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Monthly Archives: November 2012

Yellen: Fed May Need to Keep Rates Low Until 2016

“Federal Reserve Vice Chair Janet Yellen said that U.S. interest rates may need to stay near zero until early 2016 to forcefully lift employment, and she strongly backed adopting inflation and unemployment thresholds to guide policy.

Yellen, viewed as a front-runner to succeed Fed Chairman Ben Bernanke when his term expires in January 2014, argued that an optimal path for U.S. monetary policy would keep rates on hold for longer than expected, at the cost of a bit more inflation.

“This highly accommodative policy path generates a faster reduction in unemployment than in the baseline, while inflation overshoots the (Fed policy) committee’s two percent objective for several years,” she told students at the Haas School of Business at the University of California, Berkeley.”

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The Fed Makes a Move Towards Untangling Fed Speak

“The Federal Reserve is inching closer to revamping its communication strategy by stating more explicitly than before what would get officials to start raising short-term interest rates.

Under a new approach being considered by senior officials, the Fed would state how high inflation would have to rise or how low unemployment would have to fall before it would begin moving rates, which have been near zero since late 2008.

“Several of my [Fed] colleagues have advocated such an approach, and I am also strongly supportive,” Janet Yellen, the Fed’s vice chairwoman, said in a speech Tuesday at the University of California, Berkeley.”

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The SEC Expands its Probe Into $KCG

 

“The Securities and Exchange Commission has deepened its probe into whetherKnight Capital Group Inc. KCG -2.01% did enough to police its trading systems before computer errors nearly destroyed the brokerage.

The inquiry, which began after Knight’s errant Aug. 1 trades saddled it with more than $450 million in losses, initially focused more narrowly on what caused the errors. The probe has broadened to look further at the company’s risk-control procedures and Knight’s compliance with a rule implemented last year—called the market-access rule—that requires brokerages to guard against these sorts of problems, say people familiar with the investigation.”

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$MOS Lowers Q2 Production Expectations

“PLYMOUTH, Minn. (AP) — The Mosaic Co. says weak international demand for its crop nutrients has hurt sales volumes, which may not pick up until 2013.

The Plymouth, Minn.-based company, which sells phosphate and potash, lowered its second-quarter production guidance and tightened its price forecast as a result.

Shares of the company fell more than 4 percent in after-hours trading on the news.

Mosaic said international crop nutrient market demand has fallen as distributors are holding off on purchases to avoid price risk. The company believes this demand is simply delayed, but said sales volumes may not pick up until 2013.

The company had previously forecast second-quarter potash volumes of 1.6 million to 1.9 million metric tons, which already excluded shipments to India and China. Mosaic now forecasts shipments in the range of 1.3 million to 1.4 million metric tons, as other international buyers have followed suit and held off on purchases.

The company expects its phosphate volume to be in the range of 2.9 million to 3.1 million metric tons, down from its prior forecast of 3 million to 3.4 million metric tons.”

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$T Sees Opportunity in Cybersecurity

 

“BARCELONA (Reuters) – Companies will double or triple spending on cybersecurity in the coming years as attacks grow more sophisticated and frequent, creating a billion dollar business opportunity for U.S. carrier AT&T Inc, it said on Wednesday.

Attacks on AT&T networks have doubled in the past four months and now tend to be more targeted to evade detection, Frank Jules, president of AT&T’s global enterprise unit, said at the Morgan Stanley TMT conference.

“We see them on a daily basis and they are now getting smaller instead of coming in huge waves, which were easier for us to detect,” he said.

“Every chief information officer at major corporations that I meet wants to talk about security. I think this will be a $40 billion market one day.”

Jules said AT&T’s strategy for its global business solutions unit was to accompany big multinationals as they expand overseas to provide them not just with connectivity but new products and services like security and machine-to-machine technology, which puts mobile SIM cards into everything from cars to vending machines.

AT&T said in early November it would boost capital spending on its U.S. network by about 16 percent to $22 billion a year for the next three years to upgrade its wireless and wireline networks.”

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$SPLS Beats the Street, Stock Higher Premarket

 

“(Reuters) – Staples Inc , the largest U.S. office supply chain, reported a slightly better than expectedquarterly profit, as costs declined and sales in North America held up, although weakness in Europe and Australia hit overall revenue.

Staples shares were up 4 percent at $11.70 in premarket trade. They had fallen by about a 20 percent this year.

Staples’ third-quarter adjusted profit beat estimates by 1 cent per share, although restructuring coststook it to a net loss.

Office supply chains are a good gauge of economic health because demand for their products is closely tied to white-collar employment rates.

Sales at Staples have suffered as corporate customers and other shoppers cut back on discretionary spending in the weak global economy, forcing the chain to keep a tight lid on costs.

But in the latest quarter, Staples reported North American delivery sales rose 1 percent even as retail sales remained flat.”

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Toyota Recalls 2.8 Million Vehicles for a Steering Problem

“TOKYO (Reuters) – Toyota Motor Corp <7203.T> said it will recall 2.77 million vehicles worldwide, including some of its popular Prius hybrid cars, for steering and water pump problems in the carmaker’s second multimillion-vehicle recall in a little over a month.

The defects, which Toyota said had caused no accidents and could each be fixed in an hour or so, could cost hundreds of millions of dollars to repair, according Deutsche Securities autos analyst Kurt Sanger.”

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Europe Protests Austerity With Strikes in Spain, Italy

“Spanish workers staged a second general strike this year as unions across Europe prepared the biggest coordinated protests yet against budget cuts that policy makers say are needed to end the region’s debt crisis.

In Spain, unions said most auto and metal workers joined the strike, even as demand for electricity was just 12 percent below usual. One of Portugal’s two biggest labor groups also called a strike. Partial walkouts are planned in Greece and Italy, and French unions are urging workers to join protest marches.

Opposition to Spanish Prime Minister Mariano Rajoy’s cuts in health, education and welfare benefits is growing while those measures are failing to rein in the budget deficit or bring down borrowing costs. Demands for less austerity are gaining traction as the International Monetary Fund recommends nations including Spain slow the pace of budget cuts.

“This is a strike against the suicidal economic policies of the government,” Ignacio Fernandez Toxo, head of Spain’s CCOO union, told supporters late yesterday.

Rajoy, who won a landslide election victory a year ago, is wrestling with the second-largest budget deficit in the euro region while trying to revive the economy from a five-year slump that pushed the jobless rate to 26 percent. He is trying to avoid following Portugal, Greece and Ireland into seeking a sovereign bailout as Spaniards resist the measures being implemented as a condition for the 100 billion-euro ($127 billion) European bank rescue he agreed to in June.”

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Inflation Hits an Eight Month Low in India

 

India’s inflation unexpectedly eased to an eight-month low in October, a slowdown that may be limited as the effects of a diesel-price increase spread through Asia’s third-largest economy.

The wholesale-price index rose 7.45 percent from a year earlier after climbing 7.81 percent in September, the Commerce Ministry said in a statement in New Delhi today. The median of 28 estimates in a Bloomberg News survey was 7.9 percent.

The Indian government boosted diesel tariffs by about 14 percent two months ago to curb fuel subsidies that have stoked a budget deficit. The central bank on Oct. 30 predicted faster inflation this quarter following the move, while signaling it may cut interest rates in the January-to-March quarter next year as price pressures subsequently moderate.

“The recent fuel subsidy cuts will stoke fuel inflation in the coming months, and have secondary effects on core inflation,” said Jyoti Narasimhan, India economist at IHS Global Insight in Bangalore. “With inflation unlikely to recede substantially, we no longer expect the Reserve Bank of India to soften its stance and cut policy rates” at the next review on Dec. 18, she said.”

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European Stocks Fall on Weak Earnings Reports

“European stocks declined for the fifth time in six days, after a late-day selloff in U.S. equity benchmarks, and as companies including ICAP Plc (IAP) and Mediaset SpA reported earnings that disappointed investors. U.S. index futures rose, while Asian shares were little changed.

ICAP dropped 5.9 percent after the world’s largest broker of transactions between banks reported a slump in earnings. Mediaset declined 4.5 percent after the broadcaster cut its full-year profit forecast. Vivendi (VIV) SA climbed 4.5 percent after it said earnings will fall less this year than it had expected.”

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The Bank of England Will Continue Asset Purchases to Stimulate a Weakening Economy

Bank of England Governor Mervyn King said the U.K. economy may shrink in the current quarter and its recovery will be subdued, prompting officials to keep open the option of further asset purchases to aid growth.

“We face the rather unappealing combination of a subdued recovery with inflation remaining above target for a while,” King told reporters in London today. “There are limits to the ability of domestic policy to stimulate private sector demand as the economy adjusts to a new equilibrium. But the Committee has not lost faith in asset purchases as a policy instrument, nor has it concluded that there will be no more purchases.”

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Hong Kong Takes the Title of Most Expensive District for Retail Space

“Hong Kong ended New York’s 11-year reign as the home of the world’s most expensive district for retailers as luxury-brand companies competed for space to sell goods to mainland Chinese tourists.

Average annual rents at Causeway Bay on Hong Kong Island rose 35 percent to $2,630 a square foot at the end of June from a year ago, Cushman & Wakefield Inc. estimates. Hong Kong overtook Fifth Avenue in Manhattan, while Paris’s Avenue des Champs-Elysees rose to third in a global ranking of 326 prime shopping locations published by the real estate broker today.”

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The Aussie Dollar Rises on as Consumer Confidence and Economic Data Surprises to the Upside

Australia’s dollar touched a two- month high against its New Zealand counterpart after retail sales in the smaller nation unexpectedly fell.

The so-called Aussie reached the strongest level in a week against the U.S. dollar after reports showed Australia’s consumer confidence rose to a 19-month high. Demand for both South Pacific currencies was limited amid signs that Europe’s debt crisis is hampering the region’s recovery.

“New Zealand’s economy isn’t showing robust growth at present, and the retail sales didn’t help that,” said Hans Kunnen, the chief economist at St. George Bank Ltd. in Sydney. “The pace of economic growth in Australia is firmer, and we expect that to be reflected in the currency market.”

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The Yen Weakens Against the Dollar on Stimulus Expectations

“The yen weakened on speculation Japan will pursue more aggressive monetary easing to support its economy. European stocks slid while U.S. stock index futures climbed and Treasuries fell for the first time in five days.

The yen dropped against all 16 major counterparts and declined 1.1 percent to 101.99 per euro at 7 a.m. in New York. Futures on the Standard & Poor’s 500 Index rose 0.5 percent while the Stoxx Europe 600 Index slipped 0.4 percent as ICAP Plc sank 6.4 percent after reporting declining profit. Germany sold two-year notes at a negative yield for the second time on record. U.S. natural gas rose to a two-week high.”

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Black Gold Gains on Stimulus Expectations in Japan

“Crude rose for the first time in three days, buoyed by speculation that Japan may pursue more aggressive monetary easing, potentially buoying fuel demand.

Futures gained as much as 0.7 percent as the Standard & Poor’s GSCI Index of commodities advanced for the first time in three days. Japan’s Prime Minister Yoshihiko Noda said he is willing to dissolve parliament on Nov. 16, pushing the yen lower as investors speculated that the central bank would add stimulus to revive the economy. U.S. inventories probably climbed last week to the highest in more than three months, according to a Bloomberg survey before a government report tomorrow. U.S. equity futures rose.”

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Borrowing Costs in Italy Drop to Two Year Lows

 

Italy sold three-year bonds at the lowest rate in more than two years and the Treasury took advantage of growing demand for the country’s debt to auction securities with a maturity longer than 15 years.

The Rome-based Treasury sold 3.5 billion euros ($4.5 billion) of its benchmark three-year bond today to yield 2.64 percent, less than the 2.86 percent at the last auction of the same securities on Oct. 11. The Treasury also auctioned 1.5 billion euros of debt due in 2023 and one in 2029, the first sale of a security with a maturity of more than 15 years since May 2011.”

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