. “Our financing needs next month will be covered. There are funds available. There are about 45 billion euros (57.69 billion U.S. dollars) still available from the first bailout pact,” stressed Venizelos during a press briefing at the Finance Ministry.
Sales at South Korea’s major discount outlets and department stores grew in July due to rising demand during the vacation season, a government report showed Tuesday. Total sales at the country’s three leading discount outlets, including E-Mart, Lotte Mart and Homeplus, rose by 4.9 percent in July from a year earlier, up from a 2.7 percent on-year expansion tallied for the previous month, the Ministry of Knowledge Economy said in a monthly report.
A ‘business-as-usual’ approach will not work if the Indian economy is to achieve its long-term 9 per cent annual growth target, which is “very ambitious” in the backdrop of global uncertainties, Prime Minister Manmohan Singh said on Monday. In his address at the Golden Jubilee celebrations of the Indian Institute of Management (IIM) here, Dr. Singh said while the Indian economy has inherent economic strength, “difficult things would be needed” to reach the growth target.

Dubai export markets by value are highly concentrated in India and Switzerland, comprising 40 per cent and 20 per cent, respectively, a government agency has said. According to Dubai Exports, an agency of the Department of Economic Development (DED), this has been due to the export of gold to these countries, whereas other direct exports go mainly to Gulf Cooperation Council (GCC) and the neighboring countries in small shares.

The Reserve Bank of India is likely to continue with its tight monetary policy stance to fight inflation and effect another hike in key interest rates in September, even though the global economic environment is on a downslide, believe experts. However, while the Reserve Bank of India is likely to go for another interest rate hike at its next mid-quarterly policy review on September 16, it will not be very aggressive, the experts said.

Six years can make a big difference in the energy world. Deals by Indian energy and utility companies abroad have soared and compare favourably against China and Russia. Data gathered for Business Lineby analytics firm Dealogic show that since 2006 Indian utility and energy companies have made $5,112 million worth of acquisitions outside BRIC nations, against $6,001 million by Russia and $ 7,436 million by China (Brazil’s figure is far lower at $704 million).
South Korea’s external debt hit a fresh record high in the second quarter on foreigners’ buying spree of local bonds, but the growth of its short-term foreign debt eased due to tighter rules on currency derivatives, the central bank said Tuesday. South Korea’s external debt amounted to a record of US$398 billion as of the end of June, up $15.4 billion from three months earlier, according to the Bank of Korea (BOK). The second-quarter growth compared with a $22.6 billion on-quarter gain tallied in the first quarter.
Russians have turned to real estate as a safe haven for investment over the last two months amid the high volatility of world financial markets caused by Standard and Poor’s downgrading the U.S. credit rating and the debt crisis in Europe, developers said. “We have noticed … a sales increase in August, it’s both direct sales of new homes and mortgage deals,” said Pavel Kocheryozhkin, deputy chief executive of YIT Moskovia, a subsidiary of Finnish developer YIT.
Sanctions on Iran have not had a major impact on trade and financial links between the country and Dubai, Saeed Al Awadi, CEO of Dubai Exports, told Gulf News. Al Awadi said Iran’s trading and financial ties continued with Dubai, even in the face of tighter sanctions by the western countries. “While many expected the measures to spell disaster for thousands of Iranian businesses that deal with Dubai which has built its reputation on its role as the re-export hub for the Gulf trade between the two countries has grown, according to the latest figures,” he said.