News That Matters

US and European stock markets managed to overcome the bleak results of two keenly watched surveys, which showed confidence slumping on both sides of the Atlantic, to eke out modest gains, the FT reports.

Europe’s top banking regulator is drawing up options to help banks in Europe struggling to tap credit markets for medium- and long-term funding, the FT reports. Among the policy proposals being considered by the European Banking Authority is a new guarantee scheme for bank bonds,

A dispute has erupted over control of Libya’s $65bn sovereign wealth fund, as the national transitional council attempts to maintain stability in the oil-rich nation, reports the FT. Several NTC members have contested the authority of Mahmoud Badi

Local councils plan to return to the capital markets en masse for the first time in decades as a result of George Osborne’s decision last autumn to raise sharply the rates on central government loans,


Chinese companies and investors are stepping up their purchases of industrial commodities such as copper, the FT reports. The wave of buying is providing support for metals and minerals prices after commodities prices fell this month at worries about a double-dip

Temasek has emerged as a key player in the consortium that bought up half of Bank of America’s stake in China Construction Bank for $3.3bn, reports the WSJ. Singapore’s sovereign wealth fund had pared back its CCB shares earlier in the month in line with sales of holdings in Bank of China,

The United States is unlikely to embrace Yoshihiko Noda, Japan’s sixth prime minister in five years, as it shows its frustration at the ‘revolving door’ of Japanese politics, the FT says. Washington does not expect the head of the country’s 95th cabinet to last beyond 2013?s general election.

Members of the Federal Reserve’s open markets committee wanted to make additional asset purchases “to provide more accommodation” in August’s meeting, before settling on committing to keep rates low until 2013,

Consumer confidence in the United States has fallen to its lowest since April 2009, in the depths of the previos recession, Reuters reports. An index of consumer attitudes fell to 44.5 from 59.2 a month before,

Italy’s centre-right coalition is to revise radically a tax on high incomes introduced as part of the €45.5bn austerity package passed by the cabinet two weeks ago, in an attempt by Silvio Berlusconi, prime minister, to win back support for his ruling majority. The cancelling of the so-called “solidarity contribution” for everyone but national legislators is to be balanced with new fiscal measures to combat tax evasion and the reduction of tax breaks for co-operatives, said a statement issued after a long meeting between Mr Berlusconi, Giulio Tremonti, his finance minister, and Umberto Bossi, leader of the Northern League and a close government ally.

A leading Fed policymaker called for more monetary stimulus on Tuesday as it emerged that staff at the US central bank have permanently cut their growth forecasts. In an interview with CNBC, Charles Evans of the Chicago Fed said that he would “favour more accommodation” and became the first policymaker on the rate-setting Federal Open Market Committee to explicitly countenance letting inflation rise above the Fed’s target of 2 per cent in the short-term.
Asian shares were mostly lower on Wednesday amid cautious trade, with exporters in Tokyo struggling to make headway amid weak global and domestic data. Japan’s Nikkei Stock Average fell 0.2%, Australia’s S&P/ASX 200 was flat, South Korea’s Kospi Composite tacked on 0.1% and New Zealand’s NZX-50 was off 0.5%. Dow Jones Industrial Average futures fell four points in screen trade.  The weak backdrop for equities kept the euro under pressure. The single currency was also weighed by Tuesday’s dour consumer confidence reading for the region and an underwhelming bond auction underscored the euro-zone’s debt travails.

Industrial production in Japan and South Korea fell short of expectations in July, the latest sign Asia’s manufacturing sector may be losing momentum due to softening U.S. and European demand. Japanese industrial output in July was up 0.6% from the previous month, a fourth straight month of expansion, the Ministry of Economy, Trade and Industry said Wednesday. But the median forecast of economists by Nikkei and Dow Jones Newswires was 1.5%. Japanese companies surveyed by the ministry said on average they expect to cut production by 2.4% in September after a 2.8% increase in August.

Federal Reserve officials are as deeply divided as they’ve been in decades about how to spur the flagging economy, records released Tuesday show, as they stake out positions on what, if any, action to take at their September meeting. Minutes of the Fed’s Aug. 9 meeting, released Tuesday after the normal three-week lag, offered new evidence that some officials wanted to immediately restart a controversial bond-buying program aimed at spurring the economy. Others felt that even the smaller steps the central bank instead chose were too aggressive.  Officials considered a range of actionswhich included setting numerical targets for inflation and

India’s economy grew 7.7% in the April-to-June period from a year earlier, its slowest pace in six quarters, confirming fears that a series of interest-rate increases, combined with the global slowdown and a lack of local reforms, have kept growth well below the government’s estimate. The growth data, however, don’t indicate a broad-based slowdown; the services sector, which accounts for 58% of India’s gross domestic product, grew 10% despite a muted 5.1% expansion in industries. India’s April-June expansion was only slightly lower than the 7.8% growth in the preceding quarter, though it lagged behind the 8.8% increase in the same period last year.

Iran’s steadfast support for Syria’s regime has rapidly eroded Tehran’s credibility among Arabs, leaving the country with a foreign-policy dilemma as popular uprisings mount across the region. Supporting President Bashar al-Assad will further diminish Tehran’s already troubled standing in the region, political analysts say. But abandoning him would crumble Iran’s platform in Syria.

The European Commission confirmed Tuesday that member states are in the process of completing an embargo on Syrian oil exports with the measures due to come into effect in coming days. John Clancy, an interim spokesman for High Representative for Foreign Affairs Catherine Ashton, said member states are now “dotting the I’s and crossing the T’s” on the sanctions. The focus “now is on getting these additional sanctions or measures in place … around the weekend.” European Union foreign ministers will hold an informal meeting at the weekend in Poland.

The first comprehensive soil survey from areas around the Fukushima Daiichi nuclear plant showed extensive ground contamination and another report warned of the continued threat to Japan’s food chain, underscoring the major challenges the country still faces in its radioactive cleanup efforts.

Sentiment among euro-zone companies and consumers plunged in August, the latest sign that steep declines in equity markets earlier in the month, public anger over the second bailout of Greece and signs of feeble growth in Germany are taking a severe toll on the economic outlook. The European Central Bank stepped into the fray again as the euro bloc’s primary crisis responder, buying Italian and Spanish bonds ahead of a key sale of longer-term Italian government debt. The Economic Sentiment Index fell for a sixth straight month, to 98.3 in August from 103.0 in July, the European Commission said, the

U.S. home prices increased in the second quarter but fell compared with the same period last year, painting a mixed picture of the real-estate market amid plummeting consumer confidence. The S&P/Case-Shiller Home Price Index, released Tuesday, rose 3.6% for the quarter ended in June, but fell 5.9% annually, sending prices back to pre-boom 2003 levels. Consumer confidence, meanwhile, sank to its lowest level in two years, according to the Conference Board, a private research group.  Confidence fell to a reading of 44.5 in August from 59.2 in July. That is its lowest level since April 2009 and much worse than
China’s consumer inflation may have tapered off, with consumer-price-index growth slowing in the remaining months of this year from a three-year high of 6.5% in July, said analysts. Mizuho Securities’ Greater China chief economist Shen Jianguang and Qiao Yongyuan at consultancy CEBM, expected CPI to grow 6.2% in August. The slowdown of the U.S. economy has to some extent subdued the rise of global oil prices, and thus alleviated China’s inflationary pressures, said Shen. Though food prices remain high, growth momentum eased in August from July, said Qiao. Industrial Securities chief economist Lu Zhengwei expected China’s full-year CPI growth to range from 5.4% to 5.6%, citing a peak in July.

Though the Federal Reserve should not have pledged to keep rates at ultra-low levels through the middle of 2013, the central bank shouldn’t revisit that commitment made earlier this month, according to Narayana Kocherlakota, the Minneapolis Fed president, one of three who dissented on that decision. “I believe that undoing this commitment in the near term would undercut the ability of the Committee to offer similar conditional commitments in the future – and this ability has certainly proved very useful in the past three years,” he said on Tuesday. However, Kocherlakota made the case against further easing at its scheduled September meeting.

If you’re not interested in 10 pages of two-column verbiage, here are the condensed minutes from the Federal Open Market Committee meeting of Aug. 9:  “The economy’s lousy. It’s not our fault. We can do more things but they probably won’t work, or at least not work well.”
Spot gold edged lower on Wednesday as investors waited for more clues to economic conditions and watched to see if the U.S. Federal Reserve would deploy more stimulus measures, but the metal is poised for its biggest monthly gain since November 2009. Spot gold inched down 0.2 percent to $1,833.29 an ounce by 0254 GMT, headed for a monthly rise of 13 percent, its strongest gain since November 2009. It has risen nearly 30 percent so far this year, close to the gain for all of 2010. U.S. gold gained 0.4 percent to $1,836.50 an ounce, also on course for a 13-percent rise from a month earlier.

Italy returned to bond markets on Tuesday with a 7.74 billion euro sale that met relatively weak demand despite the ECB buying Italian debt in recent weeks, sparking a nervous reaction among investors. Traders said the European Central Bank stepped in after the auction to buy significant amounts of 10-year debt, bringing yields back down. The launch of a new 10-year benchmark bond drew bids worth 1.27 times the 3.75 billion euros sold, below the year’s average bid-cover ratio of 1.4. The ECB began buying Italian debt on the secondary market earlier this month, bringing benchmark 10-year yields down from levels well above 6 percent, seen as unsustainable, to around 5 percent.
Oil declined, heading for the biggest monthly drop since May, as investors speculated that increasing crude stockpiles in the U.S. indicate fuel demand is faltering in the world’s biggest consumer of the commodity. Crude for October delivery slid as much as 55 cents to $88.35 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.53 at 2:48 p.m. Sydney time. The contract yesterday advanced $1.63 to $88.90. Prices are down 7.5 percent this month and 3 percent this year. Brent oil for October settlement was at $114.07, up 5 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $25.54 to U.S. West Texas Intermediate futures, compared with a record close of $26.21 on Aug. 19. Brent is down 2.3 percent this month.

Masaaki Shirakawa may become the first Bank of Japan governor since the 1990s to finish his term without raising interest rates as entrenched deflation and the yen’s surge weaken the world’s third-biggest economy. The 18-month overnight-index swap rate, an indication of what derivative traders expect the Bank of Japan’s key interest rate will average during the period, sank to 0.05 percent on Aug. 23, the lowest since at least Dec. 2005, and compared with the BOJ’s target rate of zero to 0.1 percent, according to data compiled by Bloomberg. JPMorgan Chase & Co. and Mitsubishi UFJ Morgan Stanley Securities Co. have pushed back estimates for an increase in the overnight lending rate to 2014 at the earliest.

South Korea’s industrial production expanded at the slowest pace in 10 months as weakness in global growth threatens the outlook for exports. Output rose 3.8 percent from a year earlier after gaining a revised 6.5 percent in June, Statistics Korea said today. The median estimate of 11 economists in a Bloomberg News survey was for a 6.2 percent gain. Production slid 0.4 percent from June, when it increased 0.9 percent

The Philippine economy grew less than economists expected last quarter, adding to signs Asia’s expansion is easing as faltering global demand curbs exports. Gross domestic product increased 3.4 percent in the second quarter from a year earlier, compared with a revised 4.6 percent gain in the three months through March, the National Statistical Coordination Board said in Manila today. The median estimate of seven economists surveyed by Bloomberg News was for growth to slow to 4.1 percent.

The ideas President Barack Obama is considering for his new jobs agenda could put hundreds of thousands of people back to work, and still have a limited impact in an economy that remains 6.8million jobs behind its pre-recession peak, economists said. Among the options Obama is considering is a version of a tax credit for new hires that could spur the creation of 900,000 additional jobs at a cost of $30 billion, according to an estimate by Michael Greenstone, an economics professor at the Massachusetts Institute of Technology and former chief economist for Obama’s Council of Economic Advisers.
Pockets of the fixed income and money markets are starting to reflect concern that recent volatility will extend past August, and that growing risk aversion may again roil banks and funding markets. One sign of worry is the increasing reluctance of banks to use their balance sheets to facilitate trades, which has hit sectors from corporate bonds to the short-term repurchase market, where there is $1.6 trillion in triparty loans.

Bill Gross, manager of the world’s largest bond fund for Pimco, has admitted that it was a mistake to bet so heavily against the price of US government debt. Mr Gross emptied his $244 billion Total Return Fund of US government-related securities earlier this year in a high-profile call that has backfired as the bond market has rallied. As of Monday, Pimco’s flagship fund ranked 501th out of 589 bond funds in its category. 
Exxon Mobil won a coveted prize in the global petroleum industry Tuesday with an agreement to explore for oil in a Russian portion of the Arctic Ocean that is being opened for drilling even as Alaskan waters remain mostly off limits. The agreement seemed to supersede a similar but failed deal that Russia’s state oil company, Rosneft, reached with the British oil giant BP this year with a few striking differences.

Echoing a call by Warren E. Buffett, members of the European wealthy elite are urging their governments to raise their taxes or enact special levies to help reduce growing budget deficits. Maurice Lévy, chairman and chief executive of the French advertising firm Publicis, on Tuesday became the latest European business leader to ask for higher taxes on top earners, writing in The Financial Times that it was “only fair that the most privileged members of our society should take up a heavier share of this national burden.”
While much of Europe is struggling to pay its way out of the debt crisis, Norway has been awash with cash and is set to get more. Two major oil finds are revitalizing the country’s aging energy sector and promise to buoy it through the downturn looming over the global economy. Although headlines this summer have been predicting economic gloom  a flare-up in Europé ‘s debt problems, falling bank stocks, another recession in the U.S.  Norway has weathered the bad news. In fact, one of its main financial concerns is how to keep all its money from overheating the economy. “In Norway, we live in a big bubble, independent of what happens in the rest of the world,” said Beniamin Johansen, a personnel consultant in Oslo.
The head of Poland’s central bank said Tuesday that the longer the euro-zone countries take to resolve the sovereign debt crisis, the more likely it is that the bloc will have to issue eurobonds, orbonds backed collectively by all the members of the single currency union. “The longer it takes to resolve the situation in Greece, the more inevitable a eurobond becomes,” National Bank of Poland Governor Marek Belka told MarketWatch in an interview.

The chief of Poland’s central bank said Tuesday that he expected inflation in the country to keep easing in the months ahead, but that it was still too soon to rule out future interest rate increases. “We expect inflation to keep receding. But it’s far above our target, 2.5%. In that sense, it’s too early to announce a change in our general stance of policy,” Marek Belka told MarketWatch in aninterview at the Haas School of Business at the University of California, Berkeley.
Credit ratings agency Fitch has warned that it may cut China’s yuan debt rating on concerns of rising defaults. Fitch’s current rating for China’s yuan-denominated debt stands at AA-. The warning comes after Fitch revised its outlook on China’s local currency debt from “stable” to “negative” in April this year. There have been growing concerns of bad loans in China after the nation’s banks lent record sums of money in the last two years.  Andrew Colquhoun, head of Asia-Pacific Sovereigns at Fitch Ratings was quoted by news agency AFP as saying that there was a “better than even chance” of a downgrade.

Spanish politicians have overwhelmingly backed holding a vote on introducing a constitutional cap on budget deficits. The move all but guarantees that the change will be adopted. Members of the lower house of Spain’s parliament voted 319 in favour and only 17 against holding the debate and vote later this week. The reform would then go to the upper house next week. To change Spain’s constitution requires three-fifths support in both houses.

European politicians must not ignore markets, according to Sharon Bowles, chair of the European Parliament’s economic and monetary committee. Ms Bowles chaired the session on Monday about the eurozone debt crisis. “Jean-Charles Juncker, the president of the Eurogroup… said, ‘We shouldn’t believe the markets,’ and he got big applause,” she told BBC News. She added that the big problem was that politicians thought the markets would do nothing while they went on holiday.
The Western world is at mounting risk of a double-dip recession after key measures of confidence collapsed in both the United States and Europe, with Germany suffering the steepest one-month fall since records began in the 1970s.  The fund has slashed its growth forecast for America and Europe, according to a leaked draft of its World Economic Outlook. It has called on both the US Federal Reserve and the European Central Bank to stand ready for “further easing of monetary policy” – implying a fresh blast of quantitative easing (QE) by the Fed.

Mortgage approvals rose to a 14-month peak in July, the Bank of England reported, with economists attributing the pick-up to some better deals for buyers. The number of mortgage loans approved by lenders rose to 49,239, in line with the consensus forecast of 49,000 and up from 48,500 the previous month. That represented the highest figure since May 2010, albeit still well below pre-crisis levels. “The latest rise in mortgage lending may be a response to the increasingly competitive mortgage interest rates available to some borrowers in recent months,” said analysts at Capital Economics.

Britain’s debt burden has surged past the point at which it harms growth in every area of the nation’s borrowing, the Bank for International Settlements (BIS) warned. Just two other advanced economies analysed by the financial watchdog are into the danger territory where “debt is bad for growth” for all three types of non-financial sector borrowing: government, household and corporate debt, said BIS economists.

Pensioners retiring this year on a fixed income could see almost £10,000 wiped off the value of their pension pot in real terms over the next two decades, the report claimed. To beat inflation and maintain a decent standard of living, pensioners would need a retirement income worth more than double what they had set aside for the next 20 years, the analysis by Prudential said.
The housing market is in crisis as home ownership tumbles and house prices soar, a study has warned. Home ownership in England will slump to just 63.8% over the next decade  the lowest level since the mid-1980s, the National Housing Federation’s forecast, published on Tuesday, said. Huge deposits, combined with high house prices and strict lending criteria, have sent home ownership into decline, the federation said.

National house prices accelerated their falls in July amid uncertainty about the global economy and the direction of interest rates, with prices in Melbourne leading the drop but Sydney edging up. Capital city home prices sank 0.6 per cent during the month, seasonally adjusted, from a 0.3 per cent fall in June, said property research group RP Data-Rismark. Capital city home prices fell 3.4 per cent in the first seven months of the year, leaving the median capital city dwelling price at $455,000.
US President Barack Obama on Tuesday said that the US economy had suffered a ‘heart attack’ and survived but is not recuperating quickly enough, as he geared up to unveil a major jobs plan. Mr Obama appeared on the Tom Joyner Morning Show in what also appeared to be an effort to reach out to black voters following criticism by African American leaders that he has not sufficient courted their community.
Net profit growth of Chinese listed companies slowed in the first half of this year amid soaring inflation at home and economic uncertainty abroad, according to their half-year reports. Data from the Shanghai and Shenzhen stock exchanges shows that the profits of 2,272 listed firms totaled 998.94 billion yuan (156.4 billion U.S. dollars) in the first half of 2011, up 22.35 percent from a year earlier. Last year, China’s listed companies registered year-on-year net profit increases of more than 37.32 percent on average. Of the companies, ICBC, China’s largest bank, was the most profitable firm with 109.48 billion yuan of profit, or about 11 percent of the total.

Spurred by favorable performance of the gaming sector, Macao’s Gross Domestic Product (GDP) for the second quarter of 2011 grew 24 percent year-on-year, according to the figures released on Tuesday by Macao’s Statistics and Census Service (DSEC). Analyzed by major components, exports of gaming services and investment soared by 39 percent and 23.1 percent respectively in the period when total visitor spending, excluding gaming expenses, increased by 5.9 percent, the figures indicated.

Russia’s budget surplus in the first half of 2011 exceeded 1.74 trillion rubles (over 62 billion U.S. dollars), the Russian statistics agency Rosstat said on Tuesday. This is a 6.4-time growth compared with the same period of 2010, said Rosstat. According to Moscow’s Vedomosti business daily, the revenue growth happened largely due to the raising domestic demands for durable goods and good harvest.

Overseas interests could own up to 15 percent of New Zealand state-owned enterprises in a partial privatization set to go ahead next year, the government announced Wednesday. The government was expecting strong demand from a large and growing pool of New Zealand investment funds for stakes in four energy companies and the national carrier Air New Zealand, Finance Minister Bill English said in a statement.
Union Finance Minister Pranab Mukherjee said: “… It [lower GDP growth] is no doubt disappointing. There is no room for complacency. We shall have to work very hard  the government and the industry and I am confident that our workers and farmers would make their contribution in ensuring growth with inclusion … When the final figures for year will be available, there may be a recovery … Of course [I am] not going to just now make any projections what would be the final figures for the year”.
The output of eight infrastructure industries rose at its fastest pace in 15 months in July, raising hopes of a robust industrial performance during the month.  The index for eight core sector industries – crude oil, petroleum refinery products, coal, electricity, cement, steel, fertilizers and natural gas – rose 7.8% compared to 5.7% in July last year, industry ministry data released on Tuesday showed. July’s core industries performance has been led by steel, electricity and cement, with the three growing at 10% plus.

The central government’s fiscal deficit surged more than 2 fold to Rs 2.2 lakh crore during the first four months of the current fiscal, on account of low revenue realisation and higher expenditure.  The deficit was Rs 90,915 crore in April-July period of 2010. Fiscal deficit, the gap between overall expenditure and receipts, in the first four months of the financial year is almost 55 per cent of the Budget estimate of Rs 4.12 lakh crore for 2011-12, as per the latest data of the Controller General of Accounts (CGA).
South Korean individuals and corporations held a combined 11.48 trillion won (US$10.7 billion) worth of wealth in overseas accounts last year, the nation’s tax agency said Wednesday. Individuals held a total of 975.6 billion won in 768 accounts and corporate entities held 10.51 trillion won in 4,463 accounts, according to the National Tax Service (NTS). The figures were based on a voluntary report last June by people who owned 1 billion won or more in deposits, stocks and other forms in overseas accounts for at least one day last year.

South Korean banks’ lending rates climbed to the highest level in 18 months in July, due to effects from the central bank’s rate hike in June, the Bank of Korea (BOK) said Wednesday. The average rate for new loans extended to households and companies stood at 5.86 percent in July, up 0.06 percentage point from the previous month, according to the BOK. The June rate marked the second straight monthly gain. The July reading marked the highest level since 5.94 percent tallied in January 2010.
Belarussian President Alexander Lukashenko said Tuesday that the country would allow a free float of its currency sometime between Sept. 12 and 15.  The government devalued the ruble by some 50 percent this year, causing panic buying of staples and huge lines at foreign exchange offices.  Foreign currency has been hard to come by since March, boosting the black market where foreign cash can cost nearly twice as much as the official rate.
South Africa’s economy grew at its slowest pace in almost two years in the second quarter as the manufacturing and mining sectors slumped after strikes, boosting the case for interest rate cuts while denting the government’s job-creation hopes.  The slowdown will make it even harder for the legions of the country’s unemployed – more than a million have lost their jobs since 2009 – to find work, likely keeping the unemployment rate above 25%.

South Africa’s debate on the question of nationalising mines is discouraging investment, but the policy will be clear by mid-2012, an adviser to mines minister Susan Shabangu told reporters on the sidelines of a mining conference on Wednesday. “The matter will be put to bed by July next year when the ruling party holds its policy conference whereupon the issue will be debated, discussed and perhaps will be adopted or not,” adviser Sandile Nogxina said.
Robert Shiller, author of Irrational Exuberance, and one of the few professors understanding The Economy and Markets gives some insight on psychology, housing, volatility and the markets.

We have heard all day long on Bill Gross and PIMCO’s big bet gone wrong as there seems no other stories CNBC could report on. Anyway, even the best, can make a bad Trade every now and then. Meanwhile, Bill Gross’ latest report;

Somehow we are getting that deja vú again, when ES futures trade “mysteriously” strong. Remember, buying ES futures on margin is much more effective than throwing money at the falling Economy, at least if you wish to ramp up the Equities Market. From last year;