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Dec 13, 2012

The Economist | Business this week: Highlights of news coverage from December 8th - 14th 2012.

The EconomistBusiness this week


» After four months of political wrangling the European Union’s finance ministers agreed to let the European Central Bank supervise big euro-zone banks, the first step towards a full banking union. Financial integration has been resisted by some countries, notably Germany. As a compromise, most of its retail and savings banks will still be overseen by German authorities. Britain, Sweden and others outside the euro zone secured protections that limit the ECB’s power to dominate EU rule-making.
» The Federal Reserve announced a new round of bond-buying to replace Operation Twist, through which it bought $45 billion a month in long-term Treasury bonds. It funded that by selling short-term issues. But the new programme of bond-buying has no such offset and will increase the Fed’s asset portfolio. The central bank also said it would not raise interest rates until the unemployment rate drops to 6.5%, the first time it has tied a policy decision to a specific level of unemployment. November’s unemployment rate was 7.7%. See article»
» America’s Federal Deposit Insurance Corporation and the Bank of England issued joint proposals on how to cope with banks that are “too big to fail”. The proposals include plans to compel shareholders and creditors to shoulder losses at a failing bank.

A good return
» The US Treasury Department began selling the remaining shares it holds in AIG. The government ploughed $182 billion into the insurer during the crash in a virtual nationalisation of the firm. Since then it has gradually reduced its stake. The bail-out netted it a positive return of $22.7 billion.
» The first arrests were made in connection with the LIBOR scandal. Three British men who work in financial services were questioned in London by the Serious Fraud Office about the past manipulation of LIBOR, a benchmark interest rate which determines the prices of assets worldwide.
» Two big British banks reached settlements with American authorities in separate cases of alleged wrongdoing. HSBC paid penalties of $1.9 billion and submitted to a deferred-prosecution agreement with the Justice Department. The bank admitted to “past mistakes”, which include laundering drugs-money transactions through its Mexican division. Meanwhile, Standard Chartered shelled out an extra $327m for its failure to heed American sanctions policy on Iran between 2001 and 2007. Both banks have beefed up their compliance procedures. See article»


The latest airline alliance
» Delta Air Lines bought Singapore Airlines’ 49% stake in Virgin Atlantic for $360m, considerably less than the $960m that the Singaporean carrier paid for it in 1999. Sir Richard Branson’s Virgin Group holds the remaining 51%. Delta and Virgin, which is the fourth-biggest airline operating at Heathrow airport, will co-operate on lucrative transatlantic routes between America and Britain.
» After four decades of bickering the European Union at last passed a single patents regime for its member states, which should reduce the cost to innovators of protecting their intellectual property in the region by 80% or more. A European Patent Office will be based in Paris with offshoots in London and Munich. See article»
» The British government gave the go ahead to frack for shale gas. Operations had been suspended over concerns that the process causes minor earth tremors, but new safety rules were introduced to reduce that risk. Britain is hoping to boost the proportion of energy it gets from shale.
» Turkey’s GDP grew by 1.6% in the third quarter, far below expectations, making it the latest emerging-market economy to report disappointing growth. Turkey had excited investors over the past decade as its economy expanded rapidly, by more than 8% in 2010 and 2011. But the crisis in the euro zone, Turkey’s biggest trading partner, and nervousness about the conflict in neighbouring Syria has hurt it. Industrial production fell by 5.8% in October.
» ThyssenKrupp, a German conglomerate known mostly for steelmaking, reported a €4.7 billion ($6.1 billion) loss for the year to September. Most of this was caused by a write-down of its steel business in Alabama and Brazil, which Heinrich Hiesinger, the chief executive, called a “disaster”. Three of the company’s most senior executives were sacked.

No bargain booze for Christmas
» Diageo, a drinks group that includes Baileys and Johnnie Walker among its labels, called time on its lengthy pursuit of Jose Cuervo after failing to agree a price with the Beckmann family, who are sixth-generation owners of the business. Diageo has been distributing their tequila outside Mexico since 1986, but that agreement ends in June.
 

The Economist | Politics this Week: Highlights of news coverage from December 8th - 14th 2012.


  The EconomistPolitics this week

» Mario Monti, Italy’s technocratic prime minister, said he would resign by the end of the year, after a parliamentary vote on the budget, because Silvio Berlusconi’s PdL party had withdrawn its support for the government. Mr Monti is credited with bringing some stability to Italy’s chaotic finances. Earlier, Mr Berlusconi, a former prime minister who is appealing against a conviction for tax fraud, said he would run for office again next year, reversing his decision of just seven weeks ago to retire from politics. Stockmarkets shuddered. See article»
» Germany’s opposition Social Democrats nominated Peer Steinbrück as their contender for the chancellorship in next September’s election. He faces an uphill battle against Angela Merkel, the incumbent.
» The centre-left coalition of Victor Ponta, Romania’s prime minister, won a decisive victory in parliamentary elections. In spite of his big win it is uncertain whether Traian Basescu, the president, will reappoint Mr Ponta, his arch-rival, to office. See article»
» David Cameron, Britain’s prime minister, described as “shocking” the state collusion uncovered by an official review of the murder of a Catholic lawyer in Belfast. Pat Finucane was shot by loyalist paramilitaries in 1989, though they were helped by members of the British security forces. See article»
» New census data showed that London has become even more diverse. White Britons now account for less than half its 8.2m population (45%) for the first time and more than one in three residents is foreign-born. (Over 1.2m “other whites”, mainly of east European origin, also reside in the capital.) See article»
» The European Union received the Nobel peace prize at a ceremony in Norway. The British and Swedish prime ministers as well as the Czech president did not attend.

Danger ahead
» The stand-off between supporters and opponents of President Muhammad Morsi intensified in Egypt ahead of a referendum on a new constitution, which critics say will take the country in an Islamist direction. The opposition is campaigning for a no vote, and has been out in force on the streets. Mr Morsi’s supporters have blockaded the constitutional court and a building that houses Egypt’s TV media. See article»
» America and delegates from more than 100 other countries formally recognised Syria's opposition as the country’s legitimate government at a meeting in the Moroccan city of Marrakech. Reports that President Bashar Assad’s forces had fired projectiles that resembled Scud missiles reminded the world how much worse this conflict could get.
» A disputed presidential election result in Ghana took some of the gloss off that country’s reputation as a model democracy. John Mahama just cleared the threshold needed for an outright win in the first round. See article»
» Coup-prone Mali saw its prime minister ousted by the army. He resigned on television at 4 o’clock in the morning. The president remains in place, as do the Islamic fundamentalists who control the north of the country.


Battling the big C
» Hugo Chávez, Venezuela’s president, announced that his cancer had returned and named Nicolás Maduro, his vice-president, as his chosen successor. He then went to Cuba for a six-hour operation. See article»
» The European Parliament approved free-trade agreements between the European Union and Colombia, Peru and six Central American countries.
» Canada’s Conservative government finally approved a $15.1 billion bid by CNOOC, a state-owned Chinese oil company, for Nexen, a tar-sands producer. Canada has strict rules on foreign takeovers of natural-resource companies. Stephen Harper, the prime minister, said that future foreign offers for tar-sands firms would be barred, except in “exceptional circumstances”. See article»
» As part of its programme to “update” its communist economy, Cuba’s government published laws authorising workers to form co-operatives in construction, transport and other industries. Hitherto, co-operatives have been mainly restricted to farmers.

NYT | Politics (December 13, 2012).: Rice Drops Bid for Secretary of State, Citing Opposition

The New York Times

December 13, 2012

Politics

 

 

Rice Drops Bid for Secretary of State, Citing Opposition

Susan E. Rice, the ambassador to the United Nations, faced relentless Republican criticism over her statements about the deadly attack on Americans in Benghazi, Libya.

With Gap Wide and Time Short, Obama and Boehner to Meet

Little more than two weeks before the nation goes over the so-called fiscal cliff, neither Speaker John A. Boehner nor President Obama has budged from his core demands.

More Politics

Senator Bernard Sanders of Vermont in his office on Capitol Hill.

From Vermont, a Gruff Voice for Shielding Entitlements

As the debate grows over how to reduce the federal deficit, Senator Bernard Sanders is speaking out against cutting Social Security, Medicare and Medicaid benefits as part of a deal.
News Analysis

Income Malaise of Middle Class Complicates Democrats' Stance in Talks

Concern over the wage and income trends of the last decade, when pay stagnated for middle-class families, could make it more difficult for Democrats to advocate for across-the-board tax increases if a deal falls through.
Speaker John A. Boehner, at a news conference Wednesday, has lawmakers on the far right openly chafing at his leadership.

Boehner Tries to Contain Defections on Fiscal Unity

Speaker John A. Boehner is faced with lawmakers on the far right openly chafing at his leadership and some pragmatists pressing for quick accommodation on tax rate increases on the rich.
Ben Bernanke, chairman of the Fed, said Wednesday that the agency was nearing the limits of its ability to help the unemployed.

Fed Ties Rates to Joblessness, With Target of 6.5%

Making it plain that job creation had become its focus, the Federal Reserve said it would suppress interest rates so long as unemployment stayed above a certain level.

The Caucus

Top State Dept. Lawyer Is Leaving

The departure of Harold Koh is part of a major overhaul of the Obama administration's national security legal policy team.

Debt Reckoning

Study Says Farm Bills Would Add to, Not Cut, Deficit

A new analysis of previous spending on farm bills shows that the proposed bills might actually add to the deficit.
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The Debt Reckoning

This feature follows the talks between President Obama and Congressional leaders over the so-called fiscal cliff.

Multimedia

Video: Two Sides Still Apart on a Fiscal Deal
TimesCast Politics: Boehner maintains that Obama isn't serious. | The implications for the president's second term. | Christine Quinn and the race for mayor. | A new movie spurs debate about torture.
Video: Fiscal Negotiations and the Obama Agenda
David Leonhardt, Washington bureau chief, and the reporter Annie Lowrey discuss the implications of the fiscal talks on President Obama's second term.
Interactive Graphic: Presidential Exit Polls
A look at how different demographics voted in 2012.
Full Election Results
Results from the 2012 presidential, Senate and House Races.

NYT | The Learning Network (December 13, 2012).: Fiction or Nonfiction? Considering the Common Core's Emphasis on Informational Text

 

The New York Times

December 13, 2012

The Learning Network

 

Lesson Plans

Go to related Opinion piece »

Fiction or Nonfiction? Considering the Common Core's Emphasis on Informational Text

In this lesson, students will reflect on their reading experiences in and out of school and discuss the roles that both nonfiction and fiction have played in their lives. After learning what the Common Core State Standards and its critics say, they discuss the question, "What should children read?"
Stress Less: Understanding How Your Mind and Body Respond to Anxiety

Stress Less: Understanding How Your Mind and Body Respond to Anxiety

In this lesson, students learn about the physiological stress response, and then choose from a number of activities to explore various aspects of anxiety.
Teaching the Cold War With The New York Times

Teaching the Cold War With The New York Times

We have gathered 13 years of Learning Network lesson plans related to the cold war, along with our Student Crossword, select Times resources and suggested teaching Web sites.
What's Going On in This Picture? | Dec. 10, 2012

What's Going On in This Picture? | Dec. 10, 2012

Every Monday morning, we publish a New York Times photo without any caption, headline or other information about its origins. Join the conversation by posting about what you see and why in our comments section.
Common Core Practice | Lexicography, Lab Lit and Ethical Investing

Common Core Practice | Lexicography, Lab Lit and Ethical Investing

This week: exercises for learning new vocabulary words; taking a position on an issue currently roiling some college campuses; and writing short fiction that incorporates what students have read in science class.
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Student Opinion Questions

When Should You Compromise?

How do you negotiate a satisfactory solution when you strongly disagree with someone?
Should Engineers Pay Less for College Than English Majors?

Should Engineers Pay Less for College Than English Majors?

Do you think the system Florida's governor has proposed is fair? Is it a good idea? Is studying the humanities worthwhile even if those majors are not as in demand for jobs?
How Stressed Are You?

How Stressed Are You?

Tell us when and why you feel most anxious, and share tips about how to manage stress.
What Are Your Tips for Enjoying the Holiday Season?

What Are Your Tips for Enjoying the Holiday Season?

How are you enjoying this holiday season?
When Have You Seen Yourself and Your Life Reflected in a Book or Other Media?

When Have You Seen Yourself and Your Life Reflected in a Book or Other Media?

Do you feel more connected when you read about something you can relate to, or do you prefer to read about lives different from your own?
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NYT Afternoon Edition (December 13, 2012).: Russian Envoy Says Syrian Leader Is Losing Control

The New York Times
December 13, 2012

Afternoon Update



TOP NEWS

Russian Envoy Says Syrian Leader Is Losing Control

By ELLEN BARRY and RICK GLADSTONE
Russia's top Middle East diplomat and the leader of NATO on Thursday offered similar assessments of President Bashar al-Assad's future, asserting he was losing control of Syria after a nearly two-year conflict.

E.U. Leaders Hail Accord on Banking Supervision

By JAMES KANTER
The agreement on banking supervision would put between 100 and 200 major banks under the direct oversight of the European Central Bank.
DealBook

UBS Expected to Pay at Least $1 Billion in Rate-Rigging Case

By MARK SCOTT and BEN PROTESS
The Swiss financial giant UBS is close to finalizing a settlement with authorities over the manipulation of interest rates, a deal that is expected to include at least $1 billion in fines.

Life Expectancy Rises Around the World, Study Finds

By SABRINA TAVERNISE
More people worldwide are living into old age, but the gains in the United States were much smaller, according to a new study.

From Vermont, a Gruff Voice for Shielding Entitlements

By SHERYL GAY STOLBERG
As the debate grows over how to reduce the federal deficit, Senator Bernard Sanders is speaking out against cutting Social Security, Medicare and Medicaid benefits as part of a deal.
U.S.

Video: Two Sides Still Apart on a Fiscal Deal

TimesCast Politics: Boehner maintains that Obama isn't serious. | The implications for the president's second term. | Christine Quinn and the race for mayor. | A new movie spurs debate about torture.
Opinion

Room for Debate

The Human Cost of Cheap Clothing

Where does the responsibility lie when it comes to improving safety standards in factories that produce affordable clothing, and what can be done about it?
BUSINESS

U.S. Rejects Telecommunications Treaty

By ERIC PFANNER
In a moment of high drama, the U.S. said it would not go along after a majority of nations approved a document mentioning the Internet.
DealBook

Yahoo Shakes Up Its Board, Adding Levchin

By MICHAEL J. DE LA MERCED
Yahoo says two directors will be leaving the board, while Max Levchin, a former senior executive at PayPal, will be joining it.

China Pushes Deposit Insurance in Bank Overhaul

By KEITH BRADSHER
China's new leadership is preparing to introduce bank deposit insurance as the first step in financial reforms to be started at a top-level meeting in the coming days in Beijing.
DealBook

Sprint Offers to Buy Remaining Stake in Clearwire for $2.1 Billion

By DEALBOOK
Sprint Nextel on Thursday offered about $2.1 billion for the portion of Clearwire it did not already own, moving to secure access to a big chunk of spectrum.

Britain Approves Fracking for Shale Gas Exploration

By STANLEY REED
The decision, which imposes stringent controls, potentially opens the way for the development of a shale gas industry in Western Europe.

DealBook P.M. Edition (December 13, 2012).: UBS Expected to Pay at Least $1 Billion in Rate-Rigging Case



Thursday, December 13, 2012
TOP STORY
UBS Expected to Pay at Least $1 Billion in Rate-Rigging Case The Swiss financial giant UBS is close to finalizing a settlement with authorities over the manipulation of interest rates, a deal that is expected to include at least $1 billion in fines.
  • DEALBOOK »
  •  
  • DEALBOOK HIGHLIGHTS
    Wall Street Stars Raise Their Lighters at Sandy Benefit Concert The stars present at 12-12-12: The Concert for Sandy Relief weren't only on stage or manning the donation phone banks: Wall Street boldfaced names like Jamie Dimon, David Einhorn and Steven A. Cohen were also in the crowd.
    Davis Polk Starts Litigation Practice in Hong Kong Davis Polk & Wardwell is forming a litigation practice in Hong Kong, highlighting the continued push by New York's blue-chip corporate law firms into foreign financial centers.
    In Debt: Possible Ripples From the Argentine Bond Litigation Stephen J. Lubben says that recent court decisions in the Argentine debt litigation seem to go a long way toward transforming the pari passu clause from a rule of rank into a prohibition on preferences.
    Yahoo Is Said to Plan Board Shake-Up Yahoo says two directors will be leaving the board, while Max Levchin, a former senior executive at PayPal, will be joining it.
    Deutsche Bank Says Earnings Will Be Weak A day after prosecutors raided its headquarters in a tax-evasion investigation, Deutsche Bank disclosed that earnings would be weak, but called it "guidance" rather than a "profit warning."
    Sprint Offers to Buy Remaining Stake in Clearwire for $2.1 Billion Sprint Nextel on Thursday offered about $2.1 billion for the portion of Clearwire it did not already own, moving to secure access to a big chunk of spectrum.
    Breakingviews: For Clearwire, There Is No Better Alternative Robert Cyran says that in offering $2.1 billion for the 48 percent of Clearwire that it doesn't already own, Sprint is taking on some starry-eyed activists.
    GrainCorp Rejects Revised Archer Daniels Bid GrainCorp of Australia has rejected a $2.9 billion revised takeover offer from the Archer Daniels Midland Company, saying the bid undervalues the company.
    Buzz Tracker
    Khosla Ventures Teams Up With Condoleezza Rice The venture capital firm announced it had retained RiceHadleyGates, the consulting firm whose principals include Condoleezza Rice, a former secretary of state, to help Khosla achieve strategic goals.
    LOOKING AHEAD
    Economic Reports Data scheduled to be released on Friday includes the Consumer Price Index for November and industrial production for November.
    In the United States On Friday, a lockup period will expire for 156 million shares of Facebook, and Elisse B. Walter will succeed Mary L. Schapiro as chairwoman of the Securities and Exchange Commission.
    DealBook Video
    TimesCast Politics: Both Sides Still Apart on a Fiscal Deal Boehner maintains that Obama isn't serious. | The implications for the president's second term. | Christine Quinn and the race for mayor. | A new movie spurs debate about torture policy.


     

MarketWatch | Wall Street at Close Report (December 13, 2012).: U.S. stocks end lower on fiscal-cliff jitters S&P 500 Index breaks longest win streak in four months

By Kate Gibson, MarketWatch 

NEW YORK (MarketWatch)U.S. stocks fell on Thursday as politicians bickered in public over their difficulties in reaching a deal to avert recession-inducing spending cuts and tax hikes in the new year. 

House Speaker John Boehner called a news conference to air his views on what is blocking negotiations to avoid the fiscal cliff, with the Ohio Republican blasting President Barack Obama and Democrats for looking to “punish small businesses” with higher tax rates. Read more about Boehner sidestepping a question about bill extending taxes for top 2%. 

 
Pelosi urges Congress to make deal House Minority Leader Nancy Pelosi calls on legislators to pass a fiscal-cliff deal and agree to middle-income tax cuts. 

At a separate news conference, Senate Majority Leader Harry Reid, a Nevada Democrat, countered that Americans shouldn’t have their taxes “held hostage” to Boehner and his press events.
The White House also entered the fray, with spokesman Jay Carney calling Republican opposition to higher taxes on the wealthiest 2% the single obstacle holding up a deal. 

“Rates on top earners have to go up as part of the revenue equation. When that happens, we believe we can reach a deal fairly quickly,” Carney said. 

Obama and Boehner are due to meet at the White House at 5 p.m. Eastern to discuss the fiscal cliff. The two men last met on Sunday. 

The Dow Jones Industrial Average DJIA -0.56%  fell 74.73 points, or 0.6%, to end at 13,170.72. The top decliners in the Dow were from the health-care sector, with Merck & Co. MRK +0.23%  down 2% and UnitedHealth Group Inc. UNH +0.04%  down 1.6%. Read: 5 big market surprises in 2012. 

Halting a six-session winning run, its longest since one that ended Aug. 10, the S&P 500 Index SPX -0.63%  lost 9.03 points, or 0.6%, to end at 1,419.45, with health-care and energy leading sector losses. Read: Morgan Stanley’s top trades for 2013. 
 
The Nasdaq Composite Index COMP -0.72%  declined 21.65 points, or 0.7%, to end at 2,992.16.
Around 663 million shares traded on the New York Stock Exchange. Composite volume exceeded 3.3 billion. 

Scott Brown, chief economist at Raymond James,” said that “Democrats are in a much better bargaining position” on the fiscal-cliff issue. Noting that both parties want tax rates for the middle class to remain low, Brown added this alone would be basis for an agreement. 

“The market is pricing in a deal happening to avert the fiscal cliff before the end of the year,” according to Art Hogan, market strategist at Lazard Capital Markets. 

But Brown noted: “A lot of people are starting to second-guess the likelihood of a deal by the end of the year. My view is that it seems more likely in January than December.” 

Wall Street offered only brief reaction to moves by global central banks and a number of U.S. economic reports. Read: Fed, central banks extend dollar swap lines. 

“We certainly care what central banks are doing — that’s going to be important to the global economy,” said Hogan. “But all of that is the backdrop” to budget talks on Capitol Hill. 

In economic news, the Labor Department reported initial claims for jobless benefits fell by 29,000 to 343,000 last week, with the data exceeding expectations. Read: Jobless claims drop below pre-Sandy levels. 

 
Fed extends bond buying into 2013 The Fed refashions its bond-buying programs, extending its far-reaching effort to revitalize the job market and boost the economy into 2013. 


Other reports had wholesale prices falling and retail sales bouncing back in November.
The drop in prices paid by U.S. producers was lower than expected, with declining energy costs a large part of the decline. 

On Thursday, the cost of crude fell, with oil futures CLF3 -0.73%  pricing a barrel below $86.
“Our energy team is pretty optimistic that oil prices are going to come down next year” as the U.S. continues to ramp up production, said Brown at Raymond James. 

Falling energy and gasoline prices could help offset any sort of tax hike on U.S. consumers, he added.
U.S. stocks posted a flat performance Wednesday after Federal Reserve Chairman Ben Bernanke warned that the central bank doesn’t have the ability to shield the economy from the full impact of the fiscal cliff. Many economists fear that failure to avoid the cliff would trigger a recession. 

Euro-zone finance ministers approved the next round of rescue funds to Greece on Thursday, with the money expected to be in the pipeline next week. European Union leaders also reached a deal to bring the region’s biggest lenders under a single supervisory body, which Lazard’s Hogan called an especially positive development. 

“It’s a critical step needed in the path toward fiscal unity,” he said.
Shares of Google Inc. GOOG +0.74%  gained 0.7% after the search giant released a version of its Maps app for Apple Inc.’s AAPL -0.13% iPhone, which appeared on Apple’s App Store late Wednesday. The Google Maps app had been kicked off the iPhone in favor of Apple’s own software in September, prompting numerous complaints about inaccuracies and other problems.
 
Best Buy Co. BBY +15.93%  jumped nearly 16% after the Minneapolis Star Tribune reported that founder Richard Schulze was expected to make an offer for the electronics retailer by the middle of next month. Read Market Extra: Time for Best Buy to finally go private?
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Kate Gibson is a reporter for MarketWatch, based in New York. Follow her on Twitter @MWKateGibson.