News That Matters

Ft.com
US state attorneys general have until Friday to join a potential national settlement of alleged foreclosure abuses, the WSJ says, citing a document. The deadline, set by negotiators trying to pull together an agreement with the federal government, http://ftalphaville.ft.com/thecut/2012/01/31/859291/friday-deadline-for-states-on-mortgage-settlement/

RBS is scrambling to overhaul its pay systems to head off a repeat of its executive pay fiasco, says the FT. Sir Philip Hampton, RBS’s chairman, and Penny Hughes, head of the board’s remuneration committee,http://ftalphaville.ft.com/thecut/2012/01/31/859251/rbs-in-talks-to-revise-bonus-system/

European banks are preparing to tap the ECB’s emergency funding scheme for up to twice as much as the ECB supplied in its debut €489bn auction last month, the FT says, citing three chief executives of unidentified eurozone banks who said they would increase their participation two- or threefold in the auction on February 29.http://ftalphaville.ft.com/thecut/2012/01/31/859091/banks-preparing-to-tap-ltro-more-on-second-round/

Twenty-five of the EU’s 27 countries have signed up to a German-inspired treaty enshrining tougher fiscal rules to help underpin the euro, with the Czech Republic announcing it would join the UK by not agreeing to the pact.http://ftalphaville.ft.com/thecut/2012/01/31/859031/merkel-victorious-on-fiscal-treaty/

Ali Naimi, Saudi Arabia’s powerful oil minister, has insisted the kingdom will be able to make up for any disruptions to global oil supplies amid mounting tensions over the European embargo on Iran’s oil exports,http://ftalphaville.ft.com/thecut/2012/01/31/858961/saudi-oil-minister-reassures-on-global-supply/

The appeals panel of the World Trade Organization ruled on Monday that China must dismantle its system of export taxes and quotas for nine widely used industrial materials, reports the NYT. The legal setback for Beijing could set a precedent for the West to challenge China’s export restrictions on other natural resources,http://ftalphaville.ft.com/thecut/2012/01/31/858951/wto-orders-china-to-drop-rare-earth-export-taxes/

Standard & Poor’s warned it may downgrade “a number of highly rated” Group of 20 countries as of 2015 if their governments fail to enact reforms to curb rising health-care spending and other costs related to ageing populations,http://ftalphaville.ft.com/thecut/2012/01/31/858941/sp-may-cut-g20-nations-as-of-2015-on-health-costs/

Emerging market currencies are on track for their best start to the year since the turn of the century as risk appetite among investors improves, the FT reports. The Mexican peso, Brazilian real and Indian rupee have outstripped currencies in the world’s most industrialised nations to gain more than 5 per cent against the US dollar this year,http://ftalphaville.ft.com/thecut/2012/01/30/858721/emerging-market-currencies-off-to-flying-start/

Starbucks on Monday unveiled long-awaited plans to bring its coffee shops to one of the world’s greatest tea-loving nations through an $80m Indian joint venture with Tata Global Beverages, the FT reports. The first outlet will open in Mumbai or Delhi by September as part of a wider Asian expansion by the US-based coffee retailer,http://ftalphaville.ft.com/thecut/2012/01/30/858631/starbucks-plans-80m-indian-joint-venture/

European banks are preparing to tap the European Central Bank’s emergency funding scheme for up to twice as much as the ECB supplied in its debut €489bn auction last month, providing further evidence of the sector’s liquidity squeeze.  Several of the eurozone’s biggest banks have told the Financial Times that they could well double or triple their request for funds in the ECB’s three-year money auction on February 29.http://www.ft.com/intl/cms/s/0/09ab9542-4b6d-11e1-b980-00144feabdc0.html#axzz1kuxvathK

Britain, France and the US will be making their most forceful push yet for a political transition in Syria at the UN Security Council this week, lending support to an Arab plan that they hope  will overcome Russian opposition. As Syrian forces move to assert their control over Damascus suburbs that have fallen into the hands of the opposition in the more than 10-month uprising, the foreign ministers of France, the UK and the US will be in New York on Tuesday to listen to a briefing from senior Arab officials. http://www.ft.com/intl/cms/s/0/2a6777fc-4b67-11e1-a325-00144feabdc0.html#axzz1kuxvathK

Countless times during the past two years as the eurozone crisis raged, Nicolas Sarkozy, the French president, has stood side by side with Angela Merkel, German chancellor, anxious to present the image of an equal partnership battling to save the single currency Now, it seems, Ms Merkel and the example of Germany are set to play a central role in Mr Sarkozy’s battle to save his presidency as he faces an uphill struggle to win re-election in the spring.http://www.ft.com/intl/cms/s/0/94d62ac6-4b4d-11e1-88a3-00144feabdc0.html#axzz1kuxvathK

Vladimir Putin has set out an economic vision for Russia based on state capitalism and strong, paternalistic government as he seeks to return to the presidency in the face of unprecedented protests against his rule. In a long article in Vedomosti, the Financial Times’ sister paper, the Russian prime minister gave little sign he intended to implement measures to boost economic competition demanded by his country’s increasingly vocal entrepreneurial class.http://www.ft.com/intl/cms/s/0/a0accd64-4b61-11e1-b980-00144feabdc0.html#axzz1kuxvathK

Wsj.com
Most Asian stock markets were modestly higher Tuesday after encouraging comments from the Greek prime minister on debt talks, the euro zone’s move toward a closer fiscal union and positive economic data in Japan, but earnings concerns weighed on Tokyo exporters and China steelmakers. Japan’s Nikkei Stock Average gained 0.2%; Australia’s S&P/ASX 200 was down 0.2%; South Korea’s Kospi Composite added 0.1%; and India’s Sensex rose 0.9%. Hong Kong’s Hang Seng Index advanced 0.7%, while China’s Shanghai Composite rose 0.2%. Dow Jones Industrial Average futures were up 30 points in screen trade. http://online.wsj.com/article/SB10001424052970204740904577193742562782170.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Japanese industrial production rose 4% in December from the previous month, the Ministry of Economy, Trade and Industry said on Tuesday, as the impact of the flooding in Thailand on Japanese manufacturers began to ease. The reading was significantly stronger than a 2.9% gain predicted in a median forecast of economists surveyed by Dow Jones Newswires. A ministry official briefing reporters said the gains came from increases in output of cars, mobile phones and semiconductor manufacturing equipment.http://online.wsj.com/article/SB10001424052970204740904577193713129241008.html?mod=WSJASIA_hpp_LEFTTopWhatNews

Kweku Adoboli, the UBS AG trader accused of making unauthorized transactions that cost the lender as much as $2.3 billion, pleaded not guilty in London to fraud and false accounting, clearing the way for an autumn trial that could prove embarrassing for Switzerland’s largest bank. Last September, UBS disclosed that a trader on its London-based equities desk had conducted unauthorized trades that caused the bank $2.3 billion in losses. U.K. authorities arrested Mr. Adoboli and charged him with two counts each of fraud and false accounting, but the former trader entered a plea only on Monday. http://online.wsj.com/article/SB10001424052970204740904577192451928383794.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Concerns that Greece’s delay in striking a deal with private creditors could infect other European economies brought unwelcome attention to Portugal, where borrowing costs Monday pushed into euro-era highs. Other euro nations that have been linked to such contagion fears—such as Italy and Spain—were comparatively insulated, in a large part due to inexpensive cash pumped into the financial system from the European Central Bank.http://online.wsj.com/article/SB10001424052970204652904577192572929829292.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Hong Kong is bracing for more finance-sector job cuts as Western banks, many of which base their regional operations in this business hub, scale back their Asian expansion amid the fallout from Europe’s debt crisis and a generally weaker global economy. Yet while economists and analysts expect the layoffs—predominantly at European financial institutions—to continue well into the first half of this year, they see limited impact on other sectors of the city’s economy over the coming months, in part because of the strength of the flow of money from mainland China to both the retail and financial markets. http://online.wsj.com/article/SB10001424052970203920204577192752370368664.html?mod=WSJAsia_hpp_LEFTTopStories

Australian monthly house prices declined once again in December, adding to growing concern among banks and property firms that a deterioration in prices across the country will resume this year. The December decline came just a month after house prices rose for the first time in a year in November. That gain was supported by the first interest rate cut by the Reserve Bank of Australia since early 2009, and occurred ahead of the removal of a tax exemption for certain purchases. More than 90% of Australian mortgages are set at a variable rate, with interest rate cuts from the central bank typically serving as a boost to the local property market. http://online.wsj.com/article/SB10001424052970204740904577193763685792568.html?mod=WSJASIA_hpp_LEFTTopWhatNews

Reuters.com
Gold ticked up on Tuesday after the euro recouped some losses, while bullion prices headed for their biggest monthly rise since August as lingering concerns about growth in the United States prompted buying from investors. Gold added $7.05 an ounce to $1,735.69 by 0315 GMT, having hit a low around $1,716 on Monday. “I think we have good reasons to believe we are going to test $1,805 in the coming day. The Fed was clearly the most important event,” said Schnider. U.S. February gold rose $5.1 to $1,736.10 an ounce. http://www.reuters.com/article/2012/01/31/us-markets-precious-idUSTRE80T1QZ20120131

Bloomberg.com
Doubling Japan’s sales tax by 2015 won’t be enough to contain the nation’s growing debt load and the government needs to outline how it will pay for swelling social-welfare expenses, a Standard & Poor’s analyst said.  “There’s no way that would be enough,” Takahira Ogawa, director of sovereign ratings at S&P in Singapore, said in a phone interview yesterday, referring to the plan to raise the levy by 5 percentage points. “No matter how high the sales tax is raised, there’s no point unless the government does something with the social-welfare system.” http://www.bloomberg.com/news/2012-01-31/doubling-sales-tax-won-t-help-japan-enough-s-p.html

State Bank of India, the nation’s largest lender, will receive a 79 billion rupee ($1.6 billion) capital infusion from the government, ending a two-year wait for funds as slowing economic growth leads to a rise in bad loans. The state-owned lender approved selling stock to the government on a preferential basis, according to a filing yesterday to the stock exchange in Mumbai. The lender has been seeking to replenish its base for about two years after increased provisions for defaults and expansion in credit depleted capital. http://www.bloomberg.com/news/2012-01-30/india-ends-state-bank-s-wait-for-funds-by-agreeing-to-infuse-1-6-billion.html

Cnbc.com
It was good times at the Federal Reserve 1five years ago: Low interest rates instituted by then-Fed Chief Alan Greenspan had housing prices booming, the stock market was rising and Fed members were—literally—laughing their way to the…well, central bank. History shows they may have been laughing a bit too hard.  In what may be the strangest market indicator ever, a blogger found that the amount of laughter recorded in the official transcripts of Federal Reserve Open Market Committee meetings from 2000 to 2006 correlates almost perfectly with the rise in housing prices taking place at the time.  A particular series of side-splitting meetings by the central bank in 2006 marked the very top of the housing bubble. http://www.cnbc.com/id/46194541

Asia is not facing the risk of “hot money” inflows as the region is better positioned to deal with an influx of capital compared to the past, said Anoop Singh, IMF Director for Asia & the Pacific. “Asia has experience dealing with (hot money inflows). Asia is building a framework so that when money comes back, it goes into sustainable areas needed for sustaining growth in the medium term, and away from speculative hot money,” he told CNBC on Tuesday.http://www.cnbc.com/id/46198100

USAtoday.com
Washingtonpost.com
BBC.co.uk
France has cut its growth forecast for this year to 0.5% from 1%, Prime Minister Francois Fillon has announced. The revision was made to “take into account the deterioration of the economic situation”, he said. It comes as European leaders meet in Brussels to discuss the eurozone crisis, and are expected to focus on growth and job creation. On Sunday, President Nicolas Sarkozy announced plans to introduce a tax on financial transactions.http://www.bbc.co.uk/news/business-16797199

Spain’s economy shrank by 0.3% in the last quarter of 2011 from the previous three months, official figure indicate. The Spanish statistics office also confirmed that there had been zero growth in the third quarter. It is widely expected that Spain will fall into recession this year, with some analysts warning that the downturn could be prolonged. The news came as EU leaders gathered in Brussels where talks were set to focus on how to stimulate growth.http://www.bbc.co.uk/news/business-16785473

Spain’s fourth-largest airline Spanair has collapsed, leaving more than 20,000 passengers stranded across Europe and Africa. The Barcelona-based firm stopped operating on Friday and more than 200 flights were abruptly cancelled. The Spanish government is taking legal action and said Spanair could be fined 9m euros (£7.6m; $11.9m) over the collapse. In 2010, Spanair reported an operating loss of 115m euros. http://www.bbc.co.uk/news/business-16787761

Telegraph.co.uk
Five top investment bankers at RBS are in line to pick up around £30m in bonuses and pay despite the fierce public backlash against bumper pay-outs at the taxpayer-controlled lender.  They are in line to take a big share of the bank’s controversial £500m bonus pot. The five are Michael Lyublinsky, head of investment bank’s US arm; Scott Eichel, who runs securitised products and US credit; Peter Rading, co-head of fixed income, currencies and commodities (FICC); Peter Nielson, who leads markets globally; and Brian Reid, who runs research and strategy. Speaking at the at the EU Leaders Summit in Brussels David Cameron hit out at RBS, saying the bank needed to “do a better job,” especially “when they have had so much money from the taxpayer and they had made so many mistakes in the past.”http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9050704/RBS-top-bankers-set-to-share-30m-bonus-pot.html

Americans’ savings rate jumped to a four-month high in December, as consumers took advantage of a rare increase in incomes to put more money away. The savings rate rose to 4pc from 3.5pc in November, according to the Commerce Department. Incomes rose 0.5pc during December, as average earnings climbed and inflationary pressures from petrol and food remained subdued. Although most economists agree that the US savings rate does need to ultimately rise to help rebalance the global economy, December’s increase suggests that consumers have begun the year cautiously. That was underlined by separate figures showing consumer spending was flat in December after a gain of 0.1pc in November.http://www.telegraph.co.uk/finance/economics/9050100/Americans-save-more-after-rise-in-pay.html

A glimmer of light was shed on the economy after a leading survey suggested that consumer confidence improved markedly in January.  Market research firm GfK NOP said consumer confidence rose four points to minus 29 between December and January to its highest level since June last year, after improvements in expectations for the economy and people’s own finances. The rise came as a surprise given the worrying state of the economy after a 0.2pc contraction in GDP in the final quarter of 2011 fuelled fears of another recession last week.http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9050037/UK-consumer-confidence-recovers-in-January.html

Independent.co.uk
There is no respite for the depressed property market as the number of new buyers has slumped by a 10th in January from the previous month. The latest monthly survey from the property analytics firm Hometrack, published today, reveals that the number of new buyers registering with estate agents fell 10.5 per cent in January, after falls of 2.2 per cent and 6.3 per cent in the previous two months. The length of time it takes for a property to sell is also increasing, from 9.9 weeks in November to 10.2 weeks in January. Meanwhile the number of sales agreed, which climbed 4.6 per cent in November, has fallen 14.3 per cent in the past month. http://www.independent.co.uk/news/business/news/chill-over-housing-market-as-new-buyers-fall-by-105-6296648.html

Guardian.co.uk
Athens shopping streets may be busy, but thousands of stores are going out of business in the sector’s worst crisis in decades. In recent weeks Antonis Megoulis, who heads the national confederation of Greek commerce, has been playing spot the shopping bag. Standing on Ermou, an Athens street that once commanded Europe‘s highest rents from retailers, he counted the number of shopping bags carried by passersby. “If you do it yourself you will see there are hardly any at all,” he said. “Consumers are out there looking but no one is buying.” As winter sales began in Greece, Ermou was certainly bustling, but even with prices slashed by as much as 70%, cash-strapped Greeks were still more interested in window shopping than snapping up goods. http://www.guardian.co.uk/world/2012/jan/30/greek-shoppers-economic-crisis-bites

Smh.com.au
Oil fluctuated as Greece signaled opposition to economic oversight in exchange for aid and Texas economic activity increased more than expected in January. Crude for March delivery fell 35 cents, or 0.4 percent, to $99.21 a barrel at 1:06 p.m. on the New York Mercantile Exchange. Prices have gained 0.4 percent this month. The price ranged from $98.50 to $100.05. Brent oil for March settlement dropped 49 cents, or 0.4 percent, to $110.97 a barrel on the London-based ICE Futures Europe exchange. http://www.smh.com.au/business/markets/oil-fluctuates-on-greece-concern-20120131-1qq2z.html#ixzz1l0v9J7DK

Theglobeandmail.com
Rock-bottom mortgage rates have been the fuel behind Canada’s house-price boom. Now, they may also be the shield keeping that boom from becoming a bubble. Bank of Montreal chief economist Sherry Cooper argues that despite the Bank of Canada’s repeated warnings about the alarming deterioration in the country’s household debt levels, driven in no small way by a seemingly unstoppable upward march of home prices, the residential real estate market is not teetering on the edge of a U.S.-style meltdown. http://www.theglobeandmail.com/report-on-business/economy/housing/low-interest-rates-may-shield-housing-market-from-bubble/article2320221/

Xinhuanet.com
Ukraine’s budget deficit was slashed by nearly two-thirds in 2011, Finance Ministry said Monday. The budget gap stood at nearly 2.94 billion U.S. dollars, against 8.05 billion dollars in 2010, it said. Ukraine’s spending in 2011 totaled 41.6 billion dollars, down nearly 9 percent from 2010, the ministry reported on its website. Last year, the Ukrainian government received revenues of nearly 38.66 billion dollars, of which nearly 32.7 billion dollars came from taxes and 5.96 billion dollars was non-financial income. http://news.xinhuanet.com/english/business/2012-01/31/c_131384102.htm

Cs.com.cn
China’s total output of 10 major non-ferrous metals will see an annual growth of 8 percent during the 2011-2015 period, the Ministry of Industry and Information Technology (MIIT) said in a plan released on Monday. China produced 34.24 million tonnes of 10 major non-ferrous metal products in 2011, up 10.6 percent year-on-year, according to data from the National Development and Reform Commission. The 10 major non-ferrous metals include copper, aluminum, lead, zinc, nickel, stannum, antimony, mercury, magnesium and titanium. http://www.cs.com.cn/english/ei/201201/t20120131_3222073.html

China plans to make Shanghai, the country’s financial hub, a global center for innovation, transaction, pricing and clearing of RMB-denominated financial products by 2015, the country’s top economic planner said Monday. The plan will be part of China’s bid to build Shanghai into an international financial center by 2020 amid a shifting global financial landscape, with China’s economic weight and its currency taking a more prominent position on the world stage. The 12th Five-Year Plan period (2011-2015) will be “a period of strategic opportunities” for the construction of the international financial center, the National Development and Reform Commission (NDRC) said in a statement.http://www.cs.com.cn/english/ei/201201/t20120131_3222049.html
Thehindu.com
Defending the government’s decision to hold back disinvestment due to bad stock market conditions, the Planning Commission on Monday said the process of stake sale in state-owned companies could begin after the improvement in market situation.  “Disinvestment will be decided by market conditions. So if market conditions are not normal, it is sensible for the government to hold back,” Ahluwalia said in an interview to private news channel CNBC TV18. http://www.thehindu.com/business/article2845032.ece

Economictimes.com
The government has set the ball rolling for foreign direct investment (FDI) in power exchanges. The finance ministry has asked the department of industrial policy and promotion to design a FDI policy for power exchanges on the lines of commodity exchanges.  “There is a need for clear FDI regime for power exchanges. And since these are akin tocommodity exchanges a similar structure should be considered,” said an official privy to the deliberations.http://economictimes.indiatimes.com/news/economy/policy/dipp-told-to-set-rules-for-fdi-in-power-exchanges/articleshow/11693165.cms

Yonhapnews.co.kr
South Korea’s per capita consumption of staple grains fell to a record-low last year as people opted to eat more meat, vegetables and fruit, a government report showed Tuesday.  The report by Statistics Korea showed the average South Korean ate 78.6 kilograms of grain products in the 2011 food grain year, down 3.3 percent from the previous year when they averaged 81.3 kilograms. Grains include such products as rice, barley, wheat and beans. The report surveyed 1,559 households nationwide during the cited grain year that ran from Nov. 1, 2010, through Oct. 31, 2011.http://english.yonhapnews.co.kr/business/2012/01/31/6/0501000000AEN20120131006200320F.HTML

Fin24.com
China could easily boost domestic consumption to stimulate its economy if its slowdown is too sharp, the International Monetary Fund said on Monday. IMF representative for Asia Anoop Singh said Europe’s plunge into recessionary conditions could pose a challenge for Beijing keeps its growth steady. “We don’t see a hard landing as a likely event in China,” he said. But, he added, “There are clear risks, in particular an escalation of European events.”http://www.fin24.com/Economy/IMF-China-has-room-for-stimulus-20120131

Tehrantimes.com
The phases 17 and 18 of the South Pars gas field will start early production in July and will be officially inaugurated by October, the Pars Oil and Gas Company (POGC) managing director said on Monday. Shana news agency quoted POGC head Mousa Souri as saying that the two phases are projected to produce 25 million cubic meters of natural gas per day.  Five billion dollars in bonds will be issued in the current Iranian calendar year (to end March 20) to speed up the implementation of South Pars gas field projects . http://www.tehrantimes.com/economy-and-business/94968-two-south-pars-phases-to-start-early-production-in-july-

Thetrader.se
From the creator of the new normal, and the bimodal World, here are some points worth reading. By PIMCO’s El Erian via Foreign Policy. The global economy is balanced precariously between total collapse and salvation. Here are four tipping points toward disaster and four things that could get it back on track. http://www.thetrader.se/2012/01/30/on-the-edge/