Fed Signals Readiness To Ease Without U.S. Growth Pickup

” Federal Reserve policy makers signaled readiness to boost record stimulus unless they are convinced the economy is poised to rebound. Recent signs of strength may not be enough to satisfy them.

Many members of the policy-setting Federal Open Market Committee said further action would probably be needed “fairly soon” without evidence of “substantial and sustainable” improvement in the recovery, according to minutes of the July 31-Aug. 1 meeting released yesterday in Washington.

“The burden of proof is to see a sustained pickup in growth and I don’t think we’re going to get that,” said Eric Green, a former economist at the Federal Reserve Bank of New York who is now global head of rates and foreign exchange research at TD Securities Inc. in New York.”

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WTI is up $0..55 this am @ $97.81

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“The euro climbed to the strongest level against the dollar in almost seven weeks as speculation the U.S. and China will ease monetary policy spurred demand for currencies that perform better as the global economy expands.

Europe’s shared currency rose against the yen before Germany and France hold debt-crisis talks in Berlin today. The dollar fell for a fourth day before a report forecast to show sales of new houses in the U.S. increased in July and after Federal Reserve Bank of Chicago PresidentCharles Evans broadened his call for additional measures to support growth. New Zealand’s dollar appreciated against all but one of its major counterparts as Asian stocks gained.”

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World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

 

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Hybrid movers under $10:

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Gold rose to a 16-week high on signs that Federal Reserve policy makers may expand monetary stimulus to bolster the U.S. economy, boosting demand for the metal as an inflation hedge.

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Five things can go wrong in Greece in the next few weeks, in our view. The coalition government could fail to agree on the new austerity package. The Greek Parliament could fail to approve the proposed austerity package. Implementation problems could continue after Parliament approval. Social unrest could get out of control. And some Eurozone members could oppose further commitment to increase funding for Greece. We believe that Greece’s survival in the Eurozone could be at risk if any of these risks lead to a failure of the new program.

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Our Chartist Friend from Pittsburg has posted some charts with commentary. Most of the charts look like bottoms to me.

See the charts here.

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WASHINGTON – Federal Reserve officials in their last meeting discussed a “number of policy tools” that the central bank might use to further stimulate the economy in the face of the weakening recovery, an official account released on Wednesday said, but they remained in wait-and-see mode.

“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery,” the account of the meeting that ended Aug. 1 said.

With few signs of a substantial and sustainable strengthening evident this summer, the report will likely solidify investors’ expectations that the bank will take new measures this fall.

The participants in the meeting discussed a number of options to give more support to the economy, the minutes said. Those include keeping the federal funds rate near zero for a longer period than currently indicated. The Fed has said it will keep that rate low through 2014.

“It was noted that such an extension might be particularly effective if done in conjunction with a statement indicating that a highly accommodative stance of monetary policy was likely to be maintained even as the recovery progressed,” the meeting notes said.

“A few” members suggested “replacing the calendar date with guidance that was linked more directly” to the economy, or removing any guidance as to when the rate would increase.

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SAN FRANCISCO (Reuters) – Hewlett-Packard Co swung to an $8.9 billion quarterly loss as personal computer sales shrank again and it swallowed a huge write-down linked to its $13.9 billion purchase of Electronic Data Systems Corp.

The company also on Wednesday reduced its full-year earnings outlook slightly to the low end of its previous range, responding to a faltering PC market as well as touch economic conditions in Europe and also China, where growth too is slowing. Its shares slid more than 4 percent in late trading.

The No.1 personal computer maker, which employs more than 300,000 people globally, is undergoing a multi-year restructuring aimed at focusing the sprawling corporation on enterprise services, in the mould of IBM . The plan calls for reducing its employee base by 8 percent.

HP will have gone through about half of its targeted job reductions by the end of the fiscal year, HP’s Chief Financial Officer Cathie Lesjak said in an interview. It cut 4,000 jobs in fiscal third quarter and will likely have shorn 11,500 jobs by end of fiscal 2012, she said.

“HP is definitely showing progress in terms of turning around the company,” said Sterne Agee analyst Shaw Wu. “One of the clear signs is a better predictability of earnings.”

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The Obama administration paid a PR firm nearly $500,000 in stimulus funds to run a barrage of ads on White House-friendly cable programs promoting its green job training program.

According to government records, the Labor Department paid the money in late 2009 to a company that negotiated a media buy on MSNBC’s “Countdown with Keith Olbermann” and “The Rachel Maddow Show.” The ad was set to run more than 100 times — 14 times a week for two months.

It’s unclear how many people might have gotten involved in the green job training program because of the ads. But in terms of direct economic impact, the official online entry on the contract listed zero jobs created as a result of the payment.

“On the surface, this doesn’t pass the basic sniff test,” Rep. Jason Chaffetz, R-Utah, who sits on the House Oversight and Government Reform Committee, told FoxNews.com.

Chaffetz, who said he’s writing a letter to the Labor Department seeking more information about the contract, complained that the federal government already spends “way too much” on advertising as it is.

He said the targeting of these ads also raises questions about “political motivations.”

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Federal authorities are urging law enforcement agencies across the country to watch out for signs that extremists might be planning to wreak havoc at the upcoming political conventions — by blocking roads, shutting down transit systems and even employing what were described as acid-filled eggs.

The warning came in a joint FBI-Department of Homeland Security bulletin issued Wednesday.

The bulletin specifically warned about a group of anarchists from New York City who could be planning to travel to the convention sites to disrupt the events by blockading bridges.

Anarchists “see both parties as the problem,” so both conventions are prime targets for them, a federal law enforcement official told Fox News.

The Republican National Convention is set to open Monday in Tampa, Fla., and the Democratic National Convention gets underway a week later in Charlotte, N.C.

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After hitting four year highs yesterday the markets continue a minor digestion period trading in choppy fashion today.

The world waits on Europe. Gold and oil lead to the upside while industrials, consumer non cyclicals, energy, and transportation lead to the minor downside action.

Europe closes on the lows with the euro essentially flat.

The story

Market update

3 D heat map 

European boards

[youtube://http://www.youtube.com/watch?v=S8pDpdGVKpU 450 300] [youtube://http://www.youtube.com/watch?v=X_PDns23RWY 450 300]

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” $BHP reported a 35 percent drop in second-half profit which just added to signs of a wider malaise in Australia’s mining industry.

A slowdown in China and the global economy is threatening the commodity boom in Australia and the south Australian economy that has thrived on mining.

The Australian coal industry has already been cutting jobs and is now losing ground to the U.S., according to Bank of America analysts Bin Gao and Ethan Mou.

Coal accounts for 20 percent of Australia’s exports and until as recently as May, its coal exports to China had been strong, showing large year-over-year growth. But as shale-gas production picked up in the U.S., and natural gas prices started to fall, American utilities companies started to shift away from coal to natural gas to meet their electricity needs This in turn caused demand for coal and in turn coal prices to decline.

U.S. coal producers naturally turned to international markets, and Gao and Mou write:

“Coal exports by the US to China, a relatively unnoticed trend, can have significant and long-lasting substitution effect on Australia, in our view. In fact, the effect has already started showing up in recent months.”

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“There have been a few calls as of late (Hussman, ECRI, Shilling) stating that we are currently in the next recession.  Then there is everyone else.  While the “optimistic” outlook is always more enjoyable to listen to – the problem is that the current “no recession” view is primarily predicated on current quarter growth rates looked at in isolation.  These data points are then extrapolated into continuous future economic expansion.  For example, in the 2013 CBO Budget the average economic growth rate used is 5.28% which is substantially higher than the 2% growth rate currently projected by the Federal Reserve.  More importantly, neither the Fed, or the CBO, have forecasted a recession in future years.  All assumptions are based on the expectations that somehow recessions have been repealed.  This is hardly the case.

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“WASHINGTON (Reuters) – Massive spending cuts and tax hikesdue next year will cause even worse economic damage than previously thought if Washington fails to come up with a solution, Congress’ budget referee said on Wednesday.

The Congressional Budget Office said failure to avoid the so-called “fiscal cliff” of expiring tax cuts and automatic spending reductions would cause U.S. gross domestic product to shrink 0.5 percent in 2013. Previously, the non-partisan CBO forecast full-year GDP growth of 0.5 percent.

The first half of 2013 will be particularly difficult, the CBO said in its mid-year forecast update. Tax hikes and spending cuts will cause GDP to shrink 2.9 percent in the first half, compared with a prediction in May for a 1.9 percent contraction.”

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