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I think PPT sure showed up, DJI was losing 10,065, and that EOD buying pushed it up nearly above 10,100
I didn't think they'd permit a close under 10,000, the Friday before a long weekend, bad for market psychology.
jmho, of course, and there is no truth to the rumor there's a PPT, lol
Another GS Defection: Goldman Sachs Says Marc Spilker Leaving After 20 Years at Firm
one week after bonus, classic exit time, expect more to come...
By Christine Harper and Bradley Keoun
Feb. 12 (Bloomberg) -- Goldman Sachs Group Inc. said Marc Spilker, co-head of the investment management division, is leaving after 20 years at the firm, according to an internal memo. Edward Forst will take over Spilker’s role, according to a separate memo. Both memos were dated today and signed by Chief Executive Officer Lloyd Blankfein and President Gary Cohn. The contents of the memos were confirmed by Goldman Sachs spokeswoman Andrea Raphael.
To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net
Last Updated: February 12, 2010 14:21 EST
NP: Obama's 'revenge tax', Canada's Gain?
While other countries seek to punish their banks with punative taxes, Canada should invite them to move here
Jack Mintz: Obama's 'revenge tax'
Posted: February 11, 2010, 7:05 PM by NP Editor
By Jack M. Mintz
Last weekend, I passed up the Tea Party conference in Nashville for a New York University’s Law School conference on the financial crisis and taxation. While it might have been amusing to dress up in a 1776 costume and listen to Sarah Palin, it was far more stimulating to hear debate on the merits of new taxes imposed on banks, insurance companies and other financial institutions.
Two new taxes have already been created — U.S. President Barack Obama’s levy on risky bank liabilities and the bank bonus tax in Britain. Several G7 governments and international agencies are studying bank transaction taxes, potentially at the global level once recommended by the late James Tobin.
No question, governments are looking for a scapegoat in the wake of a rising tide of populist anger against those responsible for the 2008 financial crisis. Politicians, hoping to wipe their hands of blood, find it is far easier to pin responsibility on banks, the least-loved institution in society after oil companies. This is a much better strategy than acknowledging that lenders, borrowers, rating agencies, regulators, central bankers and governments themselves all played some role in creating the climate that led to a serious under-pricing of mortgage credit risk that spread throughout the world.
The new bank taxes are examples of what I call “revenge taxation,” imposed to exact a Shylock payment to cover economic losses. In fairness, revenge taxation does have one positive attribute if it helps curb moral hazard behaviour over time. In anticipation of future penalties, market players would be more careful to take on risky practices that lead to losses that taxpayers must cover through state-provided deposit insurance, pension guarantees and bailouts.
As presently constructed, however, the Obama tax will have only a limited impact in curbing moral hazard. The tax is designed to collect a payment to cover the cost of the TARP lending program that helped save several financial companies from collapse. It does have the virtue of being applied to non-insured liabilities, thereby imposing some cost on the most risky liability sources. This is quite different from past ill-designed Canadian capital taxes on financial institution shareholders’ equity and non-deposit debt that impair capital needed for financial strength.
The obvious problem is that the Obama tax applies to some financial institutions that did not receive TARP bailout funds at all, such as Canada’s TD bank. And, some banks such as J. P. Morgan, didn’t need subsidies in the first place but were forced to accept them. Even worse, some TARP recipients don’t pay the revenge tax at all, most notably the auto companies, GM and Chrysler. And then there are government-sponsored housing lenders, the biggest culprits of all — Fannie Mae and Freddie Mac — that escape the tax but have received billions in government support.
The revenge taxes will make it harder for financial institutions to raise equity, which will undermine their financial strength. Besides, the Obama tax will have a limited impact on those viewed as responsible for the financial crisis: management and shareholders. The economic consequence of the tax will little affect bank shareholder returns since owners can invest in other sectors of the U.S. economy or in foreign assets. Instead, the banks will likely shift forward the tax to their customers, who will face higher lending rates or lower deposits rates. This will hurt the competitive position of those financial institutions subject to the tax, since smaller banking institutions are exempt even though they received support through deposit insurance and bailout funds in some cases.
The U.K. tax on bank bonuses is intended to curb bad management, which is resented for large compensation packages in wake of large bank losses and government bailouts. Certainly, rewarding managers for poor performance offends shareholders, who should be pressuring companies to revisit their compensation plans. However, the U.K. bonus tax is a blunt instrument that does not discriminate between those companies that practice good behaviour and those that don’t. The tax is really just a vote-getting redistributive device by an untested Labour government that has stayed in power far too long.
Neither the U.S. bank nor U.K. bonus taxes are viewed as sufficient penalties to impose on banks. Several blood-seeking countries including Austria, France and the U.K. are pushing for a global tax on stock, bond, derivative and other financial transactions. These taxes, however, do more harm than good and should be shunned by Canada.
While some argue that financial transaction taxes reduce short-term selling and price volatility, studies have shown that large swings in prices can arise when investors dispose of assets after holding them for lengthy periods. Financial transaction taxes will result in higher borrower costs and less interest paid to depositors, doing little to reduce financial intermediate costs that should be minimized as much as possible.
Further taxes on bank loan and deposits would encourage institutions to shift operations to safe havens. Bank transaction taxes can destroy derivative markets since margins are too small to support any tax on the gains and customers will carry large wads of cash for transactions rather than pay the tax. A Swedish financial transaction tax in the 1980s and early 1990s raised relatively little revenue — the tax base disappeared because many transactions shifted to the cash economy or to other countries.
Yet, at times when governments respond to populist movements like Tea Parties, bad policy decisions like bank transaction taxes rear their head. It will be important for Canada, which has a sound financial system, to avoid shenanigans in other countries. We are better off laying out a welcome mat for new financial firms to locate here and make sure they are regulated properly.
Financial Post
Jack M. Mintz is the Palmer Chair in Public Policy, School of Public Policy, University of Calgary.
Read more: http://network.nationalpost.com/np/blogs/fpcomment/archive/2010/02/11/jack-mintz-obama-s-revenge-tax.aspx#ixzz0fLz2QmMx
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U.S. Dollar rebound could see Crude oil prices plunge
Finotec Group Inc. , Finotec Group Inc.
Published 02/12/2010 - 11:26 a.m. EST Rate This Article:
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Crude oil fell in New York for the first day in five as the dollar extended gains against the euro and analysts forecast an increase in U.S. stockpiles, signaling weak demand in the biggest energy-consuming nation. Oil slipped below $75 a barrel after the dollar strengthened on speculation the European Union will fail to take sufficient measures to help Greece tackle its fiscal deficit, damping the investment appeal of commodities.
Trading Tactics
Sell Crude Oil on a clear downtrend.
The buying point is at 77.50; previous resistance is the take profit at 80.20; Pivot point is the stop loss at 76.16
The selling point is at 74.72; Pivot point is the take profit at 72.45; pivot point highest level is the stop loss at 77.10
Technical: crude oil fails to breaks the previous resistance and makes a lower low that gives us a clear downtrend. A move back lower could set up a test of 72.45
To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice MACD crosses the signal line downwards; RSI (Relative Strength Index) is in a downtrend; ROC is in a bearish direction and stochastic crosses %D line downwards.
The following analysis is for information only; Finotec is not responsible for any decisions or misinterpretations based on the given text.
By Finotec’s professional analyst,
Copyright 2008 ForexHound.com the Forex Trading Portal. All Rights Reserved. V407 Home | About Us | Advertising |
http://www.forexhound.com/article/Technicals/Daily_Reports/US_Dollar_rebound_could_see_Crude_oil_prices_plunge/183733
BL: Willie Nelson, Neiman Marcus Fuel My Texas Road Trip: Travel
By Catherine Smith
Feb. 12 (Bloomberg) -- In the immortal words of Willie Nelson, “Texas, it’s where I want to be.”
I don’t live there anymore, but it’s my home state and most of my family is there. It’s the land of Dr Pepper and Bob Wills, Neiman Marcus and Billy Bob’s, not to mention Bingo Momma, a red 2003 PT Cruiser.
The car, its name emblazoned on the windshield, was a loaner from my Aunt Frances of Willis, about 50 miles north of Houston. Bingo Momma created a stir everywhere as I drove, visiting family, friends and the places I miss.
First stop: my hometown Austin, a quick 150 miles west of Willis. I played “Deep in the Heart of Texas” from the “Best of Bob Wills” CD I dug out of the glove box, while recalling all there is to love in the Austin area: migas (a scrambled egg dish) at Cisco’s Bakery, sunsets at the Oasis on Lake Travis, craft beer at the Dig Pub in Cedar Park.
My first job was lettuce washer and bun toaster at a hamburger joint called Whataburger. I graduated to the register, where orders were taken on paper bags and handed back to the grill.
First opened in Corpus Christi in 1950, Whataburger now has more than 700 locations in 10 states. I still order mine with a double-toasted bun, two slices of cheese and grilled onions for about $3.50.
Real Sugar
With my burger I always have a Dr Pepper, which was invented in Waco 125 years ago. The Dr Pepper Museum, also in Waco, serves an original-recipe fountain drink made with Imperial Pure Cane sugar instead of corn syrup. Admission is $7.
Heading north near Hillsboro, I pulled off at Willie’s Place at Carl’s Corner. At first I thought someone was trading on Willie Nelson’s good name. When I walked in, I realized he was trading, and trading big, on his own good name.
It used to be Carl’s Corner truck stop. Rebuilt in a three- year, $10 million project, the family-friendly complex includes a cafe, saloon, theater, music store, gift shop and travel center selling gas along with Bio Willie’s biodiesel fuel. Heck, they even have a biodiesel refinery on site.
After scanning the memorabilia lining the walls, I bought a few souvenirs from the gift shop. I’m still kicking myself with my homegrown Lucchese boots for not buying Willie Braids, a bandana with two long pigtails attached.
Billy Bob’s
By now I was ripe for a Willie concert, so I headed on to Fort Worth, home of Billy Bob’s Texas, the world’s largest honky-tonk. To set the mood, I played Wills’s “Big Balls in Cowtown.”
Part of the Fort Worth Stockyards Historic District, Billy Bob’s was an open-air cattle barn when it was built in 1910. Opened as a concert hall in April 1981, the space holds 6,000 people for stars like George Strait, Delbert McClinton and ZZ Top.
There’s no mechanical bull, but they do have live professional bull riding on Friday and Saturday nights. There are two huge dance floors and everyone moves counterclockwise. If you go, remember that even if you don’t know how to Two Step, move with the crowd or they’ll run you down.
The house was packed for Willie and Family. They played a 90-minute set including “Whiskey River,” “Me and Paul,” “Crazy” and “I’ll Fly Away.” Tickets were $20.
A couple of yee-haws later we were on the road again, driving east back to Dallas when I realized I hadn’t shopped enough.
Shop Shop Shop
I swear, Dallas has the most shopping per capita of any U.S. city. I can’t go anywhere near DFW International Airport without stopping at Last Call Neiman Marcus, in the outlet mall in Grapevine. Half my wardrobe comes from the century-old Neiman Marcus but I only buy on sale. Once I found a Carolina Herrera blue silk skirt, regularly priced at $1,000, for $60. This time I got a pair of Paige jeans for half price.
Some of the best Dallas shopping is resale. At Clothes Circuit, I met Carolyn Carson, a classical harpist who has played at Carnegie Hall. She got a $4,760 Valentino jacket with jewel-like sparkles embroidered around the waist for $175.
A margarita is the logical choice after a tough day of bargain-hunting. Mia’s Tex-Mex Restaurant has happily poured me a half-frozen, half-rocks margarita since I first decided I liked the consistency, about eight years ago. These days a ‘rita will set you back $7.
Jerky for the Troops
On the road back to Willis, I made one last stop in Centerville at Woody’s Smokehouse, the jerky capital of the world. The kid behind the counter gave me lots of samples and told me they ship their vacuum-packed smoked meats all over the world, including to local boys stationed in Iraq and Afghanistan. I gassed up, bought some barbecue and pecan pralines and got on my way.
By the time I had passed the prison at Huntsville, Bingo Momma had added 1,000 fresh miles to the odometer.
At the airport in Houston the next morning, I had to cool my boot heels till noon to have my last Shiner Bock. There’re a lot of things I miss about Texas -- but the blue law isn’t one of them.
Here’s more information on the places I miss when I’m not in Texas:
Cisco’s Bakery, 1511 E. Sixth St. in Austin. Information: +1-512-478-2420.
The Oasis, 6550 Comanche Trail on Lake Travis in Austin. Information: +1-512-266-2442; http://www.oasis-austin.com.
Dig Pub, 401 Cypress Creek Rd. in Cedar Park. Information: +1-512-996-9900; http://www.thedigpub.com.
Whataburger has locations all over the Southwest. Information: http://www.whataburger.com.
The Dr Pepper Museum, 300 S. Fifth St. in Waco. Information: +1-254-757-1025; http://www.drpeppermuseum.com.
Willie’s Place at Carl’s Corner, Exit 374 off of I-35 in Hillsboro. Information: +1-866-765-4042; www.williesplacetexas.com.
Billy Bob’s Texas, 2520 Rodeo Plaza in Fort Worth. Information: +1-817-624-7117; http://www.billybobstexas.com.
Neiman Marcus, 1618 Main St. in downtown Dallas. Information: +1-214-741-6911; http://www.neimanmarcus.com.
Clothes Circuit, 6105 Sherry Lane in Dallas. Information: +1-214-696-8634; http://www.clothescircuit.com.
Mia’s Tex-Mex, 4322 Lemmon Ave. in Dallas. Information: +1- 214-526-1020; http://www.miastexmex.com.
Woody’s Smokehouse, I-45 at Highway 7 West, Exit 164 in Centerville. Information: +1-903-536-2434; http://www.woodys-smokehouse.com.
(Catherine Smith is a writer for Bloomberg News. The opinions expressed are her own.)
To contact the writer on the story: Catherine Smith in New York at c.smith@bloomberg.net.
Last Updated: February 12, 2010 00:01 EST
BL: Economic Growth Grinds to a Halt in Europe After German Spending Stagnates
By Simone Meier
Feb. 12 (Bloomberg) -- Europe’s recovery almost stalled in the fourth quarter as waning spending and investment in Germany unexpectedly brought growth in the region’s largest economy to a halt.
Gross domestic product in the 16-nation euro region rose 0.1 percent from the third quarter, when it gained 0.4 percent, the European Union’s statistics office in Luxembourg said today. Economists forecast expansion of 0.3 percent, the median of 34 estimates in a Bloomberg survey showed. The recession in Greece deepened, with GDP falling 0.8 percent in the fourth quarter after a 0.5 percent slump in the previous three months.
European governments are struggling to contain the fall-out from Greece’s budget crisis as they phase out the stimulus measures used to pull the economy out of a recession. As market turmoil pushes bond yields higher across southern Europe, the recovery is in danger of losing momentum.
It’s “another piece of bad news for policymakers as they struggle to come up with a plan that soothes worries about the credit worthiness of the euro zone’s peripheral economies,” said Nick Kounis, chief European economist at Fortis Bank Nederland in Amsterdam. The recovery is “continuing, but at a snail’s pace.”
Greek Debt
The euro fell for a third day and was down 1 percent to $1.3558 as of 11:00 a.m. in London. German government bonds rose, pushing the yield on 10-year bunds down 3 basis points to 3.20 percent.
The euro has fallen 7 percent in the last two months on concern that Greece’s fiscal problems will spread to other countries.
From a year earlier, euro-area GDP declined a seasonally adjusted 2.1 percent in the fourth quarter. For the full year, the economy contracted 4 percent. Separate data showed that industrial production in the region fell 1.7 percent in December, the most in 10 months.
The German economy stagnated in the fourth quarter after recording 0.7 percent growth in the previous three months, while Italian GDP fell 0.2 percent. France’s economic expansion accelerated to 0.6 percent from 0.2 percent. Greece today revised down its data for GDP for the first three quarters of 2009, indicating its recession was deeper than earlier thought.
‘Serious’
Europe’s governments face a growing dilemma as they seek to fortify recoveries at a time when rising sovereign-debt burdens threaten to hobble expansion. EU leaders yesterday ordered Greece to get its deficit under control and pledged “determined and coordinated action” to protect the currency region in a statement that stopped short of setting out concrete steps.
“It’s too dangerous to try to call the bluff of the bond market,” said Rossa White, chief economist at Dublin-based securities firm Davy. “For clarity, the euro area will have to outline a backstop tied to much stricter enforcement of Greece’s consolidation plan.”
With governments phasing out incentives and unemployment at 10 percent, the highest in more than 11 years, Europe’s recovery is showing signs of waning. Expansion in service and manufacturing industries slowed in January and investor confidence fell for the first time in seven months in February.
Renault SA, France’s second-largest carmaker, on Feb. 11 forecast a 10 percent contraction in European auto demand this year. Chief Executive Officer Carlos Ghosn said there’s “still a lot of uncertainty and volatility.” Bernd Scheifele, CEO of HeidelbergCement AG, is planning an additional 300 million euros in cost cuts this year after he said on Feb. 10 that the company’s markets “showed no recovery in the fourth quarter.”
Export Boost
Still, central banks have begun to scale back some of the measures introduced during the recession. The European Central Bank is phasing out its emergency lending programs, while the U.S. Federal Reserve has said it may raise the interest rate paid on deposits to slow lending. China today ordered banks to set aside more deposits as reserves for the second time in a month to cool the world’s fastest-growing major economy.
Weaker domestic demand may be countered by an export boost from expansion in Asian economies. The International Monetary Fund last month forecast 2010 economic growth of 9.7 percent and 7.8 percent in China and India, respectively, compared with 1.6 percent expansion in the euro area and 2.4 percent in the U.S. The IMF sees the global economy expanding 3.9 percent.
Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, forecast on Feb. 5 that China deliveries may increase at least 10 percent this year.
“The paltry pace of fourth-quarter growth makes crystal clear that the euro zone economy cannot yet stand on its own feet.,” said Martin Van Vliet, an economist at ING Group in Amsterdam. “That said, it is premature, in our view, to presume that the recent soft patch in the recovery will persist.”
To contact the reporter on this story: Simone Meier in Dublin at smeier@bloombert.net
Last Updated: February 12, 2010 06:12 EST
LOL...with this connection? I can't even get full speed steaming quotes, argh
No trading for me today with this access...with a 2 day options trading week next week, and all kinds of things which could happen over the weekend, I'll be sitting it out, unless a big trend develops
but I'll light a candle for you! Have you tried sacrificing a pig? I hear the market gods respond to that offering, lol
Are you around, dude? Ice get you too?
Apologies! I'm fighting it out with my internet all day. Time Warner is having outages all over Dallas with all the snow and ice
it's sick, lol
10,065....PPT will show up
BL: SocGen’s Edwards Sees Euro Breakup as Feldstein Predicts Change
By Alexis Xydias
Feb. 12 (Bloomberg) -- The Greek budget crisis is a symptom of imbalances that will lead to the breakup of the euro region, according to Societe Generale SA strategist Albert Edwards, and Harvard University Professor Martin Feldstein said monetary union “isn’t working” in its current form.
Southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, top-ranked Edwards wrote in a report today. Feldstein, speaking on Bloomberg Radio, said a one-size-fits-all monetary policy has fueled big deficits as countries’ fiscal records differ.
The problem for countries including Portugal, Spain and Greece “is that years of inappropriately low interest rates resulted in overheating and rapid inflation,” Edwards wrote. Even if governments “could slash their fiscal deficits, the lack of competitiveness within the euro zone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Any help given to Greece merely delays the inevitable breakup of the euro zone.”
The euro has slumped 9.9 percent against the dollar since November on concern countries including Greece will struggle to tame their budget deficits. The common currency and stocks in the region dropped yesterday as European leaders closed ranks to defend Greece in a plan that investors said lacked details.
Euro Falls
The euro fell for a third day against the dollar, to $1.3626 as of 5:01 p.m. in London. Europe’s recovery almost stalled in the fourth quarter, as gross domestic product in the 16-nation euro region rose a less-than-expected 0.1 percent from the third quarter, the European Union’s statistics office in Luxembourg said today.
While the European Central Bank sets interest rates for the region’s 16 economies, the practice until now has been that each country has to steer its economy and can set its own tax and spending plans.
“They have a single monetary policy and yet every country can set its own fiscal and tax policy,” Feldstein, 70, said. “There’s too much incentive for countries to run up big deficits as there’s no feedback until a crisis,” he said.
Tommaso Padoa-Schioppa, a former European Central Bank executive board member and Italian finance minister, said today there was no possibility of a partition of the euro area.
Padoa-Schioppa
“I don’t think there is any prospect for such an event and I don’t think it makes much sense to talk about it,” he said in an interview on Bloomberg Television.
Edwards was voted second-best European strategist in the 2009 Thomson Extel survey after his then-colleague James Montier and is known for his bearish views on equities. In 1996 he angered southeast Asian governments by predicting the currency meltdown that struck the region a year later. The poll also named Societe Generale as the top economics and strategy research firm for a third straight year.
In a 1997 article, Feldstein wrote that while it is impossible to predict whether political clashes will lead to war, “it is too real a possibility to ignore in weighing the potential effects” of monetary and political union.
After a three-month long plunge in Greece’s bonds amid speculation it was facing the threat of default, the euro region’s leaders yesterday ordered the country to slash its budget deficit and warned investors they would be willing to defend the country from speculative attack if necessary.
Portuguese, Spanish Bonds
Portuguese and Spanish bonds also declined earlier this month on concern those countries may also need to cut spending.
Prime Minister George Papandreou’s drive to get Greece’s ballooning budget under control is being challenged in the streets by striking schools, hospitals and airline employees.
“Unlike Japan or the U.S., Europe has an unfortunate tendency towards civil unrest when subjected to extreme economic pain,” Edwards wrote. Consigning the countries in southern Europe with the weakest finances “to a prolonged period of deflation is most likely to impose too severe a test on these nations.”
The budget crisis in Greece may escalate in the way the Asian currency meltdown of 1997 paved the way for the Russian default and the collapse of Long-Term Capital Management LP in 1998, Edwards added.
This is “a different chapter in the same book,” he wrote, adding that the need to tighten deficits is a “particular issue for the U.S. and U.K.” “There will be more crises to follow Greece, both inside and outside of the euro-zone.”
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.
Last Updated: February 12, 2010 13:04 EST
BL: China Stocks Fall in U.S. as Beijing Raises Bank Reserve Ratio
By Ye Xie
Feb. 12 (Bloomberg) -- China stocks trading in the U.S. fell the most in more than a week after the nation ordered banks to set aside more deposits as reserves for the second time in a month to cool the world’s fastest-growing economy.
The Bank of New York Mellon China ADR Index, which tracks American depositary receipts, lost 2.2 percent to 358.67 as of 10:39 a.m. New York time. PetroChina Co., the country’s biggest oil producer and the world’s largest company, tumbled. E-House China Holdings Ltd., the Shanghai-based provider of real-estate services, and Industrial & Commercial Bank of China, the world’s largest bank by market value, fell more than 2 percent.
“China will need to take more aggressive tightening measures to stabilize excess liquidity and to get a leg up on inflationary pressures,” said Andy Mantel, founder and managing director of Pacific Sun Investment Management Ltd. “Chinese equities will face some short-term weakness, particularly Chinese banks and property stocks.”
Mantel said he has been betting the banking and property stocks will decline since “early December.”
The reserve requirement will increase 50 basis points, or 0.5 percentage point, effective Feb. 25, the People’s Bank of China said on its Web site today. The current level is 16 percent for big banks and 14 percent for smaller ones.
Global Retreat
Emerging-market stocks, crude oil and copper declined after Beijing’s announcement on concern that tighter lending in China will damp the global economic recovery. The MSCI Emerging Markets Index of 22 nations’ stocks declined 0.4 percent. The S&P GSCI Index of 24 raw materials fell 2 percent, the most since Feb. 5. Stocks in Brazil, which counts China as its biggest trading partner, dropped for the first time this week, with the Bovespa index losing 1 percent.
China’s policy makers are aiming to avert asset bubbles and restrain inflation after banks extended 19 percent of this year’s 7.5 trillion yuan ($1.1 trillion) lending target in January and property prices climbed the most in 21 months.
PetroChina lost 2.9 percent to $108.83 as crude declined for the first time this week. E-House China Holdings slid 3.1 percent to $17.52. ICBC declined 2.4 percent to $35.55.
The USX China Index, which tracks 159 companies that get most of their revenue from China, lost 1.9 percent. Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, was the biggest drag on the index, retreating 5.1 percent to 23.35.
‘Controlling Boom’
“This is all about controlling the boom, so that we don’t have a bust in the second half,” said Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai.
The central bank moved after Chinese markets closed and on the eve of a weeklong Lunar New Year holiday when the nation moves into the Year of the Tiger from the Year of the Ox. The Shanghai Composite Index rose 1.1 percent before the announcement. The stock index has lost 7.9 percent this year.
Record lending and a 4 trillion yuan stimulus package have helped the nation to lead the recovery from the first global recession since World War II.
“With China’s increasing economic significance in the world economy, major policy moves will always touch a nerve with global markets,” said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong. “Still, timely tightening in China will help sustain growth and avoid overheating, benefiting the world in the long term.”
‘Crisis Mode’
The central bank said yesterday that it wanted to gradually normalize monetary conditions from a “crisis mode” after gross domestic product grew 10.7 percent in the fourth quarter, the fastest pace in two years. It also said that not all countries will exit stimulus policies at the same time.
Policy makers are yet to drop the yuan’s effective peg to the U.S. dollar, which was adopted in July 2008 to aid the nation’s exporters, stoking friction with the U.S. and Europe.
Credit Suisse Group AG estimated that today’s move will remove about 300 billion yuan from a financial system also facing inflows of cash from investors betting on the nation’s recovery and likely gains by the yuan. The nation’s foreign- exchange reserves swelled to a record $2.4 trillion in December, partly on inflows of “hot money,” or speculative capital.
The central bank on Jan. 12 increased banks’ reserve requirements for the first time since June 2008. The latest move will soak up liquidity from maturing central-bank bills and also money injected into the financial system for the coming holiday, China International Capital Corp. said.
At Morgan Stanley, Hong Kong-based economist Wang Qing said that today’s increase would counter foreign-exchange inflows which “must have been persistently strong since January” and also withdraw money added for the holiday.
Reserve-requirement increases will continue through 2010, Wang said. “The market should get used to it.”
To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net
Last Updated: February 12, 2010 10:43 EST
BL: Euro Area Headed for Break-Up, SocGen’s Edwards Says (Update2)
February 12, 2010, 11:10 AM EST
By Alexis Xydias
Feb. 12 (Bloomberg) -- Southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, a situation that will lead to the break-up of the euro bloc, according to Societe Generale SA’s top-ranked strategist Albert Edwards.
The problem for countries including Portugal, Spain and Greece “is that years of inappropriately low interest rates resulted in overheating and rapid inflation,” London-based Edwards wrote in a report today. Even if governments “could slash their fiscal deficits, the lack of competitiveness within the euro zone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Any help given to Greece merely delays the inevitable break-up of the euro zone.”
The euro has slumped 9.9 percent against the dollar since November on concern countries including Greece will struggle to tame their budget deficits. The common currency and stocks in the region dropped yesterday as European leaders closed ranks to defend Greece in a plan that investors said lacked details.
The euro fell for a third day against the dollar to $1.3557 as of 12:50 p.m. in London. Europe’s recovery almost stalled in the fourth quarter, as gross domestic product in the 16-nation euro region rose a less-than-expected 0.1 percent from the third quarter, the European Union’s statistics office in Luxembourg said today.
Padoa-Schioppa
Tommaso Padoa-Schioppa, a former European Central Bank executive board member and Italian finance minister, said today there was no possibility of a partition of the euro-zone.
“I don’t think there is any prospect for such an event and I don’t think it makes much sense to talk about it,” he said in an interview on Bloomberg Television.
Edwards was voted second-best European strategist in the 2009 Thomson Extel survey after his then-colleague James Montier and is known for his bearish views on equities. In 1996 he angered south-east Asian governments by predicting the currency meltdown that struck the region a year later. The poll also named Societe Generale as the top economics and strategy research firm for a third straight year.
After a three-month long plunge in Greece’s bonds amid speculation it was facing the threat of default, the euro region’s leaders yesterday ordered the country to slash its budget deficit and warned investors they would be willing to defend the country from speculative attack if necessary.
Portuguese and Spanish bonds also declined earlier this month on concern those countries may also need to cut spending.
Strikes
Prime Minister George Papandreou’s drive to get Greece’s ballooning budget under control is being challenged in the streets by striking schools, hospitals and airline employees.
“Unlike Japan or the U.S., Europe has an unfortunate tendency towards civil unrest when subjected to extreme economic pain,” Edwards wrote. Consigning the countries in southern Europe with the weakest finances “to a prolonged period of deflation is most likely to impose too severe a test on these nations.”
The budget crisis in Greece may escalate in the way the Asian currency meltdown of 1997 paved the way for the Russian default and the collapse of Long-Term Capital Management LP in 1998, Edwards added.
This is “a different chapter in the same book,” he wrote, adding that the need to tighten deficits is a “particular issue for the U.S. and U.K.” “There will be more crises to follow Greece, both inside and outside of the euro-zone.”
--With assistance from Andrea Catherwood in London. Editor: Jason Carey.
To contact the reporter on this story: Alexis Xydias in London at +44-20-7073-3372 or axydias@bloomberg.net.
To contact the editor responsible for this story: David Merritt at +44-20-7673-2639 or dmerritt1@bloomberg.net.
BL: Euro `Isn't Working' Says Harvard's Feldstein:
Harvard’s Feldstein Says Greece Shows Euro ‘Isn’t Working’
By Simon Kennedy and Thomas R. Keene
Feb. 12 (Bloomberg) -- Harvard University Professor Martin Feldstein, who warned in 1997 that European monetary union would spark greater political conflict, said Greece’s fiscal woes expose the fault lines of the single currency project.
A day after EU leaders promised “determined and coordinated action” to help Greece control its budget deficit, Feldstein said the weakness of having a single monetary policy and different fiscal policies is being revealed.
“It isn’t working,” Feldstein, 70, said today in an interview on Bloomberg Radio. “In Europe, they have a single monetary policy and yet every country can set its own fiscal and tax policy.”
Feldstein said European governments will have to find a new way to ensure budget deficits don’t get out of control.
“There’s too much incentive for countries to run up big deficits as there’s no feedback until a crisis,” he said.
While the European Central Bank sets interest rates for the region’s 16 economies, the practice until now has been that each country has to steer its economy and can set its own tax and spending policies.
In his 1997 article, Feldstein wrote that while it’s impossible to predict whether political clashes will lead to war, “it is too real a possibility to ignore in weighing the potential effects” of monetary and political union.
To contact the reporter on this story: Simon Kennedy in Brussels at skennedy4@bloomberg.net
Last Updated: February 12, 2010 09:05 EST
Euro Area Is Headed for a Breakup, Societe Generale's Albert Edwards Says
BL: Multinationals taken aback by Rio Tinto prosecutions
Jane Macartney in Beijing, David Robertson and Alex Spence
February 11, 2010
Chinese authorities have charged four Rio Tinto executives with bribery and violating commercial secrets in a case that is being regarded as a warning to other multinational companies operating in the country.
The so-called Rio Four, as the Australian miner’s executives have become known, are almost certain to stand trial and could face up to seven years in jail. Stern Hu, an Australian citizen and the head of Rio’s iron ore negotiating team in China, and his three Chinese colleagues were arrested last year on espionage and bribery charges.
The Shanghai prosecutor’s office asserted yesterday that the police had gathered sufficient evidence to proceed with charges of bribery and possession of commercial secrets.
Xinhua, the state news agency, said: “The accused four, including Stern Hu, exploited their positions to seek gain for others, and numerous times either sought or illegally accepted massive bribes from a number of Chinese steel firms.”
The move against the Rio executives has sparked fear among foreign businessmen working in China because, they say, the rules on bribery, corruption and espionage are opaque and poorly defined. Companies engaging in what elsewhere might be regarded as normal market intelligence activities could step over an invisible line into corporate espionage.
A leading City lawyer said: “It is extremely worrying. There’s quite a lot of politics and game-playing here.”
Other lawyers and risk consultants operating in China have said that they have been inundated with inquiries from clients about the Rio incident and how it might affect them.
The charges against the Rio Four also show that China is taking anticorruption measures seriously. Jeremy Cole, a partner at Lovells, said: “Just a few years ago only the American regulators were interested in prosecuting corporate executives for bribery. Then the European regulators got in on the act and now the Chinese regulators. These days corporate executives need to watch out wherever they go.”
According to the Shanghai prosecutor’s office, Chinese companies had been the victims of the Rio executives’ activities. Xinhua said: “Many times they used personal inducements and other improper means to obtain commercial secrets from Chinese steel firms, causing serious consequences for the steel firms concerned.”
Wang Hong, lawyer for Zhang Peihong, a Chinese employee of Rio Tinto, said that he was able to see his client frequently and that he was being treated well. The four men were arrested in July on the more serious charges of stealing state secrets, a capital offence in China. However, as the investigation proceeded, the accusations were lowered to industrial espionage, focusing on alleged bribery during high-stakes iron ore contract talks.
Rio Tinto’s China team was responsible for negotiating and managing details of term contracts for iron ore, for which there is a huge demand in the vast Chinese steel industry. They also tracked market information. Rio Tinto maintains that the four have done nothing wrong.
The formal charges come just as China begins annual price talks with Rio Tinto, BHP Billiton and Vale, the big participants in the market.
Last year the China Iron and Steel Association, which took over representing iron ore buyers in the negotiations, failed to reach agreement on iron-ore prices, and top suppliers and mills were left to pay spot prices.
http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7022665.ece
BL: Dubai Default Swaps Rise to Highest Since Debt Delay (Update1)
By Laura Cochrane
Feb. 12 (Bloomberg) -- The cost to protect against a default by Dubai rose to the highest level since state- controlled holding company Dubai World said in November it wanted to delay debt repayments.
Credit-default swaps linked to Dubai debt jumped the most in two months to 638 basis points today from 585 basis points yesterday, the highest since Nov. 27, two days after the company said it wanted to postpone payments, according to CMA Datavision at 2:15 p.m. in London. Dubai’s Islamic bond due 2014 fell to 87.125 cents on the dollar from 89 cents, the lowest since the debt was sold in October, according to Royal Bank of Scotland Group Plc prices.
Dubai World, developer of the world’s tallest tower, said in November it wanted a standstill agreement from creditors so that it could restructure $22 billion of debt. The announcement shook investor confidence around the world and sent Dubai default swaps, which rise as perceptions of credit quality deteriorate, to as high as 647 basis points.
Abu Dhabi’s government provided $10 billion for Dubai’s financial support fund on Dec. 14 to help repay obligations, including the $4.1 billion needed for payments on the Islamic bond of Nakheel PJSC. Dubai World has yet to present an offer to lenders or say when a deal may be struck.
Credit default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point is 0.01 percentage point and is equivalent to $1,000 a year on a contract protecting $10 million of debt.
To contact the reporter responsible for this story: Laura Cochrane at lcochrane3@bloomberg.net
Last Updated: February 12, 2010 10:13 EST
BL: Greek Strikes to Paralyze Athens as Papandreou's Deficit Drive Challenged
By Natalie Weeks and Maria Petrakis
Feb. 10 (Bloomberg) -- Prime Minister George Papandreou’s drive to get Greece’s ballooning budget under control is being challenged in the streets today as striking labor unions shut down schools, hospitals and flights.
Air-traffic controllers and civil-aviation workers are effectively closing down Greek airspace as part of the 24-hour work stoppage by ADEDY, the umbrella group representing about 600,000 civil servants. Some 483 international and domestic flights have been cancelled, a spokeswoman for Athens International Airport, Greece’s biggest, said by telephone.
Protests against Papandreou’s plans to freeze wages and reduce benefits come after European Union leaders, set to meet at a summit in Brussels tomorrow, signaled they may aid the country if progress in cutting the deficit is made. Bonds have slumped in Greece and in the euro area’s southern edge as investors examine budget shortfalls across the 16-nation bloc.
“The concern is whether the strike will be a one-off or the first of a long series of street demonstrations involving other parts of the economy,” said Giada Giani, an economist at Citigroup Global Markets in London. “We need to see a prolonged period of strikes before we know whether the government’s willingness will be affected.”
ADEDY opposes Papandreou’s program and plans to call out its workers again on Feb. 24, when the biggest private-sector group, GSEE, holds its own 24-hour strike. Today’s walkout, with rallies in Athens and other cities and towns, is organized labor’s first major challenge since the Oct. 4 election of Papandreou, a socialist whom unions backed in the vote.
Union Threats
“People are out expressing their rage,” said Yiannis Kelekis, 68, who said he gets a 470-euro ($646) monthly pension. “They are absolutely right. The people that caused this crisis are now asking for others to make sacrifices.”
Protesters marched through the center of rainy Athens carrying signs that read “No to the speculators” and “Overturn the Growth and Stability Pact.”
“Cutting public-sector salaries is an easy political choice,” Spyros Papaspyros, chairman of the ADEDY civil servants union, said this week. “Attacks that start on the public sector will lead to attacks on all.”
The unions are contesting measures demanded by the EU and investors to reduce a deficit of 12.7 percent of gross domestic product last year to within the EU’s 3 percent limit in 2012. Greece’s fiscal woes have stoked concerns that it may need a bailout and helped spark a rout in global stocks.
Market Selloff
Spain and Portugal, also suffering from gaping deficits after the worst recession since World War II, have been sucked into a market selloff that has seen the euro fall to a nine- month low against the dollar on concern that swelling shortfalls will stifle Europe’s recovery.
Moody’s Investors Service said today that Greece shouldn’t be grouped with Spain and Portugal and that Greece faces “material challenges.”
“The Greek government’s plans are very ambitious, although if implemented exactly as promised, the rating could stabilize at A2,” according to the Moody’s report. “If the implementation falls just short of the execution promised by the Greek authorities, then we may adjust the rating to A3 in the coming months.”
“However, if only partial implementation is achieved, then we may downgrade Greece’s rating to Baa1,” Moody’s said.
Bonds Jump
Greek, Spanish and Portuguese bonds jumped yesterday after the EU signaled it may aid Greece. The euro rose the most in more than five months and the Greek 10-year bond yield dropped the most since at least 1998.
The premium investors demand to buy Greek debt over comparable German bonds ballooned on Jan. 28 to the highest since 1998 amid concern that Papandreou’s deficit plan relied too much on one-off measures for revenue and not enough on spending cuts.
Greek 10-year yields fell 33 basis points to 6.06 percent. The Greek-German 10-year yield spread narrowed 36 basis points to 288 basis points. The benchmark Athens stock index rose 3.2 percent to 1,956.44 at 3:50 p.m. in Athens, spurred by a 5.8 percent gain in National Bank of Greece SA, the country’s largest lender.
Olli Rehn, who today takes over as European economic affairs commissioner, said the EU may offer Greece “support in the broad sense of the word.” In Paris, after meeting with French President Nicolas Sarkozy, Papandreou said Greece was ready to take any measures to meet its deficit goals.
Hiring Freeze
Hours before the strike, Greek Finance Minister George Papaconstantinou reiterated a hiring freeze for civil servants. He also said the government will offer a tax amnesty on funds held abroad in a bid to boost revenue.
While forbidden by law to take part, police, fireman and coast guard workers said they will also join the rallies.
“This game of speculation is being played out at the expense of the worker,” said Yiannis Grivas, the head of the union of tax collectors, which held a 48-hour strike last week and will rally again on Feb. 17.
Still, not all public workers are striking.
More than 64 percent of 2,299 people polled in the two days after Papandreou announced additional deficit-cutting measures believe his government is moving in the right direction and the measures are necessary, according to a Kappa Research poll for To Vima newspaper on Feb. 7.
“Why should I strike and lose 50 euros?” said Effie Strati, a childcare worker at a state-run nursery. She said all her colleagues will be at work.
To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens nweeks2@bloomberg.net.
Last Updated: February 10, 2010 09:25 EST
Emerging-Market Stock Funds Post Biggest Outflows in 19 Months on Greece
By Bloomberg News
Feb. 12 (Bloomberg) -- Investors pulled the most money from emerging-market equity funds in 19 months as Greece’s debt crisis escalated and the Federal Reserve laid the groundwork for exiting its record credit expansion.
Outflows from emerging-market equity funds reached $2.9 billion in the week to Feb. 10, the highest since the period ended July 9, 2008, according to Cambridge, Massachusetts-based research firm EPFR Global in an e-mailed release.
“Investors fretted that Greece’s sovereign debt woes could drive up yields, and hence credit costs, worldwide,” EPFR said. “Further talk by U.S. Federal Reserve officials about an ‘exit strategy’ also weighed on sentiment.”
European leaders yesterday ordered Greece to get the bloc’s highest budget deficit under control and promised “determined” action to staunch the worst crisis in the euro currency’s 11- year history.
The MSCI Emerging Markets Index has declined 6.5 percent this year amid concern that Greece, Spain and Portugal may struggle to repay lenders as their budget gaps widen. That compares with the 4.9 percent drop in the MSCI World Index, which tracks developed markets. The developing-nation gauge surged a record 75 percent last year, more than triple the 23 percent gain by the Standard & Poor’s 500 Index. Brazil, Russia, India and China led gains among the major global markets in 2009.
Less Profitable
While emerging-market stocks outpaced advanced-nation equities by about 10 percentage points a year during the past decade, returns since 1975 show they were a less-profitable investment, according to a report by by Elroy Dimson, Paul Marsh and Mike Staunton of London Business School. Emerging-market stocks will probably only outperform advanced markets by about 1.5 percent a year over the “long run,” the authors wrote.
Federal Reserve Chairman Ben S. Bernanke said in congressional testimony Feb. 10 that a potential increase in the Fed’s discount rate would be part of the “normalization” of lending “before long” and wouldn’t signal a change in the outlook for monetary policy. U.S. policy makers are trying to determine when to tighten credit with unemployment at 9.7 percent and the world’s largest economy forecast to grow at the fastest pace since 2005.
High-yield bond funds posted outflows of more than $1 billion for their worst week since early in the third quarter of 2008, EPFR said. Japanese equity funds had net inflows for a seventh week, the longest since July 2008.
Asia ex-Japan Equity funds had their worst week since August amid concerns over a possible trade spat after the U.S. proposed to sell arms to Taiwan, EFPR said.
China halted planned military exchanges with the U.S. and said it will punish companies involved in a Pentagon plan to sell weapons worth $6.4 billion to Taiwan.
To contact the Bloomberg News staff on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net
Last Updated: February 11, 2010 21:35 EST
>>Stocks, Euro, Commodities Drop on Concern Over Greece, China Reserve Rule
By Justin Carrigan
Feb. 12 (Bloomberg) -- U.S. and European equities and commodities fell after China unexpectedly increased bank reserve requirements, while the euro weakened for a third day against the dollar on concern European Union efforts to avoid a default by Greece will undermine the currency region.
The Standard & Poor’s 500 Index retreated 1.4 percent, erasing the week’s advance, and the MSCI World Index slipped 0.9 percent at 9:46 a.m. in New York. The euro slid as much as 1.2 percent against the dollar after European leaders pledged yesterday to take “determined and coordinated action” to support the nation. Oil and copper fell more than 2 percent.
China, the world’s fastest-growing economy, ordered banks to set aside more deposits as reserves for the second time in a month after loan growth accelerated and property prices surged. Pressure is building on European governments to show how they will back up promises to assist Greece with action as investors turn their attention to a meeting of finance ministers in Brussels next week.
“Just as one fire has been put out for now, Greece, the one that originally caused jitters in the markets in mid-January, China, now flares up again,” said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, in a note to clients. “While I understand the market’s response this morning, particularly in commodities, China has no choice but to slow the extraordinary loan growth that has manifested itself in a massive property bubble.”
U.S. Stocks
The S&P 500 erased yesterday’s 1 percent rally. The index has slumped 7.5 percent from a 15-month high on Jan. 19 even as most companies report better-than-estimated fourth-quarter results. More than 350 companies in the S&P 500 have reported earnings since Jan. 11, with about 76 percent topping analysts’ estimates, according to data compiled by Bloomberg.
Sales at U.S. retailers climbed in January for the third time in four months. The 0.5 percent increase was larger than forecast and followed a 0.1 percent drop the prior month that was smaller than previously estimated, Commerce Department figures showed. Purchases excluding autos rose 0.6 percent.
The euro weakened against 12 of its 16 most-traded counterparts, and declines accelerated after an EU report showed the euro region’s gross domestic product grew 0.1 percent in the fourth quarter from the third. The average forecast of economists in a Bloomberg survey was for 0.3 percent expansion.
The Dollar Index, which tracks the U.S. currency against six major trading partners, rose 0.7 percent.
‘Lack of Specifics’
The euro is falling “first on the continuing concern on the lack of specifics on the Greece bailout package, and second on China’s reserve-requirement increase, which hit risk appetite across the board,” Adam Cole, the London-based global head of currency strategy at RBC Capital Markets Inc., wrote in a research report.
Crude oil and copper led the worst decline in commodities in a week as China, the world’s fastest-growing major economy, sought to cool growth. The S&P GSCI Index of 24 raw materials retreated 2 percent to 491.75, the biggest drop since Feb. 5. Oil fell 2.6 percent in New York trading and copper slid 2.9 percent in London. Aluminum, wheat, gold and platinum also declined.
Europe’s Dow Jones Stoxx 600 Index was little changed as the economic reports from the EU and China offset better-than- estimated earnings from ThyssenKrupp AG, Germany’s largest steelmaker, and Eni SpA, Italy’s biggest oil company.
The MSCI Asia Pacific Index gained 0.5 percent. Japan’s Asahi Glass Co. surged 6.9 percent in Tokyo after forecasting in increase in profit. Pacific Metals, the country’s top ferro- nickel producer, and GS Yuasa Corp. gained at least 7.3 percent after boosting their projections.
Credit-default swaps on the Markit iTraxx Crossover Index of 50 mostly high-yield European companies climbed 9.5 basis points to 485.5, according to JPMorgan Chase & Co. prices at 9:22 a.m. in London. Contracts tied to Greek government debt were unchanged at 353.5 basis points, after soaring to a record 428 on Feb. 4, according to CMA DataVision prices.
To contact the reporter on this story: Justin Carrigan in London on jcarrigan@bloomberg.net
Last Updated: February 12, 2010 09:50 EST
>>SKIL +14.65%, LEAP +3.10%, QDEL +2.98%
>>SKIL +14.65%, LEAP +3.10%, QDEL +2.98%
>>STEEL all RED: MT -2.89%, MTL -2.81%, VALE -2.21%, NUE -2.07%, XME -2.32%, AKS -2.28%, X -2.15%, PKX -2.12%, STLD -1.53%, IYM -1.47%
COPPER Stocks RED on China cutbacks: ABX -2.35%, BHP -2.11%, FCX -2.36%, PCU -1.59%, SLT -1.68%, VALE -2.51%
BL: China Raises Reserve Requirement for Second Time in a Month to Cool Growth
By Bloomberg News
Feb. 12 (Bloomberg) -- China ordered banks to set aside more deposits as reserves for the second time in a month to cool the fastest-growing economy after loan growth accelerated and property prices surged.
The reserve requirement will increase 50 basis points, or 0.5 percentage point, effective Feb. 25, the People’s Bank of China said on its Web site today. The current level is 16 percent for big banks and 14 percent for smaller ones.
Stocks reversed gains in Europe after the announcement on concern that tighter lending in China will damp the global economic recovery. Policy makers aim to avert asset bubbles and restrain inflation after banks extended 19 percent of this year’s 7.5 trillion yuan ($1.1 trillion) lending target in January and property prices climbed the most in 21 months.
“This is all about controlling the boom, so that we don’t have a bust in the second half,” said Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai.
The central bank moved after Chinese markets closed and on the eve of a weeklong Lunar New Year holiday when the nation moves into the Year of the Tiger from the Year of the Ox. Europe’s Dow Jones Stoxx 600 Index and commodities fell. The Shanghai Composite Index rose 1.1 percent before the announcement.
Record lending and a 4 trillion yuan stimulus package have helped the nation to lead the recovery from the first global recession since World War II.
Avoiding ‘Overheating’
“With China’s increasing economic significance in the world economy, major policy moves will always touch a nerve with global markets,” said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong. “Still, timely tightening in China will help sustain growth and avoid overheating, benefiting the world in the long term.”
Investors’ concern about investment bubbles in China, and what action the government may take to prevent or deflate them, has mounted this year.
“There’s a monumental property bubble and fixed-asset investment bubble that China has underway right now,” hedge fund manager James Chanos, founder of New York-based Kynikos Associates Ltd., said in a Jan. 25 Bloomberg Television interview. “Deflating that gently will be difficult at best.”
The central bank said yesterday that it wanted to gradually normalize monetary conditions from a “crisis mode” after gross domestic product grew 10.7 percent in the fourth quarter, the fastest pace in two years. It also said that not all countries will exit stimulus policies at the same time.
Pegged Currency
Policy makers are yet to drop the yuan’s effective peg to the U.S. dollar, which was adopted in July 2008 to aid the nation’s exporters, stoking friction with the U.S. and Europe.
Credit Suisse Group AG. estimated that today’s move will remove about 300 billion yuan from a financial system also facing inflows of cash from investors betting on the nation’s recovery and likely gains by the yuan. The nation’s foreign- exchange reserves swelled to a record $2.4 trillion in December, partly on inflows of “hot money,” or speculative capital.
“The central bank will keep raising the ratio frequently until the middle of the year,” said Lu Zhengwei, a Shanghai- based economist at Industrial Bank Co., who predicted today’s increase. “The central bank wants to stay ahead of the curve by tightening before inflation starts to gain pace.”
He forecast an increase in the benchmark lending rate from 5.31 percent as early as April.
In contrast, Citigroup Inc. said the central bank may not raise rates until the third quarter as inflation stays “mild.”
Weaker Inflation
Consumer prices rose 1.5 percent in January from a year earlier, down from 1.9 percent in December, on smaller gains in food prices. Inflation will accelerate to 3.6 percent by the end of June, according to a Bloomberg News survey of economists.
“Raising the reserve ratio on the eve of the Chinese New Year holiday really makes a lot of sense as it will give markets time to react,” said Mark Williams, an economist at Capital Economics Ltd. in London.
Economic data this week showed property prices across 70 cities surged 9.5 percent in January from a year earlier, exports climbed and producer-price inflation accelerated. Bank lending of 1.39 trillion yuan topped the total for the previous three months combined.
The central bank on Jan. 12 increased banks’ reserve requirements for the first time since June 2008. The latest move will soak up liquidity from maturing central-bank bills and also money injected into the financial system for the coming holiday, China International Capital Corp. said.
At Morgan Stanley, Hong Kong-based economist Wang Qing said that today’s increase would counter foreign-exchange inflows which “must have been persistently strong since January” and also withdraw money added for the holiday.
Reserve-requirement increases will continue through 2010, Wang said. “The market should get used to it.”
To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net
Last Updated: February 12, 2010 07:49 EST
FUTURES: DJI -0.6: 10,045.0 open, NDX -.76: 1,762 open, SPX -0.8%: 1,068 open
GM! OIL -73.91%, GOLD: $1,088, USD: 80.585, EURO: $1.3586 (yikes), PLATINUM: $1515 (climbing)
FAZ: +1.85%, QID: +1.36%, SDS +1.52%, SKF +1.26%
Hi! There are weather related internet outages here in Dallas, so I'm logging in through my Tmobile G3 stick....
I will be SLOOOOOOOW, but try and get some things up
WSJ: Traders Brace for Weakness in Regional Banks
By TENNILLE TRACY
FEBRUARY 12, 2010
NEW YORK—Options traders circled regional banks as several stocks in the sector failed to rise alongside the broader market.
Among the banks targeted was SunTrust Banks Inc., a regional bank based in Atlanta. A bulk of the action in SunTrust took place in the first two hours of the session, when traders pursued bearish "put spreads" in the company's April contracts. Traders could be looking to protect portfolios of SunTrust shares against declines or speculating on such moves happening.
Traders in this case bought April $22 puts and then sold April $18 puts, which help offset the cost, according to Trade Alert. Priced at $1.10, the position makes money if SunTrust slips below $20.90 before expiration on April 16. The stock closed at $22.48, losing 2.2%. The last time it dropped below $20.90 was in early January.
Similar activity took place in Fifth Third Bancorp and Comerica Inc., where traders adopted put spreads in the April and May contracts.
In Fifth Third—which closed at $11.87, up 1.5%—traders adopted put spreads in the May contracts, buying May $11 puts and selling May $9 puts.
"This looks like an opening debit spread and possibly to hedge exposure to the regional-banking sector in the months ahead," said WhatsTrading.com analyst Frederic Ruffy in a note.
In Comerica—which finished at $35.04, up 1.2%—another trader conducted a put spread in April contracts. This trader bought April $32.50 puts and sold April $27.50 puts, paying $1.10 for positions that make money if Comerica's stock falls below $31.40.
There was also considerable action in Zions Bancorp, which is based in Salt Lake City. Trading in that bank jumped to twice the normal level, with investors picking up 46,000 puts that allow them to sell the bank's stock and 7,000 calls letting them buy it, according to Track Data.
The largest transaction in Zions involved a put spread in the April contracts, whereby a trader bought April $17 puts and then sold April $13 puts. Other traders scooped up February $18 puts and longer-dated March $17 puts. The March contracts, priced at 90 cents, make money if Zions slides below $16.10.
The shares closed at $18.17, down 1.9%. The last time they slipped below $16.10 was Jan. 19.
The activity coincided with mild declines in the SPDR KBW Regional Banking ETF, which tracks the performance of several regional-banking stocks, on a day when the broader market rose. The SPDR regional-banking ETF lost 0.3% to close at $23.26, while the Dow Jones Industrial Average gained 1.05%.
Write to Tennille Tracy at tennille.tracy@dowjones.com
WSJ: Resource, Commodity Stocks Up
By SHRI NAVARATNAM And PHILIP VAHN
FEBRUARY 12, 2010, 12:34 A.M. ET
Asian shares markets were mostly up Friday, with stocks exposed to the resources and commodities sector helping Japan and China trade higher.
There was still come caution in markets as investors awaited specific measures from European leaders to prop up fiscally strapped Greece. The European leaders Thursday pledged support for Greece, but stopped short of providing any immediate financial assistance.
"Although E.U officials spurred on by France and Germany agreed that some form of support was needed the lack of detail came as a disappointment," said Credit Agricole Corporate and Investment Bank in a note to clients.
"Differences in opinion on how help should be provided meant that markets had nothing concrete to digest aside from a general agreement to provide assistance if needed."
Japan's Nikkei 225 was up 0.9% after resuming trade following a holiday Thursday, while Australia's S&P/ASX 200 was up 0.2% and South Korea's Kospi Composite was down 0.5%. Hong Kong's Hang Seng Index rose 0.4%, the Shanghai Composite was 0.5% higher and Singapore's Straits Times Index gained 0.3%. Dow Jones Industrial Average futures were 9 points lower in screen trade.
Indian markets are closed for a public holiday and Taiwan's bond and stock markets are shut ahead of the Lunar New Year.
The resources sector was underpinning the Australian market after metals prices rose Thursday. However, lingering concerns over Europe's fiscal woes and some position squaring ahead of the Lunar New Year appeared to limit early demand.
Rio Tinto rose 2.3% after the mining giant's full year profit for 2009 beating market expectations Thursday, with profit rising 33% to US$4.87 billion; fellow miner BHP Billiton also advanced 0.9%. Metal firms were also leading China's market higher with Shandong Gold-Mining up 1.6% and Yunnan Copper Co. tacking on 2.5%.
"It's the external factors lifting the metal stocks today while concerns have eased after Europe pledged to rescue Greece," said Xu Yinhui from Guotai Junan Securities.
Tokyo shares were boosted by stocks exposed to the commodities sector, such as trading houses. Mitsui & Co. rose 3.9% and Mitsubishi Corp was up 2.9%.
Beverage concern Kirin Holdings fell 3.4% after a weak fiscal year earnings report released Wednesday. Asahi Glass jumped 7.1% on expectations the glass maker may upgrade its earnings target for this fiscal year as analysts said the company's net profit forecast of Y90 billion looks conservative.
"The company's medium-term business plan released Wednesday spurs hopes for improvements in North American operations and growth in solar battery-related business," said SMBC Friend Research Center analyst Kazumasa Fukumoto.
Technology and automobile stocks were dragging the Korean market lower. "Demand for IT products is expected to fall during the Lunar New Year holidays, which is weighing on the stocks today," said Bae Sung-young at Hyundai Securities. Samsung Electronics fell 2.1% and Hynix Semiconductor gave up 2.3%. Hanwha Securities rose 3.1% on hopes the company may acquire foreign brokerage units. A person familiar with the matter told Dow Jones Newswires that Hanwha Securities is set to sign a contract later Friday to buy two South Korean units -- Prudential Investment & Securities, Prudential Asset Management -- of U.S.-based Prudential Financial Inc.
New Zealand shares were modestly higher, but gains were being capped by Telecom's 0.4% fall after the country's biggest phone company by subscribers reported fiscal second quarter earnings largely in line with expectations. First NZ Capital equities director James Lee said results were in line with expectations, but many uncertainties, such as its participation in national fast broadband plan, remain.
Data earlier Thursday showed New Zealand retail sales grew a below-expected 1.0% in the fourth quarter from the third. Given the fairly subdued consumption growth, some economists now expect the Reserve Bank of New Zealand to start raising rates in the second half of this year although a majority still expect the hike-cycle to begin in June.
Elsewhere, Philippine shares gained 1.4%, Malaysian shares were up 0.3%, Thai shares were uop 0.2% and the NZX-50 was up 0.5%.
Foreign exchange majors were trading in a tight range, with the euro trading slightly lower after falling sharply Thursday. Traders say the single currency will remain under pressure until there are some concrete measures from European leaders to pull Greece out of its fiscal troubles.
Against the dollar, the euro was buying $1.3668 compared with $1.3678 late in New York Thursday, and was at Y122.54 against the yen from Y122.79. The dollar was fetching Y89.63, from Y89.73.
Minoru Shioiri, chief manager of foreign exchange trading at Mitsubishi UFJ Securities, said the market is disappointed by the lack of immediate financial backing for Greece. "Market participants are also worried about the problems spreading out of Greece to Portugal, Spain and Italy, so that concern is weighing on the euro's top-side," he said.
Lead March Japanese government bond futures contract was lower on weaker U.S. Treasurys Thursday and the Nikkei's strength. The contract was down 0.11 at 139.32 points while the 10-year cash JGB yield was up 0.5 basis point at 1.330%.
Three-month London Metals Exchange copper futures contract was at $6,876 per ton, down $63.00 from the London afternoon kerb. Spot gold was at $1,089.20 per troy ounce, down $3.40 from the New York close. Nymex March crude oil futures were down 38 cents at $74.90 per barrel.
Write to Shri Navaratnam at shri.navaratnam@dowjones.com
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
North Korean weapons shipments bound for Iran intercepted
Zachary LynnIssue date: 2/12/10 Section: World
In late December, Thai authorities, acting in support of a U.N. resolution, intercepted a North Korean Il-76 transport aircraft. When Thai authorities searched the plane, they found over 35 tons of rocket launchers, ammunition, and other small arms.
According to Business Week, while the official flight plan indicated that the plane's destination was Colombo, Sri Lanka, a report filed this week by Thai authorities to the United Nations Security Council claims that the North Korean plane was actually Iran-bound.
Charged with the trafficking of illegal arms and violating U.N. sanctions against trading with North Korea, all five crewmembers - four Kazakhs and one Belarusian ? were arrested. According to the Bangkok Post, members of the American intelligence community tipped off the Thai authorities about the plane.
Following the stipulations set forth in a 2009 U.N. sanction against the release and refueling of dubious North Korean aircraft, the plane was impounded where it landed in the Thai airport. The sanction, associated with U.N. resolution 1874, came as a response to North Korea's unbidden Taepodong-2 missile launch over the Sea of Japan and nuclear tests last year.
But resolution 1874 is just the latest in a series of U.N. resolutions affecting the armament sales of North Korea. Resolution 1718, passed in June 2006, banned the sale of "Armored combat vehicles, large caliber artillery systems, attack helicopters, missiles, and spare parts".
According to military reporting group globalsecurity.org, this is not the first time that North Korean weapons have been intercepted bound for Iran. In August 2009, the authorities of the United Arab Emirates intercepted a shipment of North Korean arms. Since 2006, Iran has steadily built up an arsenal of several hundred scud-c missiles, many of them purchased from North Korea, or manufactured with North Korean aid.
North Korea earns about $1.5 billion in annual income from missile sales abroad to countries such as Iran and Libya, according to a report published by the United States-based Institute for Foreign Policy Analysis.
Associate Professor of History Zhihong Chen spoke of the reasoning for the partnership between Iran and North Korea.
"The partnership between Iran and North Korea has a lot to do with the axis of evil," she said. "Such a label forced them to take sides. Iran has been backed into a corner by the United States."
"North Korea has been an arms supplier, especially ballistic missiles, to the Middle East and terrorist groups for years," said Associate Professor of Political Science Robert Duncan.
Duncan suggested that these sales would certainly be considered a threat to United States national security, but only if they have been going on for some time.
So far, the United Nations missions of Iran and North Korea have declined to comment on the seizures, and it remains to be seen what further actions will be implemented by the United Nations Security Council.
http://media.www.guilfordian.com/media/storage/paper281/news/2010/02/12/World/North.Korean.Weapons.Shipments.Bound.For.Iran.Intercepted-3870822.shtml
AFP: Euro slides in Asia despite EU Greece pledge
Agence France-Presse
First Posted 12:29:00 02/12/2010
Filed Under: business, Debt Markets, Markets & Exchanges
TOKYO – The euro skidded lower in Asian trade Friday after a European Union pledge to support debt-stricken Greece failed to calm market fears about the region's fiscal troubles.
The euro dropped to $1.3663 in Tokyo morning trade from 1.3695 in New York late Thursday, and to 122.53 yen from 122.86. The dollar eased to 89.64 yen from 89.70.
In recent weeks, the euro has been rocked by concerns that other European countries such as Portugal, Ireland, Italy, Greece and Spain could suffer similar fiscal problems as Greece.
"It is evident that fiscal and debt problems in Greece and elsewhere in Europe have tarnished the image of the euro," said Credit Agricole analyst Mitul Kotecha.
European Union leaders at a summit in Brussels promised solidarity to debt-stricken Greece but held back from offering an immediate cash bailout.
The "lack of detail came as a disappointment. Markets had nothing concrete to digest aside from a general agreement to provide assistance if needed," said Kotecha.
Under a European Commission budget target agreement, Greece must reduce its public deficit this year by four percentage points from the current 12.7 percent, which is more than four times above the EU limit.
"European leaders look to be back-stopping the Greek government in the short term without committing to long-term financial assistance in order to give it time to push through fiscal austerity measures without a real crisis of investor confidence unfolding," said Rabobank economist Adrian Foster.
Investors were waiting for a snapshot of eurozone economic growth in the fourth quarter of 2009, expecting modest growth.
Market players were also eyeing US indicators including January retail sales and a consumer confidence report by the University of Michigan, looking for fresh signs that a recovery in the world's largest economy remains on track.
BL: Asian Stocks Climb as Growth Optimism Overcomes Greece Concerns
By Will McSheehy
Feb. 12 (Bloomberg) -- Stocks in Asia rose, with the benchmark index set for its longest winning streak in two months, on optimism the global economic recovery will be sustained. Concern about Greek finances drove down the euro for a third day.
The MSCI Asia Pacific Index climbed 0.6 percent to 116.61 as of 12:49 p.m. in Tokyo, gaining for a fourth day. The euro weakened for a third day against the dollar and the yen. Futures on the Standard & Poor’s 500 Index dropped 0.2 percent. The cost of protecting Asian bonds from default declined.
U.S. stocks rallied and commodities gained yesterday after European Union leaders said they will support Greece, without offering a detailed plan. Lower-than-estimated U.S. jobless claims and a pledge by China’s central bank to withdraw stimulus polices gradually helped allay concern the global economic recovery will falter.
“The EU will most likely prevent Greece from abruptly defaulting on its debt, which would otherwise have adverse effects among the region’s other countries such as Portugal,” said Akio Yoshino, the chief economist in Tokyo at Societe Generale Asset Management (Japan) Inc., which manages the equivalent of $17 billion. “Companies have done terrifically at slashing costs. Once sales rise even a bit it will result in a terrific earnings recovery.”
Japan’s Nikkei 225 Stock Average advanced 0.8 percent, while Hong Kong’s Hang Seng Index rose 0.3 percent. China’s Shanghai Composite Index rose 0.3 percent, advancing for a fourth day, as raw-material producers climbed on higher commodity prices.
Material Stocks
Mitsubishi Corp., a Japanese trading company that gets 39 percent of its sales from commodities, climbed 2.9 percent in Tokyo. Sony Corp., which derives 23 percent of its sales from the U.S., added 1.7 percent. Asahi Glass Co. climbed 7 percent after forecasting profit to increase. Jiangxi Copper Co., China’s biggest producer of the metal, increased 2.3 percent as copper prices gained the most since August.
Investors pulled the most money from emerging-market equity funds in 19 months as Greece’s debt crisis escalated and the Federal Reserve laid the groundwork for exiting its record credit expansion. Outflows from emerging-market equity funds reached $2.9 billion in the week to Feb. 10, the highest since the period ended July 9, 2008, according to Cambridge, Massachusetts-based research firm EPFR Global.
“Investors fretted that Greece’s sovereign debt woes could drive up yields, and hence credit costs, worldwide,” EPFR said in a statement.
Euro, Yen
The euro approached a one-week low against the dollar, falling to as low as $1.3654 and traded at $1.3667 as of 12:43 p.m. in Tokyo. It declined to 122.61 yen as of 12:55 p.m. in Tokyo, from 122.90 in New York yesterday.
The common currency has fallen 4.5 percent against the dollar this year on concern that nations with the biggest debt burdens will struggle to meet their obligations. Greece’s deficit is 12.7 percent of gross domestic product, more than four times the EU limit.
Statements by European leaders left open how the EU will respond to a fresh wave of speculative attacks against Greece or countries such as Spain and Portugal, which are also struggling to cut budget deficits. An agreement brokered by German Chancellor Angela Merkel, Greek Prime Minister George Papandreou and European Central Bank President Jean-Claude Trichet called for closer monitoring of the Greek economy.
The dollar strengthened versus 12 of 16 major counterparts on prospects U.S. reports today will add to signs the world’s largest economy is gaining momentum, providing the Federal Reserve with more evidence to increase borrowing costs.
Retail Sales
Sales at U.S. retailers rose 0.3 percent in January, after a 0.3 percent drop the previous month, according to a Bloomberg News survey of economists before the Commerce Department’s report today. The Reuters/University of Michigan final index of U.S. consumer sentiment, also scheduled for release today, increased to 75 this month from 74.4 in January, a separate Bloomberg survey showed.
New Zealand’s currency declined 0.3 percent to 69.67 U.S. cents. Retail sales for December were unchanged from the previous month, Statistics New Zealand said today, compared with economists’ forecasts for a 0.6 percent gain.
The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan fell 3 basis points to 113 basis points as of 8:16 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show.
Oil fell for the first day in five ahead of the release of a U.S. Energy Department report, which may show an increase in crude stockpiles in the world’s largest energy consumer. Crude oil for March delivery dropped as much as 43 cents, or 0.6 percent, to $74.85 a barrel in electronic trading on the New York Mercantile Exchange.
Copper for three-month delivery dropped 0.4 percent to $6,915 a metric ton, trimming its weekly gain to 10 percent, the most in a year. Aluminum rose 1.1 percent to $2,078 a ton and zinc gained 0.7 percent to $2,195.
To contact the reporter for this story: Will McSheehy in Singapore at wmcsheehy@bloomberg.net
Last Updated: February 11, 2010 22:59 EST