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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

Europe is the new Japan – ECB cuts rates

Yesterday…The Fed’s FOMC meeting notes showed that we’re moving away from the “let’s close the money tap” idea and back to “whatever it takes” – meaning easing or no easing. The statement said that policy action will be taken with an eye on how the economy will progress. read Alphaville (interestingly, Matthew Yglesias of Slate has interpreted this as a call for stimulus)

Apple‘s mega bond of $17m helps the company to avoid $9bn in taxes. If Apple would have had to bring in money from abroad to pay dividends to shareholders, that’s what it would have cost them. Of course, the average Apple customer, like me, doesn’t care about tax avoidance (it’s not even illegal), but the American state is upset, as it’s trying to crack down on offshore tax avoidance like never before this year. read FT

Otherwise, an infographic to yesterday’s ADP employment report. view graphic

This morning…
all eyes are on the ECB, which just announced a benchmark interest rate cut by a quarter point to 0.50%. A press conference during which Mario Draghi will wear a suit made of money is set to follow at 1.30 BST. Let the excitement begin. Money for everyone.

UBS is holding an investor meeting today, during which the bank may be urged to split its investment banking and wealth management units [again]. read Reuters

So long.

Death Star Economics
ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

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Slovenia slides down the bailout slope

Yesterday

The Fed is considering tougher capital requirements over worries that banks could be playing the [Basel III] system. Currently, the international agreement sees equity capital at only 3%. Basel brought that up significantly, but also gave the parties involved more room for… creative accounting. Give a bank a loophole. read FT

Moody’s downgraded Slovenia to junk with negative outlook (ouch), which is unfortunate, because the country was planning to auction off some debt. read FT
And now the pathway to an EU bailout: (read Bloomberg)

Rising loan losses resulting from a housing bust and a second recession in two years have left a hole of about 7.5 billion euros ($9.9 billion) at Slovenia-based lenders, investment bank Keefe Bruyette & Woods estimates. That’s a lot for a 35 billion-euro economy: A bank bailout would push government debt above 70 percent of economic output.

Apple issued $17bn in debt – the largest corporate debt offering ever – in six tranches to return money to shareholders and avoid repatriation taxes on overseas funds. read WSJ

In New York, the Empire State Building was lit up in FT-pink to celebrate the 125th anniversary of the newspaper.

This morning…
is quiet due to Labor Day in vast parts of the world.

Later on, we’ll get some data from the US, including the ADP employment report, ISM manufacturing data and the post-FOMC meeting statement from the Fed (ex Bernanke press conference). The ISM is expected to drop below 50, as it last did in November of last year and several months in 2009.

So long.

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Letta new Italian PM; Apple profits drop for first time in decade

Yesterday…
It was a dark day for the European economy, with April PMIs across the globe disappointed, except for France, which beat expectations and soared to four-months highs. China and Germany on the other hand, undercut expectations – Germany even fell below the magic mark of 50, to 48.8, the lowest level in six months. read Bloomberg

After all the united G20 talk of appropriate monetary measures, S&P said that there’s a 30+% chance that Japan will lose its AA rating. The reasoning: it’s great to have quantitative easing, stimuli and private sector involvement, but that strategy doesn’t work if all you do is print money. read Reuters

Meanwhile in Portugal, the government is planning to lower corporate taxes to attract business. Good timing. read WSJ

Right after close, the Twitter account of the Associated Press was hacked, posting a tweet about attacks on the White House. The Syrian Electronic Army claimed responsibility. read Alphaville read BBC

Otherwise, it was all about Apple. The tech giant posted first quarter earnings,showing that profits dropped for the first time in a decade in year-on-year comparison. Alongside quarterly results, the company also announced an expansion to its now $100bn share buyback program to return money to investors. read WSJ

This morning…
Italy is set to announce a new Prime Minister. The current candidates are Guiliano Amato (Prime Minister 1992-1993 and 200-2001), Matteo Renzi (Mayor of Florance) and Enrico Letta (center-left deputy leader), all of which are less crazy than Berlusconi and none of which have worked for Goldman Sachs. read Reuters
BREAKING: Enrico Letta set to become Italy’s new prime minister

In anticipation on next week’s ECB meeting, rumor has it the Mario Draghi is likely to cut another quarter of a point off current interest rates, as inflation rates are below target and the eurozone finds itself back in recession. read Reuters

So long.

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IMF joins Cyprus creditors; Fannie Mae records first profits in 6 years

There won’t be an update tomorrow, Thursday April 4th.

Yesterday…In the US, people are getting more nervous about the Fed’s spending spree. Eyeing over to Japan, that might be fair. Once again, it’s Jeffrey Lacker, President of the Federal Reserve Bank of Richmond, who doesn’t beat around the bush when it comes to disliking monetary policy. read article

Fannie Mae, which received a total of $116.1bn in bailout finance from the US Treasury since the financial crisis, officially returned back to black. For the financial year 2012, the mortgage business recorded $17.2bn in profit. Finally. Although things are looking up, $84.7bn of its bailout package remain outstanding. read article

Speaking of earnings, the SEC has given companies the okay to announce earnings and other news via Facebook and Twitter, throwing off all those institutions (read banks) that blocked social networking sites for their employees. read article

Cyprus’ Minister of Finance resigned, saying he had done his deed in negotiating the bailout deal. In related news, the IMF stated today that it will pay €1bn of the total €10bn bailout package for Cyrpus, spread out over three years.

This morning…
there’s little to talk about. By 9.45am the most striking news were that Apple may release two new phones this year, and even that was a story from yesterday. read article

Spanish Prime Minister Mariano Rajoy is looking towards Brussels to get the growth in Europe going (good luck with that) and stop the austerity vise (even more luck for that), asking for countries in the position to do so to spend more to stimulate the economy. read article

So long.

Death Star Economics
ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

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China curbs growth targets in light of social issues

There won’t be an update tomorrow, Wednesday March 6th.

News from China, where outgoing Prime Minister Wen Jiabao presented the country’s economic targets for 2013, including an unchanged GDP target of 7.5%, a lowered inflation target of 3.5% (down from 4%) and a budget deficit of RMB1.2tn, or 2% of GDPDefense spending will be boosted by 10.7%, a smaller increase than in any year since 1990. But the departing Premier also said that China’s growth model was unsustainable and on top of that paired with a whole array of social issues, like the income gap, increasing pollution and a real estate bubbleread article

Also in China, the SEC has been allowed to subpoena Deloitte’s China unit over accounting fraud at Chinese companies operating in the US. After initial co-operation between the American and Chinese securities regulators failed, this is a big step in terms of cross-border fraud investigations. read article

In other regulatory news, an undisclosed group of banks in the City of London have received a hat tip from law firm Shearman & Sterling that it was possible to fight the EU’s banker bonus cap [proposal] in courtread article 

Until then, enter George Osborne.

Otherwise, Apple’s stock fell to a new 52-week low yesterday, dragging the company’s market cap down below $400bn for the first time in over a year. 

So long.

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Across the board disappointing results: Japan’s deficit, Apple’s earnings, S Korea’s GDP

Over the past weeks, Japan has done a lot to try and convince the rest of the world of its [return to] well-being, but no distraction really did the job. And now this: Japan’s 2012 trade deficit hit JPY6.93tn ($78.27bn), the highest ever reported. Reasons are poor performance of its largest companies, rising fuel costs, the strength of its currency and the whole argument with China over the Senkaku Islands in the East China Sea. read article

South Korea’s 2012 GDP underperformed, recording the weakest growth figures since 2009. The country’s very own central bank had forecast the economy to grow 3% over the whole year – the actual number game in at 2%. To blame is the eurozone crisis, among other things, weakening demand for export products, which account for 50% of the South Korean economy. read article

The US House of Representatives approved a short-term extension on America’s borrowing spree, answering the question of whether the US will be able to pay its bills in the near future. This has bought some time to come up with a budget proposal to solve all problems – and without raising taxes, if you believe Paul Ryan, Chairman of the House Budget Committee. read article

The timing of the extension means the debt limit will be revisited after two other fiscal deadlines. Many members of both parties have said they want to revise of replace across-the-board spending cuts set for March 1, and they will need to renew funding by March 27 if they want to prevent a partial government shutdown. They are far apart on how to achieve both goals.

According to Reuters, the US Treasury will need the remaining $16.4tn the country is legally allowed to borrow until early March.

In Davos, Angela Merkel shows patience, saying that she was going to listen to David Cameron‘s complaints to work out the best possible solutions under which the UK would stay in the European Union. Wise words, after all, the UK’s vote would be helpful on her European budget proposal. Barack Obama also urged Britain to stop messing around and stay in the union. In the background economists polled by Reuters say that there is a 60% chance the UK will lose its AAA rating, which it has held since 1978, in the coming 12 months.

In other news, Apple announced earnings last night, showing the weakest increase in sales in 3.5 years, and the most disappointing profit growth since 2003. Since the shares of the world’s largest public company hit $700 in September, the price has fallen by 27%. Other technology companies like IBM, Google and Netflix did well and beat expectations in Q4 of the last year. Microsoft will report earnings tonight. read article

So long.

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No trillion-dollar coin, and no budget either – the US on hold

The White House has announced to delay the submission of the 2014 budget talks until the fiscal cliff is dealt with entirely. In other words, the US might enter 2014 (fiscal year begins three months before) without any clue where to spend how much money on what. read article

After much hoping that Ben Bernanke would help re-enacting The Simpson’s episode “The Trouble with Trillions” and mint a trillion-dollar coin (coin, note, same difference), he responded to questions regarding said piece of metal saying “I’m not going to give that any oxygen.” Fine then. He continued defending his policies and claiming that their ineffectiveness was merely due to a too small scaleread article

Even Norway is now jumping on the QE band wagon. The deputy governor of the Norwegian central bank indicated that something would have to be done about high interest rates if the NOK continues to be so strong.

The preliminary reading of Germany’s fourth quarter GDP says the country’s economy contracted by 0.5% from Q3, bringing annual growth down to 0.7% from 3% in 2011. Ouch. But not actually that far off what economists had predicted. At least Germany is running a teeny tiny surplus of 0.1% again – the first one since before the financial crisis. Yay. read article

After solar panels and telecommunicationsChina and the EU are fighting about another traded good: steel. The European Commission says China has paid illegal subsidies to steel companies to dodge the market price of organic coated steel, making Europe’s manufacturers pay higher import tariffs on Chinese products. read article

The British business press is full of American Pie (The Day the Music Died) puns, as high street music retailer HMV is going into administration. Considering Virgin closing one superstore after the other, this is just another battle won by AmazonApple and co against the old world of retail.

And while Apple shares dropped 3.6% to a still ridiculous $501.75 yesterday, Dell is struggling to find a new direction in life. For months, reports the WSJ, the computer company has been in talks with Silver Lake and TPG Capital, two huge American private equity buyers, who could emerge as dis-/joint bidders for the business. Delisting a $19bn company would be quite expensive and mark the largest buyout since KKR’s acquisition of First Data Corporation in 2007. Founder Michael Dell owns 14% of the company’s shares, which rose almost 13% in response to the news. read article

So long.

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Waiting for what there is to come

This pretty much sums it up:

…with investors reluctant to make any big bets on the last trading day before the closely contested US election and with an eye on China’s leadership transition later in the week.

Apple is considering to strip Intel of a massive deal: in 2005, Apple decided to switch from Motorola and IBM chips to Intel processors for its Macbooks. Now word got out that Apple believes its own chips that run its iPhones and iPads will soon be developed enough to replace Intel technology in laptops. Only judging by the Macbook ratio in London’s Starbucks alone (one Starbucks, two Starbucks?), it becomes clear that this is about a lot of money. When it came to official comments, fingers were pointed silently, with Intel referring all requests to Apple, which in turn decided to keep quiet. As with basically all news regarding the Apple, “people close to the matter” are to blame, like the time the new top-secret iPhone was forgotten in some bar… read article

The IMF released its annual report on the French economy yesterday, saying if Hollande fails to drive its country towards necessary reforms, it would follow Italy and Spain down the rabbit hole of financial and political crisis. The IMF points out that France lacks competitiveness among its peers and predicts its economy to grow only 0.4% in the first half of 2013 – halving the rate expected in Paris. Of course, Christine Lagarde used to be French Minister of Finance, so naturally, she knows better. Former CEO of EADS, Louis Gallois, also issued a report, addressed to Monsieur Hollande himself. Gallois is saying the same, that France has to man up sooner than later. His recommendations include cuts in welfare spending, more support to businesses of all sizes and exploiting France’ shale gas reserves. read article

London’s financial district will lose another 13,000 jobs next year says the Centre of Economics and Business Research (CEBR). That would increase the number of jobs lost since the onset of the crisis in 2007 to 100,000. Happy days. The City’s workforce will be at its lowest in 20 years come 2014, CEBR continues. Even happier days. A disgruntled Allister Heath (CITY AM) writes that this has gone too far.

In other news, BMW is set to post another record-sales year, with sales up 8.6% between January and September 2012. For Germany that means that its car industry, of all options available, is driving its export economy the most. The fact that Japanese car makers have essentially lost China as a market in the past three months, certainly doesn’t harm either.

So long.

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Morals = money: financial incentives for whistle-blowing

Apple’s earnings missed forecasts, posting slightly higher sales but lower EPS. Apple reportedly sold 26.9 million iPhones and 14 million iPads last quarter. Key rival Samsung sold 53.6 million phones, which makes for a market share of almost a third worldwideSamsung’s earnings were better than expected, but South Korea posted GDP growth of 1.6% in Q3, the slowest rate since 2009. That dragged Asian shares, including Samsung, which is the heaviest weighted stock in the MSCI Asia-Pacific index, down to a seven-week lowread article

The European Parliament is working on a new directive to financially incentivize whistle-blowing, says the Handelsblatt Morning Briefing. Of course, much of this aimed at the financial services sector, especially considering recent scandals regarding insider trading and interest rate fixing. What may have been claimed to be the moral high-ground will therefore soon become a way of cashing in. It seems like something Greg Smith would enjoy.

On that note, Societe Generale, Royal Bank of Canada, Bank of America, Credit Suisse, Bank of Tokyo Mitsubishi UFJ, Norinchukin Bank, Rabobank, Lloyd’s and West LB have also been subpoenaed in regard to the Libor scandal. Maybe it’s time to accept that everybody was involved and move on. read article

One of the last firms with a clean slate in this case is BNP Paribas, France’ largest bank, which was downgraded from AA- to A+. The ratings for Credit Agricole and Societe Generale were confirmed with negative outlook. France’s president Francois Hollande has meanwhile hit the lowest voter satisfaction ratings since his inauguration, reaching only 36% in a recent poll by Le Figaro, versus the highest rating of 55%. The poor rating is most likely due to the country’s terrible economic performance that has forgotten what growth even looks like by now. In September, the unemployment rate hit a 13-year high; Hollande expects to take another 12-14 months to see any effects in the jobless numbers. But let’s not forget that Monsieur le president is convinced that the worst is lying behind us, and Europe will flourish again in no time. read article

And in the background, Greece has run out of money again. Officials said that the country requires an additional €30bn to make it through 2016. Greece will also fail to meet the 120% debt (of GDP) target in 2020; officials say it will be more like 136%. Have fun negotiating that with the Germans. If this was last year and anybody would have heard about additional billions that far down the line, Greece would have been kicked out of the EMU faster than they can put on a general strike. read article

Weekend reading

– Why the color of your parachute doesn’t matter if you don’t know where it’s taking you, read article

– the five lies Mario Drahgi told ze Germans about the OMT programread article

– the Harvard comparison: Obama vs Romneyread article

– an economist at the US treasury found the transcript of the 1944 Button Woods negotiationsread article

Have a good one.

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EU getting ready to pay, China-Japan conflict boosts German car production

There won’t be a news brief tomorrow and Wednesday, 09/10 October 2012.

Hugo Chavez won another six-year term in Venezuela’s national elections held on Sunday. By the end of the new term, he will have been in office for 20 years. Chavez is planning to step up effort to nationalize companies in areas like finance, nutrition and healthcare. Prior to Sunday’s elections, Chavez underwent cancer treatments in Cuba; his illness may pose a threat to his upcoming term as president, commencing on January 10. read article

The Eurogroup of Finance Ministers is meeting today to officially launch the ESM, concluding the day with a press conference in the evening. The second bailout fund will hold €80bn paid-in capital (mostly by Germany, as we know), with €620bn of callable capital, which will be used as a base to borrow money in the public markets, reaching full capacity in 2014. The focus of the meeting will be next steps for Spain and possible the progress of Greece, where Angela Merkel and an army of 7,000 policemen will observe the situation tomorrow. read article

Following last month’s conflict between China and JapanToyota, Honda and Nissan are cutting their production targets for Chinese plants by about half until further notice, due to a slump in Chinese demand. In direct response, sales for South Korea’s Hyundai rose 15%, while German brands Audi, BMW and Mercedes-Benz rose 20%, 55% and 10% respectively last month. read article

Also in ChinaHan Hoi Precision Industry, a subsidiary of Foxconn that assembles iPhones, iPads and other Apple products, is the bullseye in a labor rights dispute that is igniting in China. Foxconn employs 1.2 million people in China, some of which were involved in a strike last week Friday. The strike regarded increasing working hours and quality assurance, was supported by China Labor Watch and involved employees working on the new iPhone 5. According to WSJ:

Labor groups have criticized Hon Hai for its work practices after several workers at the company’s massive manufacturing base in China jumped to their deaths in separate incidents in 2010. Hon Hai has since increased salaries and outfitted worker dormitories with safety nets in an effort to prevent such incidents.

In the US, earnings season is starting tomorrow evening with Aluminum producer Alcoa. Expectations are depressing and will underline the poor performance of the Western economies despite government efforts to boost growth. But a quarter doesn’t make a year, according to the FT, “S&P 500 companies are on course for record cash profits in 2012.”

Also in the news, Google is tapping into its massive cash reserves and will launch its own credit card. The card will be exclusively linked to its AdWords business and make it easier for clients to purchase advertising space. This is following Amazon’s announcement to make loans to their vendorsread article

Otherwise, applications for the position as Governor of the Bank of England have closed. Alphaville considers the contestants Paul Tucker and Lord Turner.

So long.

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