Capital Controls in Cyprus Expected to Last Years, Euro to Take the Toll

“Cyprus is on the verge of an unprecedented financial experiment: imposing controls on money transfers in an economy that doesn’t have its own currency.

Countries from Argentina to Iceland have used similar measures in the past to defend against devaluation. Being part of the euro zone may make it harder for the Mediterranean island to enforce restrictions, as any money that leaves the banking system can be taken out of Cyprus without losing value.

That also may make it more difficult to meet the goal set yesterday by Finance Minister Michael Sarris to lift any controls in “a matter of weeks.” When economies in Asia and Latin America tried to stem the outflow of money in the 1980s and 1990s, they ended up keeping the measures in effect for six months to two years. Iceland, another island nation with an outsize banking system, still has capital controls five years after its banks collapsed in 2008.

“Thanks to political mismanagement, we now have a first: capital controls in the euro zone,” said Nicolas Veron, a senior fellow at Bruegel in Brussels and a visiting fellow at the Peterson Institute for International Economics in Washington. “How long is temporary? It could turn out like Iceland, extending to many years.”

Russian Deposits…”

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“Ericsson AB (ERICB) is in talks to buy Microsoft Corp. (MSFT)’s IPTV business, which makes software used by phone companies such as AT&T Inc. (T) to deliver television over the Internet, people with knowledge of the matter said.

The transaction could be announced in a few weeks, said one of the people, who asked not to be identified because the discussions are private.

Ericsson, the largest maker of wireless networks, is seeking to cater to phone companies that are competing with cable, satellite and Web-based providers. The move will also help Ericsson step up its emphasis on software and services amid accelerating competition in hardware. Microsoft, the biggest software maker, intends to focus on delivering TV through its Xbox game console, a person familiar with its plans said….”

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“The five BRICS emerging-market nations will need more time to set up a new development bank as they work out details on funding and operations, Russia’s finance minister said.

“An intention to create a BRICS bank will be mentioned in the leaders’ communique,” Finance Minister Anton Siluanov said in an interview yesterday after a meeting with his BRICS counterparts. “As an idea it was positively discussed, but we still need to work on the mechanism. There was a proposal to declare capital of $50 billion but to pay $10 billion. Divided by the five members this will be $2 billion each.”

The so-called BRICS nations — Brazil, Russia, India, China andSouth Africa — have been studying the viability of the bank for a year, and their leaders are due to sign an accord on its establishment at a summit today. In the run-up to the gathering in Durban, South Africa, officials from Brazil and Russia indicated each country could contribute $10 billion.

The five nations, which have 43 percent of the world’s population and total foreign-currency reserves of $4.4 trillion, are seeking greater financial sway to match their rising economic power. India proposed the bank a year ago amid criticism from developing nations that existing multilateral lenders aren’t doing enough to address under-development and Western nations have too much say over their management.

Capital Contributions…”

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“China’s largest banks posted a decline in bad-loan ratios for 2012 amid the slowest economic expansion in 13 years, signaling policy makers may have averted a surge in defaults.

The gauge shrank to 1.33 percent at Agricultural Bank of China Ltd., the nation’s third-largest by market value, from 1.55 percent in 2011, while net income increased by 19 percent, the Beijing-based lender said yesterday. At Bank of China Ltd., the fourth-largest, non-performing loans dropped to 0.95 percent of the total from 1 percent, and profit climbed 12 percent…”

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“Asian shares rose after U.S. home prices climbed the most since 2006 and orders for durable goods beat estimates. Gains by Japanese shares were limited as about 80 percent of the companies in the Topix (TPX) Index traded without rights to a dividend today….”

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Yields for Italy, Spain, France,  and Germany …

“A member of the Federal Reserve’s inner circle Monday promoted a plan for the central bank to scale back the pace of its bond-buying program as the jobs market improves, though he stressed that a decision on how to proceed is far from imminent.

William Dudley, president of the Federal Reserve Bank of New York, said in a speech the Fed “should calibrate” how much U.S. debt and mortgage-backed securities it buys each month “by allowing the flow rate of purchases to respond to material changes in the labor market outlook.”

Mr. Dudley described the tapering proposal as somewhat more certain than Fed Chairman Ben Bernanke did last week after the central bank’s two-day policy meeting. Mr. Bernanke stuck with the conditional tense, saying the Fed “may adjust” the pace of its bond-buying to a strengthening job market.

The Fed is currently buying $45 billion in long-term Treasurys and $40 billion of mortgage-backed securities each month—part of an effort to boost the economy by driving down long-term interest rates to encourage more borrowing, spending and hiring.

Mr. Dudley, one of the chief advocates of the bond-buying programs, appeared decisively in favor of tapering off purchases in the future. “At some point, I expect that I will see sufficient evidence of economic momentum to cause me to favor gradually dialing back the pace of asset purchases,” he said, speaking to the Economic Club of New York.

Echoing Mr. Bernanke, he said the Fed could dial purchases back up if economic conditions worsened. Mr. Dudley stressed the labor market and broader economy are still not healthy enough to begin scaling back the bond buying…..”

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Is there no end to the shadiness of banks and making money?

“WASHINGTON—A U.S. housing regulator is cracking down on a little-known practice that has hit millions of struggling borrowers with high-price homeowners’ insurance policies arranged by banks that benefit from the costly coverage.

The Federal Housing Finance Agency, which regulates mortgage giants Fannie MaeFNMA +4.67% and Freddie Mac, FMCC +3.96% plans to file a notice Tuesday to ban lucrative fees and commissions paid by insurers to banks on so-called force-placed insurance.

Such “forced” policies are imposed on homeowners whose standard property coverage lapses, typically because the borrower stops making payments. Critics say the fee system has given banks a financial incentive to arrange more expensive homeowners’ policies than necessary.

Banning the fees and commissions could help lower the price of the insurance policies. The housing agency’s move would apply nationwide to all mortgages guaranteed or owned by Fannie and Freddie—about half of the housing market”

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APC, AAPL, BSFT, CAT, EA, FIO, GMAN, BTU, RFMD, TI,

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In Play ,

On the Wires 

“Yahoo has acquired the mobile news gathering start-up Summly, the company announced Monday.

Summly is a mobile reader app that presents summarized news stories in a simple browsing format. While the application was originally created in 2011 by 15-year-old Nick D’Aloisio, the app didn’t officially launch until last November.

The app aims to give readers a “snapshot” of a story on their mobile device so that users can consume content in a quick manner. Basically, the app uses an algorithm to condense the story to a size that fits the screen of the users’ mobile device, so that the user doesn’t have to scroll to continue reading…”

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“Call it bad timing or just back to reality, but the Standard & Poor’s 500 all-time high has become a significant barrier to stock market gains.

For the fifth time in the past two weeks the broad-based index came within 5 points of its record, only to be beaten back either by technical resistance or, as was the case Monday, more disturbing global headlines.

“There’s resistance to climb over a high that hasn’t been breached since ’07. It takes a tremendous push,” said Mitchell Goldberg, president at ClientFirst Strategy.

“There’s an awful lot of people out there who are just breaking even now, who have become more risk-adverse and have had enough of risk-taking in the stock market,” he added. “The news cycle doesn’t help.”

Indeed, it was the latest out of Europe that pulled the stock market down Monday, with an agreement to bail out Cyprus banks rattling investors concerned about the deal coming apart and its contagion risk. Markets were also spooked by comments from Dutch finance minister Jeroen Dijsselbloem saying that the Cyprus bailout dealmight be a template for other bank bailouts in Europe…..”

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X transportion was …-0.5%

Capital goods orders …-2.7%

Shipments were +1.9%

“Intel Corp. (INTC) is making progress in talks with Time Warner Inc. (TWX), NBC Universal andViacom Inc. (VIAB) to obtain TV shows and films for a first-of-its kind online pay-TV service, according to people with knowledge of the situation.

Intel, the world’s largest chipmaker, is negotiating financial terms with the companies, according to the people, who sought anonymity because the talks are private. The media companies have signed off on the broad outlines of the proposed service, they said, with some aspects still to be settled. Other network owners aren’t as far along, the people said….”

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“Ford Motor Co. (F) Chief Executive Officer Alan Mulally said he’s concerned about the depreciation of the yen that’s bolstering the competitiveness of Japanese carmakers.

“The most important thing that most countries around the world believe in is letting the markets determine the currency,” Mulally said today from Bangkok in reference to the Japanese currency, during an interview on Bloomberg TV’s First Up with Susan Li. “That’s just so important to all of us in the international trading system.”

The yen has fallen about 15 percent since mid-November, when Prime Minister Shinzo Abe, then running for office, began a campaign to talk down the value of Japan’s currency to revive the nation’s export-led economy. That’s bolstered shares ofToyota Motor Corp. (7203), Nissan Motor (7201) Co. and Honda Motor Co.

On Europe, Mulally said the company is scaling back production to meet “real demand” amid economic contraction in the region.

Ford is cutting jobs in Europe and adding plants in Asia to curb losses in both regions, while relying on profits in North America. Ford achieved just 3 percent of its target for global market share and 32 percent of its goal for automotive operating cash flow in 2012, according to a U.S. regulatory filing.

China Market…”

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“West Texas Intermediate crude advanced to trade near its highest level in five weeks before reports forecast to show signs of economic recovery in the U.S.

Futures climbed as much as 0.8 percent. U.S. durable-goods orders probably increased in February by the most in five months, while sales of new homes posted the best back-to-back performance in four years, economists said before reports today. WTI slipped earlier on estimates that U.S. crude stockpiles increased by 1.4 million barrels to 384.1 million last week, the highest since June.

“The U.S. is showing signs of improving,” said Thina Saltvedt, an analyst at Nordea Bank AG in Oslo. “We will see the momentum in the world economy reach a bottom in the second quarter, and then increase, which should be positive for oil the oil demand outlook.”

WTI for May delivery climbed as much as 77 cents, or 0.8 percent, to $95.58 a barrel in electronic trading on the New York Mercantile Exchange, and traded for $95.45 at 11:32 a.m. in London. The volume of all futures traded was 12 percent below the 100-day average for the time of day. The contract rose as high as $95.65 yesterday, its strongest intraday level since Feb. 20.

Brent for May settlement rose 10 cents to $108.27 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 46 percent above the 100-day average. Prices are down 2.5 percent in 2013. The European benchmark crude’s premium to WTI was at $12.87. It closed at $13.36 yesterday, the lowest closing level since July.

U.S. Supplies….”

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“The devil lies in the detail of Cyprus’s salvation.

The island nation’s rescue sets precedents for the euro zonethat may stick in the memory of depositors and bondholders alike as investors debate who will next fall victim to the debt crisis. Under the terms of the agreement struck yesterday in Brussels, senior Cypriot bank bond holders will take losses and uninsured depositors will be largely wiped out.

The message that stakeholders of all stripes can be coerced into helping a cash-strapped nation may make investors more skittish they’ll be targeted if Slovenia, Italy, Spain or evenGreece again is next in line to need help. The risk is that bank runs and bond market selloffs become more likely the moment a country applies for a new rescue, said economists and academics from Nicosia to New York.

“We now have a new type of rule and everyone within the euro zone has to sit down and see what that implies for their own finances,” Nobel laureate Christopher Pissarides, an adviser to the Cypriot government, told “The Pulse” on Bloomberg Television….”

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“MADRID (AP) — Spain’s central bank is predicting a continuing recession and mounting unemployment for the rest of 2013 as the country struggles to free itself from a broad European slowdown and repair its finances.

The Bank of Spain said Tuesday it expects the country’s economy to shrink 1.5 percent this year, compared with 1.4 percent in 2012, and only return to growth in late 2014.

It forecast the jobless rate will rise to 27.1 percent this year…”

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