Jan. 1 (Bloomberg) -- Prime Minister Gordon Brown said the U.K. government is working with President Barack Obama on tightening airport security and rooting out potential terrorists after a Nigerian man tried to blow up a trans-Atlantic aircraft.
“The threat can only be met through enhanced cooperation,” Brown said in a statement posted on a government Web site in London today. “It has been another wake-up call for the ongoing battles we must wage.”
Brown said Britain and the U.S. are examining advanced x- ray technology, equipment that detects a trace of explosives on passengers and full-body scanners that penetrate clothes.
The comments are aimed at answering concerns that Britain is harboring communities of extremists planning to attack Western nations. Umar Farouk Abdulmutallab, who was arrested on Dec. 25 after a bomb hidden in his trousers fizzled, lived in the U.K. before boarding a plane from Amsterdam to Detroit.
Brown said he ordered a review of U.K. airport security on Dec. 28 and that he will receive preliminary findings in the next few days. Obama has ordered similar measures.
U.K. has barred 180 people from entering the country on national security grounds, Brown said. Britain has deported eight people citing security concerns since July 2005, when bombs exploded in a London bus and subway trains. Eight more have left voluntarily.
“We have to take on extremists wherever they are based, in Afghanistan, Pakistan and all around the world, including here in Britain,” Brown wrote in the message. “We nevertheless need to remain vigilant against people being radicalized here as well as abroad.”
For Related News and Information:
To contact the reporter on this story: Reed Landberg in London at landberg@bloomberg.net.
Last Updated: December 31, 2009 19:01 EST
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* Yahoo! Buzz Jan. 1 (Bloomberg) -- Prime Minister Gordon Brown said the U.K. government is working with President Barack Obama on tightening airport security and rooting out potential terrorists after a Nigerian man tried to blow up a trans-Atlantic aircraft.
“The threat can only be met through enhanced cooperation,” Brown said in a statement posted on a government Web site in London today. “It has been another wake-up call for the ongoing battles we must wage.”
Brown said Britain and the U.S. are examining advanced x- ray technology, equipment that detects a trace of explosives on passengers and full-body scanners that penetrate clothes.
The comments are aimed at answering concerns that Britain is harboring communities of extremists planning to attack Western nations. Umar Farouk Abdulmutallab, who was arrested on Dec. 25 after a bomb hidden in his trousers fizzled, lived in the U.K. before boarding a plane from Amsterdam to Detroit.
Brown said he ordered a review of U.K. airport security on Dec. 28 and that he will receive preliminary findings in the next few days. Obama has ordered similar measures.
U.K. has barred 180 people from entering the country on national security grounds, Brown said. Britain has deported eight people citing security concerns since July 2005, when bombs exploded in a London bus and subway trains. Eight more have left voluntarily.
“We have to take on extremists wherever they are based, in Afghanistan, Pakistan and all around the world, including here in Britain,” Brown wrote in the message. “We nevertheless need to remain vigilant against people being radicalized here as well as abroad.”
Thursday, December 31, 2009
Lambert Says U.K. Delay in Deficit Curbs May Hurt the Pound
Jan. 1 (Bloomberg) -- Richard Lambert, a former Bank of England policy maker now leading the Confederation of British Industry, said any delay in curbing the government’s budget deficit may lift interest rates and depress the pound.
“The government has not yet established a credible path back to fiscal stability,” Lambert said in a statement released in London today. “The longer this is delayed, the greater the threat to long-term interest rates and sterling.”
Chancellor Alistair Darling last month set out a plan to cut in half Britain’s budget deficit over the next four years, saying a quicker reduction may hurt the nation’s recovery from the worst recession on record. The deficit will peak next year at 13.2 percent of gross domestic product, the most in the Group of 20 nations, according to the International Monetary Fund.
Lambert also said the international banking crisis “is far from resolved.” While conditions at U.K. banks have improved, “there could be more aftershocks,” he said, adding that lending to companies is declining and that policy makers have yet to reform banking regulations.
“While another setback cannot be ruled out, the more likely outcome is that the economy will bump along the bottom for a little while before starting a fragile recovery driven by higher exports, investment in working capital, and a slightly stronger pattern of domestic consumption,” Lambert said.
“The government has not yet established a credible path back to fiscal stability,” Lambert said in a statement released in London today. “The longer this is delayed, the greater the threat to long-term interest rates and sterling.”
Chancellor Alistair Darling last month set out a plan to cut in half Britain’s budget deficit over the next four years, saying a quicker reduction may hurt the nation’s recovery from the worst recession on record. The deficit will peak next year at 13.2 percent of gross domestic product, the most in the Group of 20 nations, according to the International Monetary Fund.
Lambert also said the international banking crisis “is far from resolved.” While conditions at U.K. banks have improved, “there could be more aftershocks,” he said, adding that lending to companies is declining and that policy makers have yet to reform banking regulations.
“While another setback cannot be ruled out, the more likely outcome is that the economy will bump along the bottom for a little while before starting a fragile recovery driven by higher exports, investment in working capital, and a slightly stronger pattern of domestic consumption,” Lambert said.
Wednesday, December 30, 2009
Asian Consumer Spending Spurs Retailers’ Bonds to Best Returns
Dec. 31 (Bloomberg) -- Parkson Retail Group Ltd. and Shinsegae Co. led Asian retailers whose dollar bonds delivered the best returns of any industry group in the region this year as consumer spending rose.
Asia consumer company bonds returned 56 percent on average, according to an index compiled by JPMorgan Chase & Co., beating those of financial companies at 36 percent, industrial companies at 32 percent and utilities at 22 percent. The extra yield spread investors demand to own the retailers’ dollar notes instead of U.S. Treasuries narrowed 19.02 percentage points to 4.76 percentage points since Jan. 2, JPMorgan data show.
“One of the big stories of 2009 has been the rebalancing of growth towards domestic demand in Asia,” Sebastien Barbe, head of emerging-market research for Calyon, said in a phone interview from Hong Kong. “Consumer demand, particularly in India, China and Indonesia, has been more resilient than people expected at the beginning of the year. That’s contributed to the narrowing of spreads.”
Chinese retail sales may rise by more than 15 percent to exceed 12.5 trillion yuan ($1.83 trillion) this year, Trade Minister Chen Deming said on Dec. 24, as government stimulus measures and record bank lending spurred the fastest-growing major economy. Sales at South Korea’s major department stores rose for a ninth month in November, the Ministry of Knowledge Economy said Dec. 18. Spending at the three biggest chains climbed 6.4 percent from a year earlier.
Credit Recovery
PT Matahari Putra Prima, Indonesia’s second-biggest retailer by market value, and Shinsegae, which runs Korea’s biggest discount-store chain, sold dollar bonds this year as credit markets recovered from the worst global recession since the Great Depression and the 2008 collapse of Lehman Brothers Holdings Inc.
Shinsegae, based in Seoul, sold $200 million of three-year, 6.125 percent bonds in June 2008 that yielded 3 percent yesterday, according to Royal Bank of Scotland Group Plc. They were yielding 10.6 percent on Jan. 1, the Edinburgh-based lender’s prices show.
Beijing-based Parkson Retail, which owns department stores in 29 cities in China according to its Web site, sold $125 million of 7.125 percent notes due 2012 in May 2007 that yielded 6.099 percent yesterday, according to Nomura Holdings Inc. The notes yielded 20.8 percent on Jan. 9, Nomura prices show.
Rare Bonds
“If Parkson came out with another bond people would snap it up because retail dollar bonds are rare in Asia and there’s always a lot of interest from investors in this sector,” said Anthony Shum, a Hong Kong-based director of Asia-Pacific debt capital markets for Barclays Capital. “Parkson, with its stores in China, has been influenced by the government stimulus and Chinese New Year should also have a positive effect.”
Asian retail dollar bonds last outperformed their peers in 2006, when they delivered a 13 percent return compared with 6 percent for financials, utilities and industrials, JPMorgan data show. The notes handed investors a loss of 29 percent last year, almost double the 15 percent loss on bonds of the region’s financial companies.
“Employment in many east Asian economies has shown surprising resilience while real estate prices in a number of key markets have held up well, or even risen, despite large declines in the U.S. and parts of Europe,” said Tan Kim Eng, a Singapore-based credit analyst at Standard & Poor’s. “These factors have supported consumption, and with an expected recovery next year they must have led many to expect companies in the consumer sector will do well.”
Asia consumer company bonds returned 56 percent on average, according to an index compiled by JPMorgan Chase & Co., beating those of financial companies at 36 percent, industrial companies at 32 percent and utilities at 22 percent. The extra yield spread investors demand to own the retailers’ dollar notes instead of U.S. Treasuries narrowed 19.02 percentage points to 4.76 percentage points since Jan. 2, JPMorgan data show.
“One of the big stories of 2009 has been the rebalancing of growth towards domestic demand in Asia,” Sebastien Barbe, head of emerging-market research for Calyon, said in a phone interview from Hong Kong. “Consumer demand, particularly in India, China and Indonesia, has been more resilient than people expected at the beginning of the year. That’s contributed to the narrowing of spreads.”
Chinese retail sales may rise by more than 15 percent to exceed 12.5 trillion yuan ($1.83 trillion) this year, Trade Minister Chen Deming said on Dec. 24, as government stimulus measures and record bank lending spurred the fastest-growing major economy. Sales at South Korea’s major department stores rose for a ninth month in November, the Ministry of Knowledge Economy said Dec. 18. Spending at the three biggest chains climbed 6.4 percent from a year earlier.
Credit Recovery
PT Matahari Putra Prima, Indonesia’s second-biggest retailer by market value, and Shinsegae, which runs Korea’s biggest discount-store chain, sold dollar bonds this year as credit markets recovered from the worst global recession since the Great Depression and the 2008 collapse of Lehman Brothers Holdings Inc.
Shinsegae, based in Seoul, sold $200 million of three-year, 6.125 percent bonds in June 2008 that yielded 3 percent yesterday, according to Royal Bank of Scotland Group Plc. They were yielding 10.6 percent on Jan. 1, the Edinburgh-based lender’s prices show.
Beijing-based Parkson Retail, which owns department stores in 29 cities in China according to its Web site, sold $125 million of 7.125 percent notes due 2012 in May 2007 that yielded 6.099 percent yesterday, according to Nomura Holdings Inc. The notes yielded 20.8 percent on Jan. 9, Nomura prices show.
Rare Bonds
“If Parkson came out with another bond people would snap it up because retail dollar bonds are rare in Asia and there’s always a lot of interest from investors in this sector,” said Anthony Shum, a Hong Kong-based director of Asia-Pacific debt capital markets for Barclays Capital. “Parkson, with its stores in China, has been influenced by the government stimulus and Chinese New Year should also have a positive effect.”
Asian retail dollar bonds last outperformed their peers in 2006, when they delivered a 13 percent return compared with 6 percent for financials, utilities and industrials, JPMorgan data show. The notes handed investors a loss of 29 percent last year, almost double the 15 percent loss on bonds of the region’s financial companies.
“Employment in many east Asian economies has shown surprising resilience while real estate prices in a number of key markets have held up well, or even risen, despite large declines in the U.S. and parts of Europe,” said Tan Kim Eng, a Singapore-based credit analyst at Standard & Poor’s. “These factors have supported consumption, and with an expected recovery next year they must have led many to expect companies in the consumer sector will do well.”
Australian Stocks Rise on Commodity Prices; Qantas Advances
Dec. 31 (Bloomberg) -- Australian stocks climbed as metal and oil prices rose amid optimism the global economic recovery is strengthening.
BHP Billiton Ltd., the world’s largest mining company and Australia’s biggest oil producer, gained 1 percent as copper extended yesterday’s rally in New York, while crude rose for a seventh day. Fortescue Metals Group Ltd., Australia’s No. 3 iron-ore producer, rallied 2.5 percent. Qantas Airways Ltd. advanced 2.4 percent on signs global air travel is picking up.
Australia’s S&P/ASX 200 Index rose 0.8 percent to 4,870.70 as of 1:03 p.m. in Sydney. The gauge, which tumbled 41 percent last year as the global recession deepened, is headed for a 31 percent gain this year as government stimulus measures help shore up economies. New Zealand’s NZX 50 Index advanced 0.3 percent and is set for a 19 percent annual gain.
“Investors are generally a lot more relaxed right now,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management in Sydney. “The sixty-four-million dollar question is: what happens next year where we could have a much stronger economic backdrop but tighter liquidity conditions? Markets may well end up consolidating gains in 2010 rather than making another big move upwards.”
Economic Recovery
Futures on the Standard & Poor’s 500 Index were little changed. The gauge added less than 0.1 percent yesterday as a report from the Institute for Supply Management-Chicago Inc. showed U.S. companies expanded in December at the fastest pace in almost four years. Most U.S. stocks fell amid speculation the Federal Reserve will withdraw stimulus measures.
BHP Billiton climbed 1 percent to A$43.12. Santos Ltd., Australia’s third-largest oil and gas producer, added 0.5 percent to A$14.07. Fortescue rallied 2.5 percent to A$4.46, after the cash price for iron ore delivered to China, the world’s biggest buyer, rose the most in more than five months to its highest this year, according to The Steel Index.
Copper futures in New York gained 0.8 percent in after- hours trading to the highest level since Aug. 28, 2008. Prices also rose on speculation a mine strike will disrupt supplies from Chile, the world’s largest producer. Crude oil added 0.5 percent today, taking a seven-day advance to 8.1 percent.
“It’s nice to see the market surging across the line, as opposed to staggering,” said Ben Potter, a research analyst at IG Markets in Melbourne. “Investor sentiment across Asia heading into 2010 is cautiously optimistic. There seems to be a general view that the economic recovery is still on track.
Qantas Airways rose 2.4 percent to A$3. International air travel rose 2.1 percent last month from a year earlier, the International Air Transport Association said yesterday in an e- mailed statement. Freight demand jumped 9.5 percent.
“The improvement trends for both passenger and freight are being exaggerated by the sharp fall in demand experienced during the second half of 2008,” IATA said.
BHP Billiton Ltd., the world’s largest mining company and Australia’s biggest oil producer, gained 1 percent as copper extended yesterday’s rally in New York, while crude rose for a seventh day. Fortescue Metals Group Ltd., Australia’s No. 3 iron-ore producer, rallied 2.5 percent. Qantas Airways Ltd. advanced 2.4 percent on signs global air travel is picking up.
Australia’s S&P/ASX 200 Index rose 0.8 percent to 4,870.70 as of 1:03 p.m. in Sydney. The gauge, which tumbled 41 percent last year as the global recession deepened, is headed for a 31 percent gain this year as government stimulus measures help shore up economies. New Zealand’s NZX 50 Index advanced 0.3 percent and is set for a 19 percent annual gain.
“Investors are generally a lot more relaxed right now,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management in Sydney. “The sixty-four-million dollar question is: what happens next year where we could have a much stronger economic backdrop but tighter liquidity conditions? Markets may well end up consolidating gains in 2010 rather than making another big move upwards.”
Economic Recovery
Futures on the Standard & Poor’s 500 Index were little changed. The gauge added less than 0.1 percent yesterday as a report from the Institute for Supply Management-Chicago Inc. showed U.S. companies expanded in December at the fastest pace in almost four years. Most U.S. stocks fell amid speculation the Federal Reserve will withdraw stimulus measures.
BHP Billiton climbed 1 percent to A$43.12. Santos Ltd., Australia’s third-largest oil and gas producer, added 0.5 percent to A$14.07. Fortescue rallied 2.5 percent to A$4.46, after the cash price for iron ore delivered to China, the world’s biggest buyer, rose the most in more than five months to its highest this year, according to The Steel Index.
Copper futures in New York gained 0.8 percent in after- hours trading to the highest level since Aug. 28, 2008. Prices also rose on speculation a mine strike will disrupt supplies from Chile, the world’s largest producer. Crude oil added 0.5 percent today, taking a seven-day advance to 8.1 percent.
“It’s nice to see the market surging across the line, as opposed to staggering,” said Ben Potter, a research analyst at IG Markets in Melbourne. “Investor sentiment across Asia heading into 2010 is cautiously optimistic. There seems to be a general view that the economic recovery is still on track.
Qantas Airways rose 2.4 percent to A$3. International air travel rose 2.1 percent last month from a year earlier, the International Air Transport Association said yesterday in an e- mailed statement. Freight demand jumped 9.5 percent.
“The improvement trends for both passenger and freight are being exaggerated by the sharp fall in demand experienced during the second half of 2008,” IATA said.
Tuesday, December 29, 2009
Japan Air Plunges to Record Amid Bankruptcy Reports
Dec. 30 (Bloomberg) -- Japan Airlines Corp., Asia’s biggest carrier by sales, plunged to a record in Tokyo trading after reports the carrier may enter bankruptcy proceedings led investors to sell shares on the year’s last trading day.
Japan Air fell as much as 32 percent to 60 yen and traded at 66 yen as of 11 a.m. local time. The volume of shares sold was five times the daily average for the past three months.
“Shareholders are becoming convinced that bankruptcy will be the case,” said Mitsushige Akino, who manages the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “They are dumping the stock. JAL’s value will be zero if it goes bankrupt.”
A state-affiliated agency charged with rescuing Japan Air met creditors yesterday to discuss a proposed bankruptcy, the Yomiuri newspaper said, without citing anyone. Japan Air owed its four main lenders, including Mitsubishi UFJ Financial Group Inc., at least 529 billion yen ($5.8 billion) as of July.
Bankruptcy is the preferred option being pursued by the agency, known as the Enterprise Turnaround Initiative Corporation, the Asahi newspaper reported yesterday, without saying where it got the information. The agency is scheduled to decide on a plan for the unprofitable airline next month.
Mizuho, Sumitomo Mitsui
Japan Air’s lenders opposed bankruptcy in yesterday’s meeting, according to the Yomiuri’s report. The Tokyo-based airline’s biggest creditors also include Mizuho Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and the state- affiliated Development Bank of Japan.
Japan Air officials were unavailable for comment due to a holiday, according to a person answering the phone at the carrier’s head office.
Takashi Takeuchi, a spokesman for Mitsubishi UFJ, was unavailable, and a spokeswoman for Sumitomo Mitsui said the company had no immediate comment. Mizuho spokesman Tomohiro Sakauchi declined to comment.
Japan’s government has pledged to keep Japan Air operating as it bails out the carrier for the fourth time since 2001. The company has posted three losses in four years and reported a net loss of 63.2 billion yen in the fiscal year ended March 31 as international travel slumped amid a global recession.
The airline secured a 100 billion yen bridge loan from a state-affiliated bank and is trying to persuade staff and retirees to accept pension cuts as it battles to avoid collapse. It has also received competing investment offers from Delta Air Lines Inc. and American Airlines.
Japan Air shares have declined 69 percent this year, the biggest drop on the Nikkei 225 Stock Average, which has risen 20 percent.
Japan Air fell as much as 32 percent to 60 yen and traded at 66 yen as of 11 a.m. local time. The volume of shares sold was five times the daily average for the past three months.
“Shareholders are becoming convinced that bankruptcy will be the case,” said Mitsushige Akino, who manages the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “They are dumping the stock. JAL’s value will be zero if it goes bankrupt.”
A state-affiliated agency charged with rescuing Japan Air met creditors yesterday to discuss a proposed bankruptcy, the Yomiuri newspaper said, without citing anyone. Japan Air owed its four main lenders, including Mitsubishi UFJ Financial Group Inc., at least 529 billion yen ($5.8 billion) as of July.
Bankruptcy is the preferred option being pursued by the agency, known as the Enterprise Turnaround Initiative Corporation, the Asahi newspaper reported yesterday, without saying where it got the information. The agency is scheduled to decide on a plan for the unprofitable airline next month.
Mizuho, Sumitomo Mitsui
Japan Air’s lenders opposed bankruptcy in yesterday’s meeting, according to the Yomiuri’s report. The Tokyo-based airline’s biggest creditors also include Mizuho Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and the state- affiliated Development Bank of Japan.
Japan Air officials were unavailable for comment due to a holiday, according to a person answering the phone at the carrier’s head office.
Takashi Takeuchi, a spokesman for Mitsubishi UFJ, was unavailable, and a spokeswoman for Sumitomo Mitsui said the company had no immediate comment. Mizuho spokesman Tomohiro Sakauchi declined to comment.
Japan’s government has pledged to keep Japan Air operating as it bails out the carrier for the fourth time since 2001. The company has posted three losses in four years and reported a net loss of 63.2 billion yen in the fiscal year ended March 31 as international travel slumped amid a global recession.
The airline secured a 100 billion yen bridge loan from a state-affiliated bank and is trying to persuade staff and retirees to accept pension cuts as it battles to avoid collapse. It has also received competing investment offers from Delta Air Lines Inc. and American Airlines.
Japan Air shares have declined 69 percent this year, the biggest drop on the Nikkei 225 Stock Average, which has risen 20 percent.
Bankers Get $4 Trillion Gift From Barney Frank: David Reilly
Dec. 30 (Bloomberg) -- To close out 2009, I decided to do something I bet no member of Congress has done -- actually read from cover to cover one of the pieces of sweeping legislation bouncing around Capitol Hill.
Hunkering down by the fire, I snuggled up with H.R. 4173, the financial-reform legislation passed earlier this month by the House of Representatives. The Senate has yet to pass its own reform plan. The baby of Financial Services Committee Chairman Barney Frank, the House bill is meant to address everything from too-big-to-fail banks to asleep-at-the-switch credit-ratings companies to the protection of consumers from greedy lenders.
I quickly discovered why members of Congress rarely read legislation like this. At 1,279 pages, the “Wall Street Reform and Consumer Protection Act” is a real slog. And yes, I plowed through all those pages. (Memo to Chairman Frank: “ystem” at line 14, page 258 is missing the first “s”.)
The reading was especially painful since this reform sausage is stuffed with more gristle than meat. At least, that is, if you are a taxpayer hoping the bailout train is coming to a halt.
If you’re a banker, the bill is tastier. While banks opposed the legislation, they should cheer for its passage by the full Congress in the New Year: There are huge giveaways insuring the government will again rescue banks and Wall Street if the need arises.
Nuggets Gleaned
Here are some of the nuggets I gleaned from days spent reading Frank’s handiwork:
-- For all its heft, the bill doesn’t once mention the words “too-big-to-fail,” the main issue confronting the financial system. Admitting you have a problem, as any 12- stepper knows, is the crucial first step toward recovery.
-- Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule.
-- Oh, hold on, the Federal Reserve and Treasury Secretary can’t authorize these funds unless “there is at least a 99 percent likelihood that all funds and interest will be paid back.” Too bad the same models used to foresee the housing meltdown probably will be used to predict this likelihood as well.
More Bailouts
-- The bill also allows the government, in a crisis, to back financial firms’ debts. Bondholders can sleep easy -- there are more bailouts to come.
-- The legislation does create a council of regulators to spot risks to the financial system and big financial firms. Unfortunately this group is made up of folks who missed the problems that led to the current crisis.
-- Don’t worry, this time regulators will have better tools. Six months after being created, the council will report to Congress on “whether setting up an electronic database” would be a help. Maybe they’ll even get to use that Internet thingy.
-- This group, among its many powers, can restrict the ability of a financial firm to trade for its own account. Perhaps this section should be entitled, “Yes, Goldman Sachs Group Inc., we’re looking at you.”
Managing Bonuses
-- The bill also allows regulators to “prohibit any incentive-based payment arrangement.” In other words, banker bonuses are still in play. Maybe Bank of America Corp. and Citigroup Inc. shouldn’t have rushed to pay back Troubled Asset Relief Program funds.
-- The bill kills the Office of Thrift Supervision, a toothless watchdog. Well, kill may be too strong a word. That agency and its employees will be folded into the Office of the Comptroller of the Currency. Further proof that government never really disappears.
-- Since Congress isn’t cutting jobs, why not add a few more. The bill calls for more than a dozen agencies to create a position called “Director of Minority and Women Inclusion.” People in these new posts will be presidential appointees. I thought too-big-to-fail banks were the pressing issue. Turns out it’s diversity, and patronage.
-- Not that the House is entirely sure of what the issues are, at least judging by the two dozen or so studies the bill authorizes. About a quarter of them relate to credit-rating companies, an area in which the legislation falls short of meaningful change. Sadly, these studies don’t tackle tough questions like whether we should just do away with ratings altogether. Here’s a tip: Do the studies, then write the legislation.
Consumer Protection
-- The bill isn’t all bad, though. It creates a new Consumer Financial Protection Agency, the brainchild of Elizabeth Warren, currently head of a panel overseeing TARP. And the first director gets the cool job of designing a seal for the new agency. My suggestion: Warren riding a fiery chariot while hurling lightning bolts at Federal Reserve Chairman Ben Bernanke.
-- Best of all, the bill contains a provision that, in the event of another government request for emergency aid to prop up the financial system, debate in Congress be limited to just 10 hours. Anything that can get Congress to shut up can’t be all bad.
Even better would be if legislators actually tackle the real issues stemming from the financial crisis, end bailouts and, for the sake of my eyes, write far, far shorter bills.
(David Reilly is a Bloomberg News columnist. The opinions expressed are his own.)
Hunkering down by the fire, I snuggled up with H.R. 4173, the financial-reform legislation passed earlier this month by the House of Representatives. The Senate has yet to pass its own reform plan. The baby of Financial Services Committee Chairman Barney Frank, the House bill is meant to address everything from too-big-to-fail banks to asleep-at-the-switch credit-ratings companies to the protection of consumers from greedy lenders.
I quickly discovered why members of Congress rarely read legislation like this. At 1,279 pages, the “Wall Street Reform and Consumer Protection Act” is a real slog. And yes, I plowed through all those pages. (Memo to Chairman Frank: “ystem” at line 14, page 258 is missing the first “s”.)
The reading was especially painful since this reform sausage is stuffed with more gristle than meat. At least, that is, if you are a taxpayer hoping the bailout train is coming to a halt.
If you’re a banker, the bill is tastier. While banks opposed the legislation, they should cheer for its passage by the full Congress in the New Year: There are huge giveaways insuring the government will again rescue banks and Wall Street if the need arises.
Nuggets Gleaned
Here are some of the nuggets I gleaned from days spent reading Frank’s handiwork:
-- For all its heft, the bill doesn’t once mention the words “too-big-to-fail,” the main issue confronting the financial system. Admitting you have a problem, as any 12- stepper knows, is the crucial first step toward recovery.
-- Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule.
-- Oh, hold on, the Federal Reserve and Treasury Secretary can’t authorize these funds unless “there is at least a 99 percent likelihood that all funds and interest will be paid back.” Too bad the same models used to foresee the housing meltdown probably will be used to predict this likelihood as well.
More Bailouts
-- The bill also allows the government, in a crisis, to back financial firms’ debts. Bondholders can sleep easy -- there are more bailouts to come.
-- The legislation does create a council of regulators to spot risks to the financial system and big financial firms. Unfortunately this group is made up of folks who missed the problems that led to the current crisis.
-- Don’t worry, this time regulators will have better tools. Six months after being created, the council will report to Congress on “whether setting up an electronic database” would be a help. Maybe they’ll even get to use that Internet thingy.
-- This group, among its many powers, can restrict the ability of a financial firm to trade for its own account. Perhaps this section should be entitled, “Yes, Goldman Sachs Group Inc., we’re looking at you.”
Managing Bonuses
-- The bill also allows regulators to “prohibit any incentive-based payment arrangement.” In other words, banker bonuses are still in play. Maybe Bank of America Corp. and Citigroup Inc. shouldn’t have rushed to pay back Troubled Asset Relief Program funds.
-- The bill kills the Office of Thrift Supervision, a toothless watchdog. Well, kill may be too strong a word. That agency and its employees will be folded into the Office of the Comptroller of the Currency. Further proof that government never really disappears.
-- Since Congress isn’t cutting jobs, why not add a few more. The bill calls for more than a dozen agencies to create a position called “Director of Minority and Women Inclusion.” People in these new posts will be presidential appointees. I thought too-big-to-fail banks were the pressing issue. Turns out it’s diversity, and patronage.
-- Not that the House is entirely sure of what the issues are, at least judging by the two dozen or so studies the bill authorizes. About a quarter of them relate to credit-rating companies, an area in which the legislation falls short of meaningful change. Sadly, these studies don’t tackle tough questions like whether we should just do away with ratings altogether. Here’s a tip: Do the studies, then write the legislation.
Consumer Protection
-- The bill isn’t all bad, though. It creates a new Consumer Financial Protection Agency, the brainchild of Elizabeth Warren, currently head of a panel overseeing TARP. And the first director gets the cool job of designing a seal for the new agency. My suggestion: Warren riding a fiery chariot while hurling lightning bolts at Federal Reserve Chairman Ben Bernanke.
-- Best of all, the bill contains a provision that, in the event of another government request for emergency aid to prop up the financial system, debate in Congress be limited to just 10 hours. Anything that can get Congress to shut up can’t be all bad.
Even better would be if legislators actually tackle the real issues stemming from the financial crisis, end bailouts and, for the sake of my eyes, write far, far shorter bills.
(David Reilly is a Bloomberg News columnist. The opinions expressed are his own.)
Sunday, December 27, 2009
IBM, Qualcomm, Sunrise Senior Living, 3Par: U.S. Equity Preview
Dec. 27 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.
Electronics for Imaging Inc. (EFII:US): The digital- printing company said its tender offer was oversold and that it had accepted orders to buy about 5.5 million shares at $12.75 a share.
International Business Machines Corp. (IBM:US): The world’s largest computer-services provider may rise as the company focuses on expanding in emerging markets and projects geared to information technology and infrastructure, Barron’s reported, citing an interview with Chief Executive Officer Sam Palmisano.
Qualcomm Inc. (QCOM:US): The world’s biggest maker of chips for mobile phones said that Len Lauer, chief operating officer, has resigned and accepted a job as chief executive officer at another company.
Sunrise Senior Living Inc. (SRZ:US): The manager of retirement communities said its Sunrise Connecticut Avenue Assisted Living unit amended its credit line. The company made a $5 million payment on the principal of $29.5 million of borrowings outstanding and suspending or amending some covenants.
3Par Inc. (PAR:US): The data-storage provider may rise as the company expands its customer base and gains market share, making it an attractive takeover target, Barron’s reported, without citing anyone.
Electronics for Imaging Inc. (EFII:US): The digital- printing company said its tender offer was oversold and that it had accepted orders to buy about 5.5 million shares at $12.75 a share.
International Business Machines Corp. (IBM:US): The world’s largest computer-services provider may rise as the company focuses on expanding in emerging markets and projects geared to information technology and infrastructure, Barron’s reported, citing an interview with Chief Executive Officer Sam Palmisano.
Qualcomm Inc. (QCOM:US): The world’s biggest maker of chips for mobile phones said that Len Lauer, chief operating officer, has resigned and accepted a job as chief executive officer at another company.
Sunrise Senior Living Inc. (SRZ:US): The manager of retirement communities said its Sunrise Connecticut Avenue Assisted Living unit amended its credit line. The company made a $5 million payment on the principal of $29.5 million of borrowings outstanding and suspending or amending some covenants.
3Par Inc. (PAR:US): The data-storage provider may rise as the company expands its customer base and gains market share, making it an attractive takeover target, Barron’s reported, without citing anyone.
Hands Says Banker Pay Takes From the Economy, Telegraph Reports
Dec. 27 (Bloomberg) -- Guy Hands, the private-equity investor, said bankers’ pay attracts “many of the most talented individuals in society,” removing them from jobs in the “real” economy, the Sunday Telegraph reported, citing a letter to investors in his Terra Firma Capital Partners Ltd.
Hands said banking jobs remove workers from “more entrepreneurial, creative or leadership roles,” according to the Telegraph. Bankers get paid 60 percent to 80 percent of profits when business goes right while shareholders and the government pay the costs when business goes wrong, Hands said.
Recovering equity markets after the worst global recession since World War II are a sign that “for a while we have pulled back from the brink,” the Telegraph said, citing Hands. “The fundamental cause of the crisis, primarily that the West is living beyond its means on borrowed money from the East, has yet to be addressed.”
Hands said banking jobs remove workers from “more entrepreneurial, creative or leadership roles,” according to the Telegraph. Bankers get paid 60 percent to 80 percent of profits when business goes right while shareholders and the government pay the costs when business goes wrong, Hands said.
Recovering equity markets after the worst global recession since World War II are a sign that “for a while we have pulled back from the brink,” the Telegraph said, citing Hands. “The fundamental cause of the crisis, primarily that the West is living beyond its means on borrowed money from the East, has yet to be addressed.”
Treasury Yield Curve Steepens to Record on Debt Demand Concern
Dec. 25 (Bloomberg) -- Treasuries fell, with the difference in yields between 2- and 10-year notes widening to a record amount, as investors bet the U.S. recovery will fuel inflation and reduce demand at the government’s debt auctions.
The 10-year note’s yield climbed to the highest level in four months as reports showed increases in sales of existing homes and orders for durable goods. The U.S. will sell a record- tying $118 billion of 2-, 5- and 7-year notes next week.
“We are in a steepening trend,” said John Spinello, chief technical strategist in New York at Jefferies Group Inc., one of the Federal Reserve’s 18 primary dealers, which are required to bid at government debt auctions. “It was the recognition that the Treasury will be extending the debt as we know it and the economy is showing signs of recovery.”
The benchmark 10-year note’s yield rose 26 basis points on the week, or 0.26 percentage point, to 3.80 percent, according to BGCantor Market Data. That’s the highest level since Aug. 10. The 3.375 percent security due in November 2019 fell 2 5/32 or $21.56 per $1,000 face amount to 96 16/32.
Two-year note yields rose 18 basis points on the week to 0.97, the highest level since Oct. 30. The note to be sold on Dec. 28 in a record-tying $44 billion offering traded at 1.02 percent in pre-auction trading. The debt drew a yield of 0.802 percent, the lowest ever, at the last auction, a $44 billion offering on Nov. 23.
‘Inflationary Pressures’
The difference, or spread, between 2- and 10-year note yields widened to 2.88 percentage points on Dec. 22. The previous record of 2.81 percentage points was set on June 5, when Treasuries plunged after a government report showed the smallest decline in U.S. payrolls in eight months. Ten-year note yields touched 4 percent the following week, the highest level in 2009.
“If you are going to have a recovery, you are going to have higher inflationary pressures, so the curve should continue to steepen from here,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. “The curve could reach 300 to 325 basis points.”
Holders of U.S. Treasuries of all maturities have lost 3.3 percent this year, according to Bank of America Merrill Lynch indexes. That would be the worst performance since 1994.
American consumers’ spending and incomes climbed in November, indicating that the biggest part of the economy is poised to strengthen as the labor market recovers, government reports showed. Purchases rose 0.5 percent and incomes increased 0.4 percent.
Debt Sales
Existing home sales rose 7.4 percent last month to a 6.54 million annual rate, the highest since February 2007, from a revised 6.09 million pace the prior month, the National Association of Realtors said on Dec. 22. Sales were expected to rise to a 6.25 million annual rate, according to the median forecast in a Bloomberg News survey of economists.
Excluding demand for transportation equipment, bookings for long-lasting goods climbed a greater-than-forecast 2 percent in November, figures from the Commerce Department showed on Dec. 24 in Washington.
The U.S. will sell $44 billion in two-year notes on Dec. 28, $42 billion in five-year debt the next day and $32 billion in seven-year securities on Dec. 30. The five-year sale and seven-year offering equal the all-time highest issues of the securities set last month.
Seven-Year Auction
“The seven-year coming just a day before New Year’s eve, when the Fed had been a strong buyer of the seven-year sector to help out mortgage rates, that’s probably the auction to worry about,” Michael Pond, an interest-rate strategist in New York at primary dealer Barclays Plc, said on Dec. 24 in an interview on Bloomberg TV. “The two-year should be well spoken for. At year-end, there is plenty of demand for short paper. It’s really further out the curve that you have to worry about.”
President Barack Obama is borrowing unprecedented amounts for spending programs. U.S. marketable debt increased to a record $7.17 trillion in November from $5.80 trillion at the end of last year.
Treasury officials on Nov. 4 announced a long-term target of six to seven years for the average maturity of Treasury debt and said the department wants to cut back on its issuance of bills and two- and three-year notes.
Treasury yields will increase in 2010 as the Fed ends purchases of mortgage and agency securities, Barclays’s Pond said. The yield on the benchmark 10-year note may climb to 4.5 percent, he said.
The Fed said on Dec. 16 it will continue purchases of agency mortgage-backed securities totaling $1.25 trillion and about $175 billion of agency debt through the first quarter of next year. The Federal Open Market Committee and the Fed’s Board of Governors reiterated that “most of the Federal Reserve’s special liquidity facilities will expire on Feb. 1 2010.” The central bank completed a $300 billion program of Treasury purchases in October.
The 10-year note’s yield climbed to the highest level in four months as reports showed increases in sales of existing homes and orders for durable goods. The U.S. will sell a record- tying $118 billion of 2-, 5- and 7-year notes next week.
“We are in a steepening trend,” said John Spinello, chief technical strategist in New York at Jefferies Group Inc., one of the Federal Reserve’s 18 primary dealers, which are required to bid at government debt auctions. “It was the recognition that the Treasury will be extending the debt as we know it and the economy is showing signs of recovery.”
The benchmark 10-year note’s yield rose 26 basis points on the week, or 0.26 percentage point, to 3.80 percent, according to BGCantor Market Data. That’s the highest level since Aug. 10. The 3.375 percent security due in November 2019 fell 2 5/32 or $21.56 per $1,000 face amount to 96 16/32.
Two-year note yields rose 18 basis points on the week to 0.97, the highest level since Oct. 30. The note to be sold on Dec. 28 in a record-tying $44 billion offering traded at 1.02 percent in pre-auction trading. The debt drew a yield of 0.802 percent, the lowest ever, at the last auction, a $44 billion offering on Nov. 23.
‘Inflationary Pressures’
The difference, or spread, between 2- and 10-year note yields widened to 2.88 percentage points on Dec. 22. The previous record of 2.81 percentage points was set on June 5, when Treasuries plunged after a government report showed the smallest decline in U.S. payrolls in eight months. Ten-year note yields touched 4 percent the following week, the highest level in 2009.
“If you are going to have a recovery, you are going to have higher inflationary pressures, so the curve should continue to steepen from here,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. “The curve could reach 300 to 325 basis points.”
Holders of U.S. Treasuries of all maturities have lost 3.3 percent this year, according to Bank of America Merrill Lynch indexes. That would be the worst performance since 1994.
American consumers’ spending and incomes climbed in November, indicating that the biggest part of the economy is poised to strengthen as the labor market recovers, government reports showed. Purchases rose 0.5 percent and incomes increased 0.4 percent.
Debt Sales
Existing home sales rose 7.4 percent last month to a 6.54 million annual rate, the highest since February 2007, from a revised 6.09 million pace the prior month, the National Association of Realtors said on Dec. 22. Sales were expected to rise to a 6.25 million annual rate, according to the median forecast in a Bloomberg News survey of economists.
Excluding demand for transportation equipment, bookings for long-lasting goods climbed a greater-than-forecast 2 percent in November, figures from the Commerce Department showed on Dec. 24 in Washington.
The U.S. will sell $44 billion in two-year notes on Dec. 28, $42 billion in five-year debt the next day and $32 billion in seven-year securities on Dec. 30. The five-year sale and seven-year offering equal the all-time highest issues of the securities set last month.
Seven-Year Auction
“The seven-year coming just a day before New Year’s eve, when the Fed had been a strong buyer of the seven-year sector to help out mortgage rates, that’s probably the auction to worry about,” Michael Pond, an interest-rate strategist in New York at primary dealer Barclays Plc, said on Dec. 24 in an interview on Bloomberg TV. “The two-year should be well spoken for. At year-end, there is plenty of demand for short paper. It’s really further out the curve that you have to worry about.”
President Barack Obama is borrowing unprecedented amounts for spending programs. U.S. marketable debt increased to a record $7.17 trillion in November from $5.80 trillion at the end of last year.
Treasury officials on Nov. 4 announced a long-term target of six to seven years for the average maturity of Treasury debt and said the department wants to cut back on its issuance of bills and two- and three-year notes.
Treasury yields will increase in 2010 as the Fed ends purchases of mortgage and agency securities, Barclays’s Pond said. The yield on the benchmark 10-year note may climb to 4.5 percent, he said.
The Fed said on Dec. 16 it will continue purchases of agency mortgage-backed securities totaling $1.25 trillion and about $175 billion of agency debt through the first quarter of next year. The Federal Open Market Committee and the Fed’s Board of Governors reiterated that “most of the Federal Reserve’s special liquidity facilities will expire on Feb. 1 2010.” The central bank completed a $300 billion program of Treasury purchases in October.
Friday, December 25, 2009
Tightening Credit May Not Slow Inflation in India, Times Says
Dec. 25 (Bloomberg) -- Tightening monetary policy may not help control inflation, the Economic Times reported, citing an interview with India’s Finance Minister Pranab Mukherjee.
Mukherjee called for a balanced approach to fight inflation as it has been substantially caused by supply side problems, the newspaper reported today.
The finance minister hasn’t set a timeframe for withdrawing the fiscal-stimulus policy and the government is trying to keep the fiscal deficit within the targeted level, according to the report.
India’s benchmark wholesale-price inflation more than tripled in November to 4.78 percent from 1.34 percent in October. An index of food articles rose 19.95 percent in the week ended Dec. 5, the most since 1998, the commerce ministry said Dec. 17.
Mukherjee called for a balanced approach to fight inflation as it has been substantially caused by supply side problems, the newspaper reported today.
The finance minister hasn’t set a timeframe for withdrawing the fiscal-stimulus policy and the government is trying to keep the fiscal deficit within the targeted level, according to the report.
India’s benchmark wholesale-price inflation more than tripled in November to 4.78 percent from 1.34 percent in October. An index of food articles rose 19.95 percent in the week ended Dec. 5, the most since 1998, the commerce ministry said Dec. 17.
Along U.S.-Mexico Border, a Torrent of Illicit Cash
LAREDO, Tex. — The streets of Laredo are awash in money, stacks of grimy bills tainted with cocaine residue, wrapped in plastic and stowed in secret compartments built into the trucks, buses and cars that flow south over the Mexican border daily like a motorized river.
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War Without Borders
Smuggling Dollars South
This series examines the impact of Mexican drug cartels on both sides of the border.
Previous Articles in the Series »
Customs officials have discovered a host of ingenious hiding places, from $3 million secreted in the floor of a Mexican passenger bus to $1.6 million stuffed in duffel bags and balanced atop the heads of people wading across the Rio Grande to Mexico.
At border crossings and airports alone, American customs officers seized $57.9 million in the fiscal year ending Oct. 1, up 74 percent from the previous year. And once the money lands in Mexico, it is easily swept into a largely unregulated underground cash economy or laundered through seemingly legitimate businesses.
As the United States has tightened bank regulations and clamped down on sophisticated money-laundering schemes in the past 35 years, more of the money from illicit drug sales is being smuggled across the border to Mexico the old-fashioned way, law enforcement officials say.
American officials say stopping the bulk cash shipments and scuttling money laundering are critical to crippling the cartels in Mexico, which have unleashed a wave of violence that has claimed more than 15,000 lives since President Felipe Calderón began cracking down on their operations in December 2006.
Law enforcement officials and business owners in Mexico say that the assault on the cartels has driven drug traffickers to branch out into an array of other money-making ventures, setting up businesses like spas and day care centers to launder drug proceeds or selling new products like pirated movies or pilfered oil.
“It’s a natural evolution of criminal activity, just as with the mob in the 1950s,” said John Feeley, the deputy chief of mission of the United States Embassy in Mexico City. “They can’t continue to work on one illegal product.”
But Mexican authorities have yet to make much headway against money launderers, and customs officials say the cash they seize is still a trickle of what flows across the border.
Joint operations of customs, border patrol and immigration agents set up checkpoints on southbound lanes every day, fishing for money. Customs officials have assigned 25 more teams of dogs and handlers to the task in the past two years.
Mr. Feeley said that he expected Mexico and the United States to devote even more energy to going after the cartels’ profits.
Although United States authorities seized $138 million last year, that amount pales in comparison to the $18 billion to $39 billion a year the Drug Enforcement Agency estimates is being smuggled to Mexico every year.
“There is an enormous amount of money that is flowing undetected and un-interdicted,” said John T. Morton, the assistant secretary for immigration and customs enforcement. “We are trying to be a step ahead of the people moving the money. Unfortunately, right now we are a step behind.”
On the border, federal authorities play a constant cat-and-mouse game with the traffickers. The dealers employ spies to spot checkpoints, while informants tip off agents about the movement of cash.
Across the Border
In Mexico, the cash is relatively easy to launder, law enforcement officials say. Though the Mexican government has tightened bank regulations in the last nine months, drug cartels still buy real estate, businesses, automobiles, jewels and other luxuries in cash without any reports of suspicious activity being made to the government. The sellers then make giant but legal cash deposits to the banks, and the money flows into the economy, Mexican government officials and experts on laundering said.
“When the money is already integrated into the economy it’s very difficult to detect and the players there are not obligated to report it,” said Ramón GarcÃa Gibson, a consultant to Mexican banks on money laundering.
Nor is it a crime in Mexico to buy and sell dollars on the street. Thousands of informal money brokers exchange cash, and while they are not allowed to handle more than $10,000 a day per client, the rule is often ignored.
The money launderers are still outrunning the Mexican authorities. Though the main agency in the finance ministry charged with tracking money laundering has tripled in size in the past two years, it remains weak and overwhelmed with thousands of reports of questionable activity, officials there say. In the past year, they have referred about 600 cases to prosecutors, but only 18 were presented to the courts.
“They just don’t have the capacity yet to do the investigation and make it stick in court,” said Shannon K. O’Neil, a Mexico analyst with the Council on Foreign Relations in New York.
No one knows precisely how much money is shipped across the border, but Mexican authorities say cash smuggled illegally into their country and then sent back to United States banks through Mexican financial institutions totals at least $10 billion a year.
A good portion of that is pooled by foreign exchange businesses and then shipped back to United States banks in armored trucks, experts on money laundering said. Money is also smuggled out of Mexico to Colombia and other countries to pay cocaine producers.
Skip to next paragraph
War Without Borders
Smuggling Dollars South
This series examines the impact of Mexican drug cartels on both sides of the border.
Previous Articles in the Series »
Customs officials have discovered a host of ingenious hiding places, from $3 million secreted in the floor of a Mexican passenger bus to $1.6 million stuffed in duffel bags and balanced atop the heads of people wading across the Rio Grande to Mexico.
At border crossings and airports alone, American customs officers seized $57.9 million in the fiscal year ending Oct. 1, up 74 percent from the previous year. And once the money lands in Mexico, it is easily swept into a largely unregulated underground cash economy or laundered through seemingly legitimate businesses.
As the United States has tightened bank regulations and clamped down on sophisticated money-laundering schemes in the past 35 years, more of the money from illicit drug sales is being smuggled across the border to Mexico the old-fashioned way, law enforcement officials say.
American officials say stopping the bulk cash shipments and scuttling money laundering are critical to crippling the cartels in Mexico, which have unleashed a wave of violence that has claimed more than 15,000 lives since President Felipe Calderón began cracking down on their operations in December 2006.
Law enforcement officials and business owners in Mexico say that the assault on the cartels has driven drug traffickers to branch out into an array of other money-making ventures, setting up businesses like spas and day care centers to launder drug proceeds or selling new products like pirated movies or pilfered oil.
“It’s a natural evolution of criminal activity, just as with the mob in the 1950s,” said John Feeley, the deputy chief of mission of the United States Embassy in Mexico City. “They can’t continue to work on one illegal product.”
But Mexican authorities have yet to make much headway against money launderers, and customs officials say the cash they seize is still a trickle of what flows across the border.
Joint operations of customs, border patrol and immigration agents set up checkpoints on southbound lanes every day, fishing for money. Customs officials have assigned 25 more teams of dogs and handlers to the task in the past two years.
Mr. Feeley said that he expected Mexico and the United States to devote even more energy to going after the cartels’ profits.
Although United States authorities seized $138 million last year, that amount pales in comparison to the $18 billion to $39 billion a year the Drug Enforcement Agency estimates is being smuggled to Mexico every year.
“There is an enormous amount of money that is flowing undetected and un-interdicted,” said John T. Morton, the assistant secretary for immigration and customs enforcement. “We are trying to be a step ahead of the people moving the money. Unfortunately, right now we are a step behind.”
On the border, federal authorities play a constant cat-and-mouse game with the traffickers. The dealers employ spies to spot checkpoints, while informants tip off agents about the movement of cash.
Across the Border
In Mexico, the cash is relatively easy to launder, law enforcement officials say. Though the Mexican government has tightened bank regulations in the last nine months, drug cartels still buy real estate, businesses, automobiles, jewels and other luxuries in cash without any reports of suspicious activity being made to the government. The sellers then make giant but legal cash deposits to the banks, and the money flows into the economy, Mexican government officials and experts on laundering said.
“When the money is already integrated into the economy it’s very difficult to detect and the players there are not obligated to report it,” said Ramón GarcÃa Gibson, a consultant to Mexican banks on money laundering.
Nor is it a crime in Mexico to buy and sell dollars on the street. Thousands of informal money brokers exchange cash, and while they are not allowed to handle more than $10,000 a day per client, the rule is often ignored.
The money launderers are still outrunning the Mexican authorities. Though the main agency in the finance ministry charged with tracking money laundering has tripled in size in the past two years, it remains weak and overwhelmed with thousands of reports of questionable activity, officials there say. In the past year, they have referred about 600 cases to prosecutors, but only 18 were presented to the courts.
“They just don’t have the capacity yet to do the investigation and make it stick in court,” said Shannon K. O’Neil, a Mexico analyst with the Council on Foreign Relations in New York.
No one knows precisely how much money is shipped across the border, but Mexican authorities say cash smuggled illegally into their country and then sent back to United States banks through Mexican financial institutions totals at least $10 billion a year.
A good portion of that is pooled by foreign exchange businesses and then shipped back to United States banks in armored trucks, experts on money laundering said. Money is also smuggled out of Mexico to Colombia and other countries to pay cocaine producers.
China Raises GDP Growth Estimates, Narrowing Gap With Japan
Dec. 25 (Bloomberg) -- China raised its 2008 growth estimate to 9.6 percent from 9 percent and said this year’s quarterly figures will increase, narrowing the gap with Japan, the world’s second-biggest economy.
Gross domestic product was 31.405 trillion yuan ($4.6 trillion) last year, the statistics bureau said at a briefing in Beijing today. That compares with a previous 30.067 trillion yuan and the World Bank’s estimate of $4.9 trillion for Japan.
China’s expansion will be more than 8 percent in 2009, according to government officials, and the nation is poised to overtake Japan next year, International Monetary Fund projections show. Today’s figures result from an economic census which showed a bigger contribution from services and continue a pattern of China revising up preliminary growth estimates.
“The big underlying factor propelling China’s growth is the continued migration of people from the agricultural sector to the more modern economy -- industry and services,” said David Cohen, an economist at Action Economic in Singapore. “There’s no stopping China.”
For 2009, revisions will mainly affect the value of the year’s gross domestic product, with a “very small” impact on the growth rate, said Peng Zhilong, the head of the bureau’s national economy calculation department.
China’s expansion in 2008 compares with U.S. growth of less than 1 percent. Japan’s gross domestic product shrank 1.2 percent. The Indian economy expanded 6.7 percent in the fiscal year ended March 2009.
‘Loose’ Monetary Policy
This year, the Chinese economy grew 8.9 percent in the third quarter from a year earlier, 7.9 percent in the second and 6.1 percent in the first. The government has pledged to maintain a “moderately loose” monetary policy in 2010 to sustain a rebound driven by a stimulus package and record lending.
The pace of growth is attracting more investment. Foreign direct investment climbed 32 percent in November to $7 billion from a year earlier. Luxury carmaker Bayerische Motoren Werke AG said last month that it will build a new factory worth 5 billion yuan in China to tap an auto market set to overtake the U.S. as the world’s largest.
“Investors are anxious to participate in what remains, with India, the biggest story that’s out there,” Action Economics’ Cohen said.
Today’s figures showed a 13.1 trillion yuan contribution from services in 2008, compared with 12 trillion yuan previously. The census, intended to give a better picture of the economy’s make-up, focused on industry and services rather than agriculture.
More Revisions Pending
Gross domestic product figures for 2005, 2006 and 2007 will also be revised as a result of the census, Peng said.
China’s economy was 4.4 percent bigger in 2008 than originally estimated, today’s figures showed. In comparison, a previous census in 2005 showed the statistics bureau had under- estimated the size of the 2004 economy by 17 percent.
Besides the census, China routinely carries out a first and second check of each set of annual figures for gross domestic product, issuing revisions where necessary.
In April last year, the bureau raised the growth figure for 2007 to 11.9 percent from 11.4 percent, citing larger estimates for the contribution from service industries such as telecommunications and retailing. In January this year, it raised the estimate again to 13 percent.
“Upward revisions of China’s GDP numbers are frequent, large and well expected, so we expect little market impact from today’s revision,” Lu Ting, a Hong Kong-based economist for Bank of America-Merrill Lynch said.
Energy Consumption
China also revised energy consumption per unit of economic output in 2008, officials led by chief statistician Ma Jiantang said at today’s briefing.
The measure showed a drop of 5.2 percent compared with an earlier estimate of a 4.59 percent decline. The statisticians revised up energy consumption for the year by 2.12 percent to the equivalent of 2.91 billion tonnes of standard coal.
Before this month’s talks in Copenhagen on climate change, China announced a target of cutting its 2005 levels of carbon dioxide emissions per unit of GDP by between 40 percent and 45 percent by 2020.
Today’s figures suggest “it should be a reasonable goal,” Merrill’s Lu said.
Gross domestic product was 31.405 trillion yuan ($4.6 trillion) last year, the statistics bureau said at a briefing in Beijing today. That compares with a previous 30.067 trillion yuan and the World Bank’s estimate of $4.9 trillion for Japan.
China’s expansion will be more than 8 percent in 2009, according to government officials, and the nation is poised to overtake Japan next year, International Monetary Fund projections show. Today’s figures result from an economic census which showed a bigger contribution from services and continue a pattern of China revising up preliminary growth estimates.
“The big underlying factor propelling China’s growth is the continued migration of people from the agricultural sector to the more modern economy -- industry and services,” said David Cohen, an economist at Action Economic in Singapore. “There’s no stopping China.”
For 2009, revisions will mainly affect the value of the year’s gross domestic product, with a “very small” impact on the growth rate, said Peng Zhilong, the head of the bureau’s national economy calculation department.
China’s expansion in 2008 compares with U.S. growth of less than 1 percent. Japan’s gross domestic product shrank 1.2 percent. The Indian economy expanded 6.7 percent in the fiscal year ended March 2009.
‘Loose’ Monetary Policy
This year, the Chinese economy grew 8.9 percent in the third quarter from a year earlier, 7.9 percent in the second and 6.1 percent in the first. The government has pledged to maintain a “moderately loose” monetary policy in 2010 to sustain a rebound driven by a stimulus package and record lending.
The pace of growth is attracting more investment. Foreign direct investment climbed 32 percent in November to $7 billion from a year earlier. Luxury carmaker Bayerische Motoren Werke AG said last month that it will build a new factory worth 5 billion yuan in China to tap an auto market set to overtake the U.S. as the world’s largest.
“Investors are anxious to participate in what remains, with India, the biggest story that’s out there,” Action Economics’ Cohen said.
Today’s figures showed a 13.1 trillion yuan contribution from services in 2008, compared with 12 trillion yuan previously. The census, intended to give a better picture of the economy’s make-up, focused on industry and services rather than agriculture.
More Revisions Pending
Gross domestic product figures for 2005, 2006 and 2007 will also be revised as a result of the census, Peng said.
China’s economy was 4.4 percent bigger in 2008 than originally estimated, today’s figures showed. In comparison, a previous census in 2005 showed the statistics bureau had under- estimated the size of the 2004 economy by 17 percent.
Besides the census, China routinely carries out a first and second check of each set of annual figures for gross domestic product, issuing revisions where necessary.
In April last year, the bureau raised the growth figure for 2007 to 11.9 percent from 11.4 percent, citing larger estimates for the contribution from service industries such as telecommunications and retailing. In January this year, it raised the estimate again to 13 percent.
“Upward revisions of China’s GDP numbers are frequent, large and well expected, so we expect little market impact from today’s revision,” Lu Ting, a Hong Kong-based economist for Bank of America-Merrill Lynch said.
Energy Consumption
China also revised energy consumption per unit of economic output in 2008, officials led by chief statistician Ma Jiantang said at today’s briefing.
The measure showed a drop of 5.2 percent compared with an earlier estimate of a 4.59 percent decline. The statisticians revised up energy consumption for the year by 2.12 percent to the equivalent of 2.91 billion tonnes of standard coal.
Before this month’s talks in Copenhagen on climate change, China announced a target of cutting its 2005 levels of carbon dioxide emissions per unit of GDP by between 40 percent and 45 percent by 2020.
Today’s figures suggest “it should be a reasonable goal,” Merrill’s Lu said.
Terror Attempt Seen as Man Tries to Ignite Device on Jet
A Nigerian man tried to ignite an explosive device aboard a transatlantic Northwest Airlines flight as the plane prepared to land in Detroit on Friday, in an incident the United States believes was “an attempted act of terrorism,” according to a White House official who declined to be identified.
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Times Topics: Airplane Accidents and Incidents
The device, described by officials as a mixture of powder and liquid, failed to fully detonate. Passengers on the plane described a series of pops that sounded like firecrackers.
Federal officials said the man wanted to bring the plane down.
“This was the real deal,” said Representative Peter T. King of New York, the ranking Republican on the House Homeland Security Committee, who was briefed on the incident and said something had gone wrong with the explosive device, which he described as somewhat sophisticated. “This could have been devastating,” Mr. King said.
It was unclear how the man, identified by federal officials as Abdul Mudallad, 23, managed to get the explosive on the plane, an Airbus A330 wide-body jet carrying 278 passengers that had originated in Nigeria with a stop in Amsterdam. A senior administration official said that the government did not yet know whether the man had had the capacity to take down the plane.
“We’re trying to ascertain exactly what he had and what he thought he was doing, but our sense is he wanted to wreak some havoc here and was attempting to do just that,” the official said. “Whether at the end of the day he had the ability to do that is what I think we’ll be able to pull together over the next several days as we investigate this.”
A senior Department of Homeland Security official said that the device Mr. Mudallad had on him was “more incendiary than explosive,” and that he had tried to ignite the device or mixture to cause a fire as the airliner was approaching Detroit.
Mr. Mudallad told law enforcement authorities, the official said, that he had had explosive powder taped to his leg and that he had used a syringe of chemicals to mix with the powder to try to cause an explosion.
A federal counterterrorism official who asked not to be identified said Mr. Mudallad was apparently in a government law enforcement-intelligence data base, but it is not clear what extremist group or individuals he might be linked to.
“It’s too early to say what his association is,” the counterterrorism official said. “At this point, it seems like he was acting alone, but we don’t know for sure.” Although Mr. Mudallad is said to have told officials that he was directed by Al Qaeda, the counterterrorism official expressed caution about that claim, saying “it may have been aspirational.”
The incident unfolded just before noon. Passengers who were on the plane said they had heard a loud pop, smelled smoke and then seen flames in one area of the plane.
The suspect was quickly subdued as the plane — Northwest Airlines flight 253, operated on a Delta airplane — made its descent into Detroit Metropolitan Airport, landing at 11:53 a.m. (The two airlines merged last year.) Once on the ground, it was immediately guided to the end of a runway, where it was surrounded by police cars and emergency vehicles and searched by a bomb-disabling robot.
“Out of an abundance of caution, the plane was moved to a remote area where the plane and all baggage are currently being re-screened,” the Transportation Security Administration said Friday night. “A passenger is in custody and passengers are being interviewed.”
Sandra Berchtold, a spokeswoman with the Federal Bureau of Investigation’s Detroit office, said F.B.I. agents were at the scene Friday night and were investigating the matter. She declined comment when asked questions about Mr. Mudallad and any possible ties to terrorism.
One federal official who requested anonymity said Mr. Mudallad had suffered severe burns but was expected to survive. The man was admitted to the University of Michigan’s hospital in Ann Arbor, according to a senior state official who insisted on anonymity.
President Obama was kept informed throughout the day as he spent the Christmas holiday with his family and friends at a secluded Hawaiian beach house. After a secure conference call, he was given several follow-up briefings on paper. John O. Brennan, the White House counterterrorism chief, convened an interagency meeting in the late afternoon to go over what was known about the incident and what precautions should be taken.
A second Department of Homeland Security official said the Transportation Security Administration used layers of security measures at the nation’s airports and that it would be tightening them as a result of the incident in Detroit.
These measures — some visible to passengers, some not — include bomb-sniffing dog teams, carry-on luggage and passenger screening measures, and plainclothes behavioral-detection specialists inside airport terminals. The official said there were no immediate plans to elevate the nation’s threat level, which has been at orange since 2006.
Mr. King, of the Homeland Security committee, said there was no indication at this point that anyone else was involved, but he said officials would look back to see if any intelligence signals were missed. “For a while now we have had real concerns about Al Qaeda or terrorist connections in Nigeria,” he said.
Of the device used on Friday, he said, “It appears to be different from explosive devices that have been used before. That is perhaps why it escaped detection. Maybe that is why it made it through.”
Anahad O’Connor reported from New York, and Peter Baker from Hawaii. Eric Lipton and Eric Schmitt contributed reporting from Washington, and Micheline Maynard and Bill Vlasic from Detroit.
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Times Topics: Airplane Accidents and Incidents
The device, described by officials as a mixture of powder and liquid, failed to fully detonate. Passengers on the plane described a series of pops that sounded like firecrackers.
Federal officials said the man wanted to bring the plane down.
“This was the real deal,” said Representative Peter T. King of New York, the ranking Republican on the House Homeland Security Committee, who was briefed on the incident and said something had gone wrong with the explosive device, which he described as somewhat sophisticated. “This could have been devastating,” Mr. King said.
It was unclear how the man, identified by federal officials as Abdul Mudallad, 23, managed to get the explosive on the plane, an Airbus A330 wide-body jet carrying 278 passengers that had originated in Nigeria with a stop in Amsterdam. A senior administration official said that the government did not yet know whether the man had had the capacity to take down the plane.
“We’re trying to ascertain exactly what he had and what he thought he was doing, but our sense is he wanted to wreak some havoc here and was attempting to do just that,” the official said. “Whether at the end of the day he had the ability to do that is what I think we’ll be able to pull together over the next several days as we investigate this.”
A senior Department of Homeland Security official said that the device Mr. Mudallad had on him was “more incendiary than explosive,” and that he had tried to ignite the device or mixture to cause a fire as the airliner was approaching Detroit.
Mr. Mudallad told law enforcement authorities, the official said, that he had had explosive powder taped to his leg and that he had used a syringe of chemicals to mix with the powder to try to cause an explosion.
A federal counterterrorism official who asked not to be identified said Mr. Mudallad was apparently in a government law enforcement-intelligence data base, but it is not clear what extremist group or individuals he might be linked to.
“It’s too early to say what his association is,” the counterterrorism official said. “At this point, it seems like he was acting alone, but we don’t know for sure.” Although Mr. Mudallad is said to have told officials that he was directed by Al Qaeda, the counterterrorism official expressed caution about that claim, saying “it may have been aspirational.”
The incident unfolded just before noon. Passengers who were on the plane said they had heard a loud pop, smelled smoke and then seen flames in one area of the plane.
The suspect was quickly subdued as the plane — Northwest Airlines flight 253, operated on a Delta airplane — made its descent into Detroit Metropolitan Airport, landing at 11:53 a.m. (The two airlines merged last year.) Once on the ground, it was immediately guided to the end of a runway, where it was surrounded by police cars and emergency vehicles and searched by a bomb-disabling robot.
“Out of an abundance of caution, the plane was moved to a remote area where the plane and all baggage are currently being re-screened,” the Transportation Security Administration said Friday night. “A passenger is in custody and passengers are being interviewed.”
Sandra Berchtold, a spokeswoman with the Federal Bureau of Investigation’s Detroit office, said F.B.I. agents were at the scene Friday night and were investigating the matter. She declined comment when asked questions about Mr. Mudallad and any possible ties to terrorism.
One federal official who requested anonymity said Mr. Mudallad had suffered severe burns but was expected to survive. The man was admitted to the University of Michigan’s hospital in Ann Arbor, according to a senior state official who insisted on anonymity.
President Obama was kept informed throughout the day as he spent the Christmas holiday with his family and friends at a secluded Hawaiian beach house. After a secure conference call, he was given several follow-up briefings on paper. John O. Brennan, the White House counterterrorism chief, convened an interagency meeting in the late afternoon to go over what was known about the incident and what precautions should be taken.
A second Department of Homeland Security official said the Transportation Security Administration used layers of security measures at the nation’s airports and that it would be tightening them as a result of the incident in Detroit.
These measures — some visible to passengers, some not — include bomb-sniffing dog teams, carry-on luggage and passenger screening measures, and plainclothes behavioral-detection specialists inside airport terminals. The official said there were no immediate plans to elevate the nation’s threat level, which has been at orange since 2006.
Mr. King, of the Homeland Security committee, said there was no indication at this point that anyone else was involved, but he said officials would look back to see if any intelligence signals were missed. “For a while now we have had real concerns about Al Qaeda or terrorist connections in Nigeria,” he said.
Of the device used on Friday, he said, “It appears to be different from explosive devices that have been used before. That is perhaps why it escaped detection. Maybe that is why it made it through.”
Anahad O’Connor reported from New York, and Peter Baker from Hawaii. Eric Lipton and Eric Schmitt contributed reporting from Washington, and Micheline Maynard and Bill Vlasic from Detroit.
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India imposes re-entry limit on foreigners
Stung by allegations that a US citizen with a long-term multiple-entry visa was the scout for the Mumbai terror attacks, India’s security apparatus has decided to bar foreign visitors re-entering India for two months after any trip to the country.
The sudden imposition of the new policy at the height of India’s busy winter season – which brings a surge of foreign holiday makers, business visitors, and academics – has generated confusion and anxiety, exacerbated by erratic implementation.
EDITOR’S CHOICE
Russia to supply India with nuclear reactors - Dec-07
Chicago man charged over Mumbai attack - Dec-07
A strained restraint - Nov-28
Himalayan ski plan hangs in balance - Dec-04
Radioactive leak was deliberate, says India - Nov-29
India reins in illegal mining - Nov-27
“Foreign passports are now stamped on exit to indicate that the bearer cannot re-enter India within two months of exit unless special permission is obtained,” the US embassy in India advised its citizens this week.
Both the UK and the US, have formally expressed their concern and urged Indian authorities to rethink the new rules, hurriedly drafted after David Headley, a US citizen of Pakistani origin, was accused of helping plan the Mumbai terror attacks during repeated visits to the country on a multiple-entry visa.
The furore comes as New Delhi is trying to aggressively promote itself as a tourist destination with a slick “Incredible India” advertising campaign. Despite its wealth of attractions, India received just 5.3m foreign tourists in 2008, up 5.6 per cent from 2007, but just a fraction of the nearly 14m visitors much-smaller Thailand attracts each year.
Indian officials say the requirement of the two-month “cooling off period” for foreign tourists is intended to deter misuse of five and 10-year multiple entry tourist visas, now used by thousands of foreigners to live in India while avoiding the complex process – and heavy tax liability – of establishing residency in the country.
However, the US embassy said the policy is also hitting genuine tourists who want to use India as a base from which to travel to other popular tourist destinations in the region.
It said an American family travelling to Sri Lanka from India was told they would need a special permission to re-enter India, while the visiting college-age children of a US businessman in India were told they could not re-enter if they left for a side trip to Thailand, after just three days in India.
The embassy said foreigners holding other visa types had also been affected. “There has been some confusion about what rules are in force and what rules are not,” said one Western diplomat.
India also recently tightened rules governing business visas to crack-down on tens of thousands of unskilled, and semi-skilled Chinese labourers who were working for Chinese companies on infrastructure projects in India.
The sudden imposition of the new policy at the height of India’s busy winter season – which brings a surge of foreign holiday makers, business visitors, and academics – has generated confusion and anxiety, exacerbated by erratic implementation.
EDITOR’S CHOICE
Russia to supply India with nuclear reactors - Dec-07
Chicago man charged over Mumbai attack - Dec-07
A strained restraint - Nov-28
Himalayan ski plan hangs in balance - Dec-04
Radioactive leak was deliberate, says India - Nov-29
India reins in illegal mining - Nov-27
“Foreign passports are now stamped on exit to indicate that the bearer cannot re-enter India within two months of exit unless special permission is obtained,” the US embassy in India advised its citizens this week.
Both the UK and the US, have formally expressed their concern and urged Indian authorities to rethink the new rules, hurriedly drafted after David Headley, a US citizen of Pakistani origin, was accused of helping plan the Mumbai terror attacks during repeated visits to the country on a multiple-entry visa.
The furore comes as New Delhi is trying to aggressively promote itself as a tourist destination with a slick “Incredible India” advertising campaign. Despite its wealth of attractions, India received just 5.3m foreign tourists in 2008, up 5.6 per cent from 2007, but just a fraction of the nearly 14m visitors much-smaller Thailand attracts each year.
Indian officials say the requirement of the two-month “cooling off period” for foreign tourists is intended to deter misuse of five and 10-year multiple entry tourist visas, now used by thousands of foreigners to live in India while avoiding the complex process – and heavy tax liability – of establishing residency in the country.
However, the US embassy said the policy is also hitting genuine tourists who want to use India as a base from which to travel to other popular tourist destinations in the region.
It said an American family travelling to Sri Lanka from India was told they would need a special permission to re-enter India, while the visiting college-age children of a US businessman in India were told they could not re-enter if they left for a side trip to Thailand, after just three days in India.
The embassy said foreigners holding other visa types had also been affected. “There has been some confusion about what rules are in force and what rules are not,” said one Western diplomat.
India also recently tightened rules governing business visas to crack-down on tens of thousands of unskilled, and semi-skilled Chinese labourers who were working for Chinese companies on infrastructure projects in India.
Wednesday, December 23, 2009
Japan Stocks Poised to Rebound After Trailing Developed Markets
Dec. 24 (Bloomberg) -- Government spending and the central bank’s plan to hold down interest rates will spur a rebound in Japanese stocks, this year’s worst-performing equities among major markets, six of the biggest securities firms said.
Kathy Matsui, Goldman Sachs Group Inc.’s chief strategist in Tokyo, forecasts the Topix index will rally 16 percent from the close on Dec. 22 to 1,050 by the first half of next year as the government moves to prevent a double-dip recession. Nomura Holding Inc.’s chief strategist, Seiichiro Iwasawa, predicts the Topix will climb to as much as 1,200 by the end of 2010.
“Chances are high for a turnaround in currency and equity markets,” Iwasawa said in a Bloomberg interview this month. “We can expect improvement in the performance of Japanese shares relative to other markets.”
Forecasts for a recovery in Japanese shares come as the Topix is poised for the smallest annual gain among the so-called Group of 20 nations, rising 5.1 percent this year, data compiled by Bloomberg show. The gauge is trailing the MSCI World Index by 21 percentage points, the most for any year since 1998, the data show.
Prime Minister Yukio Hatoyama’s government announced a 7.2 trillion yen ($80 billion) economic stimulus package on Dec. 8. The Bank of Japan unveiled a plan the previous week to provide 10 trillion yen in emergency credit to banks in an effort to revive an economy that it estimates will contract this year.
Bank of Japan Governor Masaaki Shirakawa said on Dec. 21 that the bank is committed to holding interest rates near zero “persistently.” The next day, the yen fell and the Nikkei 225 Stock Average climbed to its highest close in three months.
Strong Yen
The Topix dropped for three-straight months through November, widening its underperformance compared with benchmark indexes in other countries. The Russian Trading System Index, the Group of 20’s top performer, has climbed 124 percent this year. The earnings outlook in Japan has been hurt by a strong yen, whose average of 93.63 to the dollar this year is the highest level since currencies became freely traded in 1971.
A strong yen hurts exporters by reducing their foreign revenue when converted into yen and making their products more expensive overseas.
“Pessimism and frustration about Japanese shares are at their highest level in my 20-year career,” said Goldman Sachs’ Matsui in a report dated Dec. 10. “The government has finally realized that unless it quickly acts, the economy will be in danger of contracting again.”
Earnings Outlook
So-called current profit, or pretax profit from operations, for Japan’s major corporations will rise 62 percent in fiscal 2010 from the previous year, according to a forecast by Nomura Securities Financial & Economic Research Center, which assumed an exchange rate of 90 yen to the dollar.
Overall earnings for companies in the Topix are projected to rise 85 percent to 44.12 yen a share next year, according to estimates from equity analysts compiled by Bloomberg. That compares with an estimated growth of 27 percent for stocks in the MSCI World Index and 39 percent for the MSCI Asia Pacific index.
More stimulus measures may be introduced, along with dollar buying by the Bank of Japan, to stem the yen’s appreciation, according to Nomura’s Iwasawa.
The government’s implementation of fiscal and monetary policies to counter deflation and a stronger yen “make it easier to envision V-shaped recoveries in corporate earnings in fiscal 2010,” said Credit Suisse Group AG’s chief market strategist for Japan, Shinichi Ichikawa.
U.S. Jobs
The Bank of Japan forecasts the nation’s real gross domestic product will expand 1 percent in 2010 after falling 3.4 percent this year and dropping 1.13 percent in 2008.
“Corporations may continue to raise their earnings forecasts into early spring as the global economy improves,” said Shoji Hirakawa, UBS AG’s chief equity strategist for Japan. “Companies that are especially sensitive to changes in the economy may lead gains in equity markets.”
Further gains in Japan’s equity markets will depend on U.S. employment rates, according to Mizuho Securities Co. Equity Strategist Tomochika Kitaoka.
“When better job statistics make it possible for the U.S. to raise interest rates from near-zero, the yen may be sold and Japanese shares may be bought,” Kitaoka said in a report dated Dec. 11.
U.S. unemployment is estimated to rise to 10 percent in 2010 from 9.3 percent this year, according economists’ estimates compiled by Bloomberg, while real GDP is projected to expand 2.6 percent from a contraction of 2.5 percent this year.
Domestic Demand
A U.S. economic recovery may leave Japan as the last major economy with near-zero interest rates, which would “prompt liquidity to head to Japan,” said Kitaoka.
“Shares of Japanese exporters may be bought if improved U.S. employment prompts expectations of a recovery in consumer spending,” said Barclays Plc’s chief equity strategist for Japan Fumiyuki Takahashi in an interview earlier this month.
Companies that depend on domestic demand may also climb after the expansion of child-care subsidies planned by the Hatoyama administration, according to UBS’s Hirakawa. From April, the start of the fiscal year, ”the stimulus may lead to a greater-than-expected recovery in domestic demand. I’m focusing on banking, real estate, and retail shares,” said Hirakawa in an interview this month.
Kathy Matsui, Goldman Sachs Group Inc.’s chief strategist in Tokyo, forecasts the Topix index will rally 16 percent from the close on Dec. 22 to 1,050 by the first half of next year as the government moves to prevent a double-dip recession. Nomura Holding Inc.’s chief strategist, Seiichiro Iwasawa, predicts the Topix will climb to as much as 1,200 by the end of 2010.
“Chances are high for a turnaround in currency and equity markets,” Iwasawa said in a Bloomberg interview this month. “We can expect improvement in the performance of Japanese shares relative to other markets.”
Forecasts for a recovery in Japanese shares come as the Topix is poised for the smallest annual gain among the so-called Group of 20 nations, rising 5.1 percent this year, data compiled by Bloomberg show. The gauge is trailing the MSCI World Index by 21 percentage points, the most for any year since 1998, the data show.
Prime Minister Yukio Hatoyama’s government announced a 7.2 trillion yen ($80 billion) economic stimulus package on Dec. 8. The Bank of Japan unveiled a plan the previous week to provide 10 trillion yen in emergency credit to banks in an effort to revive an economy that it estimates will contract this year.
Bank of Japan Governor Masaaki Shirakawa said on Dec. 21 that the bank is committed to holding interest rates near zero “persistently.” The next day, the yen fell and the Nikkei 225 Stock Average climbed to its highest close in three months.
Strong Yen
The Topix dropped for three-straight months through November, widening its underperformance compared with benchmark indexes in other countries. The Russian Trading System Index, the Group of 20’s top performer, has climbed 124 percent this year. The earnings outlook in Japan has been hurt by a strong yen, whose average of 93.63 to the dollar this year is the highest level since currencies became freely traded in 1971.
A strong yen hurts exporters by reducing their foreign revenue when converted into yen and making their products more expensive overseas.
“Pessimism and frustration about Japanese shares are at their highest level in my 20-year career,” said Goldman Sachs’ Matsui in a report dated Dec. 10. “The government has finally realized that unless it quickly acts, the economy will be in danger of contracting again.”
Earnings Outlook
So-called current profit, or pretax profit from operations, for Japan’s major corporations will rise 62 percent in fiscal 2010 from the previous year, according to a forecast by Nomura Securities Financial & Economic Research Center, which assumed an exchange rate of 90 yen to the dollar.
Overall earnings for companies in the Topix are projected to rise 85 percent to 44.12 yen a share next year, according to estimates from equity analysts compiled by Bloomberg. That compares with an estimated growth of 27 percent for stocks in the MSCI World Index and 39 percent for the MSCI Asia Pacific index.
More stimulus measures may be introduced, along with dollar buying by the Bank of Japan, to stem the yen’s appreciation, according to Nomura’s Iwasawa.
The government’s implementation of fiscal and monetary policies to counter deflation and a stronger yen “make it easier to envision V-shaped recoveries in corporate earnings in fiscal 2010,” said Credit Suisse Group AG’s chief market strategist for Japan, Shinichi Ichikawa.
U.S. Jobs
The Bank of Japan forecasts the nation’s real gross domestic product will expand 1 percent in 2010 after falling 3.4 percent this year and dropping 1.13 percent in 2008.
“Corporations may continue to raise their earnings forecasts into early spring as the global economy improves,” said Shoji Hirakawa, UBS AG’s chief equity strategist for Japan. “Companies that are especially sensitive to changes in the economy may lead gains in equity markets.”
Further gains in Japan’s equity markets will depend on U.S. employment rates, according to Mizuho Securities Co. Equity Strategist Tomochika Kitaoka.
“When better job statistics make it possible for the U.S. to raise interest rates from near-zero, the yen may be sold and Japanese shares may be bought,” Kitaoka said in a report dated Dec. 11.
U.S. unemployment is estimated to rise to 10 percent in 2010 from 9.3 percent this year, according economists’ estimates compiled by Bloomberg, while real GDP is projected to expand 2.6 percent from a contraction of 2.5 percent this year.
Domestic Demand
A U.S. economic recovery may leave Japan as the last major economy with near-zero interest rates, which would “prompt liquidity to head to Japan,” said Kitaoka.
“Shares of Japanese exporters may be bought if improved U.S. employment prompts expectations of a recovery in consumer spending,” said Barclays Plc’s chief equity strategist for Japan Fumiyuki Takahashi in an interview earlier this month.
Companies that depend on domestic demand may also climb after the expansion of child-care subsidies planned by the Hatoyama administration, according to UBS’s Hirakawa. From April, the start of the fiscal year, ”the stimulus may lead to a greater-than-expected recovery in domestic demand. I’m focusing on banking, real estate, and retail shares,” said Hirakawa in an interview this month.
BOJ Members Were Ready to Take Action, Minutes Show
Dec. 24 (Bloomberg) -- The Bank of Japan said “many” of its board members expressed readiness to act against financial- market volatility last month, before officials held an emergency meeting to address a surge in the yen.
“Many” agreed “the bank would maintain its stance of responding promptly to changes in the market situation,” according to minutes of the bank’s Nov. 19-20 meeting released in Tokyo today. The central bank “would adopt the most effective method for money-market operations that conformed to changes in financial markets,” the report said.
The central bank unveiled a 10 trillion yen ($110 billion) fixed-rate lending facility in an emergency meeting on Dec. 1 to lower borrowing costs and counter the yen’s advance to a 14-year high against the dollar. Governor Masaaki Shirakawa has said the bank is ready to do more and can extend the lending program if the demand for cash jumps.
“The central bank’s next option will probably be to provide abundant funds aggressively by utilizing the latest program,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo. “Expanding the program will allow the bank to enhance the effect of its accommodative monetary policy.”
The emergency meeting was prompted by the yen’s advance to 84.83 on Nov. 27 and escalating warnings from Prime Minister Yukio Hatoyama’s government about prolonged declines in consumer prices. Shirakawa in October had announced plans to end some of its emergency lending programs.
Stimulus Package
Hatoyama unveiled a 7.2 trillion-yen stimulus package, his first since coming to office in September, a week after the BOJ’s emergency gathering.
Commercial banks are utilizing the central bank’s program of offering them three-month loans at 0.1 percent. In a Dec. 16 auction, lenders asked to borrow 8.5 times more than the amount offered. Deputy Prime Minister Naoto Kan said this month BOJ policies have helped the yen decline.
The board kept its benchmark overnight lending rate at 0.1 percent in a unanimous vote at the November gathering. Members said the bank would maintain an “extremely accommodative financial environment,” the minutes showed.
Board members also discussed how the bank should express its view on deflation, according to the minutes. One person said the bank should be careful about using the word to ensure it doesn’t hurt corporate and consumer sentiment. Shirakawa on Nov. 30 said the central bank agreed with the government’s view that the economy is in “mild” deflation.
Doesn’t Tolerate
The bank last week said it “does not tolerate a year-on- year rate of change in the CPI equal to or below zero percent.” Policy makers consider prices are stable as long as they are in a positive range equal to or below 2 percent. Analysts said the stance may signal the bank is committed to keeping interest rates at 0.1 percent until prices rise.
A Cabinet Office official attending the meeting, who wasn’t identified by name, called on the bank to recognize the risks of deflation, the minutes said. Government representatives attend policy board meetings, though they don’t vote on policy decisions.
A “few” members said the central bank should clearly explain that persistent price declines are being driven by weak demand and that it is “essential” for business sentiment and consumer spending to drive growth in order to overcome deflation.
“Many” agreed “the bank would maintain its stance of responding promptly to changes in the market situation,” according to minutes of the bank’s Nov. 19-20 meeting released in Tokyo today. The central bank “would adopt the most effective method for money-market operations that conformed to changes in financial markets,” the report said.
The central bank unveiled a 10 trillion yen ($110 billion) fixed-rate lending facility in an emergency meeting on Dec. 1 to lower borrowing costs and counter the yen’s advance to a 14-year high against the dollar. Governor Masaaki Shirakawa has said the bank is ready to do more and can extend the lending program if the demand for cash jumps.
“The central bank’s next option will probably be to provide abundant funds aggressively by utilizing the latest program,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo. “Expanding the program will allow the bank to enhance the effect of its accommodative monetary policy.”
The emergency meeting was prompted by the yen’s advance to 84.83 on Nov. 27 and escalating warnings from Prime Minister Yukio Hatoyama’s government about prolonged declines in consumer prices. Shirakawa in October had announced plans to end some of its emergency lending programs.
Stimulus Package
Hatoyama unveiled a 7.2 trillion-yen stimulus package, his first since coming to office in September, a week after the BOJ’s emergency gathering.
Commercial banks are utilizing the central bank’s program of offering them three-month loans at 0.1 percent. In a Dec. 16 auction, lenders asked to borrow 8.5 times more than the amount offered. Deputy Prime Minister Naoto Kan said this month BOJ policies have helped the yen decline.
The board kept its benchmark overnight lending rate at 0.1 percent in a unanimous vote at the November gathering. Members said the bank would maintain an “extremely accommodative financial environment,” the minutes showed.
Board members also discussed how the bank should express its view on deflation, according to the minutes. One person said the bank should be careful about using the word to ensure it doesn’t hurt corporate and consumer sentiment. Shirakawa on Nov. 30 said the central bank agreed with the government’s view that the economy is in “mild” deflation.
Doesn’t Tolerate
The bank last week said it “does not tolerate a year-on- year rate of change in the CPI equal to or below zero percent.” Policy makers consider prices are stable as long as they are in a positive range equal to or below 2 percent. Analysts said the stance may signal the bank is committed to keeping interest rates at 0.1 percent until prices rise.
A Cabinet Office official attending the meeting, who wasn’t identified by name, called on the bank to recognize the risks of deflation, the minutes said. Government representatives attend policy board meetings, though they don’t vote on policy decisions.
A “few” members said the central bank should clearly explain that persistent price declines are being driven by weak demand and that it is “essential” for business sentiment and consumer spending to drive growth in order to overcome deflation.
Tuesday, December 22, 2009
New Zealand Economy Grows Slower-Than-Forecast
Dec. 23 (Bloomberg) -- New Zealand’s economy grew less than economists estimated in the third quarter, driving the nation’s currency to a three-month low on speculation the central bank may not need to raise interest rates until mid-2010.
Gross domestic product rose 0.2 percent from the previous quarter, Statistics New Zealand said in Wellington today. That was half the median forecast of a 0.4 percent gain in a Bloomberg survey of 12 economists.
A decline in construction, manufacturing and business investment hobbled New Zealand’s recovery from its worst recession in 30 years. Reserve Bank Governor Alan Bollard said this month the bank may raise the benchmark interest rate from a record low sooner than he previously indicated should the economic rebound be sustained.
“The recovery is in train, but has been off to a subdued start,” said Khoon Goh, senior markets economist at ANZ National Bank Ltd. in Wellington. The data doesn’t “warrant hiking rates as early as March. We see June 2010 as the central case for when the tightening cycle starts.”
New Zealand’s dollar dropped to 69.75 U.S. cents, the lowest since Sept. 14, from 70.20 cents before the report was released. It bought 69.89 cents at 12.10 p.m. in Wellington. The currency had climbed 12 percent against the U.S. dollar the past six months and the NZX 50 stock index gained 14 percent on signs of a pickup in the economy.
Global Rates
Swaps traders are betting that the Reserve Bank of New Zealand will increase the benchmark rate by 203 basis points over the next 12 months, according to a Credit Suisse index.
“The recovery remains fragile,” Finance Minister Bill English said today. “To climb back up the world income ladder and to replace jobs lost during the recession, we need businesses to have the confidence to invest and create jobs.”
Central bankers around the world are assessing when to remove stimulus as the global recession abates. Australia and Norway have started raising rates and the Federal Reserve has committed to scale down buying of mortgage-backed debt.
Europe’s economy emerged from its worst slump in more than six decades, growing 0.4 percent in the third quarter from the previous three months. The U.S. economy grew at a 2.8 percent annual pace last quarter. Australia’s economy expanded in the three months through September for a third straight quarter.
Governor’s Comments
New Zealand’s central bank may begin to “remove monetary stimulus around the middle of 2010,” Bollard said on Dec. 10. In October, the governor said the nation’s benchmark interest rate would be kept on hold until the second half of next year.
The economy shrank 1.3 percent in the third quarter from a year earlier, today’s report showed. That compared with a 1.2 percent contraction estimated by economists.
“The central bank needs strong data in order to bring forward its tightening cycle to the same degree as the market has priced in,” said Stephen Toplis, head of research at Bank of New Zealand Ltd. in Wellington. “Is this the sort of data that would shift the Reserve Bank from its published view? You’d have to say no.”
Business investment fell 0.9 percent, the fifth straight decline, as companies spent less on plant and machinery, today’s report showed. Manufacturing dropped 1.9 percent and construction declined 4.4 percent.
Manufacturers, Retailers
Bridgestone Corp., the world’s largest tiremaker by sales, said in October it would close a plant in Christchurch, New Zealand, by the end of the year because of lower cost competitiveness.
Fisher & Paykel Appliances Holdings Ltd., the country’s biggest manufacturer of washers and dryers, said sales in the three months ended Sept. 30 fell 11 percent from a year earlier. Sales are likely to remain flat for the rest of the fiscal year, Chief Executive Officer Stuart Broadhurst said Nov. 27.
Smiths City Group Ltd. yesterday said sales at its furniture and appliance stores dropped 6.2 percent in the six months ended Oct. 31. “The retail environment has continued to be very tough and in big ticket, the worst for 20 years,” Chairman Craig Boyce said.
Warehouse Group Ltd., the nation’s biggest discount retailer, last month said sales were below expectations in the three months ended Nov. 1.
Household Spending
Household spending, which makes up 60 percent of the economy, rose 0.8 percent in the third quarter. Sales of cars, home appliances and other so-called durable goods gained 2 percent. Purchases of food and non-durable items fell.
Exports of goods and services were unchanged in the third quarter as increased spending by tourists offset a decline in commodity exports including meat and seafood.
The GDP deflator, a measure of prices, rose 2 percent in the year ended Sept. 30.
“GDP growth is showing little upward momentum from one quarter to the next,” said Ian Pollick, economics strategist at TD Securities in Toronto. “From a monetary policy perspective, this particular report is unlikely to light a fire under the RBNZ.”
Gross domestic product rose 0.2 percent from the previous quarter, Statistics New Zealand said in Wellington today. That was half the median forecast of a 0.4 percent gain in a Bloomberg survey of 12 economists.
A decline in construction, manufacturing and business investment hobbled New Zealand’s recovery from its worst recession in 30 years. Reserve Bank Governor Alan Bollard said this month the bank may raise the benchmark interest rate from a record low sooner than he previously indicated should the economic rebound be sustained.
“The recovery is in train, but has been off to a subdued start,” said Khoon Goh, senior markets economist at ANZ National Bank Ltd. in Wellington. The data doesn’t “warrant hiking rates as early as March. We see June 2010 as the central case for when the tightening cycle starts.”
New Zealand’s dollar dropped to 69.75 U.S. cents, the lowest since Sept. 14, from 70.20 cents before the report was released. It bought 69.89 cents at 12.10 p.m. in Wellington. The currency had climbed 12 percent against the U.S. dollar the past six months and the NZX 50 stock index gained 14 percent on signs of a pickup in the economy.
Global Rates
Swaps traders are betting that the Reserve Bank of New Zealand will increase the benchmark rate by 203 basis points over the next 12 months, according to a Credit Suisse index.
“The recovery remains fragile,” Finance Minister Bill English said today. “To climb back up the world income ladder and to replace jobs lost during the recession, we need businesses to have the confidence to invest and create jobs.”
Central bankers around the world are assessing when to remove stimulus as the global recession abates. Australia and Norway have started raising rates and the Federal Reserve has committed to scale down buying of mortgage-backed debt.
Europe’s economy emerged from its worst slump in more than six decades, growing 0.4 percent in the third quarter from the previous three months. The U.S. economy grew at a 2.8 percent annual pace last quarter. Australia’s economy expanded in the three months through September for a third straight quarter.
Governor’s Comments
New Zealand’s central bank may begin to “remove monetary stimulus around the middle of 2010,” Bollard said on Dec. 10. In October, the governor said the nation’s benchmark interest rate would be kept on hold until the second half of next year.
The economy shrank 1.3 percent in the third quarter from a year earlier, today’s report showed. That compared with a 1.2 percent contraction estimated by economists.
“The central bank needs strong data in order to bring forward its tightening cycle to the same degree as the market has priced in,” said Stephen Toplis, head of research at Bank of New Zealand Ltd. in Wellington. “Is this the sort of data that would shift the Reserve Bank from its published view? You’d have to say no.”
Business investment fell 0.9 percent, the fifth straight decline, as companies spent less on plant and machinery, today’s report showed. Manufacturing dropped 1.9 percent and construction declined 4.4 percent.
Manufacturers, Retailers
Bridgestone Corp., the world’s largest tiremaker by sales, said in October it would close a plant in Christchurch, New Zealand, by the end of the year because of lower cost competitiveness.
Fisher & Paykel Appliances Holdings Ltd., the country’s biggest manufacturer of washers and dryers, said sales in the three months ended Sept. 30 fell 11 percent from a year earlier. Sales are likely to remain flat for the rest of the fiscal year, Chief Executive Officer Stuart Broadhurst said Nov. 27.
Smiths City Group Ltd. yesterday said sales at its furniture and appliance stores dropped 6.2 percent in the six months ended Oct. 31. “The retail environment has continued to be very tough and in big ticket, the worst for 20 years,” Chairman Craig Boyce said.
Warehouse Group Ltd., the nation’s biggest discount retailer, last month said sales were below expectations in the three months ended Nov. 1.
Household Spending
Household spending, which makes up 60 percent of the economy, rose 0.8 percent in the third quarter. Sales of cars, home appliances and other so-called durable goods gained 2 percent. Purchases of food and non-durable items fell.
Exports of goods and services were unchanged in the third quarter as increased spending by tourists offset a decline in commodity exports including meat and seafood.
The GDP deflator, a measure of prices, rose 2 percent in the year ended Sept. 30.
“GDP growth is showing little upward momentum from one quarter to the next,” said Ian Pollick, economics strategist at TD Securities in Toronto. “From a monetary policy perspective, this particular report is unlikely to light a fire under the RBNZ.”
Australian Stocks Gain on Recovery Hopes, Takeover Speculation
Dec. 23 (Bloomberg) -- Australian stocks rose for a second day amid signs that economies around the world are improving and on speculation that mergers and acquisitions will accelerate. Macarthur Coal Ltd., the world’s biggest exporter of pulverized coal used by steelmakers, climbed 3.7 percent after Macquarie Group Ltd. said Hong Kong’s Noble Group Ltd. may be planning a bid. Gloucester Coal Ltd. jumped 26 percent after receiving a takeover offer from Macarthur. Telstra Corp. gained 0.9 percent after the Australian newspaper said the phone company appointed banks to sell shares in a Chinese subsidiary.
The S&P/ASX 200 Index rose 0.3 percent to 4,716.60 as of 10:58 a.m. in Sydney, after falling as much as 0.3 percent. About as many stocks advanced as declined.
U.S. existing home purchases increased and the U.K. economy shrank less than initially reported. The gauge has rallied 50 percent from a five-year low on March 6 as government stimulus measures including cash handouts and infrastructure spending helped Australia skirt a recession.
“We’re seeing a fairly broad-based improvement in most economic measures,” said Cameron Peacock, a market analyst at IG Markets in Melbourne. “Heading into next year, most people are fairly optimistic we’ll see a continued recovery across the global economy.”
The S&P/ASX 200 Index rose 0.3 percent to 4,716.60 as of 10:58 a.m. in Sydney, after falling as much as 0.3 percent. About as many stocks advanced as declined.
U.S. existing home purchases increased and the U.K. economy shrank less than initially reported. The gauge has rallied 50 percent from a five-year low on March 6 as government stimulus measures including cash handouts and infrastructure spending helped Australia skirt a recession.
“We’re seeing a fairly broad-based improvement in most economic measures,” said Cameron Peacock, a market analyst at IG Markets in Melbourne. “Heading into next year, most people are fairly optimistic we’ll see a continued recovery across the global economy.”
Monday, December 21, 2009
Treasury 10-Year Yields Reach 4-Month High on Inflation Bets
Dec. 22 (Bloomberg) -- Treasuries dropped, pushing 10-year yields to the highest level in four months, on prospects the U.S. government’s final figure for third-quarter gross domestic product will signal accelerating inflation.
The yield curve, the gap between shorter- and longer-term debt used as a barometer for the economy, widened to a record as investors bet an accelerating recovery will fuel inflation and hurt demand for unprecedented government debt sales. Government securities extended yesterday’s losses, the largest drop since August, before the U.S. tomorrow announces the sizes of two-, five- and seven-year auctions next week.
“Inflation fears are being sparked by oil price gains,” said Kazuaki Oh’e, a bond salesman in Tokyo at Canadian Imperial Bank of Commerce, the nation’s fifth-largest lender. “The trend has changed from deflation to neutral and that is damaging the bond market.”
The yield on the benchmark 10-year note rose two basis points, or 0.02 percentage point, to 3.7 percent, the highest since Aug. 13, as of 10:24 a.m. Tokyo, according to BGCantor Market Data. The 3.375 percent security due November 2019 fell 6/32, or $1.88 cents per $1,000 face amount, to 97 11/32. The two-year yield was little changed at 0.87 percent.
The difference between 2- and 10-year Treasury note yields increased to 283 basis points today. It rose from 145 basis points at the beginning of the year, with the Federal Reserve anchoring its target rate at virtually zero and the U.S. extending the average maturity of its debt.
The yield curve reached its previous record of 281 basis points on June 5, when Treasuries plunged after a government report showed the smallest decline in U.S. payrolls in eight months. Ten-year note yields touched 4 percent the following week, the highest level in 2009.
The yield curve, the gap between shorter- and longer-term debt used as a barometer for the economy, widened to a record as investors bet an accelerating recovery will fuel inflation and hurt demand for unprecedented government debt sales. Government securities extended yesterday’s losses, the largest drop since August, before the U.S. tomorrow announces the sizes of two-, five- and seven-year auctions next week.
“Inflation fears are being sparked by oil price gains,” said Kazuaki Oh’e, a bond salesman in Tokyo at Canadian Imperial Bank of Commerce, the nation’s fifth-largest lender. “The trend has changed from deflation to neutral and that is damaging the bond market.”
The yield on the benchmark 10-year note rose two basis points, or 0.02 percentage point, to 3.7 percent, the highest since Aug. 13, as of 10:24 a.m. Tokyo, according to BGCantor Market Data. The 3.375 percent security due November 2019 fell 6/32, or $1.88 cents per $1,000 face amount, to 97 11/32. The two-year yield was little changed at 0.87 percent.
The difference between 2- and 10-year Treasury note yields increased to 283 basis points today. It rose from 145 basis points at the beginning of the year, with the Federal Reserve anchoring its target rate at virtually zero and the U.S. extending the average maturity of its debt.
The yield curve reached its previous record of 281 basis points on June 5, when Treasuries plunged after a government report showed the smallest decline in U.S. payrolls in eight months. Ten-year note yields touched 4 percent the following week, the highest level in 2009.
Samsung, Technology Shares to Lead Asia: Technical Analysis
Dec. 22 (Bloomberg) -- Technology shares including Samsung Electronics Co. and Hynix Semiconductor Inc. may lead an advance in Asian markets next year after breaking out of a two-year “basing pattern,” CLSA Asia-Pacific Markets said.
The MSCI Asia excluding Japan Information Technology Index relative to the broader regional gauge has overcome the resistance formed by the October 2008 peak and the high this year, CLSA analysts Laurence Balanco and Tiara Fontanilla said in a report dated yesterday. This follows a break above its 40- week weighted moving average in July, the analysts also said.
“A break above the downtrend from the 2000 peak would appear structural to us,” the analysts wrote. “As such, the IT sector is well placed to be an area of leadership in the region for years to come.”
The MSCI regional index of technology stocks has rallied 42 percent in the past six months, the most among 10 industry groups on the broader MSCI Asia excluding Japan Index, which climbed 23 percent.
Going into the first quarter of 2010, investors should “overweight” shares of Samsung Electronics and Hynix Semiconductor, the world’s two largest computer-memory chipmakers, according to the CLSA report.
Samsung Electronics, whose shares have rallied 72 percent this year, may find its next resistance at 864,433 won, where the fifth wave would be approximately 62 percent of the first wave, the analysts wrote. The resistance level is 12 percent higher than yesterday’s close.
A subsequent target for the stock would be 979,749 won, where the final wave would equal the first leg in percentage terms, the analysts also said.
Elliott Wave Theory, developed by accountant Ralph Nelson Elliott during the Great Depression, postulates that market swings, or waves, follow a predictable, five-stage structure of three steps forward, two steps back.
Meanwhile, Hynix has broken above a “major cluster zone of resistance” at around 21,200 won formed by the peaks of August 2007, June 2008 and September 2009, CLSA said. The brokerage predicted that the stock’s next resistance will be at 26,144 won.
The MSCI Asia excluding Japan Information Technology Index relative to the broader regional gauge has overcome the resistance formed by the October 2008 peak and the high this year, CLSA analysts Laurence Balanco and Tiara Fontanilla said in a report dated yesterday. This follows a break above its 40- week weighted moving average in July, the analysts also said.
“A break above the downtrend from the 2000 peak would appear structural to us,” the analysts wrote. “As such, the IT sector is well placed to be an area of leadership in the region for years to come.”
The MSCI regional index of technology stocks has rallied 42 percent in the past six months, the most among 10 industry groups on the broader MSCI Asia excluding Japan Index, which climbed 23 percent.
Going into the first quarter of 2010, investors should “overweight” shares of Samsung Electronics and Hynix Semiconductor, the world’s two largest computer-memory chipmakers, according to the CLSA report.
Samsung Electronics, whose shares have rallied 72 percent this year, may find its next resistance at 864,433 won, where the fifth wave would be approximately 62 percent of the first wave, the analysts wrote. The resistance level is 12 percent higher than yesterday’s close.
A subsequent target for the stock would be 979,749 won, where the final wave would equal the first leg in percentage terms, the analysts also said.
Elliott Wave Theory, developed by accountant Ralph Nelson Elliott during the Great Depression, postulates that market swings, or waves, follow a predictable, five-stage structure of three steps forward, two steps back.
Meanwhile, Hynix has broken above a “major cluster zone of resistance” at around 21,200 won formed by the peaks of August 2007, June 2008 and September 2009, CLSA said. The brokerage predicted that the stock’s next resistance will be at 26,144 won.
Sunday, December 20, 2009
India Must Tighten Monetary Policy, Former Governor Jalan Says
Dec. 21 (Bloomberg) -- India’s central bank needs to drain cash from the economy to check speculation in commodities, former Governor Bimal Jalan said, after food price inflation climbed to an 11-year high this month.
“Reduction in availability of money may help in reducing the speculative pressure on retail prices,” Jalan, who headed the central bank between 1997 and 2003, said in an interview in New Delhi on Dec. 18. “Monetary policy could give a signal that it is worried about inflation.”
Reserve Bank of India Governor Duvvuri Subbarao said he discussed the country’s economic situation with Finance Minister Pranab Mukherjee on Dec. 18, fueling expectations he may tighten monetary policy soon. Indian bonds and stocks fell last week as investors bet the central bank may raise interest rates.
“The market has begun to price in a monetary policy action in the near term to anchor rapidly escalating inflation expectations,” said Shubhada M. Rao, chief economist at Yes Bank Ltd. in Mumbai.
The yield on the benchmark 10-year government bonds rose 14 basis points to 7.72 percent last week. The key Sensitive stock index fell 2.3 percent to 16,719.83 on the Bombay Stock Exchange during the same period.
Food prices are rising after the June-to-September monsoon rains, the main source of irrigation in Asia’s third-largest economy, were the weakest this year since 1972, hurting output of rice, pulses and wheat.
Surging Food Price
Production of monsoon-sown rice may total 71.65 million metric tons this year, less than the 84.58 million tons reaped a year ago, according to government estimates. Sugar crop in India, the biggest grower after Brazil, fell 9.6 percent in the first two months of the season that started Oct. 1 to 1.7 million metric tons from a year ago.
An index of food articles compiled by the commerce ministry advanced 19.95 percent in the week ended Dec. 5, the highest since Dec. 1998. India’s key wholesale-price inflation accelerated to 4.78 percent in November from a year earlier, following a 1.34 percent gain in October, the ministry.
“You don’t need a stark action because inflation is confined to food prices,” said Jalan. “According to one school of thought, some indicative monetary action is worth considering, a mild one.”
Tighter Policy
Even though the central bank’s next monetary policy statement is due on Jan. 29, Subbarao can make changes to interest rates before the scheduled date.
In his last policy announcement on Oct. 27, the governor ordered lenders to keep a greater proportion of their deposits in government bonds, taking the first step toward withdrawing monetary stimulus. Before the move, Subbarao had injected 5.85 trillion rupees ($125 billion) of cash since September 2008 to protect the economy from the global recession.
Subbarao has kept the key reverse repurchase rate unchanged at 3.25 percent since April.
Australia and Vietnam are the two countries in Asia Pacific that have already raised rates to rein in inflation.
The Organization for Economic Cooperation and Development said last month that India must tighten its monetary policy “fairly soon” to stem inflation.
Jalan, who served as a member of parliament until August this year after his stint at the central bank, said India must also step up import of food items that are in short supply.
Political Pressure
“In addition to the drought, what’s complicated the situation is that we didn’t make arrangements for import of rice,” Jalan said. “And, this could partly be because of overestimation of the likely output.”
Glencore International AG, Louis Dreyfus Corp. and Olam International were among companies that offered to sell rice to India last month.
Political pressure is mounting on Indian Prime Minister Manmohan Singh to arrest the price rise in a nation where two- thirds of the 1.2 billion people live on less than $2 a day.
A parliamentary panel on finance on Dec. 17 warned the Ministry of Finance for failing to act in a timely manner to curb inflation. A day earlier, opposition lawmakers accused the government of being ineffective in tackling prices and disrupted parliament proceedings.
Inflation is gathering strength in India as its economy recovers from the global recession. The $1.2 trillion economy expanded 7.9 percent in the three months ended Sept. 30 from a year earlier, the quickest pace in six quarters. The growth lagged behind only China among the world’s major economies.
“With a strong growth in GDP and inflation accelerating at the same time, pressure is building on the Reserve Bank to partially retract the monetary stimulus,” said Rahul Bajoria, an economist at Barclays Capital in Singapore.
“Reduction in availability of money may help in reducing the speculative pressure on retail prices,” Jalan, who headed the central bank between 1997 and 2003, said in an interview in New Delhi on Dec. 18. “Monetary policy could give a signal that it is worried about inflation.”
Reserve Bank of India Governor Duvvuri Subbarao said he discussed the country’s economic situation with Finance Minister Pranab Mukherjee on Dec. 18, fueling expectations he may tighten monetary policy soon. Indian bonds and stocks fell last week as investors bet the central bank may raise interest rates.
“The market has begun to price in a monetary policy action in the near term to anchor rapidly escalating inflation expectations,” said Shubhada M. Rao, chief economist at Yes Bank Ltd. in Mumbai.
The yield on the benchmark 10-year government bonds rose 14 basis points to 7.72 percent last week. The key Sensitive stock index fell 2.3 percent to 16,719.83 on the Bombay Stock Exchange during the same period.
Food prices are rising after the June-to-September monsoon rains, the main source of irrigation in Asia’s third-largest economy, were the weakest this year since 1972, hurting output of rice, pulses and wheat.
Surging Food Price
Production of monsoon-sown rice may total 71.65 million metric tons this year, less than the 84.58 million tons reaped a year ago, according to government estimates. Sugar crop in India, the biggest grower after Brazil, fell 9.6 percent in the first two months of the season that started Oct. 1 to 1.7 million metric tons from a year ago.
An index of food articles compiled by the commerce ministry advanced 19.95 percent in the week ended Dec. 5, the highest since Dec. 1998. India’s key wholesale-price inflation accelerated to 4.78 percent in November from a year earlier, following a 1.34 percent gain in October, the ministry.
“You don’t need a stark action because inflation is confined to food prices,” said Jalan. “According to one school of thought, some indicative monetary action is worth considering, a mild one.”
Tighter Policy
Even though the central bank’s next monetary policy statement is due on Jan. 29, Subbarao can make changes to interest rates before the scheduled date.
In his last policy announcement on Oct. 27, the governor ordered lenders to keep a greater proportion of their deposits in government bonds, taking the first step toward withdrawing monetary stimulus. Before the move, Subbarao had injected 5.85 trillion rupees ($125 billion) of cash since September 2008 to protect the economy from the global recession.
Subbarao has kept the key reverse repurchase rate unchanged at 3.25 percent since April.
Australia and Vietnam are the two countries in Asia Pacific that have already raised rates to rein in inflation.
The Organization for Economic Cooperation and Development said last month that India must tighten its monetary policy “fairly soon” to stem inflation.
Jalan, who served as a member of parliament until August this year after his stint at the central bank, said India must also step up import of food items that are in short supply.
Political Pressure
“In addition to the drought, what’s complicated the situation is that we didn’t make arrangements for import of rice,” Jalan said. “And, this could partly be because of overestimation of the likely output.”
Glencore International AG, Louis Dreyfus Corp. and Olam International were among companies that offered to sell rice to India last month.
Political pressure is mounting on Indian Prime Minister Manmohan Singh to arrest the price rise in a nation where two- thirds of the 1.2 billion people live on less than $2 a day.
A parliamentary panel on finance on Dec. 17 warned the Ministry of Finance for failing to act in a timely manner to curb inflation. A day earlier, opposition lawmakers accused the government of being ineffective in tackling prices and disrupted parliament proceedings.
Inflation is gathering strength in India as its economy recovers from the global recession. The $1.2 trillion economy expanded 7.9 percent in the three months ended Sept. 30 from a year earlier, the quickest pace in six quarters. The growth lagged behind only China among the world’s major economies.
“With a strong growth in GDP and inflation accelerating at the same time, pressure is building on the Reserve Bank to partially retract the monetary stimulus,” said Rahul Bajoria, an economist at Barclays Capital in Singapore.
Asian Stocks Climb, Led by Commodity Companies; Qantas Advances
Dec. 21 (Bloomberg) -- Asian stocks advanced for the first time in three days, led by commodity producers, after oil, copper and gold prices gained and Qantas Airways Ltd. forecast a pretax profit.
Qantas jumped 4.4 percent as Australia’s biggest airline forecast first-half pretax profit of between A$50 million and A$150 million. BHP Billiton Ltd., the world’s largest mining company and Australia’s top oil producer, added 2 percent after oil and copper rose in New York on Dec. 18. Nippon Oil Corp, Japan’s largest oil refiner, climbed 3.8 percent. Mazda Motor Corp., Japan’s second-largest car exporter, gained 1.4 percent after the yen weakened.
“Investors are cautiously optimistic heading into 2010,” said Cameron Peacock, a market analyst at IG Markets in Melbourne. “There seems to be a general view that the economic recovery is still on track. Next year will certainly be one of consolidation, and confirmation that the expectations built into equity valuations are justified.”
The MSCI Asia Pacific Index rose 0.4 percent to 117.98 as of 9:37 a.m. in Tokyo, with about five stocks advancing for every four that declined. The index has rallied 32 percent this year, on course for its biggest annual increase since 2003, as central banks worldwide reduced borrowing costs and governments increased spending to revive global economic growth.
Japan’s Nikkei 225 Stock Average climbed 0.6 percent. Australia’s S&P/ASX 200 Index gained 0.7 percent. South Korea’s benchmark Kospi index fell 0.5 percent in Seoul, while New Zealand’s NZX 50 Index slipped 0.1 percent.
Nikkei, S&P/ASX 200
The yen depreciated to as much as 90.67 today from 89.72 at the close of stock trading in Tokyo on Dec. 18. Against the euro, it weakened to as much as 129.83 from 129.03. That boosts the value of sales generated overseas for Japanese companies when converted into their home currency.
“The weak yen will likely encourage a positive move in the market,” said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. in Tokyo. “If the yen can stabilize in the 90s to the dollar, it will ease concern for company earnings.”
Copper futures for March delivery rose 1.05 cents, or 0.3 percent, to $3.1385 a pound on the Comex division of the New York Mercantile Exchange on Dec. 18. Crude oil for January delivery climbed 1 percent, the highest settlement since Dec. 7.
In New York, the Standard & Poor’s 500 Index advanced 0.6 percent on Dec. 18 after better-than-estimated profit at Oracle Corp. and Research In Motion Ltd. boosted technology companies.
The MSCI Asia Pacific Index has surged 67 percent from its lowest level in more than five years on March 9, outpacing gains of 63 percent by the S&P 500 and 56 percent for the Dow Jones Stoxx 600 Index in Europe. Stocks in the gauge are valued at an average of 22.2 times estimated earnings, compared with an average of 17.6 times for the S&P.
Qantas jumped 4.4 percent as Australia’s biggest airline forecast first-half pretax profit of between A$50 million and A$150 million. BHP Billiton Ltd., the world’s largest mining company and Australia’s top oil producer, added 2 percent after oil and copper rose in New York on Dec. 18. Nippon Oil Corp, Japan’s largest oil refiner, climbed 3.8 percent. Mazda Motor Corp., Japan’s second-largest car exporter, gained 1.4 percent after the yen weakened.
“Investors are cautiously optimistic heading into 2010,” said Cameron Peacock, a market analyst at IG Markets in Melbourne. “There seems to be a general view that the economic recovery is still on track. Next year will certainly be one of consolidation, and confirmation that the expectations built into equity valuations are justified.”
The MSCI Asia Pacific Index rose 0.4 percent to 117.98 as of 9:37 a.m. in Tokyo, with about five stocks advancing for every four that declined. The index has rallied 32 percent this year, on course for its biggest annual increase since 2003, as central banks worldwide reduced borrowing costs and governments increased spending to revive global economic growth.
Japan’s Nikkei 225 Stock Average climbed 0.6 percent. Australia’s S&P/ASX 200 Index gained 0.7 percent. South Korea’s benchmark Kospi index fell 0.5 percent in Seoul, while New Zealand’s NZX 50 Index slipped 0.1 percent.
Nikkei, S&P/ASX 200
The yen depreciated to as much as 90.67 today from 89.72 at the close of stock trading in Tokyo on Dec. 18. Against the euro, it weakened to as much as 129.83 from 129.03. That boosts the value of sales generated overseas for Japanese companies when converted into their home currency.
“The weak yen will likely encourage a positive move in the market,” said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. in Tokyo. “If the yen can stabilize in the 90s to the dollar, it will ease concern for company earnings.”
Copper futures for March delivery rose 1.05 cents, or 0.3 percent, to $3.1385 a pound on the Comex division of the New York Mercantile Exchange on Dec. 18. Crude oil for January delivery climbed 1 percent, the highest settlement since Dec. 7.
In New York, the Standard & Poor’s 500 Index advanced 0.6 percent on Dec. 18 after better-than-estimated profit at Oracle Corp. and Research In Motion Ltd. boosted technology companies.
The MSCI Asia Pacific Index has surged 67 percent from its lowest level in more than five years on March 9, outpacing gains of 63 percent by the S&P 500 and 56 percent for the Dow Jones Stoxx 600 Index in Europe. Stocks in the gauge are valued at an average of 22.2 times estimated earnings, compared with an average of 17.6 times for the S&P.
Saturday, December 19, 2009
Half-Shuffled Afghan Cabinet Keeps Men Known to U.S.
Afghan President Hamid Karzai, under pressure from the U.S. to reduce official corruption, formed a new cabinet, keeping key ministers favored by Western governments and appointing two former anti-Soviet guerrilla commanders whom Afghan policy experts describe as corrupt.
Karzai submitted names of his cabinet nominees to the lower house of parliament today, more than a month after being sworn in for a second term following an election in August marred by allegations of fraud. The cabinet will be scrutinized as an early test of Karzai’s commitment to attack official corruption, as President Barack Obama has demanded that he do.
While officials gave slightly different lists of the new cabinet, both versions showed Karzai avoiding sweeping changes. He retained the finance, defense and interior ministers and has not yet selected a foreign minister, according to a list given to reporters by officials of the lower house of parliament.
“This cabinet brings no good message to the Afghan people” and is unlikely to bolster Karzai’s waning public support, said Haroun Mir, director of the Afghanistan Center for Research and Policy Studies in Kabul, the capital. It is dominated by “former and current ministers and does not offer solutions” to the inefficacy and corruption of the government in its previous five-year term, he said.
Mining Sector
The new cabinet excludes Mines Minister Ibrahim Adel, the top official most prominently accused of graft. While mining is one of few sectors of the Afghan economy to draw international interest in investment, Afghanistan is second only to Somalia as the most corrupt of 180 countries, according to the Corruption Perceptions Index published last month by the research and lobby group Transparency International.
The Washington Post and the Associated Press last month cited unidentified U.S. officials as accusing Adel of taking a bribe of at least $20 million from the Metallurgical Corp. of China for awarding it a contract to develop one of the world’s largest copper mines. Adel denies the allegation and Afghanistan’s attorney general said yesterday the government has no evidence for charges against him.
A list of 27 cabinet members, distributed to reporters by the lower house of parliament, included two ex-commanders from the 1980s guerrilla war against Soviet occupation who are criticized by Afghan-affairs specialists for alleged corruption and autocratic rule. A 23-name list, recited to reporters by Karzai’s parliamentary affairs minister, omitted the most controversial such ex-commander, Gul Agha Sherzai.
Fiefdom
Sherzai built a fiefdom in the southern city of Kandahar after being hired by U.S. forces to help oust the Taliban from there in 2001. His subsequent rule was unpopular, seen as “corrupt and inefficient,” according to a 2005 report by the Washington-based Center for Strategic and International Studies.
Sherzai and other ex-commanders are now regional power brokers who have pressed the president for government posts in exchange for supporting him, Mir said. Obama this month threatened to cut U.S. aid to parts of the Afghan government that fail to root out corrupt officials, saying graft undermines the U.S.-led fight against the Taliban and al-Qaeda.
Karzai and his attorney general, Mohammad Ishaq Aloko, have vowed to prosecute top officials for graft, and Aloko said yesterday those to be charged include two members of the outgoing cabinet.
Prosecutions of as many as 18 current or former ministers or provincial governors will begin “in the near future,” Aloko said in a telephone interview.
As U.S. pressure on corruption has increased in the past few months, both Karzai and his attorney general have promised prosecutions of dishonest officials. The police and court systems that will have to implement any crackdown are weak, said Lorenzo Delesgues, director of Integrity Watch Afghanistan, a Kabul-based non-profit group that researches corruption.
Karzai submitted names of his cabinet nominees to the lower house of parliament today, more than a month after being sworn in for a second term following an election in August marred by allegations of fraud. The cabinet will be scrutinized as an early test of Karzai’s commitment to attack official corruption, as President Barack Obama has demanded that he do.
While officials gave slightly different lists of the new cabinet, both versions showed Karzai avoiding sweeping changes. He retained the finance, defense and interior ministers and has not yet selected a foreign minister, according to a list given to reporters by officials of the lower house of parliament.
“This cabinet brings no good message to the Afghan people” and is unlikely to bolster Karzai’s waning public support, said Haroun Mir, director of the Afghanistan Center for Research and Policy Studies in Kabul, the capital. It is dominated by “former and current ministers and does not offer solutions” to the inefficacy and corruption of the government in its previous five-year term, he said.
Mining Sector
The new cabinet excludes Mines Minister Ibrahim Adel, the top official most prominently accused of graft. While mining is one of few sectors of the Afghan economy to draw international interest in investment, Afghanistan is second only to Somalia as the most corrupt of 180 countries, according to the Corruption Perceptions Index published last month by the research and lobby group Transparency International.
The Washington Post and the Associated Press last month cited unidentified U.S. officials as accusing Adel of taking a bribe of at least $20 million from the Metallurgical Corp. of China for awarding it a contract to develop one of the world’s largest copper mines. Adel denies the allegation and Afghanistan’s attorney general said yesterday the government has no evidence for charges against him.
A list of 27 cabinet members, distributed to reporters by the lower house of parliament, included two ex-commanders from the 1980s guerrilla war against Soviet occupation who are criticized by Afghan-affairs specialists for alleged corruption and autocratic rule. A 23-name list, recited to reporters by Karzai’s parliamentary affairs minister, omitted the most controversial such ex-commander, Gul Agha Sherzai.
Fiefdom
Sherzai built a fiefdom in the southern city of Kandahar after being hired by U.S. forces to help oust the Taliban from there in 2001. His subsequent rule was unpopular, seen as “corrupt and inefficient,” according to a 2005 report by the Washington-based Center for Strategic and International Studies.
Sherzai and other ex-commanders are now regional power brokers who have pressed the president for government posts in exchange for supporting him, Mir said. Obama this month threatened to cut U.S. aid to parts of the Afghan government that fail to root out corrupt officials, saying graft undermines the U.S.-led fight against the Taliban and al-Qaeda.
Karzai and his attorney general, Mohammad Ishaq Aloko, have vowed to prosecute top officials for graft, and Aloko said yesterday those to be charged include two members of the outgoing cabinet.
Prosecutions of as many as 18 current or former ministers or provincial governors will begin “in the near future,” Aloko said in a telephone interview.
As U.S. pressure on corruption has increased in the past few months, both Karzai and his attorney general have promised prosecutions of dishonest officials. The police and court systems that will have to implement any crackdown are weak, said Lorenzo Delesgues, director of Integrity Watch Afghanistan, a Kabul-based non-profit group that researches corruption.
Democrats Clinch Deal for Deciding Vote on Health Bill
WASHINGTON — Senate Democrats said Saturday that they had clinched an agreement on a far-reaching overhaul of the nation’s health care system and forged ahead with efforts to approve the legislation by Christmas over Republican opposition.
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Sen. Ben Nelson, right, agreed after hours of negotiation Friday to back the Senate Democrats’ legislation, making him the pivotal 60th vote.
As the Senate convened in a blizzard, Democratic leaders hailed a breakthrough that came when Senator Ben Nelson, Democrat of Nebraska, agreed to back the bill after 13 hours of negotiations on Friday, making him the pivotal 60th vote for a measure that President Obama has called his top domestic priority.
“Change is never easy, but change is what’s necessary in America,” Mr. Nelson said at a morning news conference. “And that’s why I intend to vote,” he said, “for health care reform.”
Mr. Obama, appearing on television from the White House, said: “Today is a major step forward for the American people. After nearly a century-long struggle, we are on the cusp of making health care reform a reality in the United States of America.”
The legislation, the most significant overhaul of the nation’s health care system in more than a generation, seeks to extend health benefits to more than 30 million uninsured Americans.
The blinding snow outside the Capitol added to what had already been a chaotic few weeks for the Senate, which has met every day since Nov. 30 and was working through its third consecutive weekend. The sergeant-at-arms had four-wheel-drive vehicles at the ready to bring lawmakers in for votes. And while senators wore the jackets and ties required on the Senate floor, dress shoes gave way to boots.
Mr. Nelson committed his vote after winning tighter restrictions on insurance coverage for abortions, as well as increased federal health care aid for his state.
With Senate leaders increasingly confident that they would pass the bill, Mr. Nelson pointedly warned that he would oppose the final version if negotiations with the House, which approved its bill last month, result in changes that he does not like.
But House liberals are expected to resist some concessions made in the Senate. To secure the votes of centrist holdouts, Senate leaders dropped a proposed government-run health insurance plan, or public option, and an alternate plan to let some people ages 55 to 65 buy coverage through Medicare, both favored by liberals.
Because the Democrats nominally control 60 seats in the Senate — the precise number needed to overcome a Republican filibuster — every senator in the Democratic caucus effectively has veto power over the bill. No Republican is willing to support it.
“The lines are drawn,” said Senator Richard M. Burr, Republican of North Carolina. “He has to get 60 votes. If he doesn’t get 60 votes, the American people win. If he does get them, America’s payback will come in the form of the 2010 elections.”
Not all Democrats have publicly said they will vote for the bill, but Senate leaders and senior White House officials believe they have agreement.
“All Senate Democrats stand shoulder to shoulder with President Obama and the American people, who know that inaction is not an option,” the majority leader, Senator Harry Reid of Nevada, said at a news conference.
Faced with Republican resistance that many Democrats saw as driven more by politics than policy disagreements, Senate Democrats in recent days gained new determination to bridge differences among themselves and prevail over the opposition.
Lawmakers who attended a private meeting between Mr. Obama and Senate Democrats at the White House on Tuesday pointed to remarks there by Senator Evan Bayh, Democrat of Indiana, as providing some new inspiration.
Mr. Bayh said that the health care measure was the kind of public policy he had come to Washington to work on, according to officials who attended the session, and that he did not want to see the satisfied looks on the faces of Republican leaders if they succeeded in blocking the measure.
The measure would extend health benefits by expanding Medicaid and providing subsidies to help moderate-income people buy private insurance. It would require nearly all Americans to obtain insurance or pay financial penalties for failing to do so.
By redrawing the health care sector, the legislation stands to reshape roughly one-sixth of the American economy.
The nonpartisan Congressional Budget Office said the legislation would cost $871 billion over 10 years, with the expense more than offset by revenues from new taxes and fees and by reductions in government spending, particularly on Medicare.
The budget office said the bill would reduce future deficits by $132 billion over that period.
Republicans have accused Democrats of using accounting tricks to hide the true cost of the measure, which they predicted would be huge, particularly if Congress did not follow through with the Medicare cuts.
In place of the public option, the Senate bill would create at least two national insurance plans modeled after those offered to federal workers, including members of Congress. The bill includes a new government-run long-term-care insurance program. And it imposes tight new regulations on the health insurance industry, barring insurers from denying coverage based on pre-existing medical conditions and limiting how much extra they can charge based on age.
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Prescriptions Blog
A blog from The New York Times that tracks the health care debate as it unfolds.
* More Health Care Overhaul News
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Health Care Conversations
Share your thoughts about the health care debate.
Top Discussions: The Public Option | Medicare and the Elderly | The Senate Bill
Living Story
Health Care Reform
Recent developments on the struggle over health care with background, analysis, timelines and earlier events from NYTimes.com and Google.
Related
Congressional Budget Office Score for the Health Bill
Enlarge This Image
Brendan Smialowski for The New York Times
Sen. Ben Nelson, right, agreed after hours of negotiation Friday to back the Senate Democrats’ legislation, making him the pivotal 60th vote.
As the Senate convened in a blizzard, Democratic leaders hailed a breakthrough that came when Senator Ben Nelson, Democrat of Nebraska, agreed to back the bill after 13 hours of negotiations on Friday, making him the pivotal 60th vote for a measure that President Obama has called his top domestic priority.
“Change is never easy, but change is what’s necessary in America,” Mr. Nelson said at a morning news conference. “And that’s why I intend to vote,” he said, “for health care reform.”
Mr. Obama, appearing on television from the White House, said: “Today is a major step forward for the American people. After nearly a century-long struggle, we are on the cusp of making health care reform a reality in the United States of America.”
The legislation, the most significant overhaul of the nation’s health care system in more than a generation, seeks to extend health benefits to more than 30 million uninsured Americans.
The blinding snow outside the Capitol added to what had already been a chaotic few weeks for the Senate, which has met every day since Nov. 30 and was working through its third consecutive weekend. The sergeant-at-arms had four-wheel-drive vehicles at the ready to bring lawmakers in for votes. And while senators wore the jackets and ties required on the Senate floor, dress shoes gave way to boots.
Mr. Nelson committed his vote after winning tighter restrictions on insurance coverage for abortions, as well as increased federal health care aid for his state.
With Senate leaders increasingly confident that they would pass the bill, Mr. Nelson pointedly warned that he would oppose the final version if negotiations with the House, which approved its bill last month, result in changes that he does not like.
But House liberals are expected to resist some concessions made in the Senate. To secure the votes of centrist holdouts, Senate leaders dropped a proposed government-run health insurance plan, or public option, and an alternate plan to let some people ages 55 to 65 buy coverage through Medicare, both favored by liberals.
Because the Democrats nominally control 60 seats in the Senate — the precise number needed to overcome a Republican filibuster — every senator in the Democratic caucus effectively has veto power over the bill. No Republican is willing to support it.
“The lines are drawn,” said Senator Richard M. Burr, Republican of North Carolina. “He has to get 60 votes. If he doesn’t get 60 votes, the American people win. If he does get them, America’s payback will come in the form of the 2010 elections.”
Not all Democrats have publicly said they will vote for the bill, but Senate leaders and senior White House officials believe they have agreement.
“All Senate Democrats stand shoulder to shoulder with President Obama and the American people, who know that inaction is not an option,” the majority leader, Senator Harry Reid of Nevada, said at a news conference.
Faced with Republican resistance that many Democrats saw as driven more by politics than policy disagreements, Senate Democrats in recent days gained new determination to bridge differences among themselves and prevail over the opposition.
Lawmakers who attended a private meeting between Mr. Obama and Senate Democrats at the White House on Tuesday pointed to remarks there by Senator Evan Bayh, Democrat of Indiana, as providing some new inspiration.
Mr. Bayh said that the health care measure was the kind of public policy he had come to Washington to work on, according to officials who attended the session, and that he did not want to see the satisfied looks on the faces of Republican leaders if they succeeded in blocking the measure.
The measure would extend health benefits by expanding Medicaid and providing subsidies to help moderate-income people buy private insurance. It would require nearly all Americans to obtain insurance or pay financial penalties for failing to do so.
By redrawing the health care sector, the legislation stands to reshape roughly one-sixth of the American economy.
The nonpartisan Congressional Budget Office said the legislation would cost $871 billion over 10 years, with the expense more than offset by revenues from new taxes and fees and by reductions in government spending, particularly on Medicare.
The budget office said the bill would reduce future deficits by $132 billion over that period.
Republicans have accused Democrats of using accounting tricks to hide the true cost of the measure, which they predicted would be huge, particularly if Congress did not follow through with the Medicare cuts.
In place of the public option, the Senate bill would create at least two national insurance plans modeled after those offered to federal workers, including members of Congress. The bill includes a new government-run long-term-care insurance program. And it imposes tight new regulations on the health insurance industry, barring insurers from denying coverage based on pre-existing medical conditions and limiting how much extra they can charge based on age.
NYSE Trading Surges to Record on Expiration, S&P 500 Changes
New York Stock Exchange trading surged to a record 3.15 billion shares as derivatives expiration and changes to the Standard & Poor’s 500 Index lifted volume to more than double this year’s average.
Yesterday was the last day of trading for December futures and options on U.S. indexes and stocks. The expiration, a quarterly event known as “quadruple witching,” boosts volume because investors and dealers must buy and sell stocks and derivatives to move positions into future months and make corresponding trades to hedge, or cancel out, their risk of loss. Visa Inc. was among five companies that joined the S&P 500 yesterday, forcing funds that track the index to buy shares.
U.S. trading has slowed as the S&P 500 rebounded from a 12- year low in March, with average monthly volume falling 36 percent. Fewer than 7.87 billion shares changed hands each day on U.S. exchanges during November, the lowest month average since August 2008, Bloomberg data show. Analysts including Mary Ann Bartels at Bank of America Corp. say the slowdown in volume was a bearish sign following the S&P 500’s 63 percent surge.
“There’s been a lot of inactivity on the part of the mutual fund investor and that’s translated into low volume,” said David Goerz, who oversees $17.5 billion as chief investment officer at Highmark Capital Management in San Francisco. “What they’re waiting for is some evidence that the economy is recovering, and that evidence is clear at this point.”
Lehman’s Collapse
Trading at the NYSE, the world’s biggest stock exchange, beat the previous record of almost 3 billion shares on Sept. 19, 2008, a quadruple witching day at the end of the week when New York-based Lehman Brothers Holdings Inc. filed for the biggest- ever bankruptcy. NYSE volume this year has averaged 1.39 billion shares a day.
Visa, Mead Johnson Nutrition Co., Ross Stores Inc., Cliffs Natural Resources Inc. and SAIC Inc. joined the S&P 500 yesterday. MBIA Corp., Ciena Corp., Dynegy Inc., KB Home Inc. and Convergys Corp. were removed.
The S&P 500 changes require investors that mimic the index to trade 1.02 percent of the value of their portfolios, compared with 0.3 percent to 0.4 percent in a normal rebalancing, said Charles Behette, a director in portfolio trading at New York- based Investment Technology Group Inc.
The value of shares being added to the index exceeds the value of shares being removed by about $6 billion, Behette said. The discrepancy may prompt selling of companies whose index weights aren’t changing and limit gains in those whose weights are increasing, he said.
Futures are agreements to buy or sell a specific amount of a commodity or security at a specific price and time. Options give the right though not the obligation to buy or sell a security at a set price and date. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will increase or decrease.
Yesterday was the last day of trading for December futures and options on U.S. indexes and stocks. The expiration, a quarterly event known as “quadruple witching,” boosts volume because investors and dealers must buy and sell stocks and derivatives to move positions into future months and make corresponding trades to hedge, or cancel out, their risk of loss. Visa Inc. was among five companies that joined the S&P 500 yesterday, forcing funds that track the index to buy shares.
U.S. trading has slowed as the S&P 500 rebounded from a 12- year low in March, with average monthly volume falling 36 percent. Fewer than 7.87 billion shares changed hands each day on U.S. exchanges during November, the lowest month average since August 2008, Bloomberg data show. Analysts including Mary Ann Bartels at Bank of America Corp. say the slowdown in volume was a bearish sign following the S&P 500’s 63 percent surge.
“There’s been a lot of inactivity on the part of the mutual fund investor and that’s translated into low volume,” said David Goerz, who oversees $17.5 billion as chief investment officer at Highmark Capital Management in San Francisco. “What they’re waiting for is some evidence that the economy is recovering, and that evidence is clear at this point.”
Lehman’s Collapse
Trading at the NYSE, the world’s biggest stock exchange, beat the previous record of almost 3 billion shares on Sept. 19, 2008, a quadruple witching day at the end of the week when New York-based Lehman Brothers Holdings Inc. filed for the biggest- ever bankruptcy. NYSE volume this year has averaged 1.39 billion shares a day.
Visa, Mead Johnson Nutrition Co., Ross Stores Inc., Cliffs Natural Resources Inc. and SAIC Inc. joined the S&P 500 yesterday. MBIA Corp., Ciena Corp., Dynegy Inc., KB Home Inc. and Convergys Corp. were removed.
The S&P 500 changes require investors that mimic the index to trade 1.02 percent of the value of their portfolios, compared with 0.3 percent to 0.4 percent in a normal rebalancing, said Charles Behette, a director in portfolio trading at New York- based Investment Technology Group Inc.
The value of shares being added to the index exceeds the value of shares being removed by about $6 billion, Behette said. The discrepancy may prompt selling of companies whose index weights aren’t changing and limit gains in those whose weights are increasing, he said.
Futures are agreements to buy or sell a specific amount of a commodity or security at a specific price and time. Options give the right though not the obligation to buy or sell a security at a set price and date. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will increase or decrease.
US TV groups fight for India’s airtime
Time Warner said on Thursday that next year would be critical in the war for supremacy in India’s prime time pay television market, as the country becomes a battleground for the largest US media groups.
Time Warner, which formally announced a $126.5m deal to take over Hindi general entertainment channel NDTV Imagine, expects the deal to boost its India revenue by 40 per cent as it takes on the market leaders, Viacom’s joint venture, Colours, and News Corp’s Star.
EDITOR’S CHOICE
Time Warner buys Indian entertainment network - Dec-17
Hopes remain as magazine sector loses gloss - Dec-07
US media companies raise outlook - Nov-04
Time Inc prepares for further job cuts - Oct-23
Magazine publishers plan digital store - Oct-02
Big media push for new tracking system - Sep-10
“With the fight for the nights that we’ve seen for the past year or two, the kind of hegemony that Star used to enjoy in the past decade is long gone,” said Sameer Nair, chief executive officer of NDTV Imagine, which broadcasts reality TV shows and soaps. “It’s an open battle and I think 2010 is going to be quite a defining year for everyone.”
India’s foreign ownership regime in the broadcast media sector is liberal compared with rivals such as China, making it an ideal target for US broadcasters seeking to tap Asia’s growth.
The second-largest pay-TV market in the world by subscribers after China, India has become the most important country for News Corp’s Asian regional business. It is also the biggest revenue earner for Turner, the Time Warner division which operates channels such as Cartoon Network, Warner Brothers and Pogo in India as well as CNN under a franchise agreement. The India operations generate 25 per cent of Turner’s Asia-Pacific revenues, a figure that is expected to rise to 35 per cent once NDTV Imagine’s sales are incorporated.
But India’s television market, particularly the general entertainment genre, is highly competitive following the launch of a swathe of channels over the past two to three years.
Turner’s initial foray into Indian general entertainment with Real, a joint venture with local company Miditech, has failed to get off the ground in terms of ratings, leading the two companies to “reassess” their partnership.
The partners are in negotiations on Real’s future that are expected to be completed by the first half of next year, Steve Marcopoto, president, Turner Broadcasting System Asia-Pacific said on Thursday.
Under the deal with NDTV, Turner will invest $50m into NDTV Imagine, which will continue to be run by Mr Nair.
The channel is ranked about fifth by television ratings – behind the top three, Colours, Star and local channel Zee – and is losing about $10m-$15m a quarter, according to analyst estimates.
“The question is: if you’re not in the top three, are you anywhere?” said Vivek Couto, executive director at Media Partners Asia. “Yes you can hold the fourth and fifth spots, but can you make money?”
Time Warner, which formally announced a $126.5m deal to take over Hindi general entertainment channel NDTV Imagine, expects the deal to boost its India revenue by 40 per cent as it takes on the market leaders, Viacom’s joint venture, Colours, and News Corp’s Star.
EDITOR’S CHOICE
Time Warner buys Indian entertainment network - Dec-17
Hopes remain as magazine sector loses gloss - Dec-07
US media companies raise outlook - Nov-04
Time Inc prepares for further job cuts - Oct-23
Magazine publishers plan digital store - Oct-02
Big media push for new tracking system - Sep-10
“With the fight for the nights that we’ve seen for the past year or two, the kind of hegemony that Star used to enjoy in the past decade is long gone,” said Sameer Nair, chief executive officer of NDTV Imagine, which broadcasts reality TV shows and soaps. “It’s an open battle and I think 2010 is going to be quite a defining year for everyone.”
India’s foreign ownership regime in the broadcast media sector is liberal compared with rivals such as China, making it an ideal target for US broadcasters seeking to tap Asia’s growth.
The second-largest pay-TV market in the world by subscribers after China, India has become the most important country for News Corp’s Asian regional business. It is also the biggest revenue earner for Turner, the Time Warner division which operates channels such as Cartoon Network, Warner Brothers and Pogo in India as well as CNN under a franchise agreement. The India operations generate 25 per cent of Turner’s Asia-Pacific revenues, a figure that is expected to rise to 35 per cent once NDTV Imagine’s sales are incorporated.
But India’s television market, particularly the general entertainment genre, is highly competitive following the launch of a swathe of channels over the past two to three years.
Turner’s initial foray into Indian general entertainment with Real, a joint venture with local company Miditech, has failed to get off the ground in terms of ratings, leading the two companies to “reassess” their partnership.
The partners are in negotiations on Real’s future that are expected to be completed by the first half of next year, Steve Marcopoto, president, Turner Broadcasting System Asia-Pacific said on Thursday.
Under the deal with NDTV, Turner will invest $50m into NDTV Imagine, which will continue to be run by Mr Nair.
The channel is ranked about fifth by television ratings – behind the top three, Colours, Star and local channel Zee – and is losing about $10m-$15m a quarter, according to analyst estimates.
“The question is: if you’re not in the top three, are you anywhere?” said Vivek Couto, executive director at Media Partners Asia. “Yes you can hold the fourth and fifth spots, but can you make money?”
Friday, December 18, 2009
Asian Currencies Decline This Week, Led By Won, on Credit Risk
Dec. 19 (Bloomberg) -- Asian currencies fell this week, led by South Korea’s won and the Philippine peso, as concern about the creditworthiness of nations including Greece and Mexico prompted investors to shun emerging-market assets.
The Bloomberg-JPMorgan Asia Dollar Index dropped for a second week after Standard & Poor’s cut Greece’s debt rating to BBB+ from A- and signaled it may lower the level further. The company also downgraded Mexico’s ranking one level to BBB. The peso declined for a second week as the government said it may raise its budget deficit estimate for next year.
“There’s a flight to safety and it weighs on the emerging currencies,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “But there’s a recognition that the Asian financial situation is less vulnerable than some of these European countries.”
The Asia Dollar Index, which tracks the region’s 10 most- active currencies excluding the yen, declined 0.5 percent this week. The won fell 1 percent 1,176 per dollar, according to data compiled by Bloomberg. The peso slipped 1.1 percent to 46.618 and the Taiwan dollar dropped 0.3 percent to NT$32.278.
Emerging-market equity fund inflows slowed in the week to Dec. 16, with 2010 poised to be a more “testing year” amid waning stimulus measures worldwide, EPFR Global said Dec. 17. Net inflows were $571 million, down from $2.3 billion the previous week. Overseas investors bought $15 million more Korean shares than they sold this week, following net purchases of $645 million in the previous five trading days.
Foreigners Sell
“Flows into Korean equities slowed, which probably adds to a little more downside pressure on the Korean won,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong. “We remain bullish on Asian currencies. Next year we’ll see inflows into Asian equities return, and the economic picture will continue to show improvement over other regions.”
Sales at South Korea’s three largest department-store chains rose 6.4 percent from a year earlier in November, a ninth straight gain, and Singapore’s non-oil domestic exports climbed for the first time in 19 month, according to government data released this week. Jobless rates declined in Hong Kong and the Philippines, whose central bank kept its benchmark interest rate at a record-low 4 percent.
Deficit Woes
The peso yesterday touched a two-week low of 46.765 per dollar as foreigners trimmed their holdings of the nation’s shares for a second day.
The Philippine budget deficit in the first 10 months of 2009 was 250 billion pesos ($5.4 billion), headed for an annual record. Finance Secretary Gary Teves said yesterday that the government’s 233.4 billion peso estimate for next year may be raised to close to 300 billion pesos because of weak revenue and increased public spending.
“The deficit still can’t be pinned down and that’s a negative,” said Marcelo Ayes, senior vice president at Rizal Commercial Banking Corp. in Manila.
Elsewhere, the Singapore dollar fell 0.9 percent in the week to S$1.4009 versus the greenback and the Indian rupee declined 0.5 percent to 46.7712. China’s yuan was little changed at 6.8280.
The Bloomberg-JPMorgan Asia Dollar Index dropped for a second week after Standard & Poor’s cut Greece’s debt rating to BBB+ from A- and signaled it may lower the level further. The company also downgraded Mexico’s ranking one level to BBB. The peso declined for a second week as the government said it may raise its budget deficit estimate for next year.
“There’s a flight to safety and it weighs on the emerging currencies,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “But there’s a recognition that the Asian financial situation is less vulnerable than some of these European countries.”
The Asia Dollar Index, which tracks the region’s 10 most- active currencies excluding the yen, declined 0.5 percent this week. The won fell 1 percent 1,176 per dollar, according to data compiled by Bloomberg. The peso slipped 1.1 percent to 46.618 and the Taiwan dollar dropped 0.3 percent to NT$32.278.
Emerging-market equity fund inflows slowed in the week to Dec. 16, with 2010 poised to be a more “testing year” amid waning stimulus measures worldwide, EPFR Global said Dec. 17. Net inflows were $571 million, down from $2.3 billion the previous week. Overseas investors bought $15 million more Korean shares than they sold this week, following net purchases of $645 million in the previous five trading days.
Foreigners Sell
“Flows into Korean equities slowed, which probably adds to a little more downside pressure on the Korean won,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong. “We remain bullish on Asian currencies. Next year we’ll see inflows into Asian equities return, and the economic picture will continue to show improvement over other regions.”
Sales at South Korea’s three largest department-store chains rose 6.4 percent from a year earlier in November, a ninth straight gain, and Singapore’s non-oil domestic exports climbed for the first time in 19 month, according to government data released this week. Jobless rates declined in Hong Kong and the Philippines, whose central bank kept its benchmark interest rate at a record-low 4 percent.
Deficit Woes
The peso yesterday touched a two-week low of 46.765 per dollar as foreigners trimmed their holdings of the nation’s shares for a second day.
The Philippine budget deficit in the first 10 months of 2009 was 250 billion pesos ($5.4 billion), headed for an annual record. Finance Secretary Gary Teves said yesterday that the government’s 233.4 billion peso estimate for next year may be raised to close to 300 billion pesos because of weak revenue and increased public spending.
“The deficit still can’t be pinned down and that’s a negative,” said Marcelo Ayes, senior vice president at Rizal Commercial Banking Corp. in Manila.
Elsewhere, the Singapore dollar fell 0.9 percent in the week to S$1.4009 versus the greenback and the Indian rupee declined 0.5 percent to 46.7712. China’s yuan was little changed at 6.8280.
China Resolves WTO Case by Ending Subsidies of ‘Famous Brands’
Dec. 19 (Bloomberg) -- China resolved a trade dispute with the U.S. by agreeing to end dozens of subsidies that promote its exports, the Obama administration said.
The agreement settles a year-old U.S. complaint at the World Trade Organization accusing China of violating global trade rules by providing cash grants, loans and research funding to makers of so-called famous brands products including apparel, agriculture goods and electronics.
“We have signed an agreement with China confirming full elimination of the numerous subsidies we identified as prohibited under WTO rules,” U.S. Trade Representative Ron Kirk said yesterday in an e-mailed statement.
The WTO case was filed by the Bush administration, which said it uncovered 70 different subsidies that are prohibited by global trade rules because they are aimed at boosting exports. That total rose to 90 counting provincial subsidies, the U.S. trade office said yesterday.
The Obama administration also has challenged China’s trade policies, imposing tariffs of 35 percent on tire imports from China in September and filing a WTO complaint against China’s use of export curbs on raw materials used in steel production and manufacturing.
U.S. trade officials have said the amount of subsidies for famous brands is difficult to calculate because China’s system isn’t transparent. Aid to textile and apparel firms alone totaled hundreds of millions of dollars, according to the National Council of Textile Organizations.
The U.S. was joined by Mexico and Guatemala in its WTO complaint, which said the subsidies were improperly used to promote exports.
Wang Baodong, a spokesman for the Chinese Embassy in Washington, said that China “has been standing for settling disputes with the U.S. on the basis of mutual respect and mutual accommodation of each other’s concerns, and by following international trade rules.”
The agreement settles a year-old U.S. complaint at the World Trade Organization accusing China of violating global trade rules by providing cash grants, loans and research funding to makers of so-called famous brands products including apparel, agriculture goods and electronics.
“We have signed an agreement with China confirming full elimination of the numerous subsidies we identified as prohibited under WTO rules,” U.S. Trade Representative Ron Kirk said yesterday in an e-mailed statement.
The WTO case was filed by the Bush administration, which said it uncovered 70 different subsidies that are prohibited by global trade rules because they are aimed at boosting exports. That total rose to 90 counting provincial subsidies, the U.S. trade office said yesterday.
The Obama administration also has challenged China’s trade policies, imposing tariffs of 35 percent on tire imports from China in September and filing a WTO complaint against China’s use of export curbs on raw materials used in steel production and manufacturing.
U.S. trade officials have said the amount of subsidies for famous brands is difficult to calculate because China’s system isn’t transparent. Aid to textile and apparel firms alone totaled hundreds of millions of dollars, according to the National Council of Textile Organizations.
The U.S. was joined by Mexico and Guatemala in its WTO complaint, which said the subsidies were improperly used to promote exports.
Wang Baodong, a spokesman for the Chinese Embassy in Washington, said that China “has been standing for settling disputes with the U.S. on the basis of mutual respect and mutual accommodation of each other’s concerns, and by following international trade rules.”
Thursday, December 17, 2009
Euro Declines to Three-Week Low Against Yen on Risk Aversion
Dec. 18 (Bloomberg) -- The euro fell to a three-week low against the yen as investors shunned riskier assets amid concern the region’s economic rebound will stall.
The yen rose for the first time in four days against the dollar as Asian stocks tumbled and Japanese exporters brought home earnings before the end of the year. The dollar headed for a third weekly advance against the euro before a report next week forecast to show German consumer confidence declined, adding to signs a recovery in the biggest economy of the euro- zone may be slow.
“Prospects for the euro-zone economy are growing murky, given sovereign debt woes and banking sector issues,” said Keiji Matsumoto, currency strategist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan’s third-largest banking group. “The euro may stretch its decline both against the dollar and the yen.”
The euro fell to 127.79 yen as of 9:44 a.m. in Tokyo from 129 yen yesterday in New York, after touching 127.54, the weakest since Nov. 27. The yen gained to 89.22 per dollar from 89.96. The euro was at $1.4343 from $1.4338.
Nuremberg-based GfK will say Dec. 22 its sentiment index, based on a survey of about 2,000 people, fell to 3.5 in January from 3.7 in the previous month, according to the median estimate of economists surveyed by Bloomberg.
Sovereign Concern
Standard & Poor’s this week cut Greece’s credit rating to BBB+ from A- and signaled it may lower the level further. Fitch Ratings downgraded Greece to BBB+ on Dec. 8, raising concern among investors that the worst global recession since World War II is still weighing on some economies.
S&P yesterday cut long-term credit ratings for Greek banks EFG Eurobank Ergasias and Alpha Bank AE by one level to BBB, and put those ratings on “creditwatch negative,” signaling S&P may reduce them further.
The Greek government, which came to power in October promising higher spending and wages, is trying to persuade investors it can cut its deficit from 12.7 percent of output to below the European Union’s 3 percent limit by 2013. Greece’s Prime Minister George Papandreou said yesterday he’s determined to turn around the country’s economy and that a default is “simply out of the question.”
Austria said on Dec. 14 that it was nationalizing Hypo Alpe-Adria Bank and injecting as much as 450 million euros ($649 million) into the lender.
Dollar Index
The yen and dollar rose as investors retreated from higher- yielding assets. Ten-year Treasuries jumped the most since October yesterday and the Standard & Poor’s 500 Index tumbled 1.2 percent. The MSCI Asia Pacific Index of regional shares dropped 0.2 percent.
The ICE futures exchange’s Dollar Index rose the most in two weeks yesterday, advancing as much as 1.2 percent to 77.94, the highest since Sept. 8. It was the biggest one-day gain since Dec. 4, when the Labor Department reported fewer-than-expected job losses.
The Dollar Index gained 13 percent during the six months beginning in September 2008 as investors bought dollars while seeking a refuge from the collapse of global financial markets. The dollar slid 17 percent from the beginning of March through Dec. 3 as investors dumped the U.S. currency in favor of higher- yielding assets while the Fed kept its target rate near zero.
In the past two weeks, the index rebounded 4 percent on signs of economic recovery, prompting traders to speculate that U.S. policy makers could raise rates sooner than expected.
The yen rose for the first time in four days against the dollar as Asian stocks tumbled and Japanese exporters brought home earnings before the end of the year. The dollar headed for a third weekly advance against the euro before a report next week forecast to show German consumer confidence declined, adding to signs a recovery in the biggest economy of the euro- zone may be slow.
“Prospects for the euro-zone economy are growing murky, given sovereign debt woes and banking sector issues,” said Keiji Matsumoto, currency strategist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan’s third-largest banking group. “The euro may stretch its decline both against the dollar and the yen.”
The euro fell to 127.79 yen as of 9:44 a.m. in Tokyo from 129 yen yesterday in New York, after touching 127.54, the weakest since Nov. 27. The yen gained to 89.22 per dollar from 89.96. The euro was at $1.4343 from $1.4338.
Nuremberg-based GfK will say Dec. 22 its sentiment index, based on a survey of about 2,000 people, fell to 3.5 in January from 3.7 in the previous month, according to the median estimate of economists surveyed by Bloomberg.
Sovereign Concern
Standard & Poor’s this week cut Greece’s credit rating to BBB+ from A- and signaled it may lower the level further. Fitch Ratings downgraded Greece to BBB+ on Dec. 8, raising concern among investors that the worst global recession since World War II is still weighing on some economies.
S&P yesterday cut long-term credit ratings for Greek banks EFG Eurobank Ergasias and Alpha Bank AE by one level to BBB, and put those ratings on “creditwatch negative,” signaling S&P may reduce them further.
The Greek government, which came to power in October promising higher spending and wages, is trying to persuade investors it can cut its deficit from 12.7 percent of output to below the European Union’s 3 percent limit by 2013. Greece’s Prime Minister George Papandreou said yesterday he’s determined to turn around the country’s economy and that a default is “simply out of the question.”
Austria said on Dec. 14 that it was nationalizing Hypo Alpe-Adria Bank and injecting as much as 450 million euros ($649 million) into the lender.
Dollar Index
The yen and dollar rose as investors retreated from higher- yielding assets. Ten-year Treasuries jumped the most since October yesterday and the Standard & Poor’s 500 Index tumbled 1.2 percent. The MSCI Asia Pacific Index of regional shares dropped 0.2 percent.
The ICE futures exchange’s Dollar Index rose the most in two weeks yesterday, advancing as much as 1.2 percent to 77.94, the highest since Sept. 8. It was the biggest one-day gain since Dec. 4, when the Labor Department reported fewer-than-expected job losses.
The Dollar Index gained 13 percent during the six months beginning in September 2008 as investors bought dollars while seeking a refuge from the collapse of global financial markets. The dollar slid 17 percent from the beginning of March through Dec. 3 as investors dumped the U.S. currency in favor of higher- yielding assets while the Fed kept its target rate near zero.
In the past two weeks, the index rebounded 4 percent on signs of economic recovery, prompting traders to speculate that U.S. policy makers could raise rates sooner than expected.
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