Wednesday, November 30, 2011

Fed, Five Central Banks Cut Dollar Swap Rate

Fed, Five Central Banks Cut Dollar Swap Rate
By Scott Lanman and Jeff Black - Nov 30, 2011 10:49 AM ET

Six central banks led by the Federal Reserve lowered the cost of emergency dollar funding for financial companies in a global effort to ease Europe’s sovereign-debt crisis.

The new interest rate is the dollar overnight index swap rate plus 50 basis points, a half percentage-point cut, and the program was extended by six months to Feb. 1, 2013, the Fed said today in a statement in Washington. The Fed coordinated the move with the European Central Bank as well as the Bank of Canada, Bank of England, Bank of Japan, and Swiss National Bank. (SNBN)

U.S. and European stocks rallied on the move aimed at easing strains in markets and boosting central banks’ capacity to support the global financial system. The cost for European banks to fund in dollars rose to the highest levels in three years today as concerns about a possible breakup of the euro area increased after leaders said they’d failed to boost the region’s bailout fund as much as planned.

Businesses plan for possible end of euro

Businesses plan for possible end of euro
By Tony Barber in London and Daniel Dombey in Istanbul

International companies are preparing contingency plans for a possible break-up of the eurozone, according to interviews with dozens of multinational executives.
Concerned that Europe’s political leaders are failing to control the spreading sovereign debt crisis, business executives say they feel compelled to protect their companies against a crash that can no longer be wished away. When German chancellor Angela Merkel and French president Nicolas Sarkozy raised the prospect of a Greek exit from the eurozone earlier this month, it marked the first time that senior European officials had dared to question the permanence of their 13-year-old experiment with monetary union.

Tuesday, November 29, 2011

OECD: euro collapse would have 'highly devastating outcomes' worldwide

OECD: euro collapse would have 'highly devastating outcomes' worldwide
Chief economist Pier Carlo Padoan scolds hesitancy of European leaders in grave warning on global economic health

The collapse of the euro could send the world's advanced economies into a severe recession, dragging emerging markets with them into the mire, the Organisation for Economic Co-operation and Development warned on Monday.

The Paris-based thinktank slashed its forecast for growth among its 34 members from 2.3% half a year ago to 1.6%, with Europe dramatically downgraded from 2% to just 0.2% because of the unresolved sovereign debt crisis.

Fitch Keeps U.S. Credit Rating at ‘AAA’, Cuts Outlook to Negative

Fitch Keeps U.S. Credit Rating at ‘AAA’, Cuts Outlook to Negative

Fitch Ratings kept its pristine AAA rating on the U.S. on Monday, but the credit-ratings company downgraded its outlook to “negative” in the wake of the Supercommittee’s failure to find $1.2 trillion in spending cuts.

The development, which had been hinted at last week, could have been worse for the U.S. as McGraw-Hill’s (MHP: 41.20, +0.66, +1.63%) Standard & Poor’s slashed its credit rating for the first time ever in August.

However, the negative outlook indicates a “slightly greater” than 50% chance that Fitch downgrades the U.S. over the next two years.
“Failure to reach agreement in 2013 on a credible deficit reduction plan and a worsening of the economic and fiscal outlook would likely result in a downgrade of the U.S. sovereign rating,” David Riley, a managing director at Fitch, said in the report.

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Monday, November 28, 2011

Germany, France plan quick new Stability Pact: report

Germany, France plan quick new Stability Pact: report

(Reuters) - France and Germany are planning a quick new pact on budget discipline that might persuade the European Central Bank to ramp up its government bond purchases, Welt am Sonntag reported on Sunday.

Echoing a Reuters report on Friday from Brussels, the Sunday newspaper said the French and German leaders were prepared to back a deal with other euro countries that might induce the ECB to intervene more forcefully to calm the euro debt crisis.

The newspaper report quoted German government sources as saying that the crisis fighting plan could possibly be announced by German Chancellor Angela Merkel and French President Nicolas Sarkozy in the coming week.

IMF drawing up £500bn package to save Italy, Spain and the euro

IMF drawing up £500bn package to save Italy, Spain and the euro
The International Monetary Fund is being lined up potentially to help Italy and Spain amid growing fears that a European rescue scheme will not be able to prop up the countries.

Reports in Italy suggested that the IMF is drawing up plans for a €600 billion (£517 billion) assistance package for the country. Spain may be offered access to IMF credit, rather than a rescue package, to avoid it being “picked off” by the markets in the coming weeks.

Britain draws up emergency plans for collapse of Euro after warnings Italy needs £500bn bailout

Britain draws up emergency plans for collapse of Euro after warnings Italy needs £500bn bailout
Rescue package to give Mario Monti 12 to 18 months' breathing room to implement spending cuts
Last updated at 8:44 AM on 28th November 2011

Britain is drawing up emergency plans for the collapse of the ‘creaking’ Eurozone amid warnings debt-stricken Italy will need a £500 billion bailout involving billions of pounds of UK taxpayers’ money.

Chancellor George Osborne said the Treasury had ‘stepped up’ contingency planning and aimed to be ready for ‘whatever the Eurozone throws at us’.

It emerged yesterday that the International Monetary Fund, in which Britain is a major shareholder, could be forced to offer Italy a €600 billion (£514bn) rescue package to give its unelected new prime minister Mario Monti 12 to 18 months’ breathing room to implement big tax rises and spending cuts.

Sunday, November 27, 2011

Banks Build Contingency for Breakup of the Euro

Banks Build Contingency for Breakup of the Euro

Published: November 25, 2011

PARIS — For the growing chorus of observers who fear that a breakup of the euro zone might be at hand, Chancellor Angela Merkel of Germany has a pointed rebuke: It’s never going to happen.

But some banks are no longer so sure, especially as the sovereign debt crisis threatened to ensnare Germany itself this week, when investors began to question the nation’s stature as Europe’s main pillar of stability.

On Friday, Standard & Poor’s downgraded Belgium’s credit standing to AA from AA+, saying it might not be able to cut its towering debt load any time soon. Ratings agencies this week cautioned that France could lose its AAA rating if the crisis grew. On Thursday, agencies lowered the ratings of Portugal and Hungary to junk.

Saturday, November 26, 2011

Dow, S&P Log Worst Thanksgiving Week Since 1932

Dow, S&P Log Worst Thanksgiving Week Since 1932
Published: Friday, 25 Nov 2011 | 1:10 PM ET Text Size
By: JeeYeon Park Writer

Stocks closed in negative territory in thin, shortened trading Friday as investors were reluctant to go long ahead of the weekend and amid ongoing worries over the euro zone.

The Dow and S&P posted their worst Thanksgiving week since the Great Depression on a percentage basis.






The Dow Jones Industrial Average erased their gains to finish lower, led by H-P [HPQ  25.39     -0.39  (-1.51%)   ] and Chevron [CVX  92.29     -1.46  (-1.56%)   ].

The S&P 500 and the Nasdaq also ended lower, logging a seventh consecutive decline. Some traders are watching for 1,150 on the S&;P as the next key level.

Wednesday, November 23, 2011

"Disastrous" bond sale shakes confidence in Germany

"Disastrous" bond sale shakes confidence in Germany
by Stephen Brown and Noah Barkin
BERLIN | Wed Nov 23, 2011 10:52am EST

(Reuters) - A "disastrous" German bond sale on Wednesday sparked fears that Europe's debt crisis was even starting to threaten Berlin, with the leaders of the euro zone's two biggest economies still firmly at odds over a longer-term structural solution.

Investors were also unnerved by reports that Belgium is leaning on France to pay more into emergency support for failed lender Dexia under a 90-billion-euro ($120 billion) rescue deal that had appeared done and dusted.

A special report by Fitch Ratings suggested France had limited room left to absorb shocks to its finances like a new downturn in growth or support for banks without endangering its cherished AAA credit status.

After one of the least successful debt sales by Europe's powerhouse economy since the launch of the single currency, the euro fell to 1.336 to the dollar and European shares sank to 7-week lows.

Tuesday, November 22, 2011

Pimco’s El-Erian Says U.S. Economic Setting ‘Terrifying’

Pimco’s El-Erian Says U.S. Economic Setting ‘Terrifying’
By Cordell Eddings and Betty Liu - Nov 22, 2011 12:20 PM ET

Pacific Investment Management Co.’s Chief Executive Officer Mohamed A. El-Erian said U.S. economic conditions are “terrifying” as the nation struggles to recover from recession.

The odds of the U.S. returning to recession are as high as 50 percent, El-Erian said during an interview on Bloomberg Television’s “In the Loop” with Betty Liu. U.S. economic growth was worse than expected and congressional policy makers are gridlocked over what to do about the economy and the deficit, which risk exacerbating an already weak recovery, he said.

“We have less economic momentum than we thought we had and we have no policy momentum,” said El-Erian, who also serves as co-chief investment officer with Pimco founder Bill Gross at the world’s largest manager of bond funds.

Monday, November 21, 2011

Stocks End Sharply Lower Amid Debt Fears

Stocks End Sharply Lower Amid Debt Fears
Published: Monday, 21 Nov 2011 | 4:05 PM ET Text Size
By: Jeff Cox Senior Writer

Worries over debt in both the U.S. and Europe overcame Wall Street on Monday, sending stocks into a tailspin as investors flocked for the exits ahead of the Thanksgiving holiday.

Though considerably off the worst levels of the day, the selloff was still good enough to take 2 percent off the Dow industrials and nearly as much from the Standard & Poor's 500 and the Nasdaq.

Financials and industrials were the big losers of the day, with traders worried that mandated spending cuts that come with the failure of the congressional debt supercommittee to reach a deal will eradicate the nascent economic recovery.

Supercommittee failure could trigger US credit downgrade, economists warn

Supercommittee failure could trigger US credit downgrade, economists warn

Economists predict dire consequences if committee fails to reach agreement on how to reduce America's massive debt

Economists are warning of dire consequences if US politicians fail to make progress this weekend in tense talks aimed at reducing America's massive deficit ahead of a Wednesday deadline.

The bi-partisan congressional super-committee is charged with drawing up plans for a $1.2tn reduction in the nation's deficit by the middle of next week. Failure to do so will trigger an automatic "sequester" that will make cuts of that size to defence and social welfare programmes starting in 2013. But the two sides seem far from finding a solution after clashing over tax revenues.

While Wednesday is the official deadline for the supercommittee to report back, it has until Monday to tell the Congressional Budget Office about the impact any plan they send to Congress will have on the budget.

Thursday, November 17, 2011

U.S. Banks Face Serious Risk From Europe: Fitch

U.S. Banks Face Serious Risk From Europe: Fitch
By Dakin Campbell - Nov 16, 2011 4:44 PM ET

U.S. banks face a “serious risk” that their creditworthiness will deteriorate if Europe’s debt crisis worsens, Fitch Ratings said.

“Fitch believes that unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” the New York-based rating company said today in a statement.

Banks in the U.S. have manageable exposure tied to stressed European markets in Greece, Ireland, Italy, Portugal and Spain, “but further contagion poses a serious risk,” Fitch said. Gross exposures to larger European countries and major banks are greater than those of the five stressed countries, the rating firm said. It didn’t explain what it meant by contagion.

Monday, November 14, 2011

Blair warns of 'catastrophe' if euro collapses

Blair warns of 'catastrophe' if euro collapses
Nov 13 09:17 AM US/Eastern

Former British prime minister Tony Blair warned on Sunday that the collapse of the euro would be "catastrophic" and urged Europe to move fast to support the currency.
Blair said European leaders faced "very difficult and painful" choices and a "long-term framework of credibility" was needed to see off the crisis.

Speaking following the resignation of Italian Prime Minister Silvio Berlusconi on Saturday, Blair said there had "never been a tougher time to be a leader than right now".

But he said the "whole weight" of European institutions -- including the European Central Bank -- must get behind the euro if it was to survive.

He told BBC TV that economies had to align and that "the myth that the Italian and German economies were the same -- that 10-year myth has now evaporated".

Measures required to bring stability to the euro would be painful, he warned, but added: "If the single currency broke up, it would be catastrophic."

Friday, November 11, 2011

Jim Cramer: In 31 Years I've Never Seen Markets This Crazy

Jim Cramer: In 31 Years I've Never Seen Markets This Crazy

Jim Cramer has come to only one conclusion about markets today: "No one knows what the heck he or she is doing." Not hedge funders, not bankers... no one.
Things sure have changed over the years.
In the past week, he's noted 6 weird happenings that show the market is totally out of whack

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Thursday, November 10, 2011

European debt crisis spiralling out of control

European debt crisis spiralling out of control

Reports that Germany and France have begun talks to break up the eurozone amid fears that Italy will be too big to rescue

Fears that Europe's sovereign debt crisis was spiralling out of control have intensified as political chaos in Athens and Rome, and looming recession, created panic on world markets.

Reports emerging from Brussels said that Germany and France had begun preliminary talks on a break-up of the eurozone, amid fears that Italy will be too big to rescue.

Despite Silvio Berlusconi's announcement that he would step down as prime minister once austerity measures were pushed through parliament, a collapse of investor confidence in Europe's third-biggest economy sent interest rates in Italy to the levels that triggered bailouts in Portugal, Greece and Ireland.

Milton Friedman - Greed

Milton Friedman - Greed

Wednesday, November 09, 2011

Dow Plunges 3.2% on Fears That Euro Crisis Spreading

Dow Plunges 3.2% on Fears That Euro Crisis Spreading
Wednesday, 09 Nov 2011 09:58 AM

Trouble on two fronts in Europe's debt crisis dragged the Dow Jones Industrial Average down 389 points Wednesday. The S&P 500 lost 3.7 percent, its biggest one-day drop since August, after Italy's borrowing costs soared and talks collapsed in Greece on forming a new government.

The euro dropped 2 percent against the dollar and Treasury yields sank as money moved out of Europe and traders bought U.S. government bonds. Goldman Sachs, Morgan Stanley and other large banks were hit hard on worries over their ability to handle a financial crisis that might be brought on by trouble in Europe.

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Fannie Mae taps $7.8 billion from Treasury, loss widens

Fannie Mae taps $7.8 billion from Treasury, loss widens
By Margaret Chadbourn
WASHINGTON | Tue Nov 8, 2011 7:29pm EST

(Reuters) - Fannie Mae, the biggest source of money for U.S. home loans, on Tuesday said it needed a further $7.8 billion in federal aid to stay afloat as a shaky housing market widened its third-quarter loss to $5.1 billion.

The government-controlled firm also attributed the deeper cash drain to losses on derivatives used to hedge its exposure to interest-rate swings and on expenses related to home loans made prior to the 2008 financial collapse. In the year-earlier quarter it had a loss of a $1.3 billion.

Fannie Mae has now drawn $112.6 billion in bailout funds from the Treasury Department since being seized by the government in 2008 as mortgage losses mounted, and it has returned $17.2 billion to taxpayers in the form of dividends.

"There is certainly a lot of pre-2009 loans that we need to work through and that is certainly driving the credit losses you saw in this quarter and over the last several years," Fannie Mae Chief Financial Officer Susan McFarland told Reuters.

Monday, November 07, 2011

Italy: Too Big to Fail, Too Big to Save?

Italy: Too Big to Fail, Too Big to Save?
Published: Monday, 7 Nov 2011 | 2:54 AM ET Text Size
By: Catherine Boyle
Staff Writer,

Italy's economic problems took center stage Monday as its government, led by increasingly threatened Prime Minister Silvio Berlusconi, faced yet another key vote.

The health of the euro zone's third-largest economy has come into focus despite Berlusconi accepting IMF monitoring and surviving several confidence votes in recent months.

Italy's size makes the potential consequences if it were to fail more wide-ranging than the much smaller Greece.

"Italy has much more systemic implications," Thanos Vamvakidis, Head of European G10 FX Strategy, BofA Merrill Lynch Global Research, told CNBC Monday.

"It's too big to fail, too big to save."

Friday, November 04, 2011

Jobs Report: 'Things Are So Bad That This Looks Good'

Jobs Report: 'Things Are So Bad That This Looks Good'
Published: Friday, 4 Nov 2011 | 11:42 AM ET
By: Patti Domm
CNBC Executive News Editor

October's employment reports showed continued sluggish job growth, but positive revisions for earlier months takes away some of the sting and reaffirms the economy is growing.

The government reported 80,000 total jobs were added in October. There were 104,000 private sector positions added in professional and business services, leisure and hospitality, health care and mining, and 24,000 government jobs were lost.

The unemployment rate fell slightly to 9 percent from 9.1 percent in September.

"We have to remind ourselves that things are so bad that this looks good. In the context of what we're living through, it's not a bad report," said Dan Greenhaus, global market strategist at BTIG.

Wednesday, November 02, 2011

Greece risks meltdown after bailout vote bombshell

Greece risks meltdown after bailout vote bombshell
By Dina Kyriakidou and Lefteris Papadimas | Reuters – 22 minutes ag

ATHENS (Reuters) - The Greek government faced possible collapse on Tuesday as ruling party lawmakers demanded Prime Minister George Papandreou resign for throwing the nation's euro membership into jeopardy with a shock call for a referendum.

Caught unawares by his high-stakes gamble, the leaders of France and Germany summoned Papandreou to crisis talks in Cannes on Wednesday to push for a quick implementation of Greece's new bailout deal ahead of a summit of the G20 major world economies.

The euro and global stocks were pummeled on financial markets after the Greek move threw into question the survival of crucial efforts to contain the euro zone's sovereign debt crisis.

Six senior members of Greece's ruling PASOK socialists, angered by his decision to call a plebiscite on the 130 billion euro rescue package agreed only last week, said Papandreou should make way for a "politically legitimate" administration.

Tuesday, November 01, 2011

Euro crisis 'could lead to social unrest'

Euro crisis 'could lead to social unrest'
Oct 30 07:24 AM US/Eastern

The eurozone debt crisis could lead to a decade-long recession and rising social unrest, the International Labour Organisation (ILO) has warned, according to a German media report on Sunday.

"The next few months will be decisive in terms of avoiding a dramatic decline in employment and a further sharp increase in social unrest," news weekly Focus reported, citing the ILO's new annual report on the labour market.

Without counter-measures, the crisis might unleash a recession that could last a decade, as governments find themselves powerless to act due to pressure to reduce their debts, Focus said, citing the ILO document.

The ILO was not immediately available for comment.

The greatest risk of social unrest exists in Greece, Portugal, Spain, Estonia, France, Slovenia and Ireland, according to the weekly.