News That Matters

Ft.com
Brazil’s central bank has cut interest rates for the fourth time running as the government seeks to revive an economy that stalled in the second half of last year, says the FT. The 50-basis point cut in the central bank’s benchmark Selic rate to 10.5 per cent comes as Brazil’s development bank, http://ftalphaville.ft.com/thecut/2012/01/19/840161/brazil-cuts-interest-rates-again/

The China Banking Regulatory Commission is weighing a plan to relax capital requirements for lenders, Bloomberg reports, citing four people with knowledge of the matter said. The CBRC is delaying implementing the most stringent capital adequacy ratios and may lower risk weightings for loans to small businessmen and companies, http://ftalphaville.ft.com/thecut/2012/01/19/840131/china-may-ease-bank-capital-rules/

Goldman Sachs has revealed a series of dramatic cost cuts and a 58 per cent drop in fourth-quarter earnings, after grappling with tumultuous trading conditions in the latter part of the year, reports the FT. Like many of its investment banking competitors, http://ftalphaville.ft.com/thecut/2012/01/19/840081/goldman-earnings-down-58-in-fourth-quarter/

The IMF has asked its member countries for an extra $500bn in firepower to combat the world’s spreading fiscal emergencies, which it estimates will generate demand for bail-out loans totalling $1tn over the next two years. The FT, http://ftalphaville.ft.com/thecut/2012/01/19/840071/imf-requests-500bn-for-bail-out-loans-2/

Many of the world’s central banks are offloading US Treasury bonds a record pace, the FT says. Of the $10tn in outstanding US Treasuries, foreign holders account for some 48 per cent of the market, with official investors such as central banks a significant presence. http://ftalphaville.ft.com/thecut/2012/01/19/840211/central-banks-curb-their-appetite-for-treasuries/

David Cameron’s pledge to curb executive pay and stop “rewards for failure” is set to face its biggest test, the FT says, as Royal Bank of Scotland prepares to offer a bonus of more than £1m to its chief executive, http://ftalphaville.ft.com/thecut/2012/01/19/840241/rbs-tests-cameron-resolve-on-pay-outs/

Australia unexpectedly lost jobs for a second straight month in December, capping the nation’s worst year for employment in almost two decades and weakening the local currency, reports Bloomberg. Falling part-time employment stalled job growth last year, http://ftalphaville.ft.com/thecut/2012/01/19/840271/australian-job-losses-rise-for-second-month/

The FT reports that oil demand has fallen for the first time since the 2008-09 global financial crisis, a result of the weakening economy, a mild winter and high crude prices, according to new estimates from the International Energy Agency. The industrialised nations’ watchdog said oil demand dropped by 300,000 barrels a day year-on-year in the final quarter of 2011.http://ftalphaville.ft.com/thecut/2012/01/18/839981/oil-demand-falls-for-first-time-since-2009/

India is to launch a $35bn wave of public sector investment to reverse a decline in the fast-growing economy’s growth rate and return it closer to double digits, according to the prime minister’s office. The emergency stimulus measures are in response to widespread criticism of policy paralysis in New Delhi and a dramatic fall in economic growth to 7 per cent from an earlier 9 per cent,http://ftalphaville.ft.com/thecut/2012/01/18/839961/india-to-launch-35bn-of-public-investments/

The Greek government on Wednesday appeared to move closer to a deal with private bondholders that would avert a threatened default by Athens. Talks with holders of close to €200bn of Greek debt broke down last week, http://ftalphaville.ft.com/thecut/2012/01/18/839941/greek-bond-talks-edge-closer-to-deal/

European regulators are convinced that two of the continent’s banks will fail to produce credible plans to plug capital deficits by Friday’s deadline, exposing both to the risk of full or partial nationalisation. Officials said that it looked “almost inevitable” that a fresh injection of state funds would be needed at Italy’s Monte dei Paschi di Siena and Germany’s Commerzbank. “These are the big cases,” said one. http://www.ft.com/intl/cms/s/0/7e956578-4202-11e1-9506-00144feab49a.html#axzz1jsdevBAf

The labour market faces a “rocky” first half of the year, economists warned as party leaders clashed in the Commons over the latest rise in the jobless total. Unemployment rose by 118,000 to another 17-year high of 2.68m in the three months to November, the Office for National Statistics said. The jobless rate increased more rapidly than expected to 8.4 per cent of the workforce, up 0.3 percentage points on the previous quarter and the highest since January 1996. Economists had predicted 8.3 per cent. http://www.ft.com/intl/cms/s/0/a8810dc0-41bb-11e1-a586-00144feab49a.html#axzz1jsdevBAf

David Cameron accused Argentina of “colonialism” in its policy towards the Falkland Islands on Wednesday, warning the government in Buenos Aires not to raise tensions with London on the forthcoming 30th anniversary of the conflict. As the Argentine government adopts what Britain regards as increasingly aggressive rhetoric over Britain’s ownership of the islands, Mr Cameron declared that the UK firmly supported the self-determination of the Falklands’ 3,000 people. http://www.ft.com/intl/cms/s/0/5c7ef4fa-4201-11e1-9506-00144feab49a.html#axzz1jsdevBAf

Wsj.com
Asian stock markets were buoyant Thursday following a raft of positive news from Europe and the U.S., but the Sydney exchange underperformed and the Australian dollar dropped after employment in the country unexpectedly fell in December. Japan’s Nikkei Stock Average briefly touched 8668.94, its first peak for the year, and was last up 1.1% at 8645.11. Australia’s S&P/ASX 200 added 0.3%; South Korea’s Kospi Composite advanced 1%; Hong Kong’s Hang Seng Index gained 1.1%; China’s Shanghai Composite Index rose 0.9%; and India’s Sensex was up 1%. http://online.wsj.com/article/SB10001424052970204555904577169582969778446.html?mod=WSJASIA_hpp_LEFTTopWhatNews

Indonesia’s rise as one of the most important emerging markets for investors world-wide got a major boost Wednesday as Moody’s Investors Service lifted its credit rating to investment grade for the first time in more than a decade, a move that is expected to send new, much-needed funds to the giant Southeast Asian nation.http://online.wsj.com/article/SB10001424052970203735304577168563581121548.html?mod=WSJASIA_hpp_LEFTTopWhatNews

Italy’s new government is expected on Friday to unveil controversial measures aimed at making the country’s sluggish economy more competitive, including allowing stores to hold sales outside strictly regulated times and giving out more taxi licenses across the country. Many of the measures in the proposed legislation, a draft of which was seen by The Wall Street Journal, tackle longtime obstacles to economic growth in the euro zone’s third-largest economy. http://online.wsj.com/article/SB10001424052970203735304577169110661752468.html?mod=WSJEurope_hpp_LEFTTopStories

Hungary aims to secure an agreement with the European Union and the International Monetary Fund on a loan package by the end of the first quarter, an Economic Ministry official said in an interview Wednesday. Hungary’s negotiating team with the EU and the IMF is in informal talks this week with European political leaders after visiting the IMF in Washington last week. These talks are aimed at preparing official negotiations for a credit line with the international bodies. http://online.wsj.com/article/SB10001424052970204468004577169083514452216.html?mod=WSJEurope_hpp_LEFTTopStories

The bad debt ratio of Spain’s banking sector rose for the eighth consecutive month in November to a new 17-year high, while deposits and loans shrunk further as the country edged towards a double-dip recession, data released Wednesday by the Bank of Spain showed. According to the data, 7.51% of loans held by banks were more than three months overdue for repayment in November, up from 7.42% in October. It is the highest percentage recorded since November 1994, and contrasts with bad debt levels below 1% of all loans in the years prior to the country’s 2008 property bust. http://online.wsj.com/article/SB10001424052970204468004577168420423644012.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Stocks have burst out of the gates in 2012, surprising investors and pundits alike with the strongest start of the year in a quarter century. A mix of positive economic data from the U.S., China and even Europe has helped drive shares higher, as some believed worries about the Continent would keep a lid on gains. The bullish sentiment was on full display on Wednesday, with the Dow Jones Industrial Average up 96.88 points, to 12578.95 and the Standard & Poor’s 500-stock index up 14.37 points, to 1308.04, surpassing 1300 for the first time since July. The S&P 500 is now up 4% in the first 11 trading days of the year, its best start since 1987. The Dow is up 3%, managing its best start since 2003. http://online.wsj.com/article/SB10001424052970203735304577169313330510738.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

With Europe’s problems threatening to spill over into a repeat of the 2008 financial crisis, lenders in Australia–one of the few countries to skirt a recession through that dark period–are preparing for the worst-case scenario. Australia & New Zealand Banking Group Ltd. took the lead this week, confirming that it’s cutting as many as 130 back-office jobs and warning of possible further cost-cutting measures as the year progresses. Investment bank UBS thinks the so-called “big four” Aussie banks together may end up shaving as many as 7,000 positions over the next two years, as rising wholesale funding costs on the back of European fears and softer credit growth at home crimp earnings. http://online.wsj.com/article/SB10001424052970204468004577169692223661440.html?mod=WSJASIA_hpp_LEFTTopWhatNews

Marketwatch.com
Eastman Kodak Co. announced early Thursday that it and its U.S. subsidiaries filed for Chapter 11 bankruptcy. The firm said the move “is intended to bolster liquidity in the U.S. and abroad, monetize non-strategic intellectual property, fairly resolve legacy liabilities, and enable the company to focus on its most valuable business lines.” It said it would still pay employee wages and benefits and continue customer programs. http://www.marketwatch.com/story/kodak-files-for-chapter-11-bankruptcy-2012-01-19

Reuters.com
Cash gold prices had advanced 1.5 percent so far this week, riding on renewed optimism on global growth after upbeat data from China, the United States and Germany that boosted the euro, commodities and equities. Spot gold inched up 0.3 percent to $1,664.94 an ounce by 0301 GMT, approaching a one-month high of $1,667.41 hit earlier in the week. http://www.reuters.com/article/2012/01/19/us-markets-precious-idUSTRE7AK1M520120119

Front-month Brent crude rose 76 cents to $111.42 by 0313 GMT, reversing two days of losses. U.S. oil rose 91 cents to $101.50, after rising as high as $101.62.http://www.reuters.com/article/2012/01/19/us-markets-oil-idUSTRE7AD06820120119

Bloomberg.com
China’s banking regulator is weighing a plan to relax capital requirements for lenders after the world’s second-largest economy expanded at the slowest pace in 10 quarters, four people with knowledge of the matter said. The China Banking Regulatory Commission is delaying implementing the most stringent capital adequacy ratios and may lower risk weightings for loans to small businessmen and companies, the people said, declining to be identified as the matter is confidential. The watchdog may also allow banks to increase the excess bad-loan reserves used in calculating risk buffers, they said.http://www.bloomberg.com/news/2012-01-18/china-said-to-consider-relaxing-capital-requirements-for-banks.html

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and Goldman Sachs Group Inc. (GS) CEO Lloyd C. Blankfein predict Wall Street will rebound from 2011’s trading- revenue plunge. Rivals and analysts aren’t so sure. Fourth-quarter earnings reported by four of the six largest U.S. banks show the industry probably suffered a third straight quarterly drop in combined trading and investment banking revenue. On conference calls this week, analysts are pressing executives with a similar refrain: Is it a temporary rut or a lasting shift to smaller volumes, profits and pay?http://www.bloomberg.com/news/2012-01-19/dimon-blankfein-predict-markets-to-rebound-from-slump-as-rivals-pull-back.html

Banks are beating euro governments in credit markets by the most since July as European Central Bank loans stave off punitive borrowing costs for lenders such as BNP Paribas SA (BNP) and UniCredit SpA facing debt downgrades. The Markit iTraxx Financial Index of credit-default swaps linked to the senior debt of 25 European banks and insurers now costs 104 basis points less than the Markit iTraxx SovX Western Europe Index of swaps on 15 governments. That compares with a 28 basis-point gap at the end of November and a record 118 in July. Historically, it costs more to insure banks than governments. http://www.bloomberg.com/news/2012-01-19/banks-flush-with-623-billion-ecb-cash-beating-sovereigns-credit-markets.html

Cnbc.com
The US Treasury has “no intention’ of providing additional money to the International Monetary Fund, a Treasury official told CNBC Wednesday, even though the IMF is hoping to raise an additional $500 billion to help fight the European debt crisis. The Treasury spokesperson said that Europe has the capacity to solve its own problems and the IMF cannot substitute for a robust euro-area firewall.http://www.cnbc.com/id/46037673

Nytimes.com
Hedge funds have been known to use hardball tactics to make money. Now they have come up with a new one: suing Greece in a human rights court to make good on its bond payments. The novel approach would have the funds arguing in the European Court of Human Rights that Greece had violated bondholder rights, though that could be a multiyear project with no guarantee of a payoff. And it would not be likely to produce sympathy for these funds, which many blame for the lack of progress so far in the negotiations over restructuring http://www.nytimes.com/2012/01/19/business/global/hedge-funds-may-sue-greece-if-it-tries-to-force-loss.html?_r=1&ref=business

Foxbusiness.com
The People’s Bank of China reportedly offered 183 billion yuan ($29 billion) of 14-day reverse repurchase agreements on Thursday, easing liquidity conditions ahead of the Lunar New Year holidays and sharply lowering borrowing costs in the short-term money markets. Thursday’s liquidity injection by the central bank comes on top of a 169 billion yuan reverse repo operation Tuesday. The interbank seven-day weighted average repo fell to 5.96% Thursday from a seven-month high of 7.72% late Wednesday, according to a Dow Jones Newswires report. http://www.foxbusiness.com/markets/2012/01/18/china-injects-2-billion-short-term-liquidityrpt/#ixzz1jsgybRpW

USAtoday.com
Foreign demand for U.S. Treasury debt rose in November to the highest level ever, even as China trimmed its purchases for a second straight month. The Treasury Department says total foreign holdings increased 1.7% in November to $4.75 trillion. Japan, the second-largest buyer of Treasury debt, increased its holdings 6% to $1.04 trillion. China, the largest foreign holder, trimmed its holdings 0.1% to $1.13 trillion. http://www.usatoday.com/money/economy/story/2012-01-18/foreign-Treasury-holdings-hit-record-high/52631904/1

BBC.co.uk
The World Bank has warned developing countries they need to be prepared for shocks as global economic growth slows. The organisation has slashed its growth forecasts, and is now predicting a 0.3% contraction for the eurozone in 2012. “Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time,” said World Bank chief economist Justin Yifu Lin.http://www.bbc.co.uk/news/business-16602033

Telegraph.co.uk
Traders were unconvinced by a radical proposal by the International Monetary Fund (IMF) to deploy $1 trillion (£648bn) to stem the European debt crisis and its impact on the global economy. Christine Lagarde, head of the IMF, dramatically announced the fund’s intention to raise $500bn to almost double its resources after a meeting of the 24-strong executive committee.  Ms Largade said its members recognised the “importance of ensuring adequate fund firepower to help defuse current global economic weaknesses and regional challenges.” http://www.telegraph.co.uk/finance/financialcrisis/9023791/Doubt-over-IMFs-eurozone-lifeline.html

The Government is preparing to take on public opinion by sanctioning a £1m-plus bonus for Royal Bank of Scotland chief executive Stephen Hester.  Although the pay-out is likely to be less than those enjoyed by other banking bosses it is almost certain to attract criticism after RBS’s shares almost halved last year. Senior Government sources said Mr Hester could receive as much as £1.2m in shares as recognition for his work selling off assets and reducing the bank’s balance sheet. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9024189/RBS-chief-Hester-in-line-to-collect-1m-bonus-despite-share-price-fall.html

America’s manufacturing industry expanded for the tenth quarter in succession in the final three months of last year, underlining the resilience of a key sector of the economy. Industrial production rose 0.4pc in December, according to the Federal Reserve, after a 0.3pc drop in November. Last month’s rebound helped the sector ensure another quarter of expansion for a sector that has proved a bright spot since the US emerged from recession in mid-2009. “It was a particularly strong month for manufacturers,” said Paul Edelstein of IHS Global Insight. “Consumer products bounced back, while demand for business equipment remained robust.” http://www.telegraph.co.uk/finance/economics/9023623/US-manufacturing-sector-keeps-growing.html

Guardian.co.uk
UK had the highest level of debt after Japan, an international study by management consultancy McKinsey found. Britain faces a difficult challenge over the next decade as it slowly adjusts to an economy less dependent on debt-fuelled growth, according to new research by consultancy McKinsey. An international study found Britain had the highest level of debt after Japan, that the debt had risen over the past three years to more than 500% of national output, and that on current trends it would take until 2020 for UK households to return debt levels to the pre-bubble trend.http://www.guardian.co.uk/business/2012/jan/19/uk-highest-debt-to-gdp-ratio

Theglobeandmail.com
More than $700-billion in global output is expected to be lost to the European financial crisis in 2012, with a $10-billion hit to Canada as demand slows for the country’s exports and uncertainty limits investment by companies.  The Bank of Canada quantified the effects of Europe’s sovereign-debt woes Wednesday in a forecast predicting the $70-trillion global economy will be held back by 1 per cent this year. Canada’s $1.6-trillion economy, already struggling to gain traction, will be restrained by 0.6 per cent due to the crisis. The United States, Canada’s chief export market, will suffer a hit of 0.8 per cent, the bank said. http://www.theglobeandmail.com/report-on-business/economy/global-economy-will-take-700-billion-hit-bank-of-canada-predicts/article2306524/

Straitstimes.com
As Republican presidential hopefuls entertain calls to fix the value of the dollar to the price of gold, a panel of leading economists on Wednesday roundly panned the idea of a return to the gold standard. A poll of nearly 40 bipartisan economists showed no support for the idea that pegging the currency to the price of gold would lead to a more stable US jobs market or keep prices in check.  Asked by University of Chicago whether a return to the gold standard would lead to price-stability and employment outcomes that ‘would be better for the average American,’ 100 per cent of respondents said no. http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_757441.html

Xinhuanet.com
Cs.com.cn
The European Parliament (EP) on Wednesday criticized a newly proposed treaty designed to tighten fiscal disciplines for EU countries. Most Parliaments’ political groups agreed that the planned intergovernmental agreement was “unnecessary and even dangerous.”  They believe the treaty’s key aims could be better and more effectively achieved through the existing EU system.http://www.cs.com.cn/english/ei/201201/t20120119_3216285.html

The U.S. House of Representatives Wednesday rejected a debt ceiling increase request from U.S. President Barack Obama in a symbolic vote, fresh evidence of contentious partisan wrangling in the presidential election year. Wednesday’s 239-176 vote in the Republican-led lower chamber was more symbolic than a real attempt to curb the increase in the federal government’s debt limit, as U.S. President Barack Obama had the power to veto the Congress decision on the debt ceiling increase according to a bipartisan deal inked last summer.http://www.cs.com.cn/english/ei/201201/t20120119_3216279.html

French President Nicolas Sarkozy announced a 500 million euro (640 million U.S. dollars) “package of emergency measures” to bring jobs to millions of French job seekers. “Our determination to reduce unemployment is strong and to take measures which will reinforce France’s competitiveness and will help French growth to be stronger,” Sarkozy said after a crisis meeting with businiess and union leaders. The French president promised “radical reform of vocational training” in a way that “every unemployed person has training.” http://www.cs.com.cn/english/ei/201201/t20120119_3216276.html

China’s social financing dropped by 1.11 trillion yuan (176 billion U.S. dollars) year-on-year to 12.83 trillion yuan in 2011. The decrease was equal to a year-on-year decline of around 8 percent, according to figures released by the People’s Bank of China (PBOC). New yuan-denominated lending in 2011 reached 7.47 trillion yuan, down 390.1 billion yuan year-on-year, the PBOC said in a statement.
New loans in foreign currencies were worth 571.2 billion yuan, up 85.7 billion yuan from a year earlier, it said.@ China had targeted pumping 14 trillion yuan into social financing in 2011.http://www.cs.com.cn/english/ei/201201/t20120119_3216265.html
Thehindu.com
Asserting that India was not facing any problem in making payments for the import of crude oil from Iran, Petroleum and Natural Gas Minister Jaipal Reddy on Wednesday warned that the country needed to be prepared for all eventualities. “We continue to be optimistic. Iran continues to be positive. However we have to be prepared for all eventualities,” Mr. Reddy told journalists after inaugurating Oil and Gas Conservation Fortnight 2012 here on Wednesday. http://www.thehindu.com/news/national/article2810865.ece

A United Nations report on global economic prospects has projected India’s economy to grow at a pace a tad lower than 8 per cent in 2012 and 2013 in view of the sharp increase in downside risks stemming from the problems in Europe and the U.S. In its report on ‘World Economic Situation and Prospects 2012,’ released here on Tuesday, it said: “India’s economy is forecast to expand at a pace similar to 2011 in the following two years … at 7.7 per cent in 2012 and 7.9 per cent in 2013.” http://www.thehindu.com/business/article2811695.ece

Economictimes.com
The government may make it mandatory for all taxpayers to provide details of their overseas assets, including bank accounts, while filing their annual tax returns, as the drive against tax evasion gains momentum. The proposed Direct Tax Code, or DTC, has a provision that seeks to cast an obligation on taxpayers to furnish full details of foreign assets. The government is now considering a proposal to amend the Income Tax Act to incorporate this provision as the DTC may not come into effect from April 1 2012, as originally planned, an official with knowledge of the matter said.http://economictimes.indiatimes.com/personal-finance/tax-savers/tax-news/government-may-make-declaring-of-overseas-assets-details-mandatory-by-taxpayers/articleshow/11547338.cms

Iran is considering stepping up its purchases from India to obtain a more balanced trade and reduce the problem faced by the two countries in settling payments for crude import by India, especially in the wake of fresh sanctions by the US. Iran is India’s second largest supplier of crude after Saudi Arabia, but New Delhi is unable to pay for the imports in dollars because of the sanctions imposed by the US.
Iranian officials recently met Commerce Secretary Rahul Khullar to discuss the possibility of sourcing more items from the country, an Indian official privy to the developments told ET. http://economictimes.indiatimes.com/news/economy/foreign-trade/in-part-solution-to-payment-problem-iran-explores-buying-more-goods-from-india/articleshow/11547214.cms

Yonhapnews.co.kr
South Korea’s finance minister urged the business community Thursday to ramp up its investment and hiring this year in order to help the nation’s economy tide over toughening economic conditions at home and abroad. In a meeting with heads of major business lobby groups in central Seoul, Bahk Jae-wan promised that the government will continue its efforts to improve the overall business environment by streamlining red tape deemed to be unnecessarily hampering activities in the corporate sector. http://english.yonhapnews.co.kr/business/2012/01/19/28/0502000000AEN20120119005600320F.HTML
Themoscowtimes.com
Ukraine and Russia locked horns Wednesday over Kiev’s plans to cut its demand for gas, in a scenario reminiscent of previous spats that temporarily halted Russian gas flows to Europe. Ukraine is trying to ease pressure on state finances by reducing gas import volumes as it becomes increasingly pessimistic about getting Russia to cut the price of its gas supplies. The former Soviet republic, which relies on Russian gas imports to power its chemical plants and heat homes, has been attempting for more than a year to renegotiate a 2009 gas deal with Moscow, which it says sets an exorbitant price for fuel. The two sides are due to start a new round of talks in Moscow on Jan. 15. http://www.themoscowtimes.com/business/article/no-gas-accord-with-ukraine-yet/450936.html#ixzz1jslW5ukY
The Moscow Times
Fin24.com
The International Finance Corporation (IFC) said on Wednesday it will issue more than $1bn in local currency bonds over the next 10 years to support African markets.  IFC, a member of the World Bank Group, said Ghana and eight member countries of the West African Monetary Union were participating. http://www.fin24.com/Economy/IFC-bonds-to-help-African-markets-20120119

Thetrader.se
It is no secret, the Fed is the World’s biggest hedge fund, with Bernanke calling the decisions. They don’t pay interest on their leverage, but on the other hand, they earn peanuts compared to the “real” hedge fund managers. From NYT. The year 2011 is over, and soon we’ll be hearing again about billion-dollar paydays for select hedge fund wizards. If it makes you feel any better, not everyone is sharing in these riches. http://www.thetrader.se/