News That Matters


Prospects for a rapid increase in IMF firepower to cope with the eurozone crisis have receded after the Japanese government and the Bundesbank set tough conditions before making contributions, reports the FT. On Tuesday Jun Azumi,


Morgan Stanley has resolved its legal conflicts with bond insurer MBIA, ending a long-running dispute tied to guarantees of mortgage securities that will result in the bank recording a $1.8bn pre-tax loss,


Franco-German hopes for a sweeping new treaty to bind the region’s economies more closely came under strain on Tuesday as several EU leaders warned of difficulties pushing a far-reaching pact through their national parliaments,


Opec ministers were edging towards a decision to keep oil output broadly steady at their meeting on Wednesday, the FT reports, moving to heal the profound differences between Saudi Arabia and Iran that led to the collapse of the previous meeting in June. The oil cartel painted a sanguine picture for the energy market heading into 2012,



Friction is rising over Beijing’s real estate policies, with some top Chinese policy advisers arguing that restrictions should be loosened to avoid an abrupt economic slowdown, reports the FT. In a commentary published on Tuesday,


The US Federal Reserve said the economy is doing a little better but noted significant downside risks from the eurozone crisis and kept monetary policy firmly on hold, the FT reports. Its statement on Tuesday


European credit markets are bracing for more defaults as a vital cog in the region’s deal-making and corporate lending machinery begins winding down next year. Bankers are worried about how a wall of corporate debt set to mature in 2012 will be refinanced as the bulk of outstanding collateralised loan obligations – structured investment vehicles that buy loans made to private equity firms to finance acquisitions – goes into run-down mode.

Japan’s Nikkei Stock Average fell 0.5%, South Korea’s Kospi Composite was 0.3% lower, Hong Kong’s Hang Seng Index fell 0.2% and China’s Shanghai Composite lost 0.1%. Australia’s S&P/ASX 200 was up 0.1% and India’s Sensex added 0.2%; both markets turned higher after falling in earlier in choppy trade.  Dow Jones Industrial Average futures were down six points in screen trade.


The euro tumbled to its lowest level against the dollar in nearly a year Tuesday amid mounting concerns about Europe’s economy and doubts about the latest government efforts to contain the continent’s debt crisis. In the past two days the currency has dropped 2.6% to $1.3037, a level not seen since January. The euro is down 12% from its 2011 high in May.


Federal Reserve officials left their policy options open for 2012 but took no actions Tuesday and offered an economic assessment that was guardedly more upbeat but still marked by risks. Nine out of 10 Fed officials voted to keep the U.S. central bank’s easy-credit policies unchanged for the second meeting in a row in what was the last Federal Open Market Committee gathering of the year. It took place on Fed Chairman Ben Bernanke’s 58th birthday.


Thousands of protesters marched through the heart of the Polish capital Tuesday night, shouting their opposition to the European Union’s latest plans to rescue the euro zone and demanding that Poland’s government not participate. Waving red-and-white Polish flags and chanting, “We want sovereignty, not the euro,” the demonstrators marked the anniversary of the communist-era imposition of martial law here by decrying proposed new EU limits on state budgets as an unwarranted loss of national independence.


Japan slightly increased its share of bond-buying in the latest auction by Europe’s bailout fund, Japanese government officials said Wednesday, in a sign of continued support for European efforts to contain the region’s debt crisis. Japan’s Finance Ministry bought 13.2% of the three-month bills sold by the European Financial Stability Facility on Tuesday for €260 million ($339 million), officials familiar with the matter said Wednesday.


Australian consumer sentiment plunged in December as rising unemployment and heightened fears linked to Europe’s debt crisis swamped news of cuts in interest rates over recent months. The souring mood has cast doubt over the strength of Christmas sales, which are make-or-break for some retailers, and comes as the Australian dollar fell below parity with the U.S. dollar in skittish trade. On Wednesday, the Australian dollar was trading at US$1.0015, having sunk to a session low of US$0.9978.  Economists said a further loss of confidence would strengthen the case for interest rates to be cut further in early 2012.

U.S. gold fell 2 percent on Wednesday to its lowest in nearly two months, tracking losses in cash gold prices as the dollar rallied after the U.S. Federal Reserve meeting offered no new stimulus. The most-active U.S. gold futures contract tumbled as much as 2.3 percent to $1,625.3 an ounce, before recovering to $1,633.60 by 0018 GMT. Spot gold was little changed at $1,629.79, after sliding 2 percent in the previous session. The U.S. gold contract settled at $1,663.10 on Tuesday, more than $30 higher than the closing price of spot gold.


Brent crude slipped towards $109 on Wednesday as investors booked profits after prices rose more than $2 in the previous session and worries about the global economy overshadowed concerns over disruption of supply from the Middle East. Brent crude slipped 42 cents to $109.08 a barrel by 0430 GMT, after posting the biggest one-day rise since November 28 to settle $2.24 higher. U.S. crude slipped 27 cents to $99.87, after jumping 2.4 percent, the biggest since November 16.


The regulatory arm of CME Group has turned over interviews to the Justice Department that allege former MF Global chief Jon Corzine knew that the now-bankrupt brokerage firm used customer money to lend to a European affiliate, a CME executive said on Tuesday. The information is fourth-hand but is the strongest statement yet from a regulator that Corzine may have personally known customer funds were diverted for firm use.


Italy’s five-year borrowing costs are expected to rise further above 6 percent on Wednesday, to mark a new euro lifetime high, at an auction that will provide a first test of bond market sentiment towards theeuro zone after last weekend’s EU summit. Measures agreed by European leaders to strengthen fiscal discipline have not convinced markets the debt crisis will be resolved and threatened rating downgrades for euro zone states averted, or curbed yields on outstanding Italian debt.

A Chinese leading indicator fell, fueling concern that the world’s second-biggest economy faces a deeper slowdown as Europe’s debt crisis hits exports and home sales slide. The index declined 0.1 percent to 160.1 in October, The Conference Board said in a statement today, citing a preliminary reading. The gauge captures prospects for the next six months, the New York-based research organization says. In September, it rose 0.4 percent.


The Philippines is preparing a surge in state spending in coming months that will widen its budget deficit in 2012 as the government seeks to shield the economy from the European crisis, Budget Secretary Butch Abad said. The 2011 shortfall will be 150 billion pesos ($3.4 billion) to 180 billion pesos, Abad, 57, said in an interview late yesterday in Manila. The estimate is more than double the 74.3 billion-peso deficit in the ten months through October, and compares with a previous forecast of 260.6 billion pesos. The gap may reach 286 billion pesos next year, or 2.6 percent of gross domestic product, he said, reiterating an earlier estimate.


South Korea’s unemployment rate held at a three-year low last month as service industries hired more workers to meet growing demand. The jobless rate stood at 3.1 percent in November, unchanged from October, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of 10 economists was for a rate of 3.2 percent. South Korea’s job market is showing resilience even as the deepening debt crisis in Europe and slowing global growth threaten to cool an economy that has grown for 11 straight quarters. Industrial production unexpectedly fell in October while department store sales also dropped.

So acute are the risks that few economists are now willing to bet heavily against another global recession in 2012. By common consent, the world economic outlook is much darker today than it appeared in the early autumn. The eurozone crisis has worsened with contagion spreading through Italy and Spain and now lapping at the door of France. Recoveries remain feeble in other advanced economies. And emerging markets are beginning to feel the pressure.


European policymakers are taking a page out of their American counterparts’ playbook to address their burgeoning sovereign debt crisis, banking analyst Dick Bove said. already has begun its own version of quantitative easing, the program used by the Federal Reserve to recapitalize banks during the financial crisis that exploded in 2008, said Bove, vice president of equity research at Rochdale Securities. At the same time, Bove said the ECB is well on its way to a “partial nationalization” of European banks, in which it will take equity stakes in the institutions as it seeks to stabilize the financial system.

House lawmakers voted 234-193 to approve a bill on Tuesday that would extend a payroll-tax cut for American workers and also fast-track a U.S.-Canada oil pipeline, setting up a showdown with the White House and the Senate.

National home sales figures will be lowered dating back to 2007 after the private trade group that collects them said the numbers were too high.The National Association of Realtors said Monday it will release the downward revisions for previously occupied homes on Dec. 21.The Realtors consulted with several government and private housing market experts, including the Federal Reserve, the Department of Housing and Urban Development, the Mortgage Bankers Association, the National Association of Home Builders, mortgage giants Fannie Mae and Freddie Mac and CoreLogic, the California-based data firm that first raised doubts about the annual numbers earlier this year.

US retail sales crept up another 0.2% in November according to official data. Compared with a year earlier, they were 6.7% higher, in line with recovery rate seen since early last year, the Commerce Department said. Markets had expected a 0.5% increase after shops reported strong business during Black Friday – the day after Thanksgiving and traditional start of the sales period. It was the slowest monthly growth rate since July.

Concerns are mounting that Britain may have to contribute a further £30bn to eurozone rescue loans through the International Monetary Fund, matching the sorts of burdens shouldered by Germany, France and other EMU states. The fund revealed in its official Survey Magazine that non-euro countries would put up a quarter of all new money under the EU summit deal.  “European leaders agreed to make bilateral loans to the IMF of as much as €200bn —with €150bn contributed by eurozone members and €50bn from other members of the EU,” it said. The report relied on a briefing by IMF chief Christine Lagarde, who was in the room with EU leaders during last Friday’s summit talks. Britain is the EU’s only large economy outside the euro.


The standard of living in the UK was second only to Luxembourg in the European Union last year because of Government spending, official data from the EU has shown. Living standards were 21pc higher in the UK compared with the average in the EU, the statistics office Eurostat said. In Luxembourg standards were 50pc higher. Germany took third place, followed by the Netherlands and Austria. Individual consumption was used as the measure, often cited because it includes all goods and services that a household consumes, regardless of whether they pay for them.  That way Britain’s rating is boosted by public services such as health and education, which are largely government funded.

The International Monetary Fund slashed its growth forecasts for Greece and warned that ever-deepening recession was making it harder for the debt-ridden country to meet the tough deficit reduction targets under its austerity programme. In a report likely to fan financial market concerns about a possible debt default, the regular health check by staff at the Washington-based Fund said the situation in Greece had “taken a turn for the worse”.


The Bank of England predicts that inflation will continue to fall over coming months to nearer 1.5% by the middle of next year and stay below the bank’s government-set target of 2% until at least 2014.Inflation eased back last month as a strong harvest and supermarket price wars kept a lid on food prices but British households suffering from slow pay growth continue to face a tough run-up to Christmas, economists warn.

Consumer sentiment collapsed in December by the most since the start of the global financial crisis three years ago even as the Reserve Bank cut rates to boost confidence in the economy. The Westpac-Melbourne Institute index of consumer sentiment fell 8.3 per cent in December, after a 6.3 per cent rise in November. That drop is the most in a single month since October 2008 – when US investment bank Lehman Brothers collapsed. The index stands at 94.7 in December, down from 103.4 in November.–despite-rate-cuts-20111214-1otud.html#ixzz1gUF63Pt4


The Australian economy will inevitably suffer spillover effects from the European government debt crisis, Reserve Bank of Australia deputy governor Ric Battellino says. However, Mr Battellino said that with few direct trade links to Europe, strong government finances, and a resilient banking system the country is well placed to withstand the impact of the crisis on the global economy. In a speech to the Australasian Finance & Banking Conference in Sydney today, Mr Battellino said it was possible eurozone nations would be able to resolve the worsening crisis, otherwise the continent could face dire economic consequences in the next year.


Fitch ratings agency downgraded Italian insurance giants Generali and Fondiaria-SAI on Tuesday, saying the companies were being affected by “ongoing pressure” from sovereign debt crises in Italy and Spain. Fitch downgraded Generali’s rating to A- from AA- with a negative outlook and Fondiaria-SAI to BB- from BB+, warning of “challenging investment conditions” and “fundamental uncertainties with regards to sovereign debt.”

Canadians have set a new record for household debt, a sign that many families are leaving themselves vulnerable to an economic shock. The debt burden of Canadian households has surpassed levels of both the United States and the United Kingdom and, by at least one measure, they are hurtling toward those countries’ peak levels of 2007, new Statistics Canada data show.

Ailing carmaker Saab has received a first payment from China’s Zhejiang Youngman Lotus Automobile as it struggles to stay in business and faces a crucial court hearing on its future this week.  A court is due to decide on Friday whether to keep Saab in a scheme which grants it protection from creditors while it secures itself a stable future. The administrator overseeing the scheme for the court has applied to have it ended.  In the meantime

Indonesia continues to perform strongly with gross domestic product (GDP) growth of 6.5 percent year-on-year in the third quarter 2011 and remains relatively well- positioned to weather future external shocks despite continued turbulence in international financial markets, the World Bank said in its latest “Indonesia Economic Quarterly” released on Wednesday. However, it said, freezing up of international financial markets could have an adverse impact on portfolio flows, commodity prices and both external and domestic demand.


Moody’s Investors Service has said the outlook for Indonesia’s 376 billion U.S. dollar banking sector remains stable, citing the nation’s strong domestic economy that has helped to insulate lenders from the global economic turbulence, local media reported on Wednesday. The international rating agency expects Indonesia’s economy to expand by 6 percent next year, slower than the Indonesian government’s 6.6 percent forecast and the central bank’s 6.3 percent estimate.


Greece auctioned 1.625 billion euros (2.14 billion U.S. dollars) of a six-month treasury bills sale on Tuesday with an increased rate, according to a statement from the Greek Public Debt Management Agency (PDMA). The six-month treasury bills were sold at an interest rate of 4.95 percent, slightly up from the 4.89 percent secured in the previous similar sale held in November.


The Dutch budgetary deficit is set to 4.1 percent of the gross domestic product (GDP) next year, according to the latest estimations that were published by the government’s macro-economic policy unit CPB on Tuesday. In September of this year the CPB estimated a shortage of only 2.9 percent. But due to a less stable economic climate within the Eurozone, this figure needed to be adjusted. The CBP expects 475,000 people to be jobless next year, which is 90,000 more than in 2011. The unemployment figure will raise from 4.5 percent to 5.25 percent.

China’s industries will remain the most competitive in the global market in 2012, but their strength will be weakened due to the impacts of the global financial crisis, a government think tank report said Monday.  According to a blue paper published by the Chinese Academy of Social Sciences (CASS), two important factors — stagnant growth in developed economies and pressures on the yuan’s appreciation — will trim down the global competitiveness of Chinese industries in 2012.

The Indian rupee lost 57 paise to a fresh all-time low of Rs 53.80 per US dollar in early trade on Wednesday amid persistent dollar demand from banks and importers in view of sustained foreign capital outflows.  The rupee resumed lower at Rs 53.54/55 per dollar on the Interbank Foreign Exchange, as against its previous close of Rs 53.23/24 per dollar, and declined further to a record low of Rs 53.80 against the American currency before quoting at Rs 53.60/61 per dollar at 1030 hours.


India needs to rapidly increase energy consumption to achieve the ambitious target of 9 per cent economic growth in the 12th Five-Year Plan (2012-17), Prime Minister Manmohan Singh on Wednesday said. “We have set for ourselves an ambitious target of 9 per cent annual growth in GDP in the 12th Five-Year Plan. This high rate of economic growth would require our energy consumption also to increase rapidly,” he said at the National Energy Conservation Day celebrations in New Delhi.

India’s chief economic adviser, Kaushik Basu, said on Wednesday he expects food inflation to drop to 3 percent within a month. Food inflation had dropped to 6.60 percent in the year to Nov. 26, its lowest in nearly three-and-a-half years, from an annual 8.00 percent in the previous week.


India’s economic downturn is expected to be temporary and growth should recover, Finance Minister Pranab Mukherjee said on Wednesday, following data this week that showed a 5.1% contraction in industrial output. India’s banking sector is robust, Mukherjee said, despite worries in some quarters about non-performing assets.

Market was clearly not overly impressed by the Fed. Nothing really new came out, and yes, the economy is not acting healthy. As has been our theme for the past weeks; the market is trapped in a mean reversion trading pattern. Every time people like Biggs turn bullish (after 10% surge), everything reverses. After the sell offs attract pessimists, market reverses right back up, and disappoints the bears.