News That Matters

Due to server upgrade today, we have been offline, but are back on track now. Here is today’s delayed News That Matters;

Ft.com
Spreads on dollar-denominated bonds sold by financial institutions have hit their widest levels in nearly two years amid growing concerns about the impact on the sector of European sovereign risk and US economic weakness http://ftalphaville.ft.com/thecut/2011/08/24/660961/us-banks-bond-spreads-widen-to-2009-levels/

A 5.8 magnitude earthquake shook the east coast of the US on Tuesday afternoon, the FT reports, forcing the evacuation of buildings in Washington, including the White House and Pentagon, and rattling nerves as far away as Ohio and Toronto. The earthquake was centred at Mineral http://ftalphaville.ft.com/thecut/2011/08/24/660926/us-earthquake-forces-evacuations/

A US federal judge ruled that the Federal Deposit Insurance Corporation has to face a $10bn lawsuit tied to the failure of Washington Mutual Bank, Reuters reports. The judge refused the regulator’s requesthttp://ftalphaville.ft.com/thecut/2011/08/24/660896/fdic-loses-bid-to-avoid-wamu-lawsuit/

Deals in the technology and telecoms industry have returned to pre-recession levels this year, thanks to a number of big acquisitions such as AT&T’s $39bn purchase of T-Mobile, the FT reports. After two years in the doldrums http://ftalphaville.ft.com/thecut/2011/08/24/660881/tech-deals-at-pre-recession-levels/

Japan’s sovereign-credit rating was lowered by Moody’s Investors Service, Bloomberg reports, which cited “weak” prospects for economic growth that will make it difficult for the government to rein in its public debt burden. Moody’s lowered the grade by one step to Aa3, http://ftalphaville.ft.com/thecut/2011/08/24/660841/japans-credit-rating-cut-by-moodys/

Gulfsands Petroleum, the London-listed oil and gas company, agreed to give a share of profits from its production activities in Syria to a company controlled by Rami Makhlouf, the first cousin of Syrian president Bashar al-Assad http://ftalphaville.ft.com/thecut/2011/08/23/660776/gulfsands-petroleum-in-oil-payments-to-assad-cousin/

The battle to become Japan’s next prime minister changed course dramatically on Tuesday after Seiji Maehara, the former foreign minister, entered the race, reports the FT. His decision to challenge for the leadership reduces the chances of Yoshihiko Noda, http://ftalphaville.ft.com/thecut/2011/08/23/660741/maehara-joins-battle-to-become-japan%e2%80%99s-pm/

Dmitry Medvedev, Russian president, will meet his North Korean counterpart on Wednesday to discuss plans to build gas pipelines and rail links via North Korea to South Korea, a major trade partner for Russia http://ftalphaville.ft.com/thecut/2011/08/23/660726/russia-and-north-korea-in-talks-on-links/

Eurozone consumer optimism has plummeted this month at the fastest rate for 20 years, while manufacturing contracted for the first time in two years, according to surveys that indicated economic growth across the region would remain at near stagnation. The European Commission said its consumer confidence indicator fell 5.4 points to minus 16.6 in August – a larger monthly fall than was seen in October 2008 after the collapse of Lehman Brothers. http://www.ft.com/intl/cms/s/0/f729b602-cd67-11e0-b267-00144feabdc0.html#axzz1VpA0w13T

Wsj.com
Asian shares were mostly higher Wednesday after a handful of strong manufacturing reports from China and Europe buoyed Wall Street Tuesday, while the yen briefly sagged after Moody’s Investors Services downgraded Japan’s sovereign debt rating. Japan’s Nikkei Stock Average added 0.4%, Australia’s S&P/ASX 200 was 1.2% higher, South Korea’s Kospi Composite edged down 0.1% in choppy trade and New Zealand’s NZX-50 was up 1.0%. Dow Jones Industrial Average futures were 51 points lower in screen trade. http://online.wsj.com/article/SB10001424053111903327904576527271013144428.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

The Japanese government unveiled Wednesday morning a series of unusual steps aimed at curbing the yen’s rise without directly intervening in currency markets. The package announced by Finance Minister Yoshihiko Noda included two main elements: a $100 billion fund to encourage Japanese businesses to ramp up their overseas merger and acquisition activity, and a rule requiring major financial institutions to report currency-trading positions. http://online.wsj.com/article/SB10001424053111903461304576527412989096014.html?mod=WSJASIA_hpp_LEFTTopWhatNews

U.S. stocks jumped on Tuesday as many investors sent a plea to Federal Reserve Chairman Ben Bernanke: Come to the rescue of the stalling economy and battered financial markets. The Dow Jones Industrial Average jumped 322.11 points, or 3%, to 11176.76 as a new round of bleak economy data helped buoy investor hopes that Mr. Bernanke will step in with some sort of monetary stimulus. That optimism comes despite all signs to the contrary. Federal Reserve officials are saying nothing to encourage market speculation that Mr. Bernanke will use a speech in Jackson Hole, Wyo., Friday to unveil further Fed http://online.wsj.com/article/SB10001424053111903461304576526851724687590.html?mod=WSJ_hp_LEFTWhatsNewsCollection

The standoff between Anna Hazare and the government showed signs of thawing as the Gandhian activist entered the eighth day of his fast, with the government inviting Mr. Hazare’s aides for talks and also calling for a meeting of all political parties to try to agree on legislation for an anticorruption ombudsman. Prime Minister Manmohan Singh also wrote an impassioned open letter to Mr. Hazare Tuesday evening, expressing concern about the 73-year-old’s health and stating that the government was committed to passing a constitutionally valid anticorruption watchdog bill, or Lokpal bill, with inputs from civil society. http://online.wsj.com/article/SB10001424053111903461304576525791663484266.html?mod=WSJASIA_hpp_MIDDLEFourthNews

Some emerging nations have stepped into the market this month to prevent steeper declines in their currencies. The darkening economic outlook has turned the status quo for emerging-market currencies upside down. In recent weeks Turkey, South Korea and Indonesia have taken or forewarned of measures to curb their currencies’ slides after global growth sent investors fleeing riskier assets, including equities and emerging-market currencies. These central banks and others want to prevent their currencies from swinging sharply in either direction—too steep ahttp://online.wsj.com/article/SB10001424053111903327904576526712167710934.html?mod=WSJASIA_hpp_LEFTTopWhatNews

China released draft guidelines on how foreign investors can use yuan acquired overseas for direct investment in the country, taking another significant step forward in further internationalizing the Chinese currency and opening the nation’s tightly controlled capital account. In a statement late Monday, the Ministry of Commerce laid out a framework for the so-called yuan-denominated foreign direct investment, formalizing and making technical changes to a trial program launched in the second half of last year. http://online.wsj.com/article/SB10001424053111903461304576525731746088812.html?mod=WSJASIA_hpp_LEFTTopWhatNews

Bank of America Corp. suffered through another tumultuous day in the market, with a measure of anxiety over its credit-worthiness hitting an all-time high even as analysts said the bank is much sounder than it was before the 2008 financial crisis. The cost of insuring the Charlotte, N.C., lender’s bonds against default surged Tuesday to $435,000 a year for five-year protection on $10 million in debt, according to data from Markit Group. The cost of the insurance, in the form of credit-default swaps, surpassed a record set in March 2009, at a time when the economy was in recession andhttp://online.wsj.com/article/SB10001424053111904279004576526923038008308.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Euro-zone governments are discussing a plan to have noncash Greek government assets, including real estate, offered as collateral for a new round of rescue lending to Greece, backing away from a bilateral agreement reached last week between Greece and Finland, officials said Tuesday. The discussions come as opposition is mounting among the governments to the Finnish-Greek deal—which would see Greece pay Finland hundreds of millions of euros in cash as collateral against the loans. Crucially, German Chancellor Angela Merkel has rejected the deal, said a German lawmaker.http://online.wsj.com/article/SB10001424053111903461304576526613839378594.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Triumphant rebel fighters and thousands of ordinary Libyans stormed Col. Moammar Gadhafi’s fortress compound here Tuesday after a daylong battle, but the elusive strongman was nowhere to be found. With celebratory gunfire giving way to a pandemonium of looting, rebels and residents made off with weapons, flat-screen television sets and souvenirs from the rule of their leader of four decades. One man waved an ivory staff capped with an engraved elephant head. Another made his way across the compound’s sweeping lawns, wheeling a gold-plated cocktail trolley.http://online.wsj.com/article/SB10001424053111903327904576525652544535820.html?mod=

Reuters.com
Gold rebounded more than 1 percent on Wednesday after posting its worst drop in 18 months, as risk appetite retreated after Moody’s downgraded Japan’s debt rating and strong buying interest in Asia’s physical market lent support. The sharp drop in prices in the previous session triggered strong buying interest as Asia opened business, sending spot gold up 1.2 percent to $1,851.67 an ounce by 0303 GMT. U.S. gold trimmed early losses to $1,854.80. http://www.reuters.com/article/2011/08/24/us-markets-precious-idUSTRE7781Q420110824

Apple Inc will release a cheaper iPhone 4 within weeks, jeopardizing profit margins to win lower-end customers from rivals such as Nokia in China and other emerging markets. Asian suppliers have begun making a lower-cost version of the hot-selling smartphone with a smaller 8-gigabyte flash drive that will arrive around the same time Apple unveils its much-anticipated iPhone 5, two sources with knowledge of the matter told Reuters. http://www.reuters.com/article/2011/08/23/us-apple-iphone-idUSTRE77M1P220110823

Bloomberg.com
When Libyan rebels stormed Muammar Qaddafi’s compound in Tripoli he was nowhere to be found. The hunt for the Libyan dictator may now take them underground. Suspecting it might come to this, Qaddafi taunted NATO allies three months ago, saying in a May 13 speech: “I live in a place they cannot reach and where you cannot kill me.” http://www.bloomberg.com/news/2011-08-23/hunt-for-qaddafi-takes-rebels-under-tripoli-in-search-of-secret-tunnels.html

UBS’s decision to cut 5 percent of its workforce brings to more than 40,000 the number of jobs cut by European banks in the past month as the region’s worsening sovereign debt crisis crimps trading revenue. European banks are slashing jobs this year six times faster than their U.S. peers, according to data compiled by Bloomberg, as concerns about the creditworthiness of Italy, Spain and France roil financial markets and reduce income from fixed- income trading, stock and bond underwriting as well as mergers and acquisitions. Financial firms are also cutting costs as regulators force banks to hold more and better quality capital to withstand future shocks. http://www.bloomberg.com/news/2011-08-23/european-bank-job-bloodbath-surpasses-40-000-as-ubs-cuts-workforce-by-5-.html

Australia’s opposition is pressing Labor Party lawmaker Craig Thomson to respond to claims he misused his union credit card to pay prostitutes in a scandal that could threaten Prime Minister Julia Gillard’s government. Thomson, a former national secretary of the Health Services Union, last night resigned as chair of the House Economics Committee and said he continues to reject claims of wrongdoing, according to an e-mailed statement sent by his media officer, David Gardiner. http://www.bloomberg.com/news/2011-08-24/australian-opposition-pushes-mp-for-comment-on-prostitute-claim.html

Libyan rebels needed NATO’S military might to bring Muammar Qaddafi’s rule to the brink of collapse. About $50 billion in cash abroad means they can do without foreign aid to rebuild the country after a six-month conflict. As the rebels hunt Qaddafi and his remaining followers in the capital, world leaders such as German Chancellor Angela Merkel are urging the release of frozen Libyan assets abroad to help in the transition to democracy. Those assets and Africa’s largest oil reserves set Libya apart from neighboring Tunisia and Egypt, which sought outside financial aid after popular revolts ousted their leaders this year. http://www.bloomberg.com/news/2011-08-23/oil-rich-libyans-won-t-need-financial-aid-in-post-qaddafi-era.html

As markets convulsed in September 2008, Morgan Stanley (MS) Treasurer David Wong briefed the Federal Reserve on a “dark” scenario in which the U.S. firm would need at least $10 billion of emergency loans from the central bank. It got 10 times darker by month’s end. Morgan Stanley borrowed $107.3 billion, the most of any bank, according to data compiled by Bloomberg News using information released in response to Freedom of Information Act requests, related court orders and an act of Congress. http://www.bloomberg.com/news/2011-08-22/morgan-stanley-at-brink-of-collapse-got-107b-from-fed.html

Cnbc.com
The economy is increasingly at risk of falling into recession, and could be more so if the stock market doesn’t find its sea legs sometime soon. In the past week, a number of economists downgraded their growth forecasts to levels that show the economy to be barely moving forward. “I think we’re right on the edge,” said Mark Zandi of Moody’s Economy.com. “I think confidence is extraordinarily fragile, and consumer and businesses are frozen in place. The numbers going into Q3 are tracking less than 1 percent. It’s still early but the debt ceiling drama, the S&P downgrade and what’s going on in Europe have done serious damage on the collective psyche.” http://www.cnbc.com/id/44250079

Banking analyst Dick Bove, who a month ago rocked the markets with his call to sell everything in sight, has changed gears. Now, Bove is advising to buy. With both hands. “In the last few days I started looking at valuations of these companies and was just shocked by what I saw,” said the Rochdale Securities vice president of equity research. “These stocks are selling in many cases at lower valuations than the first quarter of 2009, which was supposedly the bottom.” http://www.cnbc.com/id/44244052

Both the U.S. and Europe are facing a decade of slow growth brought on primarily by the blunders of central banks, noted doomsayer Marc Faber said. Investors should protect themselves by buying plenty of physical gold and putting it in a secure location, preferably outside the U.S., the author of the Gloom, Boom and Doom newsletter told CNBC. http://www.cnbc.com/id/44239348

Another recession isn’t likely over the next 12 months. Neither is any meaningful improvement in the economy. That’s the picture that emerges from an Associated Press survey of leading economists who have grown more pessimistic in recent weeks. They say high unemployment and weak consumer spending will hold back the U.S. economy into 2012. Their gloominess comes at a time when Europe’s debt crisis threatens to infect the global financial system. It also coincides with an annual economic conference late this week in Jackson Hole, Wyo., and speculation about whether Federal Reserve Chairman Ben Bernanke will unveil any new steps there to help the economy. http://www.cnbc.com/id/44239534

Dailyfinance.com
Chile is bracing for a nationwide, two-day shutdown as unions, students and center-left political parties demand fundamental changes in society. They want to replace Chile’s dictatorship-era constitution, which concentrates vast power in the presidency, with a new charter enabling popular referendums and making free quality education a right for all citizens. They also want pension reforms, a new labor code and more health care spending. http://srph.it/o2jLp4

President Hugo Chavez signed a decree on Tuesday formalizing the nationalization of Venezuela’s gold mining industry, a move aimed at giving the government total control over gold produced in the South American country. Speaking during a televised speech, Chavez also announced the repatriation of $11 billion in Venezuelan gold reserves currently held in U.S. and European banks would begin within several weeks. http://srph.it/qs7ajS

Foxbusiness.com
The entire U.S. east coast should be alert to Hurricane Irene as it approaches from the south in the next few days, although it is too early to say where it could directly impact, U.S. Federal Emergency Management Agency (FEMA) Administrator Craig Fugate said on Tuesday. http://www.foxbusiness.com/markets/2011/08/23/fema-entire-us-east-coast-should-be-alert-to-irene/#ixzz1Vv6RSdxQ

Telegraph.co.uk
Jyrki Katainen, the Finnish prime minister, has threatened to withdraw support for the Greek bailout in a move that could crush the fragile signs of recovery on global markets. Mr Katainen said that if Finland’s bilateral agreement with Greece over collateral payments was overruled, the Nordic country could back out of the rescue programme. He told reporters that the private collateral agreement, in which Greece agreed to give Finland €1bn (£875m) in cash in return for its suppport, was “our parliament’s decision that we demand it as a condition for us joining in”. http://www.telegraph.co.uk/finance/financialcrisis/8719095/Finland-threatens-to-withdraw-Greek-bailout-support.html

China has been forced to dig deep to meet its energy needs. It is hard to think of more awkward country in which to drill for gas than the craggy, creviced hillsides that rise up from the banks of China’s turbid Yellow River in the northern province of Shanxi, the heart of China’s northern coal belt. So steep are the sides of the valleys that local people are forced to tunnel their houses into the crumbly orange rock, sealing up the arch-shaped voids with neatly fitting windows and doors. Outside, crops grow on narrow terraces that skirt sheer-sided ridges and ravines. http://www.telegraph.co.uk/finance/china-business/8718172/China-has-been-forced-to-dig-deep-to-meet-its-energy-needs.html

The UK’s manufacturing recovery is not yet dead in the water, according to a surprisingly positive survey from the Confederation of British Industry (CBI).  Export orders improved markedly in August, the business lobby reported, raising hopes that global demand is not as weak as other surveys have indicated. Of the 510 companies polled, the same proportion (29pc) said their total orders were above normal as those who said they were below. That left the rounded balance at 1pc, against July’s three-month low of -10pc. http://www.telegraph.co.uk/finance/newsbysector/industry/8718820/UK-manufacturing-bounces-back-says-CBI.html

Smh.com.au
The two-speed economy was on full display in the construction work done in the three months to June. Engineering work done rose 5.9 per cent to $23.4 billion, seasonally adjusted, powered by investment in the mining sector, as demand from Asia for Australia’s commodities remains high. But residential work, a key element of the domestic economy, fell by 4.1 per cent in the quarter to $11.4 billion, Australian Bureau of Statistics data showed. http://www.smh.com.au/business/twospeed-economy-on-display-in-construction-20110824-1j981.html#ixzz1Vv8yqRU8

As gold prices near $US2000 an ounce, some bulls say it’s time to take money off the table after the safe-haven rally extended too far too fast in recent weeks. Gold investors at several firms said gold prices could correct sharply, citing overvaluation. While that does not mean prominent bulls are now bears, they recommended investors take profit on gold holdings, after the precious metal traded briefly above $US1900 on Tuesday for the first time. http://www.smh.com.au/business/markets/some-gold-bulls-say-its-time-to-cash-in-20110824-1j9ji.html#ixzz1Vv94yEgq

Theglobeandmail.com
Some of France’s richest people, including the billionaire heiress of L’Oreal SA and the head of oil major Total SA, urged the government to tax them more to help solve the country’s financial problems. In a petition published on the website of weekly magazine Le Nouvel Observateur on Tuesday, 16 company executives, business leaders and super-rich individuals called for the creation of a “special contribution” that would target wealth without forcing the rich to quit France for overseas tax havens. http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/please-tax-us-french-super-rich-tell-government/article2138404/

Some Canadian banks are hiking their variable mortgage rates, seeking to pump up its profit margins as it becomes evident that interest rates will remain low for some time to come. The profit margins that banks are earning on variable rate mortgages have become extremely thin. That’s becoming more of a problem for lenders because there are already signs that Canadians are piling back into variable-rate, as opposed to fixed-rate, mortgages. http://www.theglobeandmail.com/report-on-business/banks-move-to-bump-up-mortgage-rates/article2138665/

Straitstimes.com
Greece will hasten its efforts in the next four months to check a runaway public deficit that threatens recovery goals agreed with its creditors, the finance minister said on Tuesday. ‘We will accelerate in the final four months,’ Finance Minister Evangelos Venizelos told a gathering of bankers and businessmen ahead of a Greek investment roadshow to be held in London next month.http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_705448.html

India’s flagship outsourcing sector is still expected to post 16 to 18 per cent export revenue growth, despite fears of a fresh slump in its key US and European markets, an industry body said. The National Association of Software and Services Companies, or Nasscom, in February projected the sector would notch up annual export revenues of US$68 billion to US$70 billion (S$81.8 billion to S$84.2 billion) in the financial year which began April 1. http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_705444.html

Xinhuanet.com
China announced on Tuesday that all parts of the country are able to use its national currency, the yuan or Renminbi, in cross-border trade settlements. Previously, only 20 provincial regions in the country could conduct cross-border trade settlements in yuan. The policy was announced by the People’s Bank of China, the country’s central bank, and five other financial authorities. The extension is a crucial step in boosting cross-border use of yuan, which is stated in the country’s 12th Five-year Plan (2011-2015), and will better serve enterprises’ needs and further facilitate trade and investment, the central bank said in a statement on its website. http://news.xinhuanet.com/english2010/china/2011-08/23/c_131069357.htm

China’s foreign trade will continue to grow steadily in the second half of the year, but at a slower pace than last year, a senior official said Tuesday. Jiang Yaoping, vice minister of commerce, made the remarks at a press conference, noting that the country’s foreign trade sector is under great pressure in the wake of a weak global recovery caused by the spreading euro-zone sovereign debt crisis and rising global inflation. Despite the impact of these factors, “the overall situation of the country’s foreign trade is good,” Jiang said during a briefing on foreign trade development and the 110th Canton Fair scheduled for October in the southern China city of Guangzhou. http://news.xinhuanet.com/english2010/china/2011-08/23/c_131068656.htm

Cs.com.cn
China will prioritize the development of six types of new materials in its new material industry over the next five years, the China Securities Journal said on Wednesday. The report cited an insider, who noted that the country’s 12th Five-Year Plan (2011-2015) for the new material industry will come out in September, in which the government will launch key projects to support the development of the six materials. http://www.cs.com.cn/english/ei/201108/t20110824_3025571.html

Economictimes.com
The government is not keen on state-run firms securing bank licences under the proposed new banking licence policy. Currently, there are 21 public-sector banks besides five subsidiaries of the State Bank of India. The government has so far supported merger in public sector banks but has maintained that any merger proposal should come from the banks themselves. The RBI is expected to make the norms for new licences public soon. http://economictimes.indiatimes.com/news/economy/policy/psus-like-lic-power-finance-corporation-may-not-get-banking-license/articleshow/9713553.cms

Themoscowtimes.com
The Finance Ministry on Tuesday expressed satisfaction about federal budget revenue so far this year, saying it collected more funds than it expected. Revenues in excess of the plan for the first half of this year came mostly from customs duties as imports soared, the Finance Ministry said in a statement posted on the Cabinet’s web site. The revenue situation is “not bad,” said a reserved Deputy Finance Minister Anton Siluanov, speaking after a Cabinet meeting Tuesday, which was dedicated to the budget situation. Oil export revenues increased by just a tiny fraction above what was planned, as the price for the main blend of Russian oil averaged $108 a barrel. The government had forecast  a price of $106.4, Siluanov said. http://www.themoscowtimes.com/business/article/states-revenue-not-bad/442569.html#ixzz1VvCG1TVL

Fin24.com
The global economy continues to be in crisis and if it slows down markedly South Africa will act appropriately, Reserve Bank governor Gill Marcus said on Tuesday.
Marcus struck a bleak tone on global economic turmoil and its impact on the domestic economy at an American Chamber of Business breakfast meeting. “We are not in a normal cyclical downturn. The crisis cannot be resolved by monetary policy alone. Monetary policy can help to some extent,” she told the meeting. http://www.fin24.com/Economy/Marcus-SA-ready-to-act-on-slowdown-20110823