• US May Durable Goods +1.1%; f/c +0.4% prev revised lower to -0.2%
• US May Durable Good ex-trans +0.4%; f/c +0.7% prev revised up to -0.6 from -0.9
• US May Pending Home Sales m/m 5.9%; f/c 1.9% prev -5.5%
• US May Pending Home Sales y/y 15.3%; f/c 9.9% prev 14.7%
• Germany's Merkel reiterates Euro bonds are economically wrong and counterproductive
• German FinMin Schaeuble: Do not wish interest rates to remain so low, Don’t fear further downgrade of Germany due to bailout risks, Greece knows what its commitments are under bailout program, Will decide what to do after we get Troika progress report
• Italy Govt wins final confidence vote on labor reform law
• Spain’s Sec. of State for Public Administration doesn’t rule out salary cuts for public employees
• ECB’s Praet: There is no doctrine that interest rates cannot fall below 1%; Interest rate cuts always justified if they contribute to guaranteeing price stability in medium term
• ECB's Asmussen: EU and ECB mission to, with IMF support, to start work this evening in Madrid; Aim is to present Memorandum of Understanding to Eurogroup on July 9; Spanish memorandum will contain conditions for financial sector
• France’s Hollande says France and Germany both want to deepen European monetary union
• Fed’s Evans says ‘I think we should be doing more accommodation’; Hard to understand why Fed unwilling to do more to help economy, given low inflation
Priced-to-Sell Felda Jumps in IPO Debut: Southeast Asia (Source: Bloomberg)
Felda Global Ventures Holdings Bhd. (FGV), the world’s third-biggest oil palm planter, jumped as much as 20 percent in its Kuala Lumpur debut, after raising $3.3 billion in the biggest initial public offering since Facebook (FB) Inc. “Foreign investors haven’t been allocated sufficient shares,” said Alan Richardson, who helps oversee about $87 billion as a money manager at Samsung Asset Management Co. in Singapore. “An over-demand situation is likely.” Demand from institutions exceeded supply by more than 40 times during the IPO, Felda Chief Executive Officer Sabri Ahmad said in an interview on June 20. Unlike Facebook, the plantations group priced the stock below the top of its indicative range. The world’s largest social network company has slumped since its debut in May, while Felda rallied to 5.46 ringgit ($1.71) in the first 14 minutes of trading in Kuala Lumpur today.
The state-controlled company could have received more than 4.55 ringgit per share from institutions, though decided not to after allocating 90 percent of the available stock to Malaysian subscribers, Sabri said. “We wanted to put something on the table for them to enjoy,” he said.
Asian Stocks Rise on U.S. Home Sales, Durable Goods Data (Source: Bloomberg)
Asian stocks rose for a second day after reports showed U.S. home sales and durable goods orders climbed more than estimated and investors awaited the start of a summit on Europe’s debt crisis. Toyota Motor Corp. (7203) advanced 1 percent, leading gains among Japanese carmakers. Rio Tinto Group, the world’s third-largest mining company, rose 1.2 percent after metals prices climbed yesterday. Eisai Co. (4523) jumped 2.2 percent in Tokyo after its partner won Food and Drug Administration approval for weight- loss pill lorcaserin, making it the first obesity medication cleared for sale in the U.S. in 13 years. The MSCI Asia Pacific Index (MXAP) advanced 0.9 percent to 115.07 at 9:52 a.m. in Tokyo, before markets in China and Hong Kong opened. More than four stocks rose for each that fell. The gauge fell 12 percent through yesterday from its highest level of 2012 in February, paring its gain this year to 0.2 percent, amid concern growth in China and the U.S. is slowing as the euro-zone debt crisis escalates.
“The U.S. economy remains in a recovering trend,” said Mitsushige Akino, who oversees about $627 million in Tokyo at Ichiyoshi Asset Management Co. “Some deteriorating data, such as manufacturing, has been already factored into the market. Also, individual investors are buying companies counting on domestic demand and low-priced equities. That’s supporting the markets.”
China’s Stocks Fall for 6th Day After Daiwa Cuts Growth Estimate (Source: Bloomberg)
China’s stocks fell for a sixth day, the longest losing streak in six months, after Daiwa Securities Group Inc. cut its second-quarter growth estimate for the world’s second-biggest economy. Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co. led a gauge of material producers lower on the prospect of weaker demand. Shanxi Coal International Energy Group Co. (600546) dropped to the lowest level since August 2010 after the board approved the resignation of its chairman. China Oilfield Services Ltd. (2883) and Offshore Oil Engineering Co. jumped more than 6 percent on expectations oil equipment makers will benefit after Cnooc Ltd. invited bids for oil blocks. “The market is bearish on the long-term outlook for China’s economic growth and we haven’t seen a new driver for the economy emerge so far,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million.
The Shanghai Composite Index (SHCOMP) lost 0.2 percent to 2,216.93 at the close, after changing directions at least 10 times. The six-day decline is the longest since the period ended Dec. 15. The CSI 300 Index (SHSZ300) fell 0.3 percent to 2,447.20. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 1.2 percent in New York yesterday.
Japanese Stocks Rise on U.S. Housing, Durable Goods Data (Source: Bloomberg)
Japan stocks rose a second day as reports showed U.S. home sales and durable goods orders climbed, showing signs of resilience in the world’s biggest economy ahead of a European summit on the debt crisis that opens today. Toyota Motor Corp., a carmaker that gets 20 percent of its revenue in North America, rose 1.2 percent. Chubu Electric Power Co. led utilities higher after nation’s biggest electricity producers committed to nuclear power. Eisai Co. (4523) climbed 2.2 percent after its partner won approval for the first weight-loss pill cleared in the U.S. in 13 years. “The U.S. economy remains in a recovery trend,” Mitsushige Akino, who oversees about $627 million in Tokyo at Ichiyoshi Asset Management Co. “Individual investors are buying companies counting on domestic demand and low-priced equities.”
The Nikkei 225 (NKY) rose 1 percent to 8,821.68 as of 9:59 a.m. in Tokyo. The broader Topix (TPX) climbed 1.1 percent to 753.79, with more than three shares rising for each that fell. Japan’s retail sales rose more than forecast in May, a sign consumer spending will help sustain an economic rebound. The Topix has fallen about 14 percent from its peak on March 27 as growth in the U.S. and China slows amid concern the debt crisis is spreading. Stocks on the gauge are valued at 0.89 times book value, with a number below one meaning a company can be bought for less than the value of its assets.
U.S. Stocks Advance Amid China Bets, Economic Reports (Source: Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a second day, amid better-than-estimated housing and durable goods orders data while speculation grew that China will add to economic stimulus. Energy and financial shares rose the most in the S&P 500 among 10 groups. A gauge of homebuilders in S&P indexes climbed 3 percent to the highest since 2008. Monsanto (MON) Co., the world’s biggest seed company, added 3.9 percent as earnings beat estimates. Facebook Inc. (FB) fell 2.6 percent as analysts including those at lead underwriter Morgan Stanley said the social-network operator is worth no more than its debut price of $38. The S&P 500 rose 0.9 percent to 1,331.85 at 4 p.m. New York time. It has risen 1.6 percent so far in June. The Dow Jones Industrial Average added 92.34 points, or 0.7 percent, to 12,627.01. Volume for exchange-listed stocks in the U.S. was 5.8 billion shares, or 14 percent below the three-month average.
“The economic data was encouraging,” said Walter Todd, who oversees about $940 million as chief investment officer of Greenwood Capital in Greenwood, South Carolina. “It’s important to see that because most recently we’ve had weaker data here and in China while Europe came back to the forefront. Any policy moves out of China would certainly be welcomed.”
Emerging Stocks Climb on China Speculation, Durable Goods (Source: Bloomberg)
Emerging-market stocks rose the most in a week on speculation China will take further steps to bolster economic growth and as U.S. durable goods order and pending home sales beat economists’ estimates. The MSCI Emerging Markets Index (MXEF) added 0.7 percent to 913.31 at the close of trading in New York, its steepest gain since June 19. The Hang Seng China Enterprises Index posted the longest winning streak in three weeks. OAO MRSK Holding, a Russian electricity distribution company, soared in Moscow to lead the advance in the Micex Index. (INDEXCF) OGX Petroleo e Gas Participacoes SA slumped in Sao Paulo after the oil company controlled by billionaire Eike Batista cut production targets. China may introduce “more proactive” policies to ensure stable economic growth, the China Securities Journal said today. Orders for durable goods rose 1.1 percent in the U.S., a Commerce Department report showed. The median forecast of 76 economists surveyed by Bloomberg News called for an 0.5 percent gain.
Separate data showed more Americans than forecast signed contracts to buy previously owned homes last month. European leaders meet tomorrow to find a solution to the debt crisis. “Any bit of positive noise processes into stronger reactions in the market right now,” Simon Quijano-Evans, the head of emerging-market research for Europe, the Middle East and Africa at ING Groep NV, said by phone from London today. “There’s expectation that China will act on some more impulses, that maybe we’ll see a better backdrop in the euro zone and the U.S. not coming in as negative as expected -- it’s a mixture of things giving some positive sentiment.”
European Stocks Rise on China Stimulus Optimism, US Data (Source: Bloomberg)
European stocks rose the most in a week after reports on U.S durable-goods orders and pending home sales beat estimates and speculation mounted that China will introduce additional economic stimulus. Lloyds Banking Group Plc (LLOY) and Barclays Plc followed bank shares higher. Portugal Telecom SGPS SA (PTC) climbed 3.1 percent after announcing a 200 million-euro ($250 million) share buyback. Glencore International Plc (GLEN) fell after target Xstrata Plc (XTA)’s second-largest shareholder asked for a higher bid. The Stoxx Europe 600 Index gained 1.4 percent to 245.87 at the close in London, snapping four days of losses. The gauge has climbed 5.1 percent from its 2012 low on June 4 as Greece formed a coalition government after its second election. The volume of shares traded on the measure was 17 percent below the average of the last 30 days, data compiled by Bloomberg show.
“Today’s move all boils down to the news related to the world’s two largest economies” said Keith Bowman, an equity analyst at Hargreaves Lansdown Stockbrokers in London. “Positive economic data from the U.S. and rumors of further stimulus from Chinese authorities is enough to lift the markets out of the doldrums that we have seen in recent days.”
Giant Jumps as Stimulus Bets Trigger ADR Rally: China Overnight (Source: Bloomberg)
Chinese stocks traded in New York rose for a second day, as Giant Interactive Group Inc. (GA) surged the most since April, on prospects the government will take steps to shore up flagging growth in Asia’s largest economy. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in New York added 1.1 percent to 89.95 at the close of trading in New York. Online game developer Giant Interactive advanced 6 percent and software developer VanceInfo Technologies Inc. (VIT) climbed the most since February. Melco Crown Entertainment Ltd. (6883) rose for the first time in three days after the Philippines’ Belle (BEL) Corp. said it’s in talks with the Macau casino operator to set up a gambling complex in Manila.
China may introduce “more proactive” policies to ensure stable growth, the state-owned China Securities Journal said in a commentary published yesterday. Daiwa Securities Group Inc. and HSBC Holdings Plc cut their annual growth outlooks as manufacturing may have contracted for an eighth month. Companies on the Bloomberg China-US Index that reported earnings from Feb. 15 to May 16 missed analysts’ estimates by 19 percent, according to data compiled by Bloomberg.
U.K. Stocks Rise for First Time in Five Days; BP Rallies (Source: Bloomberg)
U.K. stocks climbed for the first time in five days after better-than-estimated U.S. data helped ease concern about the strength of the global economy before tomorrow’s European Union summit. BG Group Plc (BG/) and BP Plc climbed with crude oil, while CRH Plc (CRH) and Wolseley Plc (WOS) led construction-industry shares higher. Standard Chartered Plc (STAN) rallied 3.1 percent as Britain’s second- largest bank by market value reiterated its forecast. The FTSE 100 Index (UKX) rose 76.96, or 1.4 percent, to 5,523.92 at the close in London, the biggest gain since June 19. The gauge had lost 3.1 percent over the previous four days amid concern this week’s summit in Brussels won’t produce decisive measures to contain Europe’s debt crisis. The FTSE All-Share Index and Ireland’s ISEQ Index each increased 1.3 percent today.
“Durable goods and pending home sales data both enjoyed positive reads,” said Will Hedden, a sales trader at IG Index in London. “Generally, the mood is a little more positive today despite the pending EU summit.”
Facebook Analysts See Shares Staying Less Than $38 IPO Price (Source: Bloomberg)
Facebook Inc. (FB) analysts including those at lead underwriter Morgan Stanley (MS) say the social-network operator is worth no more than its debut price of $38. At least 17 securities firms began coverage of the company today, bringing the average analyst share-price estimate to $37.95, data compiled by Bloomberg show. Morgan Stanley gave Facebook the equivalent of a buy rating, as did JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and five other firms. There were eight holds and one sell, the data show. Facebook, its bankers and listing exchange Nasdaq OMX Group Inc. faced criticism after the shares fell below the initial public offering price of $38 on the second day of trading and extended declines to 32 percent on June 5. Underwriters sold stock at a higher valuation than every Standard & Poor’s 500 Index company except two.
FOREX-Euro steady, investors hold fire before summit
LONDON, June 27 (Reuters) - The euro steadied against the dollar after hitting a two-week low the previous day, but looked vulnerable ahead of a European Union summit that is not expected to deliver new measures to ease the region's debt crisis.
"People are waiting for the inevitable - which is that policymakers will probably fail to do what is necessary," said Neil Mellor, currency analyst at Bank of New York Mellon.
Euro Remains Lower Before Italy’s Debt Sales (Source: Bloomberg)
The euro was set for the biggest quarterly drop versus the yen since September amid concern the region’s debt crisis is spreading to bigger economies. The 17-nation currency remained lower against the dollar following a three-day decline before an Italian debt auction today and data forecast to show economic confidence in the euro bloc deteriorated. At a summit starting in Brussels today, European Union leaders will convene for the first time since pro-bailout parties won at Greek parliamentary elections on June 17. The dollar slid versus most major counterparts as gains in stocks supported demand for higher-yielding assets. “People are looking for further weakness in the euro,” said Alex Sinton, director for institutional foreign exchange in Auckland at Australia & New Zealand Banking Group Ltd. (ANZ) “Growth there is waning.”
The euro slid 0.1 percent to 99.29 yen as of 10:02 a.m. in Tokyo from the close in New York yesterday. It rallied 0.2 percent to $1.2491 after losing 0.8 percent over the past three days. The dollar slid 0.3 percent to 79.50 yen. Since the end of March, Europe’s shared currency has fallen 10 percent versus the yen and 6.4 percent against the dollar. As the first half of the year nears its close, the dollar is up 3.4 percent in 2012 against the yen.
Aussie, Kiwi Remain Higher on Evidence of Global Growth (Source: Bloomberg)
The Australian and New Zealand dollars climbed for a third day as U.S. economic reports eased concern the world’s largest economy is faltering, boosting demand for higher-yielding assets. The so-called Aussie headed for its biggest monthly gain versus the U.S. dollar since January as traders increased bets the Reserve Bank of Australia will keep rates unchanged next week as long as Europe’s debt crisis doesn’t deteriorate. New Zealand’s currency, nicknamed the kiwi, was set for the second- biggest gain in June among the greenback’s 16 major trading partners as Asian stocks extended a global advance. “There seems to be sufficient life in the U.S. economy without further stimulus,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. The RBA is “saying it will really only ease with further unsettling news from Europe. The Aussie has the potential to edge higher on the fact that our interest rates seem stable for the time being.”
The Australian dollar rose 0.4 percent to $1.012 as of 10:53 a.m. in Sydney from $1.0080 at the close in New York yesterday. It added 0.1 percent to 80.46 yen. New Zealand’s currency climbed 0.4 percent to 79.52 U.S. cents and advanced 0.2 percent to 63.22 yen.
Slowdown Concern Ebbs on Durable Goods, U.S. Home Sales (Source: Bloomberg)
Orders for durable goods and the number of Americans signing contracts to buy an existing home rebounded in May, easing concern the world’s largest economy is faltering. Bookings for goods meant to last at least three years rose 1.1 percent, the first increase since February, a Commerce Department report showed today in Washington. Pending home sales climbed 5.9 percent after slumping 5.5 percent in April, according to data from the National Association of Realtors. Stocks rallied as the figures indicated manufacturing, a mainstay of the economy, was holding up amid a global economic slowdown that’s curbing demand for exports and hurting sales at companies like Joy Global Inc. (JOY) Housing, the industry that triggered the recession, may keep improving as record-low mortgage rates spark buyer interest.
“The economy is growing, but it’s still muddling through,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who forecast a gain in durables orders and pending home sales. “Concerns about the collapse of manufacturing are grossly overblown. We’re in a housing recovery.”
Pending Sales of U.S. Homes Climbed More Than Forecast (Source: Bloomberg)
More Americans than forecast signed contracts to purchase previously owned homes in May, indicating the real estate industry is firming three years after the start of the economic recovery. The index of pending home resales climbed 5.9 percent to 101.1, matching a two-year high reached in March, after a 5.5 percent decline in April, figures from the National Association of Realtors showed today in Washington. The median forecast of 39 economists surveyed by Bloomberg News called for a 1.5 percent gain in May. Record-low mortgage rates and cheaper properties may keep sparking buyer interest, even as cooling employment and limited access to credit remain hurdles for the market. The Federal Reserve’s decision last week to extend a program aimed at holding down borrowing costs may sustain the progress in residential real estate.
“This improvement adds to the recent flow of good news on the housing sector, reinforcing our view that this beleaguered sector is finally on the mend,” Millan Mulraine, a senior U.S. strategist at TD Securities in New York, said in an e-mail to clients. “It points to a decent pop in existing-home sales activity in June.” Estimates in the Bloomberg survey ranged from a drop of 1.6 percent to a rise of 6.8 percent.
Older Workers in U.S. Drive Competition in Labor Market (Source: Bloomberg)
June 27 (Bloomberg News) -- Richard InLove, 60, works 20 hours a week as a receptionist and office assistant in Eugene, Oregon, and wants more. After losing a full-time job in a cereal factory three years ago, he hasn’t been able to find a second position. “I’d do one more part-time job if I could get it,” said InLove, who has been with a local museum since 2010. “I am still looking but it’s been hard.” He plans to join the record 7.3 million workers 65 or older trying to shore up finances battered by the recession that ended three years ago and stay productive. An aging population, longer and healthier lifespans and changes to retirement-benefit plans will mean rising competition for jobs and limited wage gains even after the economy strengthens.
About 74 percent of Americans say they plan to work past age 65, according to a May study by economists Jay Bryson and Sarah Watt of Wells Fargo Securities LLC in Charlotte, North Carolina. Thirty-nine percent said they need to earn to make ends meet or maintain their lifestyle, and 35 percent wanted to stay employed.
Housing Exuberance Led by Shiller’s U.S. Glamorous Cities (Source: Bloomberg)
Home prices are beginning to rise after a six-year slump in cities from San Francisco and Seattle to Miami with jobs and lifestyles that appeal to younger and affluent buyers. “A number of the cities that have done the best have been glamour cities,” Robert Shiller, an economics professor at Yale University and co-creator of the S&P/Case-Shiller property-value indexes, said yesterday in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene. “People have this speculative fervor. It comes back.” A tight supply of homes and an increase in affordability fueled by record-low mortgage rates are helping shore up some regional markets where values plunged during the recession. San Francisco’s home prices surged at a 16 percent annual rate in the three months ended in April, while Phoenix gained at a 26 percent rate, according to Case-Shiller.
“Glamour cities where people want to move to and reside have always been on the East Coast and West Coast,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ. “The drop in mortgage rates closer to 3.5 percent helped stimulate demand,” while sellers holding homes off the market caused “not a lot of supply, and what was out there got bid up.”
Colorado Wildfire Forces 32,000 to Evacuate as Homes Burn (Source: Bloomberg)
Dusty winds turned an erratic, out- of-control fire back toward Colorado Springs today, destroying homes, forcing evacuations and burning more than 15,000 acres. Scattered thunderstorms over Colorado’s second-largest city didn’t reduce the ferocity of the Waldo Canyon fire, whose flames have moved unpredictably, propelled by dry conditions and winds gusting to near hurricane strength. “It’s been house to house, door to door, street to street activity all night long and continued into today,” Rich Harvey, the incident commander for the multi-agency group fighting the blaze, said today at a news briefing.
Record heat and drought are fueling wildfires across the West, including in Idaho, Montana and New Mexico. In Colorado, at least nine have burned over about 233 square miles (600 square kilometers), according to the Incident Command System. President Barack Obama will travel to Colorado Springs June 29 to “view the damage and thank the responders bravely battling the fire,” according to a statement from his office.
Japan Sales Tax Risks Growth Grinding to Halt in 2014: Economy (Source: Bloomberg)
Japan’s Prime Minister Yoshihiko Noda risks stalling the economy by pushing through a higher sales tax that may damp consumption even as it aids efforts to tame the world’s largest debt burden. The nation’s recovery after last year’s earthquake and tsunami could grind to a halt in 2014 when the first increase will take effect, according to UBS AG and Itochu Corp. (8001) Parliament’s lower house yesterday approved the bill to raise the tax to 8 percent and then 10 percent in 2015 from 5 percent now. A slump would be a repeat of 1997, when an increase in the levy contributed to pushing the economy into a 20-month recession, costing then Prime Minister Ryutaro Hashimoto his job.
“If there are no economic stimulus measures along with a consumption tax hike we can see around zero percent growth in fiscal 2014,” said Takuji Aida, a Tokyo-based economist at UBS, who raised his growth forecast for the year ending March 2014 to 2.9 percent from 2.2 percent because he sees a 4 trillion yen ($50.4 billion) rise in consumption and investment ahead of the tax increase. A 1 percentage point increase in the tax would cut growth in real gross domestic product by 0.32 percentage point in the year after implementation, according to the Cabinet Office’s Economic and Social Research Institute.
South Korea’s Current-Account Surplus Widens to Six-Month High (Source: Bloomberg)
South Korea’s current-account surplus widened in May to a six-month high as exports increased from the previous month and annual dividend payments to foreign shareholders declined. The surplus was $3.6 billion compared with a revised surplus of $1.7 billion in April, the Bank of Korea said in a statement today in Seoul. The current account is the broadest measure of trade, tracking goods, services and investment income. The prospect that Europe’s debt woes will further damp global demand has weighed on consumer and business sentiment in South Korea, where the central bank earlier this month held off from altering borrowing costs for a 12th straight month. Confidence among U.S. consumers fell in June for a fourth consecutive month, while South Korean manufacturers’ sentiment dropped to a four-month low and consumer confidence slid to a three-month low.
“We may see a further economic slowdown unless the EU moves quickly and decisively,” Park Sang Hyun, chief economist at HI Investment & Securities Co. in Seoul, said before the release. “Interest rate cuts will come in South Korea as the last resort.” The won advanced 0.2 percent to 1,156.17 per dollar yesterday, according to data compiled by Bloomberg, trimming this quarter’s decline to 2 percent. The Kospi was little changed.
India Plans $5.3 Billion of Highways as Jams Sap Growth (Source: Bloomberg)
India may spend 300 billion rupees ($5.3 billion) tripling the length of its expressway network to ease traffic jams that are slowing trade, wasting fuel and sapping economic growth. The country intends to add about 1,600 kilometers (1,000 miles) of roads with at least six lanes, Raghav Chandra, joint secretary at the Ministry of Road Transport and Highways, said in an interview on June 14. He didn’t give a timeframe for awarding construction contracts or for completing the projects. The new highways, linking major cities, will have higher tolls than existing roads and fewer access points so trucks won’t get stuck at toll gates or behind queues of motorcycles, auto-rickshaws and tractors making local trips. India plans to build the network as it contends with congestion that costs $5.5 billion a year, according to a study by Transport Corp. (TRPC) of India and the Indian Institute of Management, Calcutta.
“This is the first step towards really improving traffic movement,” said Vishwas Udgirkar, a Gurgaon, India-based senior director for transport at Deloitte Touche Tohmatsu India Pvt. “India is way behind other countries in creating such infrastructure.”
Singh Pledges India Sentiment Push After Taking Finance Role (Source: Bloomberg)
Prime Minister Manmohan Singh said reviving investor confidence in India is one of his top priorities after taking charge of the finance ministry. “At the current juncture, we are passing through challenging times economically,” Singh said in a statement in New Delhi today. “We need to work to get the economy going again and restart the India growth story. In the short run, we need to revive investor sentiment, both domestic and international.” Singh, who assumed the finance role yesterday after Pranab Mukherjee resigned, faces a budget deficit requiring record borrowing, a paralysis in policy making that has hurt efforts to spur investment and a faltering global recovery. The rupee has slumped to an unprecedented low against the dollar, stoking elevated inflation by making imports costlier.
The currency, which touched a record low of 57.3275 per dollar on June 22, declined 0.2 percent to 57.135 today. It is down 21 percent in the past year, the worst slide among major Asian currencies. Aside from India’s deteriorating outlook, the rupee has also been hurt by Europe’s debt crisis, which has sapped demand for emerging-market assets.
Draghi May Enter Twilight Zone Where Fed Fears to Tread (Source: Bloomberg)
European Central Bank President Mario Draghi is contemplating taking interest rates into a twilight zone shunned by the Federal Reserve. While cutting ECB rates may boost confidence, stimulate lending and foster growth, it could also involve reducing the bank’s deposit rate to zero or even lower. Once an obstacle for policy makers because it risks hurting the money markets they’re trying to revive, cutting the deposit rate from 0.25 percent is no longer a taboo, two euro-area central bank officials said on June 15. “The European recession is worsening, the ECB has to do more,” said Julian Callow, chief European economist at Barclays Capital in London, who forecasts rates will be cut at the ECB’s next policy meeting on July 5. “A negative deposit rate is something they need to consider but taking it to zero as a first step is more likely.”
Should Draghi elect to cut the deposit rate to zero or lower, he’ll be entering territory few policy makers have dared to venture. Sweden’s Riksbank in July 2009 became the world’s first central bank to charge financial institutions for the money they deposited with it overnight. The Fed rejected cutting its deposit rate from 0.25 percent last year. With Europe’s debt crisis damping inflation pressures and curbing growth, the ECB may feel the benefits outweigh the negatives.
Merkel Rebuffs Rajoy Plea, Shuts Door to Euro Area Bonds (Source: Bloomberg)
German Chancellor Angela Merkel shut the door to joint euro-area bonds as a means of lowering Spain’s borrowing costs, saying they are the “wrong way” to achieve the greater European integration needed to stem the debt crisis. Speaking three hours after Spanish Prime Minister Mariano Rajoy made a plea for help from tomorrow’s European summit, Merkel said that euro bonds, euro bills and debt redemption funds are unconstitutional in Germany and economically “wrong and counterproductive.” “I fear that at the summit there will be much too much talk about mutual liability and far too little about improved oversight and structural measures,” Merkel told lower-house lawmakers in Berlin today. “Oversight and liability have to go hand in hand. There can only be joint liability when adequate oversight is ensured.”
Merkel is under growing pressure from her European and global counterparts to soften her opposition to debt sharing in the euro area and do more to cut borrowing costs for Spain and Italy. Rajoy, outlining his goals for the two-day European Union summit beginning in Brussels tomorrow, said that Spain can’t go on financing itself at current borrowing rates for long. “The most important thing today is being able to finance ourselves in the markets, that’s the main issue,” Rajoy said in Parliament in Madrid. “And on that point Spain, Italy and other countries are going to push for reasonable decisions to be made,” using the “available instruments.”
Barclays Shows Need for CFTC, SEC Funds, Wolin Says (Source: Bloomberg)
The Barclays Plc (BARC) settlements on interbank rates shows the need for the U.S. Commodity Futures Trading Commission and the Securities and Exchange Commission to be “appropriately funded,” the Treasury Department’s No. 2 official said. Barclays was fined 290 million pounds ($451.4 million) after admitting it submitted false London and euro interbank offered rates. The settlements were reached with the U.K.’s Financial Services Authority, the CFTC and the U.S. Department of Justice. House Republicans are seeking to cut the CFTC’s fiscal 2013 budget by $25 million to $180 million, about 42 percent below President Barack Obama’s request. Senate Democrats are seeking to increase the budget of the main financial-markets regulators in spending plans that clash with House Republicans’ efforts to cut funds and rein in the Dodd-Frank Act. A Senate Appropriations subcommittee has proposed a 19 percent increase for the SEC.
Wolin also said so-called “living wills” are a piece of a bigger whole of the Dodd-Frank financial overhaul to ensure that banks can be unwound. Some of the largest banks, including JPMorgan Chase & Co. (JPM) and Bank of America Corp., are required to submit to regulators by July 1 drafts of plans, known as living wills, of how they should be dismantled or rebuilt if they fail.
Czech Bargain Addicts Invigorate Push to Cut Interest Rates (Source: Bloomberg)
For Ales Moravek, the ever-deeper discounts luring buyers into his outdoor equipment store are biting into profits. For central bank Governor Miroslav Singer, they are adding to reasons to cut borrowing costs this week. A deepening recession is amplifying the Czech Republic’s traditional penchant for thrift and aversion to debt. Moravek, who co-owns a shop in Hradec Kralove, is among Czech retailers grappling with a shrinking market as fading consumer demand limits room to increase prices. “It’s incomparable,” Moravek, 47, said in an interview in his shop 100 kilometers (62 miles) east of Prague. “We rarely used to have sales before. Now one campaign follows another. Discounts on boots end one day, discounts on camping equipment start the next. This basically runs the entire season.”
Faltering demand pushed Singer, the Ceska Narodni Banka governor, to seek a reduction in borrowing costs deeper below the euro-area benchmark in May. As the European Central Bank lifted and then lowered its main rate by half-percentage point to 1 percent last year, the Czechs have held rates steady at a record-low 0.75 percent for two years because consumers’ spending fell short of fueling inflation.
Rajoy to Call for Easing Spain’s Borrowing Costs at Summit (Source: Bloomberg)
Spanish Prime Minister Mariano Rajoy said he will urge other European Union leaders at a summit tomorrow to move more urgently to reduce unsustainably high interest rates. EU leaders must use the “available instruments” to stabilize markets, Rajoy said in Parliament today, as Spain’s 10-year bond yields surged toward the 7 percent level that prompted full bailouts in other euro members. “The most important thing today is being able to finance ourselves in the markets, that’s the main issue, and on that point Spain, Italy and other countries are going to push for reasonable decisions to be made,” Rajoy said. “We can’t finance ourselves at the prices we are paying for very long.” EU leaders convene in Brussels June 28-29 for their 19th summit since the debt crisis started as pressure builds on German Chancellor Angela Merkel to make concessions to solve the two year-old crisis. Their talks will focus on a 10-year road map released yesterday by four officials led by European Union President Herman Van Rompuy.
Monti Plays Italian Politics in Labor-Law Overhaul: Euro Credit (Source: Bloomberg)
Italian Prime Minister Mario Monti, seeking to bridge European differences over how to end the region’s debt crisis, is pushing a labor market overhaul at home that has divided his allies and sapped his support. The legislation, designed to revive Italy’s economy by making it easier for distressed companies to fire workers, is due to be voted on by parliament today before tomorrow’s European Union summit in Brussels. Italy’s 10-year bond yield, at more than 6 percent, has jumped 30 basis points since June 9 when Spain became the fourth euro-region country to seek aid. The yield fell 5 basis points today to 6.14 percent. “In the European scenario, Monti is doing very well,” said Tommaso Nannicini, a professor of political economy at Bocconi University in Milan. “On the domestic side he looks more and more incapable of keeping together his majority and gives the impression of a lack of political action.”
Monti was pressed into watering down the labor law as Italy’s recession deepened and public support for the government waned. Monti is facing the possibility of early elections, while abroad he is pushing euro-region allies for collective action to foster growth. The summit will be Monti’s second meeting in less than a week with German Chancellor Angela Merkel, Spanish Prime Minister Mariano Rajoy and French President Francois Hollande after hosting the three in Rome.
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