Jan 30, 2012
NEW YORK (MarketWatch) — It’s three months past bankruptcy. Do you know where your MF Global Holdings Ltd. money is?
Neither does the firm. But for everyone who doesn’t have an MF Global account, can you really be sure that the brokerage account at your “safer,” more “stable” firm is any more secure?
That’s the question many investors are, or should, be asking themselves after the revelation Monday that investigators fear most of the $1.2 billion in missing customer funds has disappeared from MF Global and its relationship accounts. Read story on investigators’ findings on WSJ.com.
Though the story unfolds painfully slowly, it’s clear that no one at MF Global, J.P. Morgan Chase & Co. JPM -1.32% and other banks as well as Depository Trust & Clearing Corp. and LCH.Clearnet Group Ltd. noticed anything wrong — or if they did, no one raised a red flag.
Housing crisis drives election-year politics in Florida Arian Campo-Flores looks at how the housing bust has hit the Sunshine State especially hard, and how residents are seeking remedies from the crop of presidential candidates.
Yet these funds, perhaps as much as $1.2 billion, were being routed out of segregated accounts at MF Global to meet increasing margin calls and cover losses at the firm. In more consumer-friendly terms: It’s akin using your savings account to cover trades gone wrong.
Unlike the banking industry, where the Federal Deposit Insurance Corp. covers losses up to a limit for depositors, brokerage customers are at the mercy of the Securities Investor Protection Corp., an agency that’s been accused to being either slow to pay, unwilling to pay or both.
That’s why this isn’t just about a bunch of farmers, traders and institutional investors who are on the hook. It’s about the safety of the system — and by all appearances, nothing is safe.
Commentary Jan 30, 2012
With traders turning their attention back to the ongoing European debt crisis, stocks are likely to come under pressure in early trading on Monday. The major index futures are currently pointing to a notably lower open for the markets, with the Dow futures down by 94 points. (Jan 30, 2012) Full Article
South Korea saw a current account surplus of $3.96 billion in December, the Bank of Korea said on Monday - remaining in the black for the 22nd consecutive month. That was just shy of forecasts for a surplus of $4 billion, and down from the $5.046 billion surplus in November and the $4.23 billion surplus in October. (Jan 30, 2012) Full Article
House prices in the UK remained flat in January, the latest survey by property analyst Hometrack revealed Monday. Prices have failed to show any increase since June 2010, it said. (Jan 30, 2012) Full Article
The Philippine economy expanded at a faster pace in the fourth quarter, reducing the need for further stimulus measures to shield the economy from the European debt crisis. (Jan 30, 2012) Full Article
Eurozone economic confidence improved in January, marking the first increase since March 2011, driven largely by rising confidence in services, a survey carried out by the European Commission showed Monday. (Jan 30, 2012) Full Article
U.S. personal incomes increased by more than expected in December although consumer spending dipped unexpectedly, according to figures released Monday by the Commerce Department. According to DOC figures, personal income increased $61.3 billion in December, a 0.5 percent increase over November levels. (Jan 30, 2012) Full Article
Royal Philips Electronics NV (PHG, PHGFF.PK) posted Monday a fourth-quarter loss due to the negative impact of its divestment of the TV business, higher expenses and costs and weaker European sales. (Jan 30, 2012) Full Article
Ryanair Holdings plc (RYAAY, RYA.L) Monday declared a third-quarter profit on the back of a 17 percent hike in fares. The company also reported raising its full-year profit forecast. (Jan 30, 2012) Full Article
Gannett Co. Inc. (GCI) said Monday fourth-quarter profit dropped year-over-year on steeper exceptional charges and also lower revenues. Adjusted earnings, however, topped the market view, but revenues were on par. (Jan 30, 2012) Full Article
Switzerland-based ABB Ltd. (ABB) Monday reported agreeing to acquire US-based Thomas & Betts Corp. (TNB) for a cash consideration of $72 per share, or a total of $3.9 billion. The transaction, which offers a 24 percent premium to the January 27, 2012, closing price of Thomas & Betts, may close by the middle of 2012. (Jan 30, 2012) Full Article
Broker Ratings Changes
Robert W. Baird Downgrades Methode Electronics (MEI) To Neutral From Outperform With $9 Price Target
(Jan 30, 2012)
Todays WS Events
ABB Investor Conference Call At 8:30 AM ET On Thomas & Betts Acquisition
ABB (ABB) will host a conference call at 8:30 AM ET on January 30, 2012 to discuss its acquisition of Thomas & Betts. To access the webcast , visit www.abb.com/news To access the call, dial +1 866 291 4166 (US/Canada) or +41 91 610 5600 (International). For replay, dial +1 866 416 2558 (US/Canada) or +41 91 612 4330 (International) with the code 19163#. (Jan 30, 2012)
Gannett Q4 11 Earnings Conference Call At 10:00 AM ET
Gannett Co. (GCI) will host a conference call at 10:00 AM ET on January 30, 2012 to discuss its Q4 11 earnings results. To access the live webcast, log on at www.gannett.com To hear the live call, dial 1-800-967-7138 (US) or 719-325-2431 (International) with code 9051644. A replay of the call can be heard by dialing 1-888-203-1112 (US) or 719-457-0820 (International) with code 9051644. (Jan 30, 2012)
McKesson Q3 12 Earnings Conference Call At 5:00 PM ET
McKesson Corp. (MCK) will host a conference call at 5:00 PM ET on January 30, 2012 to discuss its Q3 12 earnings results. To access the live webcast, log on at www.mckesson.com/investors To participate in the call, dial 719-234-7317. (Jan 30, 2012)
Plum Creek Timber Q4 11 Earnings Conference Call At 5:00 PM ET
Plum Creek Timber Co. (PCL) will host a conference call at 5:00 PM ET on January 30, 2012, to discuss Q4 11 earnings results. To access the live webcast log on to www.plumcreek.com To listen to the call, dial 1-800-572-9852 (US) or 1-706-645-9676 (International). For a replay call, dial 1-855-859-2056 (US) or 1-404-537-3406 (International) with code 21121105. (Jan 30, 2012)
Daily Market Analysis
Monday, January 30, 2012, 09:03
Stocks and Markets in the News | U.S. Treasury Yields: Dollar pares gains, Treasurys up after U.S. data
By Deborah Levine
NEW YORK (MarketWatch) -- Treasury prices held onto gains and the dollar pared its advance slightly on Monday after a report showed U.S. personal spending unexpectedly dipped in December, though incomes rose more than some predicted. The dollar index DXY +0.59% , which measures the U.S. unit against a basket of six currencies, traded at 79.299, from 79.342 before the report and 78.854 in late North American trading on Friday. The euro EURUSD -1.03% fell to $1.3117, down from $1.3216 Friday. Yields on 10-year notes, which move inversely to prices, remained down by 5 basis points to 1.84%, their lowest level in almost two weeks.
Stocks and Markets in the News | Portugal 10 year bond Yield: Portuguese 10-year bond yield jumps to record
By William L. Watts
FRANKFURT (MarketWatch) -- The yield on 10-year Portuguese government bonds continued to explore euro-era highs Monday, topping 15% on fears the country may need to eventually seek an additional bailout or a writedown on the value of its current debt. The 10-year yield stood at 15.18% in recent action, up from around 13.6% on Friday, according to electronic trading platform Tradeweb. "Investors are worried that Greece still hasn't reached a deal with its private sector creditors on a voluntary debt exchange. That sent yields on Portugal's sovereign debt soaring because investors are worried that if Greece has a disorderly default or a forced debt restructuring, then Portugal would be next," wrote strategists at Bank of America Merrill Lynch.
Personal income in Dec. 2011 rose 0.5% Nominal Expenditures decline 0.1% and NDPI rose 0.4%.... and more: Financial and Forex Info News | Personal Income and Outlays December 2011
Personal income in December 2011 rose 0.5 percent. Nominal personal consumption expenditures (PCE) was unchanged and real PCE declined 0.1 percent. Nominal disposable personal income (DPI) rose 0.4 percent and real DPI increased 0.3 percent. The personal saving rate as a percentage of DPI was 4.0 percent in December.
Robert Kagan is a prominent neoconservative who advised John McCain in the 2008 race and is advising Mitt Romney in 2012. But after publishing a cover story in the New Republic arguing against "the myth of American decline," he has found himself a new fan: President Obama.
Josh Rogin reports that Obama has been talking Kagan's article up both in public and in private. In a recent, off-the-record meeting with news anchors, Obama spent more than 10 minutes "going over its arguments paragraph by paragraph, National Security Council spokesman Tommy Vietor confirmed." National Security Advisor Tom Donilon was dispatched to Charlie Rose to "discuss Kagan's essay and Obama's love of it." So it's not just the president who likes Kagan's article. It's the White House communications team who likes the idea of letting people know the president likes Kagan's article.
Kagan's essay isn't really about "the myth of American decline." It's about the myth that America was ever omnipotent. "Every day, it seems, brings more evidence that the time has passed when the United States could lead the world and get others to do its bidding." Kagan writes. But the reality is that "much of today’s impressions about declining American influence are based on a nostalgic fallacy: that there was once a time when the United States could shape the whole world to suit its desires, and could get other nations to do what it wanted them to do."
Indeed, Kagan says, American preeminence looks much as it always has: we produce about a quarter of the world's GDP, the same percentage that we've produced for the last four decades, and our military remains vastly larger. Nor has the cost of maintaining that preeminence increased: Both in terms of men and money, our military consumes fewer of our resources than it did throughout most of the 20th Century. That doesn't empower us to control world events in minute detail. But it makes us very rich, very influential, and very dominant.
The real core of the question of American decline is, however, the continued productive capacity of the American economy. If America's economy can no longer adapt and grow, our military commitments will quickly become unmanageable, our domestic politics will become volatile, and our position in the world will wane. And as Kagan notes, this is backed up in impressions of American power: In the 1990s, when our economy was booming, commentators spoke of our "unipolar moment" and America's historically unmatched preeminence. Today, with our economy sagging, those same commentators wonder whether we are entering a permanent decline. So the question, really, is where our economy goes from here.
New economic data suggests there's reason for optimism: the recession has not permanently derailed our economy. Gross domestic product began falling in the fourth quarter of 2007. And for most of the last four years, real GDP -- that is, GDP once you account for inflation -- has been lower than it was in late 2007. But according to the newest GDP figures, America turned the corner in the third quarter of 2011: our economy was larger in that quarter than it was before the recession. And, in the fourth quarter of 2011, it was even larger than that. Which is not to deny the terrible toll the recession took on the economy, or its continued aftereffects. But the country's basic productive capacity has endured, and is even growing.
Further underscoring the case for optimism is the fact that America is much further along in the deleveraging process -- which is, essentially, the recovery process from this sort of recession -- than competitor countries. Frankly, it would be better for us if other countries were recovering more swiftly, as it would help our exports and reduce financial uncertainty. But insofar as the question is whether America's economy is recovering comparatively faster than other advanced economies, and thus displaying its tendency to recover from global recessions in a way that makes us relatively stronger than our peers, the numbers are, for now, encouraging.
TNR subscribers can read Kagan's article here. Non-TNR subscribers should become subscribers and read Kagan's article there. But it's also up for free at the Brookings web site.
1) GDP grew at a disappointing 2.8 percent in the fourth quarter of 2011, reports Peter Whoriskey: "The economy is growing at a decent clip. Corporate profits are at record highs. And the nation’s automakers, whose near collapse in 2007 heralded the downturn, are humming along. But for many Americans, even those with jobs, the 'recovery' so far seems hardly worth celebrating. The Commerce Department issued a quarterly report Friday that said the economy expanded at a comfortable rate of 2.8 percent during the last quarter of last year. The figure suggests that, after the slowdown for much of 2011, the recovery has begun to accelerate again. But the report and other recent economic data suggest a stark divide between the fortunes of businesses and people. Companies are thriving again, but households have come under financial stress, creating dissatisfaction that, in a presidential election year, could have far-reaching effects."
@justinwolfers: GDP grew at trend--no more, no less. At this rate, we'll never reduce unemployment. The recovery has been postponed, again. @crampell: 2011 overall was the slowest non-recessionary year of GDP growth since 1947, says Neal Soss of Credit-Suisse
2) Budget cuts have harmed growth , reports David Leonhardt: "The brief version of the story is that the government, which helped mitigate the recession, has been a significant drag on growth for more than a year now. In 2007, both the private sector and government were growing. The government continued growing through 2008 and most of 2009, with the exception of one quarter when military spending fell. The private sector, though, began to shrink in 2008 and by late 2008, as the financial crisis took hold, it was shrinking rapidly...People can obviously have a spirited debate about cause and effect here. I’m not aware of much research or evidence suggesting that short-term declines in government activity -- at least in a largely free-market economy -- cause short-term growth in the private sector. Lacking such evidence, the obvious conclusion seems to be that economic growth, and employment growth, would have been significantly stronger over the last two years without government cuts."
@DLeonhardt: The private sector grew at a robust 4.5% annual rate last quarter. Government shrank at a 4.6% rate. Result: 2.8% GDP growth.
3) Gingrich's lead in Florida has collapsed, reports Nate Silver: "Based on the polling out through Saturday evening, Newt Gingrich had become a clear underdog to Mitt Romney in the Florida primary. But you could at least make the case that the downward trajectory in Mr. Gingrich’s polling had stopped, leaving open the possibility of a last-minute comeback. Now, that case has become much harder to make. Four polls released Sunday morning — from NBC News, Mason-Dixon, American Research Group and Rasmussen Reports — each give Mr. Romney a double-digit advantage in Florida."
@Freddoso: Gingrich, I can beat Obama, 'liberal' Romney can't. http://bit.ly/AdAzvR From @byronyork @EzraKlein: @freddoso Swing state voters to Gingrich: No, you can't. Yes, he can. usat.ly/ApBmO0
4) Germany proposed, and Greece angrily rejected, a debt deal that would have given the
eurozone veto power over its budgetary decisions, report Peter Spiegel and Kerin Hope: "Greece’s finance minister angrily rejected a German plan for the eurozone to impose a budget overseer onto Athens in return for a new €130bn bail-out, saying it would improperly force his country to choose between 'financial assistance' and 'national dignity'...Mr Venizelos’s comments came as talks in Athens shifted from the weeks-long negotiations over restructuring its privately held debt to the question of which public institutions will have to pay to fill a widening gap in Greece’s budget figures. According to officials involved in the discussions, negotiators representing Greek bondholders largely completed a deal with Athens at the weekend which would cut the long-term value of privately held bonds by just over 70 per cent.
@jmackin2: German oversight of Greek finances is half the answer. Fixing imbalances also needs Greek oversight of German spending, to push it up
5) European leaders may shift their focus to growth, reports Stephen Castle: "Bowing to mounting evidence that austerity alone cannot solve the debt crisis, European leaders are expected to conclude this week that what the debt-laden, sclerotic countries of the Continent need are a dose of economic growth. A draft of the European Union summit meeting communiqué calls for 'growth-friendly consolidation and job-friendly growth,’ an indication that European leaders have come to realize that austerity measures, like those being put in countries like Greece and Italy, risk stoking a recession and plunging fragile economies into a downward spiral. The difficulty, however, is that reaching such a conclusion is not the same as making it happen."
1) Austerity has failed, writes Paul Krugman: "Last week the National Institute of Economic and Social Research, a British think tank, released a startling chart comparing the current slump with past recessions and recoveries. It turns out that by one important measure -- changes in real G.D.P. since the recession began -- Britain is doing worse this time than it did during the Great Depression. Four years into the Depression, British G.D.P. had regained its previous peak; four years after the Great Recession began, Britain is nowhere close to regaining its lost ground...The infuriating thing about this tragedy is that it was completely unnecessary. Half a century ago, any economist -- or for that matter any undergraduate who had read Paul Samuelson’s textbook 'Economics' -- could have told you that austerity in the face of depression was a very bad idea. But policy makers, pundits and, I’m sorry to say, many economists decided, largely for political reasons, to forget what they used to know. And millions of workers are paying the price for their willful amnesia." 2) The rich aren't to blame for inequality, writes James Wilson: "There is no doubt that incomes are unequal in the United States -- far more so than in most European nations. This fact is part of the impulse behind the Occupy Wall Street movement, whose members claim to represent the 99 percent of us against the wealthiest 1 percent. It has also sparked a major debate in the Republican presidential race, where former Massachusetts governor Mitt Romney has come under fire for his tax rates and his career as the head of a private-equity firm...But the mere existence of income inequality tells us little about what, if anything, should be done about it. First, we must answer some key questions. Who constitutes the prosperous and the poor? Why has inequality increased? Does an unequal income distribution deny poor people the chance to buy what they want? And perhaps most important: How do Americans feel about inequality?" 3) The Buffett Rule is a terrible idea, writes Josh Barro: "It appears that Senator Sheldon Whitehouse (D-R.I.) intends to introduce a 'Buffett Rule' bill in the Senate, in line with President Obama’s State of the Union call that anybody making over $1 million should be paying at least a 30 percent tax rate. Essentially, it’s a proposal for a second Alternative Minimum Tax, though unlike the current AMT, this one would not make provision for lower taxes on capital gains. It’s important to note that this proposal effectively eliminates the tax preference for capital income for very high earners, even though 30 percent is lower than the top tax rate of 35 percent. Essentially any high earner with substantial capital income will end up being subject to the alternative tax; that means he’ll face a 30 percent marginal rate not only on capital gains, but also on additional ordinary income, whether from wages or interest. This is sure to be a powerful wedge issue for Democrats in the campaign. It’s also a terrible policy idea." 4) The new mortgage investigation must be aggressive, writes Gretchen Morgenson: "President Obama told the nation last week that he was convening a task force to investigate the abusive practices in the mortgage industry that led to our
economic woes. Both lending and the practice of bundling loans into securities will come under scrutiny, he said, adding: 'This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans.' Some greeted this new task force -- its unwieldy name is the Residential Mortgage-Backed Securities Working Group -- with skepticism. It is an election year, after all, and many might wonder if this is just a public-relations response to the outrage against the institutions and executives that almost wrecked the economy. If this task force nailed some big names, and soon, it would help to allay deep suspicions that the authorities have given powerful people and institutions a pass during this awful episode." Late night interlude: They Might Be Giants play "When Will You Die" live on Conan.
Still to come: Budget cuts are a drag on growth; debate over birth control; union membership falls; new estimates dim hopes for natural gas; and a dog sleeps with its kittens.
Exports are driving growth, reports Binyamin Appelbaum: "The estimates of the nation’s economic performance last year, released Friday, highlight a striking trend: Exports have never been more important. Foreign buyers purchased more than $2 trillion in goods and services, the first time exports have topped that threshold. And those exports accounted for almost 14 percent of gross domestic product, the largest share since at least 1929. We usually talk about exports alongside its opposite number, imports, and since the United States buys much more than it sells - our 'trade deficit' -- the general impression is that foreign trade is a drag on the economy. But that tends to obscure the importance of exports, which have accounted for about 10 percent of G.D.P. over the last two decades and, since the recession, considerably more. The growth has come from all areas, but the real strength has come from what might be called the old economy: petroleum, metals, chemicals and farm goods."
Consumer confidence ticked up, reports Kathleen Madigan: "U.S. consumers think the economy is doing a bit better in January, according to data released Friday. The Thomson Reuters/University of Michigan consumer sentiment index for the end of January rose to 75 from a preliminary reading of 74 for the month and 69.9 at the end of December, according to sources who have seen the report. The latest reading was better than the 74.5 expected by economists surveyed by Dow Jones Newswires...Better job growth in recent months has been boosting consumer spirits, but that has not translated to a burst of spending. Friday’s report on U.S. gross domestic product showed real consumer spending rising at an annual rate of 2%, which was slower than many economists had projected." The Obama administration expanded a mortgage assistance effort, report Alan Zibel and Nick Timiraos: "The Obama administration said Friday it would give troubled homeowners another year to enroll in its signature mortgage-assistance program and increase payments to banks in an effort to get them to more aggressively reduce borrowers' loan balances. The changes represent the latest overhaul of the administration's foreclosure-prevention efforts, which President Barack Obama launched three years ago. The administration has fallen far short of its original goal of modifying three million to four million mortgages. The administration's Home Affordable Modification Program had been set to expire at the end of this year but will now be extended until the end of 2013." Small business growth slowed in January, reports Lucia Mutikani: "Small business payrolls grew at a slower rate in January and wages fell, an independent survey showed on Monday, suggesting the pace of overall job growth moderated after December's sturdy gain. Small businesses added 50,000 jobs, payrolls processing firm Intuit said, compared with a gain of 60,000 in December. Still, labor market conditions continue to improve...The Intuit survey is based on responses from about 72,000 small businesses with fewer than 20 employees that use the Intuit Online Payroll system. It covered the period from December 24 to January 23. The average monthly salary for small business employees fell 0.1 percent, or $3, to $2,632 in January. The average workweek eased 0.1 percent to 24.8 hours." Tumblr interlude: On What Matters, on What Matters.
@jbarro: A system of tax-advantaged employer-based health insurance inevitably leads to govt telling employers what a health plan should be.
A new birth control rule is drawing resistance, reports Denise Grady: "This month the Obama administration, citing the medical case for birth control, made a politically charged decision that the new health care law requires insurance plans at Catholic institutions to cover birth control without co-payments for employees, and that may be extended to students. But Catholic organizations are resisting the rule, saying it would force them to violate their beliefs and finance behavior that betrays Catholic teachings...The Obama administration relied on the recommendations of the Institute of Medicine, an independent group of doctors and researchers that concluded that birth control is not just a convenience but is medically necessary 'to ensure women’s health and well-being.' About half of all pregnancies in the United States are unplanned, and about 4 of 10 of those end in abortion, according to the Institute of Medicine report, which was released in July. It noted that providing birth control could lower both pregnancy and abortion rates."
Union membership fell in 2011, reports Steven Greenhouse: "The nation’s union membership rate continued a decades-long slide last year, falling to 11.8 percent of the American work force in 2011, the Bureau of Labor Statistics announced in a report on Friday. That was down from 11.9 percent the previous year even though total union membership edged up, rising by 49,000 last year to 14.76 million. The overall membership rate declined because the increases in organized labor’s ranks did not keep pace with overall growth in employment. The bureau announced these numbers as the nation’s labor unions have been coming under heavy political attack. Republican governors and Republican-controlled legislatures in Wisconsin and in several other states have pushed to curb the power of public employees to bargain collectively. Moreover, Indiana is poised to become the first state in more than a decade to enact a 'right to work' law, which bans employers and unions from agreeing to contracts that require workers to pay fees for union representation." Obama announced a plan to reduce tuition costs, report David Nakamura and Daniel de Vise: "President Obama offered a plan Friday to reduce the costs of higher education by increasing the amount of federal grant money available for low-interest loans and tying it directly to colleges’ ability to reduce tuition. In an impassioned speech before 4,000 students at the University of Michigan, Obama delivered an election-year pitch to the type of youthful audience that buoyed his 2008 campaign, saying his administration was putting colleges 'on notice' that they must rein in soaring prices...Obama’s proposal would boost federal investment in the Perkins loan program from $1 billion to $8 billion and revamp the formula for distributing the money. Under the plan, colleges would be rewarded based on their success in offering relatively lower tuition prices, providing value and serving low-income students, the White House said." The effort is long overdue, writes Kevin Carney: "At a speech Friday morning at the University of Michigan, Obama elaborated even further. He proposed a 'Race to the Top' modeled after his successful efforts to spur state reform of K-12 schools. States would be rewarded for restructuring their college financing systems and continuing to support higher learning. A new 'College Scorecard' would rate colleges on price, graduation, debt and employment, helping students and parents decide where to enroll. Work-study jobs would double, and student loan interest rates would be kept low. Most importantly, billions of dollars in federal aid would become contingent on colleges keeping prices reasonable and low. Colleges that successfully enroll and graduate low-income students, educate people well, and help students find jobs and repay debt would get more federal aid for student loans and other programs. Colleges that fail would not." Interspecies friendship interlude: A dog sleeps with its kittens.
@daveweigel: Keystone pipeline 2012 = Panama canal 1976. Discuss.
Keystone XL will be attached to the House infrastructure bill, reports Russell Berman: "Speaker John Boehner (R-Ohio) said Sunday that legislation advancing the Keystone pipeline would be part of a major House Republican infrastructure and energy bill if it is not enacted before that bill comes to a vote. The Obama administration has rejected approval of the oil sands pipeline over GOP objections, and Republican leaders have identified it as a top job-creating priority. House GOP leaders are preparing to release a top Boehner priority: Legislation that would generate revenue for improving the nation’s aging infrastructure through expanding domestic energy production. 'If it’s not enacted before we take up the American Energy and Infrastructure Jobs Act, it’ll be part of it,' Boehner said of the Keystone pipeline bill."
New estimates show less natural gas in U.S., reports Ian Urbina: "Just how much natural gas is trapped underground in the United States? The difficulty and uncertainty in predicting natural gas resources was underscored last week when the Energy Information Administration released a report containing sharply lower estimates. The agency estimated that there are 482 trillion cubic feet of shale gas in the United States, down from the 2011 estimate of 827 trillion cubic feet -- a drop of more than 40 percent. The report also said the Marcellus region, a rock formation under parts of New York, Ohio, Pennsylvania and West Virginia, contained 141 trillion cubic feet of gas. That represents a 66 percent drop from the 410 trillion cubic feet estimate offered in the agency’s last report." California's low-carbon fuel push is drawing controversy, reports Juliet Eilperin: "Just as it pioneered curbs on greenhouse gas emissions from cars and light trucks a decade ago, California is championing standards that could transform the fuel that goes into their tanks. But its new rule, which requires lowering the amount of carbon in fuel sold in the state, has become embroiled in a fierce public battle and has been barred from being enforced. In light of tight state budgets, litigation over California’s program and a strong lobbying campaign against them, the question is whether the ambitious climate policy will get off the ground...They call for reducing the overall carbon content of fuel sold in the state by 10 percent by 2020. Refiners will either have to mix low-carbon fuels into what they sell over time in order to make the required cuts or buy credits to offset the amount by which the fuel they sell exceeds the standards." A new rule will boost mass transit, writes Matthew Yglesias: "Mass transit has, according to its fans, a staggering array of benefits. It reduces pollution, improves quality of life, and anchors vibrant walkable communities. It boosts public health and makes people happier. But relatively few transit-boosters understand that existing federal guidelines for assessing which new projects to fund not only exclude those considerations, they make it extremely difficult for newly built transit to meet those objectives. A new proposed rule from the Department of Transportation, now entering its 60-day comment period to let people raise objections, should change all that for the better...Transit projects should be built where it’s cheapest to serve the most riders.
This principle can and should stand on its own." Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.
DealBooK | DealB%K: Today's top Headlines: U.S. Banks Tally Their Exposure to Europe's Debt Maelstrom
Monday, January 30, 2012
TODAY'S TOP HEADLINES
Greece Nears Deal With Creditors Bondholders have agreed to significant concessions over the coupon that new bonds would carry, The New York Times reports, citing banks and officials who were not authorized to speak publicly.
|Stock futures down as Greek budget issues loom|
|NEW YORK (Reuters) - Stock index futures fell on Monday as concerns grew about the state of Europe's finances as Greece and Germany sparred over budget measures for Athens. | Full Article|
|EU leaders struggle to reconcile austerity, growth|
|January 30, 2012 07:27 AM ET|
|BRUSSELS (Reuters) - European leaders will struggle to reconcile austerity with growth on Monday at a summit due to approve a permanent rescue fund for the euro zone and put finishing touches to a German-driven pact for stricter budget discipline. | Full Article|
|Ex UBS trader Adoboli denies fraud, faces trial|
|January 30, 2012 07:55 AM ET|
|LONDON (Reuters) - Former UBS trader Kweku Adoboli will stand trial in September after pleading not guilty on Monday to charges related to the loss of more than $2 billion on trades the Swiss bank says were unauthorized. | Full Article|
|Citi chairman Parsons considers stepping down: report|
|January 30, 2012 04:16 AM ET|
|(Reuters) - Citigroup's chairman, Richard Parsons, is considering giving up the position to focus on other interests, the Wall Street Journal reported on Sunday, citing people familiar with the situation. | Full Article|
|Small business hiring slows, wages dip in January|
|January 30, 2012 12:06 AM ET|
|WASHINGTON (Reuters) - Small business payrolls grew at a slower rate in January and wages fell, an independent survey showed on Monday, suggesting the pace of overall job growth moderated after December's sturdy gain. | Full Article|
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — European leaders hold their first summit of 2012 on Monday, but expectations for any breakthroughs in resolving the long-running debt crisis in the euro zone are low as officials focus on finalizing new fiscal rules while deferring calls to increase the firepower of the region’s rescue funds, economists said.
The official agenda is focused on putting the finishing touches on a fiscal compact that will enshrine rules governing deficit and debt levels in the euro zone and toughen their enforcement. Leaders aim to formally approve the measures at a March meeting.
Leaders are also set to discuss ways to boost growth and create jobs. They’re expected to clear the way for the launch of the 500 billion euro ($661 billion) permanent euro-zone rescue fund, the European Stability Mechanism, at midyear.
“In spite of the need for policies to stimulate growth to ensure that deficit-reduction efforts are not fighting against the wind, we are skeptical that euro-zone officials can come up with much that will impress the market or make much difference to the growth outlook,” said Steven Barrow, currency and fixed-income strategist at Standard Bank.
A pile of worries Investors are concerned about corporate earnings, economic conditions in Europe and political uncertainty in the U.S. in an election year.
Measures aimed at improving labor flexibility may boost growth down the road, but could exacerbate weakness in the near term as employees face job cuts and wage reductions, he said.
The meeting comes amid ongoing uncertainty over Greece. Private creditors and the government reported making progress over the weekend on talks aimed at finalizing a voluntary write-down on the value of Greek debt, but said talks would continue into this week.
Meanwhile, Greek officials took exception to a proposal floated by Germany that would effectively give the European Union the power to veto Greek spending plans in return for aid.
And German Finance Minister Wolfgang Schaeuble, in an interview with The Wall Street Journal, warned that Greece must show Europe it is capable of implementing fiscal reforms or it may not receive a second bailout totaling €130 billion necessary to avoid default this spring. Schaeuble’s warning over Greek aid
The lack of a final agreement between Greece and private debt put some pressure on the euro EURUSD -0.82% , analysts said, with the shared currency slipping 0.5% to $1.3125 versus the dollar.
While stronger and more enforceable budget rules and growth-boosting initiatives are welcome, last week’s World Economic Forum annual meeting in Davos, Switzerland, saw Europe lectured on the need to boost the firewalls designed to prevent the crisis from engulfing the likes of Italy, the region’s third-largest economy, or Spain, its fourth-largest.
“It’s critical that euro-zone members develop a clear, simple firewall ... to provide trust,” said Christine Lagarde, managing director of the International Monetary Fund, in Davos on Saturday. If the firewall is big enough, it won’t need to be used, she argued. Calls grow for bigger European crisis firewall
U.S. Treasury Secretary Timothy Geithner also urged Europe to strengthen firewalls, as did British Prime Minister David Cameron, saying a credible effort would be a precursor to increased IMF support for the region.
Germany, however, has resisted calls for boosting the size of the region’s rescue funds, insisting that a long-term commitment to fiscal discipline and a slow slog toward improving competitiveness and restoring confidence are crucial to solving the crisis.
“You can’t make any firewall, any figure ... if the real problems are not solved,” Schaeuble said in Davos last week.
While Monday’s summit is seen as unlikely to offer any major breakthroughs, leaders may find themselves shielded somewhat as a result of last month’s massive injection of liquidity into the European banking summit by the European Central Bank, economists said.
Banks took up nearly half a trillion euros in three-year loans in the long-term refinancing operation, a move that strategists say has translated into lower bond yields across much of the periphery — including Italy and Spain — as bank funding worries have faded.
After peaking near a potentially unsustainable 7.5% last fall, the 10-year Italian bond yield has fallen back toward the 6% level.
But that may also be boomeranging against efforts to build a stronger firewall, said Jane Foley, senior currency strategist at Rabobank International.
“Without an increase [in rescue funds] it is less likely that non-European countries will have a will to pump more funds into an IMF firewall,” Foley said. “Merkel, however, must answer to her electorate and with Italian bond yields off their peak it is less likely that she can make the case for additional German contributions.”
For some economists, the lack of a move to boost rescue funds or move to recapitalize banks spells looming trouble for the euro zone.
Carl B. Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y., said the ECB has bought time for policy makers, but projects a “depression-like” implosion for the region in 2012 unless officials move quickly to safeguard the region’s banking sector.
“That time is not being used wisely,” he said, in a note. “We expect nothing but disappointment from today’s summit, culminating in renewed euro sales and renewed bearishness on local bonds.”
William L. Watts is a reporter for MarketWatch in Frankfurt.
By William L. Watts
FRANKFURT (MarketWatch) -- Italy saw borrowing costs fall Monday as the government sold 7.5 billion euros ($9.9 billion) of government bonds, including benchmark 10-year BTPs and a new five-year issue. The Treasury sold 2 billion euros of 10-year bonds at a yield of 6.08%, down from 6.98% in a sale on Dec. 29. A sale of 3.57 billion euros of new five-year bonds produced a yield of 5.39%, down from 6.47% in a previous sale of five-year securities last month. "While the yields were down from the last auctions, our fixed-income strategists were slightly disappointed by the results," wrote Chris Walker, currency strategist at UBS. The 10-year Italian bond yield IT:10YR_ITA +3.53% rose in the secondary market to trade at 6.13%, up 22 basis points from Friday, according to electronic trading platform Tradeweb.
|Ex UBS trader Adoboli denies fraud charges|
|LONDON (Reuters) - The former UBS trader accused of unauthorised deals that cost the Swiss bank $2.3 billion (1.4 billion pounds) pleaded not guilty to four fraud and false accounting charges in a London court on Monday. | Full Article|
|Optimism builds in euro zone economy|
|30 JAN 2012 10:21 GMT|
|BRUSSELS (Reuters) - Confidence in the euro zone's economy strengthened in January for the first time since early 2011, EU data showed on Monday, but a recovery in Germany masked a deterioration in France and Italy in a sign of the bloc's diverging fortunes. | Full Article|
|EU leaders to agree on permanent bailout fund|
|30 JAN 2012 09:09 GMT|
|BRUSSELS (Reuters) - EU leaders will sign off on a permanent rescue fund for the euro zone at a summit on Monday and are expected to agree on a balanced budget rule in national legislation, with unresolved problems in Greece casting a shadow on the discussions. | Full Article|
|Lloyds to simplify management structure - source|
|30 JAN 2012 07:43 GMT|
|LONDON (Reuters) - The chief executive of part-nationalised bank Lloyds is due to unveil over the next week plans to simplify the bank's management structure, said a source involved in the process. | Full Article|
|Battles go on around Damascus|
|30 JAN 2012 10:49 GMT|
|AMMAN (Reuters) - Street battles raged on the doorstep of the Syrian capital on Monday, as President Bashar al-Assad's troops sought to consolidate their grip on suburbs rebel fighters had taken only a few miles from the centre of Assad's power. | Full Article|
Hourly Market Report
30-01-12 07:00 , EST
|Rhodium||1425.00||1525.00||+ 0.00||+ 0.00 %||1425.00||1400.00|
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — U.S. stock futures fell on Monday, tracking losses in Asia and Europe, as investors eyed a European Union summit amid fresh worries over Greece’s ability to sort out its financial difficulties.
Futures for the Dow Jones Industrial Average DJIA -0.58% fell 70 points, or 0.6%, to 12,544. Those for the Standard & Poor’s 500 index SP2H -0.50% declined 8 points to 1,304.50.
Futures for the Nasdaq 100 ND2H -0.56% shed 15 points, or 0.6%, to 2,441.25.
China stocks reopened lower after a week of holidays and the Stoxx Europe 600 index XX:SXXP -0.70% fell 0.8% to 253.48, as tensions appeared to be brewing over Greece ahead of a summit of European Union leaders set for later on Monday.
German Finance Minister Wolfgang Schaeuble said in an interview with The Wall Street Journal on Monday that Greece must take the necessary steps to get its economy and finances in order, or euro-zone leaders may not grant it a fresh bailout.
That comes on the heels of weekend reports that Germany wants to appoint a European Union Commissioner with veto power over Greece’s finances, a report that was subsequently dismissed by Evangelos Venizelos. Also over the weekend, negotiators said an agreement was close over a voluntary debt swap between Greece and its private creditors. Talks are expected to continue this week.
U.S. stock markets finished mixed last week, with the Dow Jones Industrial Average DJIA -0.58% down 0.5% from the prior Friday and the S&P 500 index SPX -0.16% up just 0.1%. The Nasdaq Composite Index COMP +0.40% rose 1.1% on a weekly basis. Stocks were weighed Friday after disappointment over U.S. gross domestic product numbers for the fourth quarter.
Economic data for Monday include personal income and consumer spending for December, due for release at 8:30 a.m. Eastern time.
The corporate reporting calendar is lighter, with results from Gannett Co., Inc. GCI -1.05% and McKesson Corp. MCK -0.01% due to report ahead of the opening bell.
Stocks in focus for Monday include Thomas & Betts Corp. TNB -0.30% after Swiss-based ABB Ltd. ABB -1.93% CH:ABBN -1.60% said it has agreed to buy the North American supplier of power-transmission lines for $3.9 billion in cash, or $72 a share.
Shares of Alkermes PLC ALKS +4.61% and Amylin Pharmaceuticals Inc. AMLN +19.28% could gain after announcing late Friday that the U.S. Food and Drug Administration has approved their diabetes drug Bydureon.
Among commodities, gold futures pared gains seen in Asian trading as the dollar advanced amid Greece worries. Futures for February delivery GC2G -0.62% fell $11.40 to $1,720.80.
The dollar index DXY +0.48% , which measures the U.S. unit against a basket of six other currencies, traded at 79.304, compared to a level of 78.854 seen in late North American trading on Friday.
Crude-oil futures for March delivery CL2H -0.31% fell 47 cents to $99.09.
Barbara Kollmeyer is an editor for MarketWatch in Madrid.