News That Matters

Ft.com
Brazil’s federal prosecutors have filed suit against Chevron and Transocean for R$20bn ($10.6bn) in damages and demanded that both companies shut their operations in the country, in the strongest response yet to an oil spill off the coast of Rio de Janeiro last month, http://ftalphaville.ft.com/thecut/2011/12/15/801401/chevron-and-transocean-sued-over-spill/

State Street, the large US custodian bank, has cited new regulations including the “Volcker rule” for its decision to quit the UK and German government bond markets just three months after becoming an official dealer, http://ftalphaville.ft.com/thecut/2011/12/15/801331/state-street-quits-uk-and-german-bond-markets/

BP is on track to win 11 new leases for oil exploration in the Gulf of Mexico, the FT reports, after lodging the highest bids in all but four of 15 leases in a sale held in New Orleans on Wednesday. The 11 leases would cost $27m if awarded and would require much greater expenditure if BP proceeds to drill wells on them. It remains the largest holder of leases in the gulf,http://ftalphaville.ft.com/thecut/2011/12/15/801281/bp-on-track-to-win-11-new-gulf-licences/

The Bank of Japan’s latest Tankan survey showed sentiment among large Japanese manufacturers has turned negative, the FT says, highlighting doubts about the prospects for the national economy’shttp://ftalphaville.ft.com/thecut/2011/12/15/801241/japanese-manufacturer-sentiment-turns-negative/

US Federal Reserve chairman Ben Bernanke has told Republican senators the Fed plans no additional aid to European banks amid the region’s sovereign debt crisis, Bloomberg reports. Two attendees at the meeting, Senator Bob Corker from Tennessee and Senator Lindsey Graham from South Carolina, http://ftalphaville.ft.com/thecut/2011/12/15/801191/bernanke-stresses-no-european-bail-out/

David Cameron has dashed hopes in the eurozone that Britain could commit at least €30bn in extra resources to the International Monetary Fund to help countries stricken by the financial crisis, including those in the eurozone, http://ftalphaville.ft.com/thecut/2011/12/15/801131/cameron-rules-out-extra-e30bn-for-imf/

Foreign-owned banks operating in the US have suffered their largest six month fall in deposits on record in what some analysts have described as a “flight to safety” from European banks to domestic institutions, http://ftalphaville.ft.com/thecut/2011/12/15/801031/dive-in-deposits-at-foreign-owned-banks-in-us/

The euro on Wednesday hit its lowest level against the dollar since January as European countries showed the strain of efforts to force through austerity policies and impose tough new spending rules, the FT reports. http://ftalphaville.ft.com/thecut/2011/12/14/800921/doubts-over-eurozone-deal-weigh-on-euro/

Gold tumbled below $1,600 an ounce for the first time in more than 10 weeks and silver fell almost 7 per cent as the precious metals bore the brunt of a dash for dollars among investors and traders, the FT reports. http://ftalphaville.ft.com/thecut/2011/12/14/800901/gold-tarnished-in-dash-for-dollar/

India has warned that emerging market economies are beginning to “falter”, as China’s top economic policymakers described the global outlook as “extremely grim and complicated”, the FT reports.http://ftalphaville.ft.com/thecut/2011/12/14/800861/india-and-china-voice-growth-fears/

Chinese money growth slowed to its lowest in more than a decade last month, keeping the pressure on the government to loosen monetary policy and prevent the economy from slowing too sharply, the FT reports. Beijing has already switched to easing mode, http://ftalphaville.ft.com/thecut/2011/12/14/800821/china-money-growth-slows-to-decade-low/

Member states of the eurozone have set themselves on an “irreversible course towards a fiscal union” to underpin their common currency, even if it may take years to reach that goal, Angela Merkel, the German chancellor, told her parliament on Wednesday. In a staunch defence of the results of last week’s European Union summit, Ms Merkel declared that “we are not just talking about a fiscal and stability union. We have begun to create one.” http://www.ft.com/intl/cms/s/0/a4271df0-2663-11e1-85fb-00144feabdc0.html?ftcamp=rss#axzz1ga0b9Nz4

The German government has begun preparations for a possible state bail-out of Commerzbank if it fails to present a convincing plan by January 20 to fill a €5.3bn capital gap identified by regulators. German chancellor Angela Merkel’s cabinet on Wednesday agreed a bill to reinstate a state-backed bank rescue fund next year, a move that could pave the way for state aid to Commerzbank, Germany’s second-largest bank by assets. http://www.ft.com/intl/cms/s/0/94e6388c-2652-11e1-85fb-00144feabdc0.html#axzz1ga0b9Nz4

Ministers are expected on Friday to put Russia on track to become a member of the World Trade Organisation in 2012. Countless hours of negotiations, spanning 18 years and several generations of ministers, are nearing a successful conclusion. Yet doubts remain. Have the delays not largely been due to Russia’s own actions, ask WTO members? The Russians too have doubts: will the benefits of membership offset the discomfort of WTO-imposed disciplines and accountability? Amid all the uncertainty on the Russian stage, does WTO membership still make sense? My answer is: yes, yes and yes.http://www.ft.com/intl/cms/s/0/80754a44-2645-11e1-9ed3-00144feabdc0.html#axzz1ga0b9Nz4

Wsj.com
Asian stock markets tumbled Thursday as heightened worries of a full-blown financial crisis in Europe left commodities smarting from a massive selloff, sending the Shanghai bourse skidding to near a three-year low.  Japan’s Nikkei Stock Average was 1.1% lower, Australia’s S&P/ASX 200 lost 1.1%, Hong Kong’s Hang Seng Index dropped 1.9%, South Korea’s Kospi Composite fell 1.8% and India’s Sensex was down 1.1%.  Dow Jones Industrial Average futures were down four points in screen trade http://online.wsj.com/article/SB10001424052970204026804577099220664968072.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

It’s not the economy, stupid. Treasury investors are renowned for their eagle-eyed parsing of each piece of economic data, anxiously looking for any signs of inflation that could undermine their fixed-income returns. But these days, investors are ignoring better-than-expected U.S. economic data, pushing Treasury yields to near-record lows—a level normally associated with severe recessions.http://online.wsj.com/article/SB10001424052970204844504577098631335137616.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Asian airlines and shipping companies, already battling a slowdown in cargo traffic, are facing significantly higher borrowing costs as European banks pull back from lending. The companies are turning to the bond market and government export agencies and seeking out new banks to fill the lending gap, but industry executives worry that if credit remains tight, it could force companies to scale back spending. “It’s manageable at the moment, but the credit pullback is going to have a pricing effect,” said Robert Martin, chief executive of BOC Aviation, the leasing arm of China’s Bank of China. If the problem persists through next year, it could force aircraft manufacturers to lower production. http://online.wsj.com/article/SB10001424052970204844504577097840631933170.html?mod=WSJAsia_hpp_LEFTTopStories

The preliminary HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, rose to 49.0 in December compared with a final reading of 47.7 in November, HSBC Holdings PLC said on Thursday. The rise in the PMI could assuage somewhat market concerns over a worsening economic slowdown in China, although it remains in contractionary territory.  A reading below 50 indicates a contraction in http://online.wsj.com/article/SB10001424052970204026804577099280956664656.html?mod=WSJASIA_hpp_LEFTTopWhatNews

Reuters.com
President Barack Obama and fellow Democrats on Wednesday signaled a willingness to drop a proposed surtax on millionaires, but remained at odds with Republicans in efforts to extend an expiring payroll tax cut for 160 million Americans. Obama discussed abandoning the surtax, which Republicans have denounced as a levy on “job creators,” at a meeting with Senate Majority Leader Harry Reid and other top Senate Democrats at the White House, party aides said. One aide said Democrats have not offered to drop the surtax, but have made it clear to Republicans that they are willing to do so to renew the tax cut set to expire on December 31. http://www.reuters.com/article/2011/12/15/us-usa-taxes-idUSTRE7B827K20111215

A downgrade of France’s AAA credit rating would not be justified and ratings agencies are making decisions based more on politics than economics, European Central Bank policymaker Christian Noyer said on Thursday. Speaking in an interview with local newspaper Le Telegramme de Brest to be published later on Thursday, Noyer also questioned whether the use of ratings agencies to guide investors was still valid. “In the arguments they (ratings agencies) present, there are more political arguments than economic ones,” said Noyer, the head of the Bank of France and a member of the ECB’s governing council. http://www.reuters.com/article/2011/12/15/us-noyer-ratings-idUSTRE7BE05I20111215

Brent crude futures rose above $106 on Thursday, recouping some losses as investors seized the opportunity to buy after the previous session saw the biggest plunge in nearly three months, given worries over Middle East supply disruption Brent crude gained $1.02 a barrel to $106.04 by 11:39 p.m., after settling $4.48 a barrel lower on Wednesday and posting the biggest one-day percentage loss since September 22. U.S. crude was 59 cents higher at $95.54 a barrel, after settling $5.19 lower on Wednesday, also the benchmark’s biggest one-day percentage loss since September 22.http://www.reuters.com/article/2011/12/15/us-markets-oil-idUSTRE7AD06820111215

Spot gold wallowed near a 2-1/2-month low on Thursday after dropping 3.5 percent in the previous session, as investors remained nervous about the euro zone debt crisis amid the year-end rush to liquidate positions. Spot gold was little changed at $1,573.29 an ounce by 0311 GMT, after posting its biggest one-day decline in nearly three months in the previous session. The Relative Strength Index on spot gold dived to 27, its lowest in more than three years, indicating an oversold market. U.S. gold lost nearly 1 percent to $1,571.5, before trimming some losses to trade at $1,576.60.http://www.reuters.com/article/2011/12/15/us-markets-precious-idUSTRE7AK1M520111215

Bloomberg.com
Executives of Chinese developers including Shimao Property Holdings Ltd. (813) and Glorious Property Holdings Ltd. (845) are buying the most stock in their companies since at least 2008, betting the government will ease curbs on the property market that had depressed the shares. http://www.bloomberg.com/news/2011-12-14/china-property-executives-buy-stock-after-curbs-damp-valuations.html

Industrial production in the U.S. probably cooled in November as slowdowns in automobile output and mining overshadowed broader manufacturing strength, economists said before reports today.  Production at factories, mines and utilities increased 0.1 percent after advancing 0.7 percent in October, according to the median forecast of 82 economists surveyed by Bloomberg News. Manufacturing in the New York and Philadelphia regions picked up in December, a sign the industry is weathering slower global growth, a pair of regional reports may also show. http://www.bloomberg.com/news/2011-12-15/industrial-production-in-u-s-probably-cooled-as-auto-manufacturing-slowed.html

Cnbc.com
China’s plan for a new $300 billion sovereign wealth fund is as much a warning to Washington as it is a body blow to Brussels. It’s the clearest sign yet of Beijing’s waning faith in bonds issued by Europe and the United States. Europe’s festering debt debacle, record low yields on U.S. Treasurys and a depreciating dollar all add weight to the view in China that the time is ripe to change investment tack.http://www.cnbc.com/id/45675510

Cnn.com
In the new year ahead, China’s top leaders will focus instead on slowly revving up the world’s second largest economy. At least, that’s the message economists glean from reading in between the lines of an official government release Wednesday. Chinese leaders met behind closed doors for three days this week, to hash out their economic strategy for 2012 at their Central Economic Work Conference. The end result was a lengthy concluding statement, diagnosing the outlook for the world economy as “extremely grim and complicated” and focusing a lot more on stabilizing China’s growth, rather than last year’s number one priority: curbing inflation. http://money.cnn.com/2011/12/14/news/international/china_growth_inflation/index.htm?iid=HP_LN&hpt=ibu_c2

Foxbusiness.com
Federal Reserve Chairman Ben Bernanke told Senate Republicans in a closed-door meeting Wednesday that he has no plans to bail out Europe, according a report on WSJ.com quoting Sen. Bob Corker, a Republican from Tennessee, who attended the meeting. “I think people walked away knowing he has no intentions whatsoever of furthering U.S. involvement in the crisis,” Corker told reporters after the briefing. http://www.foxbusiness.com/markets/2011/12/14/bernanke-says-fed-wont-bail-out-europe-senators/#ixzz1ga49WCUQ

BBC.co.uk
French bank Credit Agricole, one of the most exposed to the eurozone debt crisis, has said it will cut 2,350 jobs worldwide. But the bank said: “Against challenging market conditions the Credit Agricole Group will post a profit for 2011.”  About 850 jobs are to be lost in France, it said. Most of the cuts – 1,750 – will come from its corporate and investment bank, Cacib. http://www.bbc.co.uk/news/business-16189510

Telegraph.co.uk
Public sector employment is falling at twice the rate forecast by Britain’s official watchdog while private sector job creation “stalls”, suggesting the jobless figure near 3m next year, experts said.  The UK will struggle to avoid a double-dip recession in the new year as worries over muted income and job prospects will see consumers “hunkering down for a difficult winter”, the Centre for Economics and Business Research said after another dire set of employment statistics. http://www.telegraph.co.uk/finance/jobs/8956930/Dire-UK-jobless-forecast-as-the-private-sector-stalls.html

Guardian.co.uk
UK unemployment has hit a fresh 17-year high after the public sector shed thousands more jobs and the private sector failed to pick up the slack. Youth unemployment held at a record high of over 1 million and the total number of unemployed people rose to 2.64m over the three months to October, according to official figures. The Office for National Statistics said that at 8.3% the unemployment rate was at its highest since 1996. http://www.guardian.co.uk/business/2011/dec/14/uk-unemployment-hits-17-year-high

Smh.com.au
Greece will likely chalk up its worst-ever recession this year, Greek Prime Minister Lucas Papademos has warned, with the contraction to be greater than the 5.5 per cent forecast. “2011 will be the worst recession here ever” with gross domestic product (GDP) contracting by “over 5.5 per cent” as the government has officially forecast, Papademos said at a dinner organised by the American-Greek Chamber of Commerce. http://www.smh.com.au/business/world-business/greece-on-track-for-worst-recession-20111215-1ovie.html#ixzz1ga5Vf8M9

Xinhuanet.com
China’s Ministry of Commerce (MOC) Thursday said the United States should open up its markets more to China while demanding for China’s further opening-up. MOC spokesman Shen Danyang was commenting on an earlier report issued by the U.S. trade representative office, which claimed China’s move toward market liberalization had slowed despite reform commitments it made on joining the World Trade Organization. http://news.xinhuanet.com/english/china/2011-12/15/c_131308145.htm

For the first time in nearly two years, South Africa’s inflation rate breached the upper end of its official 3 percent to 6 percent target range in November, the Business Day newspaper in Johannesburg reported on Wednesday.The annual rise in South Africa’s consumer price index was 6.1 percent, up from 6 percent in October. The newspaper said this is below consensus forecasts for a 6.2 percent increase. The increase in South Africa’s inflation rate was driven mainly by higher prices for food and fuel, as well as rising tariffs for housing and utilities. http://news.xinhuanet.com/english/business/2011-12/15/c_131308284.htm

Sales growth at South Korea’ major discount outlets and department stores turned negative last month due to unusually high temperature that drove seasonal goods sales down, a government report showed Thursday. Total sales at the country’s three leading discount chains, including E-Mart, Lotte Mart and Homeplus, contracted 0.5 percent in November from a year earlier, a turnaround from a 5.5 percent on-year increase tallied in the previous month, according to the Ministry of Knowledge Economy. http://news.xinhuanet.com/english/business/2011-12/15/c_131308138.htm

Chile is adopting a second contingency plan to counter the impact of the economic crisis in the European Union on the country, Chilean Finance Minister Felipe Larrain said on Wednesday. The plan includes measures to boost employment and investment, and if necessary, the use of sovereign funds, which at the end of this year are expected to reach 20 billion U.S. dollars, said Larrain during a seminar. “Chile isn’t shielded, but it’s well prepared to face the crisis because its economy is solid and its foundations can palliate the local effects of the European crisis,” said Larrain.http://news.xinhuanet.com/english/business/2011-12/15/c_131307383.htm

Cs.com.cn
Italian Prime Minister Mario Monti was under fire while exlaining his austerity measures at parliament on Wednesday despite modification of the plan. According to ANSA news agency, the hearing was temporarily suspend after lawmakers of the Northern League party jeered Monti with banners showing “No More Taxes” and “This is not a budget, it’s a Robbery.”  Pierluigi Bersani, the leader of the main centre-left Democratic Party, said Wednesday he was “amazed at the government’s weakness over the issue of liberalisation” after it failed to follow through on moves targeting taxi drivers and pharmacies.http://www.cs.com.cn/english/ei/201112/t20111215_3170784.html

China’s new yuan-denominated lending in November rose 7.8 billion yuan (1.2 billion U.S. dollars) year-on-year to 562.2 billion yuan, the People’s Bank of China (PBOC), the central bank, announced Wednesday. New loans in the month were smaller compared to that in October, which stood at 586.8 billion yuan. By the end of November, the outstanding broad money supply (M2), which covers cash in circulation and all deposits, rose 12.7 percent year-on-year to 82.55 trillion yuan, according to data released by the PBOC. http://www.cs.com.cn/english/ei/201112/t20111215_3170562.html

Thehindu.com
Headline inflation eased a tad to 9.11 per cent in November from 9.73 per cent in the previous month but its stubbornly high level above the 9-per cent mark appears to have doused expectations of the Reserve Bank of India (RBI) going soft on its monetary policy on December 16.  Following the 5.1 per cent contraction in industrial output growth in October, India Inc. has been clamouring for an easing in RBI’s anti-inflationary stance so as to spur corporate investment, induce consumer demand and drive overall growth. http://www.thehindu.com/business/Economy/article2714145.ece

Economictimes.com
A slowdown in India’s industrial output is of particular concern to the government, the finance minister said on Thursday. Pranab Mukherjee also said he was concerned about the fiscal deficit and the widening current account deficit that have heightened worries about the health of Asia’s third largest economy.  Industrial output contracted more than 5 percent in October, pulled down by a sharp drop in the production of capital goods and piling pressure on the central bank to hold rates at Friday’s policy review. http://economictimes.indiatimes.com/news/economy/indicators/concerned-about-industrial-slowdown-pranab-mukherjee/articleshow/11116931.cms

Cushman & Wakefield, a commercial real estate broker, expects its revenue in Asia will grow 30 percent next year, surpassing its global growth rate, as its clients target expansion overseas, the company’s top executive said on Wednesday. The New York-based company hired 1,500 people globally in first nine months of this year, of which 500 were for Asia, Glenn Rufrano, Cushman’s president and chief executive, told Reuters in an interview. http://economictimes.indiatimes.com/markets/real-estate/news-/cushman-wakefield-sees-30-revenue-growth-in-asia-next-year/articleshow/11106808.cms

Yonhapnews.co.kr
Promoting trade will continue to be on top of the government’s policy priorities next year, the commerce ministry said Thursday, as the country seeks to create tens of thousands of jobs based on its growing exports and free trade agreement (FTA) with the United States. South Korea’s trade volume soared to over US$1 trillion this year for the first time in the country’s history, making the country only the world’s ninth nation to breach the mark. http://english.yonhapnews.co.kr/business/2011/12/14/72/0503000000AEN20111214004451320F.HTML

Themoscowtimes.com
Russia will face the “largest impact” from the global slowdown in the first half of next year, bringing annual economic growth to 2.3 percent in 2012, Renaissance Capital said. Gross domestic product will probably expand about 4 percent this quarter from a year earlier, resulting in full-year growth of about 4 percent in 2011, the Moscow-based investment bank said in an e-mailed statement Wednesday. The forecast is based on an index of economic activity that RenCap developed with the New Economic School. “We expect to see increasing signs of this more moderate pace of economic activity on the back of weaker external demand and the completion of the inventory restocking cycle,” analysts led by Ivan Tchakarov, chief economist at Renaissance Capital, wrote in the report. http://www.themoscowtimes.com/business/article/analysts-foresee-h1-2012-slump/449922.html#ixzz1ga8J0WH2
Tehrantimes.com
Iranian Oil Minister Rostam Qasemi told reporters on Wednesday that his Saudi counterpart Ali Naimi had promised that Riyadh would not increase oil production in case the West introduces an oil embargo against Iran.  The U.S. is reportedly seeking Saudi assurances that they are ready to make up for Iranian crude lost from the market should sanctions be imposed on Iran’s crude. http://www.tehrantimes.com/economy-and-business/93542-saudis-vow-not-to-raise-output-if-west-boycotts-irans-crude

Iran’s agricultural output will reach 118 million tons by the end of the current calendar year (March 20, 2012), the deputy agriculture minister predicted.  The agricultural output includes animal, farm, fishery and garden products, Mohammad-Ali Nikbakht added, the IRNA news agency reported.  The volume of Iran’s agricultural products stood at 108 million tons in the past Iranian year, the official noted. http://www.tehrantimes.com/economy-and-business/93534-irans-agricultural-output-to-hit-118-million-tons

Khaleejtimes.com
A year of complete stagnation awaits the euro zone economy in 2012, according to a Reuters poll of economists, who said a recession has already started that will last until the second quarter of next year.  In the first poll of economists taken since EU leaders took an historic step towards fiscal union at a summit last week, economists lopped half a percentage point from their forecast for annual growth in 2012, leaving it at zero. http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/internationalbusiness/2011/December/internationalbusiness_December24.xml&section=internationalbusiness

Thetrader.se
More Europeans are “suffering” than “thriving” in several countries hard-hit by the financial crisis, including a number that have already introduced or are introducing austerity measures. More than one in five residents rate their lives poorly enough to be considered suffering in Bulgaria, Romania, Hungary, Greece, Latvia, and Portugal. The largest gap between thriving and suffering is in Bulgaria, where 45% are suffering and 5% are thriving. http://www.thetrader.se/2011/12/15/more-suffering-than-thriving-in-some-eu-countries/

More on the hottest topic of the day, the collapsing Gold price. As our readers know, we have not been overly positive on Gold in the short term. The trade is very crowded, volatility too high at these levels (suggesting something is “wrong”) and speculation high. A slightly more positive view and good insight on Gold, by Gresham’s Law; http://www.thetrader.se/2011/12/14/why-you-they-and-%e2%80%94-hell-%e2%80%94-i-might-just-buy-that-parabolic-move-in-gold%e2%80%a6/