News That Matters

Some European financial institutions should have taken bigger losses on their Greek government bond holdings in recent results announcements, according to the body that sets their accounting rules. In a private letter sent to the European Securities and Markets Authority, the European Union’s market regulator, the International Accounting Standards Board criticised the inconsistent way in which banks and insurers have been writing down the value of their Greek sovereign debt. “This is a matter of great concern to us,” Hans Hoogervorst, IASB chairman, said in the letter, which was seen by the Financial Times.

Silvio Berlusconi, Italy’s prime Minister, met Umberto Bossi, leader of the Northern League and his closest ally, on Monday in a bid to resolve differences within the ruling coalition overamendments to the government’s austerity plan. The meeting, held in Mr Berlusconi’s private residence in Arcore, just outside of Milan, was intended to convey a message of coherence to the coalition after days of feuding over proposed amendments to the package.  The €45.5bn austerity package, drawn up at the insistence of the European Central Bank, is currently being examined by the Senate, where any amendments must be presented by the end of the day on Monday.

Nordea, the largest bank in the Nordic region by market value, is to reduce its workforce by nearly 6 per cent in an attempt to protect profit amid a slowing economy and tougher regulatory environment. The Stockholm-based lender said it would cut about 2,000 of its 34,000 workers by the end of next year, joining a growing number of banks that have announced aggressive cost-saving measures as the economic outlook deteriorates. More than 60,000 jobs have been cut by European banks in recent weeks, including UBS, ABN Amro, HSBC, Barclays and Credit Suisse.

Irish residential mortgages in arrears or restructured due to financial distress rose 10 per cent in the second quarter from the previous three months, heaping pressure on the government to come up with a solution for struggling homeowners.  More than one in 10 Irish home loans are not being fully repaid and the situation is deteriorating as the rate of unemployment remains stubbornly high and house prices continue to fall, marking a three-and-half year decline.

Algeria’s foreign ministry confirmed on Monday that Safia Gaddafi, wife of the embattled Libyan leader Muammer Gaddafi, had arrived on Algerian territory along with other family members.  The presence of members of the Gaddafi family in Algeria could prove an embarassment to the authorities there, not least as domestic public opinion has long been uneasy about the government’s ambiguous stance towards the conflict in Libya.
Asian shares rose Tuesday, riding on yet another strong showing on Wall Street, with a slight pullback in the safe-haven yen buoying the Tokyo market. an’s Nikkei Stock Average rose 1.4%, Australia’s S&P/ASX 200 added 0.9%, South Korea’s Kospi Composite tacked on 0.8% and New Zealand’s NZX-50 was up 0.7%. Dow Jones Industrial Average futures rose 11 points in screen trade.  The rise in risk-appetite supported the euro and kept safe-haven Japanese yen and the Swiss franc on the defensive.

German Chancellor Angela Merkel faces growing resistance within her ruling coalition over expanding the powers of the euro zone’s bailout fund, forcing a domestic political debate she will have to win to preserve confidence in her leadership. At issue is securing German parliamentary approval for a deal Ms. Merkel brokered with other European leaders in July to keep the debt crisis from spinning out of control. Part of the agreement involves vesting the bailout fund with powers that were previously the prerogative of national parliaments. Conservative opponents of the deal worry it will open the door to relinquishing more sovereignty to the European Union.

European Central Bank President Jean-Claude Trichet signaled the ECB may reconsider its longstanding warnings about inflation, potentially setting the stage for a lengthy pause in its rate-increase cycle. In testimony to the European Parliament, Mr. Trichet also played down the risks of a renewed recession in the euro bloc, saying he expects growth in the common-currency area to continue at a “modest pace.” While euro-zone inflation is likely to remain above the bank’s 2% target in the months ahead, “risks to the medium-term outlook for price developments are under study in the context of the ECB staff projections that will be released [in] early September,” Mr. Trichet said.

Preliminary consumer-price inflation slowed slightly in Germany in August on a monthly basis, meeting economists’ expectations as food and energy prices retreated in six German states. Preliminary CPI was 0.1% lower in August than the month before, and 2.3% higher from August 2010, the German federal statistics office Destatis said Monday. On a harmonized basis, CPI was 0.1% lower than the month before and 2.4% higher than a year earlier.  Economists suggested the slowdown could help the European Central Bank justify a pause in raising interest rates amid broader signs of slowing economic growth in the euro zone and globally.

The federal government vowed to continue curbing spending for the remainder of 2011, hoping a halt in the huge rises in expenditures of recent years will ease inflation in Latin America’s biggest economy and give its central bank more leeway to lower the towering interest rates. Finance Minister Guido Mantega on Monday said the government would put aside $6.3 billion of tax revenue in an effort to curtail government spending through December.  While not a budget cut per semost of Brazil’s annual outlays are locked in through legislationthe move keeps the government from taking advantage of growing tax revenue to boost spending even further.

The yen has consistently flirted with historic highs against the U.S. dollar the past month. The Swiss franc has repeatedly reached new all-time peaks against the greenback in the same time span. But look at IntercontinentalExchange Inc.’s U.S. Dollar Index, a metric seen as a proxy for the dollar’s global worth, and you’d have no idea. The increasingly popular U.S. Dollar Index hasn’t been adjusted in 12 years. That means the way ICE weights the dollar against six other currencies is outdated. It considers Sweden to be one of the U.S.’s top trading partners and includes the krona in the

Philippine President Benigno Aquino III faces a delicate task in China this week: taking up his country’s claim to the troubled waters of the South China Sea without undermining the increasingly important economic relationship between the two countries. China is now the Philippines’ third-largest trading partner, with bilateral trade up 35% to $27.7 billion in 2010, and Manila views its gigantic northern neighbor as a potentially valuable source of investment and tourism. Philippine officials have said they expect Mr. Aquino to sign commitments on this trip, which runs from Tuesday to Saturday, that could generate $50 billion in two-way trade by 2016.

Bank of America Corp. Chief Executive Brian Moynihan bought himself some breathing room as the bank agreed to sell more than $8 billion of China Construction Bank Corp. stock, its second multibillion-dollar deal in a week. Shares rose 8% Monday, adding to a rally following a deal Thursday for Warren Buffett’s Berkshire Hathaway Inc. to buy $5 billion worth of Bank of America stock. Since the Buffett deal, the Charlotte, N.C., lender has regained $14 billion of market value.

Japanese Finance Minister Yoshihiko Noda, a proponent of tax increases known for his nationalist tinge, will become the country’s next prime minister after coming from behind Monday in a race for ruling-party leader that was driven more by factional rivalries than by policy differences. The 54-year-old Mr. Noda now has to take on rebuilding from the March 11 earthquake and tsunami, deal with a historically high yen, and win the cooperation of an opposition that controls one of the parliament’s two chambers.

As policy makers from the U.S. and Europe gathered in Jackson Hole, Wyo., to discuss ways to revive a fragile global recovery, China’s central bank was issuing a secret memo to further rein in lending in the world’s second-largest economy. The tightening move by the People’s Bank of China, which was reported Monday by the official Xinhua news agency, highlights two key points about China’s economic management: how starkly it is diverging from that of other big economieswhich continue to seek ways to pump money into the financial systemand how it remains shrouded in secrecy that some call unbefitting such
Japanese retail sales rose by less than expected in July, part of a series of mostly disappointing economic data released Tuesday. Japan’s retail sales for the month were 0.7% above the year-earlier period, slowing from a revised 1.2% year-on-year gain in June, the Ministry of Economy, Trade and Industry said. On a monthly basis, July sales were down a seasonally-adjusted 0.3%.
Brent crude rose for a sixth straight session on Tuesday, buoyed by strong data from the United States that allayed fears the world’s top oil consumer was sliding back into recession and a landmark bank merger deal in Greece. Brent October crude was up 45 cents to $112.33 a barrel by 0216 GMT. U.S. October crude rose 41 cents to $87.68 a barrel, having reached $87.72, highest intraday price since August 17. Brent’s premium to U.S. crude was at $24.73 a barrel, well off its record $26.69 on August 19.

U.S. consumer spending rose at its fastest pace in five months in July, backing views theeconomy was not falling back into recession, although pending sales of previously owned homes fell. The Commerce Department said on Monday consumer spending increased 0.8 percent on strong demand for motor vehicles, after slipping 0.1 percent in June. Economists had expected spending, which accounts for about 70 percent of U.S. economic activity, to rise 0.5 percent.

Former IMF chief Dominique Strauss-Kahn apologized to the institution’s staff in his first return visit since charges of sexual assault against him were dropped last week. He was greeted with warm applause. Strauss-Kahn, who was with his wife French TV personality wife Anne Sinclair, drove himself to the headquarters of the International Monetary Fund and met briefly with his successor and fellow French national Christine Lagarde.

Thousands of Washington lobbyists are scrambling to influence the work of a congressional “super committee” given the job of identifying up to $1.5 trillion in deficit reductions, with many worried about how to gain access to its 12 members. The committee is due to report its findings by Thanksgiving and with such massive potential cuts to the U.S. federal budget being decided by just a handful of lawmakers in such a short timeframe, lobbyists say the mission to protect their clients’ interests is unprecedented and potentially impossible.
Australian Prime Minister Julia Gillard joined Reserve Bank Governor Glenn Stevens in warning of tough days ahead for the nation’s factory workers, who are losing jobs in an economy relying more on mining for growth. Gillard today met workers from BlueScope Steel Ltd. (BSL), which Aug. 22 said it will shed about 1,000 jobs and shut a furnace because of a second-half loss due to high raw-material costs and a stronger Australian dollar. She said a A$30 million ($32 million) fund paid for by the federal and state governments, and BlueScope, would investigate setting up new industries in the Illawarra region in New South Wales.

China’s three-decade-old, one-child policy will accelerate declines in the workforce, forcing companies to upgrade to higher-value products in the way Japan did in the 1960s and 70s. China may have as little as five years to make the transition to avoid a slump in economic growth, according to Sun Mingchun, an analyst at Daiwa Capital Markets in Hong Kong and former economist at China’s State Administration of Foreign Exchange, part of the central bank. He said growth may decline in 2016-20 as low-cost producers fail and investment falls away.

Banks in China are more confident than ever that policy makers will bring inflation under control in the coming year by using monetary tightening to curb credit. Swap contracts show that this month, for the first time since 2008, it’s become cheaper for lenders to lock in interest rates for five years rather than one as UBS AG, Morgan Stanley and Deutsche Bank AG lowered economic growth forecasts for China. The gap between the five- and one-year swaps widened to a record after Standard Chartered Plc and Bank of America Merrill Lynch said the central bank issued a notice on Aug. 26 broadening the scope of reserve-requirement ratios.

India’s central bank recommended tougher capital rules for new lenders and mandatory share sales within two years as conditions for issuing new licenses for the first time in seven years. New lenders will also have to open at least one in four branches in rural areas that have a population of no more than 9,999 people, the Reserve Bank of India said in draft guidelinesposted on its website yesterday. The banks may need to meet a minimum capital requirement of 5 billion rupees ($109 million), more than double the requirement for banks in 2004. Foreign shareholding may be capped at 49 percent for new lenders for five years, the central bank said.
Many of the world’s largest hedge funds have been left nursing billions of dollars in losses following the industry’s most brutal month since the collapse of Lehman Brothers. Falling equity markets worldwide have caught hedge fund managers off-guard, leading to significant losses as portfolios declined in value and managers sold holdings, crystallizing losses. According to provisional estimates from consultancy Hedge Fund Research, the average hedge fund has lost 4.1 percent during August  making the month the industry’s fourth worst ever.

Finland has proposed that Greek state assets be transferred to a Luxembourg-based holding company and held as security for new loans to Athens, according to an internal document obtained by Reuters. The proposal, drafted in June, remains a central plank of Finnish demands for collateral in return for providing more aid to Greece. Senior euro zone officials held another conference call on Monday to try to resolve the collateral issue.  If Finland does not get its way, it may pull out of the Greek bailout, unleashing renewed trouble in financial markets.

European financial authorities appear to be shifting away from bailing out troubled sovereign lenders and toward bailing out banks in healthier countries. Over the weekend, The Times of London reportedthat European leaders were considering a “radical plan” to prevent a European credit crunch.  The plan is said to involve backstopping certain debt issued by banks.
Japan’s jobless rate rose to 4.7% in July, the Finance Ministry reported Tuesday, with the result slightly worse than expected. The median forecasts from separate Dow Jones Newswires and Reuters surveys had called for unemployment to remain steady from June at 4.6%. Household spending, however, surprised to the upside, with July consumption by households of two or more people falling 2.1% from a year earlier, after plummeting 4.2% in June. The Dow Jones Newswires survey had tipped a 2.9% drop. The yen lost ground following the data, with the dollar rising to 76.97 yen, from 76.84 in late North American trade Monday.

Hurricane Irene caused $3 billion to $6 billion in insured losses, catastrophe modeling company AIR Worldwide said on Monday, affirming the insurance industry’s suspicion the impact was not as bad as feared. Some in the industry were forecasting losses of up to $10 billion in the days before Irene hit.
A meeting on Thursday between the British government and Internet communications firms was friendly, not confrontational, according to people from the organizations that took part in the meeting. At the meeting, the government “did not seek any additional powers to close down social media networks,” the British Home Office, the government’s home security department, said in a statement. “The discussions looked at how law enforcement and the networks can build on the existing relationships and cooperation to crack down on the networks being used for criminal behavior.”
US President Barack Obama has nominated Alan Krueger, a Princeton University expert on unemployment, as his new chief economist. The decision comes as the president prepares to unveil a new jobs package in a speech planned for shortly after the Labor Day holiday on 5 September. High unemployment remains one of the main concerns about the US economy, with the rate standing at 9.1%. Mr Krueger was previously a Treasury Department economist from 2009-2010.

Royal Bank of Scotland (RBS) has said it will no longer do fundraising work for the Belarus government following a campaign by human rights groups. F ree Belarus Now and Index on Censorship argued that companies such as RBS were helping to support the regime of “Europe’s last dictator”.  Index said that RBS and other banks had sold $1.85bn (£1.1bn) worth of government bonds over the past year.  The decision followed a meeting at the bank’s headquarters last week.
Business activity in Britain’s dominant services sector has fallen at the fastest rate since the economy was barely crawling out of recession, a CBI survey shows. The quarterly survey of the employers’ lobby, which is published today,reveals an accelerating decline in the consumer services industry, as well as a surprise drop in business and professional services. The overall fall in activity is the worst since November 2009 when the economy was still reeling from the longest recession since the war.

All but four of the UK’s 48 building societies were profitable in the past year despite “highly competitive” conditions, a new report shows. At a time of record-low interest rates and subdued mortgage activity, KPMG’s annual survey of the sector showed 28 societies increased bottom-line profits, while the four making a loss compared with six in the previous year’s report. Nationwide continues to dominate, with total assets of £188.9bn in April accounting for 61.7 per cent of the sector, down £2.5bn on a year earlier.
Alarm bells are ringing over the health of the housing market after Hometrack, the propertydata company, forecast steeper falls in prices this autumn  with the latest figures showing a 3.6% annual fall in August. Hometrack’s prediction will fuel the view of bearish commentators that UK house prices are still some way from the trough, despite falls of about 10% since the credit crunch.
Gold rebounded after yesterday’s steep decline on optimism the US recovery may be sustained was seen by some investors as excessive amid ongoing debt woes in Europe. Immediate-delivery gold advanced as much as 0.7 per cent to $US1800.57 an ounce and traded at $US1796.13. December-delivery bullion in New York gained 0.4 per cent to  $US1798.30 an ounce. Bullion fell 2.2 per cent yesterday as equities rallied after a report showed personal spending rose more than forecast in July, spurring speculation the economic recovery would not falter and reducing demand for haven assets.

Building approvals rose in July, snapping three months of falls, but failed to increase as much as expected. Building approvals rose 1 per cent in July following a 3.6 per cent fall in June, seasonally adjusted, according to the Australian Bureau of Statistics. The increase was less than the 2 per cent rise in the month tipped by analysts. On an annual basis, approvals fell 15 per cent in the year to July, following a 15.5 per cent drop in the year to June. Analysts predicted a 12.4 per cent fall in the month.
Canada Mortgage and Housing Corp. said mortgage refinance activity has dropped nearly 40 per cent since Ottawa imposed stiffer mortgage rules, a sign that efforts to curb the country’s rapid rise in debt levels are having an impact. But Canadians’ exposure to debt is an issue that will continue to press Finance Minister Jim Flaherty. Some experts say another round of rule changes is needed as consumer debt levels rise faster than incomes, while others argue further tightening in the mortgage market could slow the housing industry and spark a recession.
The man designated to be Japan’s next prime minister, Yoshihiko Noda, said on Tuesday he would announce steps to deal with the strong yen once he has announced his new government. ‘After forming a new structure, I’d like to quickly put together and announce my thinking, including the use of (yen) reserves as well as how I will deal with the third extra budget,’ the former finance minister said. Mr Noda, who is expected to be confirmed as prime minister in parliament later on Tuesday, made his comments at a news conference when when asked about what he will do to rein in the soaring yen, which is hurting the nation’s exporters.
In a recent interpretation of China’s Marriage Law, the Supreme People’s Court ruled that a spouse has no share of ownership of property bought in mortgage by the other spouse before marriage, causing many young Chinese to consider buying property before marriage. In an online survey conducted by, 58.8 percent of the respondents said they would consider buying a house by themselves to avoid further disputes after marriage. And 63.5 percent expressed the concern that the new interpretation won’t cool down housing prices, but instead fuel further surges because now everyone has to secure a house of his or her own to defend their rights after marriage.

Foreign securities invested by South Korea’s financial institutions edged down in the second quarter from three months earlier due mainly to declines in share prices of emerging and European countries, the central bank said Tuesday. Foreign currency-denominated securities held by domestic financial institutions reached an outstanding 68.9 billion U.S. dollars as of the end of June, down 0.1 billion dollar recorded for the previous quarter, the Bank of Korea (BOK) said in a statement.

South Korea’s business sentiment worsened in August as local companies are more concerned about global economic uncertainties such as the economic slowdown in advanced nations and the European debt problems, the central bank said Tuesday. The monthly business survey index (BSI), gauging local manufacturers’ assessment of current business conditions, reached 80 in August, down 11 points from the previous month, the Bank of Korea (BOK) said in a monthly report.

Eurobonds should be introduced with reinforced fiscal surveillance and policy coordination, European Union (EU) economic chief said here on Monday. “It is clear that eurobonds, in whatever form they were to be introduced, would have to be accompanied with a substantially reinforced fiscal surveillance and policy coordination as an essential counterpart,” European Commissioner for Economic and Monetary Affairs Olli Rehn told a European Parliament committee.

Oil prices should continue to rise in the third quarter this year as demand is expected to rise despite economic uncertainties in the United States and Europe, an analyst with Ernst & Young said on Monday. Sanjeev Gupta, Asia-Pacific oil and gas leader for Ernst & Young, said many of the economies moved out of recession technically and are predicted to grow, albeit modestly, over the next few years. “All signs point to modest oil demand growth and uncertain supply. Barring a strong economic shock, continued strong oil prices seem to be in order over the next three to five years,” he said.
Confident that the negative global cues can be transformed to the country’s advantage, Finance Minister Pranab Mukherjee on Monday maintained that the adverse global developments, including the impact of the U.S. sovereign rating downgrade, present new economic opportunities to India. In his address at a function here to mark the golden jubilee celebrations of the Indian Economic Service (IES), Mr. Mukherjee noted that in the wake of the global economic uncertainties and the resultant slump in overall investor sentiment, India could be a source of stability for the world economy and provide a safe haven for global capital inflows.

Stating that growth and investment relations between India and South Africa were in the upward trajectory, Union Commerce and Industry Minister Anand Sharma on Monday exuded confidence that trade between the two countries would touch the $15 billion mark much before the 2014 deadline. Interacting with the South African Trade and Industry Minister, Rob Davies, during the meeting of the India-South Africa CEO Forum here, Mr. Sharma said: “We hope to achieve the target of $15 billion set for 2014 in trade much before than the proposed deadline”.
India could be a source of stability for the world economy and provide safe haven for global capital desperately looking for options, finance minister Pranab Mukherjee said inviting foreigners to invest in the country. “We could be a source of stability for the world economy and provide the safe haven for restless global capital,” Mukherjee said at golden jubilee function of Indian Economic Service.

In an endorsement of the hard bargaining by India in trade negotiations, the World Trade Organisation (WTO) has asked New Delhi to train other emerging economies in evolving trade policies and developing negotiation skills. “This is a big recognition. It means that the WTO has faith in the training abilities of our experts,” commerce secretary Rahul Khullar told ET . WTOdirector general Pascal Lamy will be in New Delhi to inaugurate the three-month course on September 5
Earnings for South Korean listed companies dropped more than 7 percent on-year in the first half of the year amid unstable external economic conditions, with one in six firms suffering losses in the second quarter, a report showed Tuesday. The combined net profit of 151 out of 660 companies, which are listed on the main bourse and close their books on Dec. 31, reached 41.67 trillion won (US$38.9 billion) in the January-June period, down 7.49 percent from 45.05 trillion won a year earlier, according to the report by the Korea Exchange and the Korea Listed Companies Association.
The Presidency reiterated on Monday evening that President Jacob Zuma does not hold any personal or financial interest in any business or corporate entity. The Presidency was reacting to a statement issued by Democratic Alliance Leader in the National Assembly, Athol Trollip, in which he repeated the allegation of a “growing list of state deals that have benefited PresidentJacob Zuma‘s family and friends”. In its response, the Presidency stated: “While the Presidency would welcome any debate on the current legislative mechanisms for parliamentary oversight over the Executive, we trust that there is no malicious intent or political grandstanding in calling for such a debate.
The Central Bank of Iran (CBI) governor said the country’s twelve-month inflation rate ended to the calendar month of Mordad (July 23-August 22) reached 17.2 percent, showing a modest growth despite implementing the subsidy reform plan. The Mehr news agency quoted Mahmoud Bahmani as saying that the direct share of the subsidy reform plan in the 16.3 percent inflation of the last month was only 4.5 percent and the indirect share was 1.9 percent. Earlier this month, the CBI chief predicted that inflation will reduce in the coming months and the country will achieve its goal of single digit inflation in the next Iranian calendar year. The subsidy reform plan, which was implemented in October 2010, charts out how the Iranian government will gradually slash national energy subsidies over the course of five years, with low-income families being compensated directly with cash subsidies.
QE 3 or not, the US Economy and the Budget hasn’t changed much. This great graphics from earlier this year, is worth studying every now and then. Sovereign Debt is out of control. Courtesy Elefint Design.

What are Bernanke’s real options when it comes to stimulus? QE1 and QE2 have not accomplished much, but higher equity prices, so the Top earners can feel rich again. Did Bernanke pull a bluff last Friday, and can he do another QE experiment? By Macro Story; The repurchase agreement or “repo” market is where primary dealers finance their inventory of US Treasuries, where companies find short term financing and where money market funds invest much of their capital. With daily “repo” transactions estimated at $2-4 trillion USD it is truly amazing how few understand the grease that keeps the US economy functioning.

Despite today’s “great bull”, volumes are very low. The HFT melt up is taking equities higher, in perfect timing, as hedge funds are running high levels of ES shorts and Gold longs. DAX index, the leader on the downmoves is showing “disturbingly” low volume. The market is continuing to confuse everybody


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