25th May: What’s news?

Americas

On the US:

Geithner Shifts Focus to Global Threats as Crisis `Fires’ Subside in U.S. Treasury Secretary Timothy F. Geithner’s trip to Europe today shows how his focus is shifting to global economic threats as Congress puts the finishing touches on its overhaul of financial regulations and the U.S. winds down bailout programs.

Bernanke Says Central Banks Must Be Free From Politics to Prevent Crises [or from WSJ] Federal Reserve Chairman Ben S. Bernanke said central banks must be free from political pressure as they bolster regulation and try to prevent future financial crises.

Debt Level, Spending Pose Risk to U.S.’s Aaa Credit Rating, Moody’s Says The U.S. government’s Aaa bond rating will come under pressure in the future unless additional measures are taken to reduce projected record budget deficits, according to Moody’s Investors Service Inc.

S&P Says It May Take Months to Assess Bank Downgrades From Financial Bill Standard & Poor’s said it may take until early 2011 to decide whether legislation that bans the U.S. government from rescuing failing banks will lead to credit downgrades at lenders such as Citigroup Inc.

U.S. Consumer Confidence Rises to Highest Level Since 2008 on Job Optimism Consumers gained more confidence in May than projected as a recovering U.S. economy raised expectations hiring will pick up in coming months.

Banks Trim Debt, Obscuring Risks BofA, Deutsche Bank and Citigroup are among the most active at temporarily shedding debt just before reporting their finances to the public, a Wall Street Journal analysis shows.

On LatAm:

Mexico Takes Share From China as Peso’s Drop Spawns Rebirth at U.S. Border Mexico’s exports to the U.S. are taking market share from China as demand rises for Mexican-made refrigerators from Whirlpool Corp. and Dodge Ram pickups from Chrysler Group LLC.

Panama Rating Raised to Investment Grade by S&P on Growth, Declining Debt Panama’s credit rating was raised to investment grade by Standard & Poor’s Ratings, which cited country’s “strong” economic growth and declining debt.

Brazil Can Grow 7% This Year Amid `Overheating’ Risks, Strauss-Kahn Says Brazil’s economy can grow as much as 7 percent this year, raising the risk of overheating, said International Monetary Fund Managing Director Dominique Strauss- Kahn.

Venezuela Economy Shrank 5.8% in First Quarter Amid Rationing, Takeovers Venezuela’s economy fell deeper into recession in the first three months of the year as electricity rationing decimated manufacturing and investment dried up because of government takeovers.

Analysis:

Finance: A wider divide A devastating financial crisis triggers public anger, congressional hearings and a sweeping overhaul of regulation – all directed at Wall Street titans, who respond by warning the new rules will cause credit to contract and harm businesses across America.

CBO: Stimulus raised GDP 1.7% to 4.2% in Q1 [CalculatedRisk blog] Congressional Budget Office: Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from January 2010 Through March 2010

Another View: Reining In the Rating Agencies Claire Hill, a law professor at the University of Minnesota, examines the impact of the financial regulatory bill on the credit rating agencies.

Europe

Manufacturing drives stronger growth in UK economy Gross domestic product rose by 0.3% between January and March, revised higher from the 0.2% growth reported last month.

Banks in London Begin to Replenish the Ranks And the search for talent means compensation is rising — despite government efforts to control it.

On EU:

Euro-Area Countries Failed Fiscal Goals 57% of Time, Data Show Euro-area governments breached their own fiscal rules more than half of the time since they began trading the single currency, according to data compiled by Bloomberg News.

Spain’s Rush to Fix Ailing Savings Banks Risks Leaving the Job Half Done In the rush to fix its struggling savings banks, Spain risks leaving the job half finished.

Fear of Spanish debt contagion sends markets tumbling Euro debt fears hit Spanish stocks and bond markets while Italy reveals austerity package to stave off market punishment.

Spain suffers debt auction struggle Spain struggled to issue debt on Tuesday amid rising tensions in the new issue markets after the seizure of one of the country’s savings banks at the weekend.

Italy Adopts $30 Billion of Budget Cuts in European Union Push on Deficits Prime Minister Silvio Berlusconi’s government approved 24 billion euros ($30 billion) of budget cuts as part of a European effort to convince investors that euro nations can trim deficits and defend the single currency.

Angela Merkel ‘naive’ over euro, claims European commission chief José Manuel Barosso’s public criticism of German chancellor signals growing political friction across Eurozone.

Germany seeks to extend ban on naked short-selling Practice of short-selling shares and derivatives without owning them could be outlawed for all company stocks.

‘It is forbidden to write or enter into currency derivatives…’ FT Alphaville’s resident germanophone Joseph Cotterill has tracked down the Finanzmärkte Diskussionspapier relating to Germany’s newest and most far-reaching draft law to ban all forms of naked short selling.

Others:

Madoff claims settled with European bank clients Banks in Europe take the hit to pay back wealthy customers for losses in Bernard Madoff’s investment business

Qatar eyes Treasury’s Citi stock The Qatar Investment Authority, a sovereign wealth fund, has expressed interest in buying part of the US Treasury’s stake in Citigroup, potentially boosting efforts to sell the shares amid the global rout in banking stocks, people familiar with the matter said.

Exports, World Cup Lift South Africa GDP South Africa’s economy grew at its fastest pace in more than 1 1/2 years as exports grew amid strengthened global demand and the country geared up to host the soccer World Cup, government data for the first quarter showed Tuesday.

Asia

Asian Stocks Stage Modest Rally The muted gains on Wednesday, after steep falls in much of the region the previous day, reflected the continued intense nervousness about high government debt levels in Europe.

Bank of Japan Debates Policy Limits as Shirakawa Warns of Credibility Risk Bank of Japan board members said the central bank should avoid getting too involved in the allocation of capital in its latest effort to spur lending and economic growth, a record of their April 30 meeting showed.

Yuan Cedes Spotlight as U.S.-China Talks Focus on North Korea, Europe Debt U.S.-China talks set up primarily to head off bilateral disputes focused much of the past two days on threats to global stability, as Europe’s debt crisis and military tension on the Korean peninsula overtook the agenda.

Pyongyang severs ties with Seoul North Korea on Tuesday severed all ties with South Korea, hitting back at Seoul, which has reduced cross-border trade to punish Pyongyang for sinking a warship in March.

Asian investors get cold feet on euro bonds Japanese investors are not just worried about debt issued by the peripheral economies of Portugal, Italy, Ireland and Greece; they seem pretty uneasy about German bonds too.

Chinese Economy Treads Risky Path. (Ask Japan.) China has grown from a peasant nation into an economic colossus, but sustaining such robust expansion may be difficult.

Forex Market

Euro Declines Third Day on Concern European Budget Cuts Will Damp Growth The euro fell against the dollar and yen for a third day as concern Europe’s debt crisis will slow economic growth damped demand for the region’s assets.

Euro Will Decline Until European Union Creates Monetary Fund, Mizuho Says The euro will remain in a long-term downtrend until the European Union creates its own monetary fund to expedite the rescue of heavily indebted nations, according to Mizuho Corporate Bank Ltd.

Loonie Falls to Six-Month Low as European, Korean Turmoil Discourages Risk Canada’s dollar dropped to its lowest level in six months as equities and commodities fell on weakness in Spain’s banking system and tension between the Koreas, discouraging demand for currencies related to growth.

South Korea Pledges to Keep Won Stable as Tensions With North Korea Mount South Korea’s government and central bank pledged coordinated action to keep the won stable as escalating military tensions on the Korean peninsula buffet the nation’s currency.

Asia Currencies to Lose 50% of Gain on Stock Drop, National Australia Says Asian currencies will lose half their gains made since the easing of the 2008 global financial crisis as Europe’s debt woes cause a “double-dip” in equity markets, according to National Australia Bank Ltd.

Cost of swapping euros for dollars soars The cost to swap euros for dollars has risen to the highest levels since December 2008 due to overwhelming demand for the US currency amid growing uncertainty in Europe over mounting public debt and the health of the financial sector.

Commodities

Copper, Oil Rebound on Speculation China’s Demand to Gain; Won Stabilizes Copper and oil rebounded, driving Asian commodity stocks higher, as Rio Tinto Group said it expects demand in China to rise. The won stabilized as South Korea’s government pledged to intervene in currency markets amid tensions with the North.

Corn in Chicago Rallies as Much as 1%; Soybeans Advance From 10-Week Low Corn futures in Chicago gained as much as 1 percent and wheat and soybeans advanced after the futures dropped yesterday on speculation that the widening Europen debt crisis would curb global demand for commodities.

Wheat Plunges to Seven-Month Low as Europe Debt Crisis Dims Demand Outlook Wheat fell to the lowest price in seven months as Europe’s widening debt woes undermined the outlook for economic growth and demand for raw materials including oil, metals and crops.

Brazil’s Largest Soy Grower Says He’s Waiting to Sell Crop on Real’s Drop Soybean farmers in Brazil, the world’s second-largest grower, are withholding supplies of the oilseed as they bet the real’s drop will boost revenue from dollar-denominated sales abroad, the head of the nation’s biggest producer said.

Platinum May `Spike’ in June on Soccer World Cup, ETF Securities Predicts Platinum prices may “spike” next month as the soccer World Cup in South Africa potentially disrupts power supplies to mines, said ETF Securities Ltd.

Rubber Advances as Crude Oil Rally Boosts Demand Amid Tight Supplies Rubber advanced as crude oil gained, improving the appeal of the commodity used to make tires, amid speculation of tight supplies from producing countries.

China seals African platinum deal China is set to commit $877m into South Africa’s platinum industry, in a deal that marks one of its biggest ever African projects outside the energy industry.

Debt crisis will cut global oil demand  Europe’s sovereign debt crisis is likely to translate into a slowdown in global demand for oil this year – and lower prices, says Francisco Blanch, head of commodities research at Bank of America-Merrill Lynch.

Economic Clout Earns Asia an Oil Discount The rising market power of Asian oil customers is increasingly helping them buy oil more cheaply than their counterparts in the West, a reversal of the historical pattern.

Sources:

Bloomberg / Guardian / NY Times / WSJ (sub req’d) / FT (sub req’d) / WaPo

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