LOL: Freddie Mac caught betting against homeowner’s refinancing

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NPR and ProPublica released an explosive report Monday that found government-owned mortgage giant Freddie Mac betting against the very homeowners it is supposed to help. According to the news article, the investment division of Freddie Mac (or as Henry calls it, Freddie’s “gambling desk”) placed billions of dollars of bets against homeowners who were trying to refinance their mortgages at lower rates.

According to NPR/ProPublica’s review of public documents, Freddie Mac invested in securities called “inverse floaters,” which receive all the interest payments from a specified mortgage-backed securities. “If lots of people ‘pre-pay’ their old loans and refinance into new, cheaper ones, then Freddie Mac starts to lose money,” ProPublica’s Jesse Eisinger and NPR’s Chris Arnold explain. “If people can’t refinance, then Freddie wins because it continues to receive that flow of older, higher interest payments.”

Although Freddie Mac’s bets are legal, they’re highly offensive. Rightly or not, many Americans blame Freddie Mac and Fannie Mae — which was not mentioned in the NPR/ProPublica report — for the housing boom and subsequent bust. Nearly all Americans would agree the company’s should not be focused on generating profits, now that they are officially wards of the state and are using taxpayer dollars to make these bets, as Aaron and Henry discuss in the accompanying video.

Freddie Mac plays a significant role in determining mortgage rates and is one of the “gatekeepers” with the power to decide whether a homeowner can refinance at a lower rate. If homeowners can reduce their mortgage payments, then Freddie Mac loses money. Hence the conflict of interest and the concern Freddie has been turning down refi requests in order to benefit its proprietary trades.

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The technology sector is known for two things: growth potential and risk.

Apple’s trouncing of Wall Street earnings forecasts this past week suggests growth is still abundant. Yet Big Tech is looking less risky than it has in the past.

Here are four reasons conservative investors should consider adding exposure to tech stocks.

Valuation
Tech stocks have had more than a decade to work off the bloated share prices from the dot-com stock bubble of the 1990s, says Cliff Hoover, chief investment officer of Dreman Value Management in Jersey City, N.J., which manages $5 billion. Many have become a good home for safety-oriented investors, he says.

The information-technology sector of the Standard & Poor’s 500-stock index recently traded at 13 times estimated 2011 earnings, on par with the broad index, according to S&P data. The consumer staples and utilities sectors, typically considered safe and stodgy, fetch 14 times earnings. And Wall Street expects the tech sector to increase its earnings by almost 14% in 2012, versus 8% for consumer staples and 1% for utilities.

Volatility
Over the past five years, large pockets of the tech sector, including hardware makers, systems software firms and consulting shops, have been no more volatile in terms of share-price changes than the broad S&P 500 index, according to S&P data.

Financial strength
The tech sector of the S&P 500 sits on $380 billion in cash and equivalents, more than any other sector and equal to 15% of its market value, according to Howard Silverblatt, senior index analyst at S&P. That doesn’t include holdings in long-term securities. Apple holds a $67 billion portfolio that is “very liquid,” Mr. Silverblatt says.

The two largest companies in the sector, Apple and Microsoft, have forward price/earnings ratios in single digits after deducting their cash and investments from their stock-market values. Microsoft and Intel now have fatter “dividend yields,” or the percentage of share price paid out as dividends, than the 500 index average.

Mr. Hoover, who considers himself a “deep value” stock picker, likes Microsoft, Intel, Cisco Systems and Applied Materials. “They’re big free-cash-flow generators and pretty good dividend payers,” he says. Microsoft pays 2.7%, Cisco 1.2%, Intel 3.1% and Applied Materials 2.6%, versus 2% for the broad S&P 500.

Low expectations
With 37% of S&P 500 companies having announced December-quarter earnings results, 68% of the technology companies that have reported have beaten analysts’ estimates, versus 59% for the index and 40% for consumer-staples companies, according to a Friday report from Thomson Reuters. (Only three utilities have reported, with one beating estimates.)

Tech outfits are doing well in part because companies that delayed technology purchases during the 2008 financial crisis are starting to spend, says David B. Armstrong, co-founder of Monument Wealth Management in Alexandria, Va., which oversees $200 million.

“Technology has become more of a necessity, and companies can only delay investments for so long,” he says. “That helps make the sector more stable.”

BRUSSELS (Reuters) – European leaders struggled to reconcile austerity with growth on Monday at a summit that approved a permanent rescue fund for the euro zone and was trying to put finishing touches to a German-driven pact for stricter budget discipline.

Officially, the half-day 27-nation summit was meant to focus on ways to revive growth and create jobs at a time when governments across Europe are having to cut public spending and raise taxes to tackle mountains of debt.

But disputes over the limits of austerity, and Greece’s unfinished debt restructuring negotiations with private bondholders, hampered efforts to send a more optimistic message that Europe is getting on top of its debt crisis.

Leaders agreed that a 500-billion-euro European Stability Mechanism will enter into force in July, a year earlier than planned, to back heavily indebted states. But Europe is already under pressure from the United States, China, the International Monetary Fund and some of its own members to increase the size of the financial firewall.

The risk premium on southern European government bonds rose while the euro and stocks fell on concerns about a lack of tangible progress in the Greek debt talks and gloom about Europe’s economic outlook.

Highlighting those fears, Spain’s economy contracted in the last quarter of 2011 for the first time in two years and looks set to slip into a long recession.

France halved its 2012 growth forecast to a mere 0.5 percent in another potentially ominous sign for President Nicolas Sarkozy’s troubled bid for re-election in May. Prime Minister Francois Fillon said the cut would not entail further budget saving measures.

Conservative Spanish Prime Minister Mariano Rajoy, attending his first EU summit, said Madrid was clearly not going to meet its target of 2.3 percent growth this year. That has raised big doubts about whether it can cut its budget deficit from around 8 percent of economic output in 2011 to 4.4 percent by the end of this year as promised.

European Commission President Jose Manuel Barroso hinted Brussels may ease Spain’s near-unattainable 2012 deficit target after it updates EU growth forecasts on February 23.

Italy, rushing through sweeping economic reforms under new Prime Minister Mario Monti, was rewarded with a significant fall in its borrowing costs at an auction of 10- and 5-year bonds, despite double-notch downgrades of its credit rating by Standard & Poor’s and Fitch this month.

But Portugal’s slide towards becoming the next Greece – needing a second bailout to avoid chaotic bankruptcy – gathered pace as banks raised the cost of insuring government bonds against default and insisted the money be paid up front instead of over several years.

The yield spread on 10-year Portuguese bonds over safe haven German Bunds topped 15 percentage points for the first time in the euro era. It cost a record 3.9 million euros ($5.12 million) to insure 10 million euros of Portuguese debt.

OUTLAWING KEYNES?

With Britain standing aloof, most of the other 26 EU leaders were set to approve a fiscal pact to write balanced budget rules into their national law, despite economists’ doubts about the wisdom of effectively outlawing deficit spending.

“To write into law a Germanic view of how one should run an economy and that essentially makes Keynesianism illegal is not something we would do,” a British official said.

European Parliament President Martin Schulz told the leaders the new fiscal treaty was unnecessary and unbalanced, because it failed to combine budget rigor with necessary investment in public works to create jobs.

The 17th summit in two years as the EU battles to resolve its sovereign debt problems was called to shift the narrative away from politically unpopular austerity and towards growth.

Negotiations between Greece and private bondholders over restructuring 200 billion euros of debt made progress over the weekend, but were not concluded before the summit.

A Greek official said Prime Minister Lucas Papademos would give the summit a brief report on the situation and meet German Chancellor Angela Merkel on the sidelines.

Until there is a deal, EU leaders cannot move forward with a second, 130-billion-euro rescue program for Athens, which they originally pledged at a summit last October.

Germany caused outrage in Greece by proposing that a European commissar take control of Greek public finances to ensure it meets fiscal targets. Greek Finance Minister Evangelos Venizelos said that to make his country choose between national dignity and financial assistance ignored the lessons of history.

The German call won cautious backing from the Dutch and Swedish prime ministers. But Merkel played down the idea of placing Greece under stewardship, saying: “We are having a debate that we shouldn’t be having. This is about how Europe can be supportive so Greece can comply, so there are targets.”

“So please don’t do it…”

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Any decision by Iran to cut oil exports to the European Union will affect the price of oil and hurt the region’s economy, OPEC Secretary General Abdalla Salem El-Badri told CNBC on Monday.

Iran’s parliament is to debate a “double-urgency bill” which would halt all oil exports to the EU in response to sanctions by the bloc, which plans to ban imports of oil from the Middle Eastern country in July.

“Iran are exporting 400-500,000 barrels a day to the EU,” El-Badri said. “Of course this quantity is going to affect the EU…you don’t want to add more problems to the EU. And for the Iranians also, to cut 400-500,000 barrels a day from their exports, it will affect their living.”

El-Bardi did not want to speculate on whether Iran will go ahead with the move to ban exports to the EU, which would disturb a five-month transitional period to allow the countries to find alternative suppliers.

“Today…the market is stable, there is no shortage of oil anywhere in the world,” he said. “However, to take out 400-500,000 barrels a day in a matter of days, this will affect the price. Of course the price will go up. I don’t know how much.”

He reiterated his statement that $100 per barrel was a sustainable price for oil for this year.

“One hundred dollars is suitable for producers and consumers,” El-Badri said. “For us, we can invest, we can have enough income for our member countries and also the consumers can survive, can have their economy flourish with $100. I think anything above $110 is a problem.”

http://video.cnbc.com/gallery/?video=3000070189

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Manufacturing activity and general business sentiment in the southwest smashed expectations, the Dallas Federal Reserve announced this morning.

The general business index surged to 15.3, topping analyst forecasts for a 1.5 reading, and above December’s -0.3.

Those expectations were steadily rising over the past several days, with the median target for the index increasing from zero on Friday, to 0.5 earlier this morning.

“Perceptions of broader economic conditions were notably more positive in January,” the Federal Reserve said in a statement. “Nearly a quarter of manufacturers noted improvement in the level of business activity, while nine percent noted a worsening. The company outlook index also increased markedly, rising from 5 to 13.5. Both indexes reached their highest readings in 10 months.”

The new orders sub-index jumped to a six month high, at 9.5, and reversed two months of negative readings.

Labor demand also increased in January, as employees saw workweeks grow longer as hiring trends perked up in the region. Twenty-one percent of firms polled by the Fed said they took on new workers, while nine percent said they initiated layoffs.

The eleventh district includes activity in Texas, northern Louisiana, and southern New Mexico. The Dallas Fed will next release manufacturing data on Feb. 27.

Kindly refer to my 2012 predictions, a.k.a. “future history.”

Irish people are going to be very pissed they agreed to do things the right and noble way. Probably furious enough to blow a hole in European fiscal union…

DUBLIN (Reuters) – It would be difficult for Ireland to remain in the euro zone if its voters rejected a proposed new fiscal treaty, its European Affairs minister said on Monday, raising the stakes in a political battle over whether to put the plan to a referendum.

European leaders are expected to agree to tighten budget rules on Monday, seeking to regain market confidence in the public finances of the 17 countries sharing the euro after three, including Ireland, had to seek international bailouts in a crisis that now threatens major economies such as Italy.

Irish citizens have twice rejected changes to EU treaties before voting through amended versions.

“It would be a very sad day if we somehow decided to opt out of that (new treaty) and allowed the other 16 members of the euro zone to progress and try to find a solution without us,” junior minister Lucinda Creighton told state broadcaster RTE.

“I think it would make it almost impossible for us to continue as part of the currency union because being part of a currency union means you have to abide by the rules,” Creighton said.

The government has rubbished opposition suggestions that Ireland should leave the euro zone rather than continue to endure savage spending cuts, saying an exit would have catastrophic consequences for the economy.

Ministers have indicated they would prefer to avoid a referendum on the treaty fearing it would be rejected in a backlash against austerity.

Creighton said the government was happy with the treaty in its current draft.

Yeah yeah, and their latest financial rules would have made trading their own bonds much cheaper than U.S. treasuries.

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DAVOS, Switzerland—The European Commission will complain to Treasury Secretary Timothy Geithner that proposed U.S. regulations could discourage banks from trading European sovereign bonds, potentially increasing funding costs for the Continent’s governments and worsening its credit crunch.

Michel Barnier, the European commissioner for the internal market, said in an interview that he plans to raise objections with Mr. Geithner next month about the potential impact of the so-called Volcker rule, which would restrict U.S. banks from making bets with their own capital.

“I will talk to Mr. Geithner next month.…We can’t accept extraterritorial consequences or Europe will be tempted to do the same thing,” Mr. Barnier said.

The issue is particularly sensitive because many European countries are struggling to raise funds at affordable rates amid the euro zone’s debt crisis.

If you listen to everything he says, it will compress your head to a volumeless state.

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Newt Gingrich took aim at Wall Street and by extension Republican presidential opponent Mitt Romney yesterday as the former U.S. House speaker said he isn’t running for president to “represent Goldman Sachs.”

Yet the investment firm Gingrich derided and the banking industry as a whole stand to gain from his proposals to eliminate the capital gains tax and repeal two financial-sector measures, four analysts said in separate phone interviews.

Gingrich’s tax package, which also calls for a reduction of the personal income and corporate tax rates, would be beneficial to many on Wall Street, including those at Goldman Sachs Group Inc., an investment banking firm based in New York, the analysts said.

“This is negative political rhetoric that’s not based on anything, either his own history or his proposed policies,” said Douglas Holtz-Eakin, an economic policy adviser to Republican presidential candidate John McCain in 2008. “He is proposing a flat, consumption-style tax, which gives incentives for people to use the financial system.”

Gingrich’s comments yesterday are “inconsistent with what he’s proposing,” said Holtz-Eakin, president of the American Action Forum, an anti-tax organization based in Washington. “It’s hard to defend on the logic.”

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Natural gas has gotten a much needed boost over the last couple weeks, rising over 15% after a catastrophic drop in the last year. The rally came in reaction to Chesapeake Energy’s (CHK) announcement that it was cutting capital expenditures by more than 2/3’s from last year, suggesting lower supplies. In addition, President Obama suggested in his State of the Union address that he’d seek to use more natural gas as a bridge between crude and renewables, suggesting stronger demand.

As econ 101 taught us: less supply + more demand = higher prices. So what’s the trade now that the tape has digested these news items and rallied sharply?

Rich Ilczyszyn, founder of iiTrader.com likes natural gas here and suggests the U.S. Natural Gas fund (UNG) as a way for retail investors to play. “UNG is definitely something I’d take a look at here,” he says in the attached clip, and offers two bullish catalysts to support the idea:

1. The huge downtrend has been accompanied by massive shorts. When shorts are forced to cover it “scoots the market up,” as Ilczyszyn puts it, leading to gains building on gains, particularly when there’s a fundamental basis for the move.

2. It’s a relatively low-risk trade, in his view.

Those who’ve been long natural gas over the last few years may take issue here. To be clea, Ilczyszyn isn’t saying there isn’t danger that the perennial “next big thing” can’t continue it’s trend lower, just that natural gas isn’t going to go to zero, and sees your downside risk that $2.

It’s fitting he gave this speech in Ann Arbor; the birthplace of pointless majors of study.

ANN ARBOR, Mich. (AP) — President Barack Obama called Friday for an overhaul of the higher education financial aid system, warning that colleges and universities that fail to control spiraling tuition costs could lose federal funds.

The election year proposal was also a political appeal to young people and working families, two important voting blocs for Obama. But the initiative faces long odds in Congress, which must approve nearly all aspects of the president’s plan.

Speaking to students at the University of Michigan, Obama said he was “putting colleges on notice” that the era of unabated tuition hikes is over.

“You can’t assume that you’ll just jack up tuition every single year. If you can’t stop tuition from going up, then the funding you get from taxpayers each year will go down,” Obama said on the final stop of a three-day post-State of the Union trip to promote components of his economic agenda.

Obama told the largely supportive student audience that the nation’s economic future depended on making sure every American can afford a world-class education.

“In the coming decade, 60 percent of new jobs will require more than a high school diploma,” he said. “Higher education is not a luxury. It’s an economic imperative that every family in America should be able to afford.”

The president first announced the outlines of the financial aid proposal during Tuesday’s State of the Union address. His plan targets what is known as “campus based” aid given to colleges to distribute in areas such as Perkins loans or in work study programs. Of the $142 billion in federal grants and loans distributed in the last school year, about $3 billion went to these programs. His plan calls for increasing that type of aid to $10 billion annually.

Italy (A+ to A-), Spain (AA- to A), Ireland (Outlook negative), Cyprus (BBB to BBB-), Belgium (AA+ to AA)

Happy Friday

It cleared the Senate, but who are we kidding? It was already going to happen when the GOP caved in August. This is just a big stage that the conservatives can stand on now to remind the world how much they hate our debt…despite fully embracing it.

Really, the Tea Party was so totally ineffective on cutting spending, it’s almost sad. Freshmen…

OHI, Japan (AP) — International inspectors are visiting a rugged Japanese bay region so thick with reactors it is dubbed “Nuclear Alley,” where residents remain deeply conflicted as Japan moves to restart plants idled after the Fukushima disaster.

The local economy depends heavily on the industry, and the national government hopes that “stress tests” at idled plants — the first of which is being reviewed this week by the International Atomic Energy Agency — will show they are safe enough to switch back on.

But last year’s tsunami crisis in northeastern Japan with meltdowns at three of the Fukushima reactors has fanned opposition to the plants here in western Fukui prefecture, a mountainous region surrounding Wakasa Bay that also relies on fishing and tourism and where the governor has come out strongly against nuclear power.

“We don’t need another Fukushima, and we don’t want to repeat the same mistake here,” said Eiichi Inoue, a 63-year-old retiree in the coastal town of Obama. “I know they added stress tests, but what exactly are they doing?”

“I oppose restarting them,” he said.

Other residents said that economic realities made the plants indispensable, including Chikako Shimamoto, a 38-year-old fitness instructor in Takahama, a town that hosts one of the region’s nuclear plants.

“We all know that we better not restart them,” Shimamoto said. “But we need jobs and we need business in this town.

“Our lives in this town depends on the nuclear power plant and we have no choice,” she said.

On Thursday, an IAEA team visited a plant in the town of Ohi to check whether officials at operator Kansai Electric Power Co. had correctly done the tests at two reactors. The tests are designed to assess whether plants can withstand earthquakes, tsunamis, loss of power or other emergencies, and suggest changes to improve safety.

Their visit, at Japan’s invitation, appeared aimed at reassuring a skeptical public that authorities are taking the necessary precautions before bringing nuclear plants back on line. After the visit, IAEA team leader James Lyons said its assessment would be released at the end of the month but deciding whether to restart the reactors was up to the Japanese goverment.

Some experts are critical of the stress tests, saying they are meaningless because they have no clear criteria, and view the IAEA as biased toward the nuclear industry.

PEORIA, Ill. (AP) — Caterpillar Inc. said Thursday that its fourth-quarter profit jumped 60 percent, boosted by pent-up demand for new equipment and continuing economic growth in developing countries.

The performance of the world’s largest maker of construction and mining equipment is an indicator of the strength of the global economy. Along with strong fourth-quarter earnings, Caterpillar issued rosy guidance, saying that it expects the global economy to grow faster this year and construction activity to continue to improve in most parts of the world.

Caterpillar, based in Peoria, Ill., reported net income of $1.55 billion, or $2.32 per share, up from $968 million, or $1.47 per share, in the same quarter last year.

Sales and revenue jumped 24 percent to $17.24 billion from $12.81 billion, as sales volumes increased at all three of the company’s major businesses. Revenue from Bucyrus International Inc., which the Caterpillar acquired in July, totaled $1.39 billion.

Poor little guys…fraud isn’t their fault, they just don’t know any better…

DAVOS, Switzerland (AP) — Chinese investment abroad is drawing scrutiny as global leaders increasingly look to China to prop up the world economy, even though some remain wary of the country’s dominance.

The head of one of China’s biggest private equity firms said at the World Economic Forum on Thursday that foreign prejudice about Chinese investment is unfair and that Chinese investors are still learning a game that much of the world has been playing for decades.

With China’s “state capitalism” booming and Western economies lagging, business and political leaders also discussed the prospects for democracy worldwide, at an Associated Press debate.

Attention at the invitation-only gathering in the Swiss Alps turned Thursday to China, and how and whether it could help developed economies in Europe and the United States avoid new recession.

Chinese companies and government funds have been using vast reserves of cash to buy up foreign companies and invest in foreign government bonds in recent years. But with billions of dollars in Chinese investments pouring into their countries, some governments have accused China of seeking to exploit the economic weakness of others to grab valuable natural and technological resources at rock bottom prices.

President Barack Obama’s administration also has repeatedly accused China of breaking global trade rules by giving unfair protection to its companies and domestic workers.

“The vast majority of Chinese companies are trying to follow the rules as they understand it,” said John Zhao, CEO of Hony Capital. “But many Chinese companies are still trying to learn the rules.” His company controls PC maker Lenovo, which bought IBM’s computer division in 2005.

TULKAREM, West Bank (AP) — Some 300 Palestinians have protested against price hikes and a recent income tax increase imposed by Prime Minister Salam Fayyad.

Fayyad says he needs to raise revenues to slash a debilitating budget deficit that has led to several cash crises in recent months. Fayyad says the tax hikes target only the rich, and the measures are needed to wean the Palestinians off foreign aid.

The tax hike comes at a time of a steep increases in the prices of some basic goods and has sparked protests in the West Bank. On Thursday, about 300 supporters of a small PLO faction, the People’s Party, staged a march in the northern West Bank town of Tulkarem.

Business leaders and the West Bank’s dominant Fatah Party also oppose the tax increase.

LONDON (Reuters) – The world is likely to have more oil, not less, this summer even as Europe imposes sanctions on Iran over its nuclear program.

Although Europe’s refiners will have to pay up for other sources of oil, they should have little difficulty finding them.

Extra crude oil from Saudi Arabia, Iraq and Libya will more than make up for any lost from Iran after the ban is imposed on July 1, and this is likely to be reflected in oil prices.

As much as 1 million barrels per day (bpd) more crude oil could be coming from these three producers alone – perhaps double the volume of Iranian exports lost to the European Union.

“The oil market should be very well supplied this summer – even better than now,” said Samuel Ciszuk, Middle East and North African (MENA) analyst at consultancy KBC Energy Economics.

“Volumes from Iraq should be up significantly, Libya is doing very well and Saudi Arabia will increase production to compensate for some of the lost Iranian barrels.”

The International Monetary Fund said on Wednesday sanctions against Tehran would imply supply declines of about 1.5 million bpd from the world’s fifth largest oil producer, adding global oil prices could rise as much as 30 percent if Iran halted oil exports as a result of the West’s actions.

But senior oil executives, traders and strategists see little chance of significant supply disruption this summer.

Although oil prices have risen on fears that conflict between Iran and the West could disrupt exports from the Middle East, they argue such a clash is extremely unlikely.

And with the European economy in the doldrums and Asian growth slowing, overall oil demand growth is being constrained.

“NOTHING WILL CHANGE”

Iran will keep selling its oil, much of it into Asia, where consumers will be only too happy to buy at the right price.

“(Iranian) oil will go somewhere else,” Total SA Chief Executive Christophe de Margerie told Reuters in Davos on Wednesday. “Iran may give a discount to make it easier and quicker but nothing will change.”

The net result is almost certain to be an overall increase in oil supply, initially into Asia but eventually to all world markets, and downward pressure on prices.

Expectations of improving supply are already beginning to affect prices, dampening Brent crude oil futures for nearby contracts relative to forward months, tipping the front of the price curve into a so-called contango.

The front-month contract for Brent, now March, traded around $111 per barrel on Thursday, and this week it has traded at a small discount to April. Many traders expect the rest of the price curve to move into contango as supplies improve.

The world’s top oil exporter, Saudi Arabia, is pumping just under 10 million bpd and is most likely to make up any shortfall in Iranian supplies. It has promised to meet any extra requests from customers and Gulf industry sources expect a significant increase this summer, maybe of up to 500,000 bpd.

Iraq is aiming to expand its crude oil exports by up to 400,000 bpd by March, after starting up a new Gulf oil terminal this month. This would take its overall oil sales to about 2.5 million bpd, an Iraqi industry source says.

Libya, returning to full production after the overthrow of Muammar Gaddafi and civil war last year, has already pushed up oil exports to around 800,000 bpd this month, says the National Oil Corp. Libya expects to increase exports by up to 500,000 bpd by the third quarter.

“FAVOURABLE” PAYMENT TERMS

Meanwhile, many buyers of Iranian oil, especially in Asia, show no sign of supporting the Western campaign against Iran.

Chinese oil companies are negotiating hard with the state-run National Iranian Oil Company on term purchases and, while they want the lowest possible price, they have no intention of taking less Iranian crude, sources familiar with the Chinese term negotiations say.

India wants to take as much Iranian oil as it can because terms are “favorable,” Oil Minister S. Jaipal Reddy said on Monday, after talks between the two sides on payment terms.

Together, China and India, could take more Iranian crude, possibly much more, if it were heavily discounted.

“Totting it all up, the figures show supplies from the MENA region improving, not decreasing,” said a senior oil trader at a large U.S. bank. “We can’t see a shortage coming.”

David Wech, head of research at Vienna-based consultancy JBC Energy, said the price impact of the changing supply-demand picture had been obscured by worries over geopolitical risk:

“There is some logic that the situation might lead to … more barrels if Iran manages to supply more than expected.”

The big losers could be European refiners, already under huge pressure from poor margins and high debt.

“The Iranians might have to discount a bit, but the real victims will be European refiners who will have to pay up for alternative supplies,” said a senior trader at a large European refiner that has been a regular buyer of Iranian crude.

TEHRAN, Iran (AP) — Iran’s parliament will begin debating a draft bill requiring the government to immediately halt oil exports to Europe, a prominent lawmaker said Wednesday, as Tehran weighs its options following the European Union’s decision to stop importing oil from the country.

The EU embargo, announced on Monday, was the latest attempt to try to pressure Iran over a nuclear program the United States and its allies argue is aimed at developing nuclear weapons but which Iran says is for purely peaceful purposes. It came just weeks after the U.S. approved, but has yet to enact, new sanctions targeting Iran’s Central Bank and, by extension, its ability to sell its oil.

Many Iranian lawmakers and officials have called for an immediate ban on oil exports to the European bloc before its ban fully goes into effect in July, arguing that the 27 EU nations account for only about 18 percent of Iran’s overall oil sales and would be hurt more by the decision than Iran. China, a key buyer of Iranian crude, has blasted the embargo.

“The bill requires the government to stop selling oil to Europe before the start of European Union oil embargo against Iran,” lawmaker Hasan Ghafourifard told the parliament’s website, icana.ir. Debate on the bill is to begin on Sunday, he said.

The U.S. sanctions had outraged Iranian officials, prompting repeated threats from various officials that the country could shutter the vital Strait of Hormuz if measures are enacted that affect its oil exports. Roughly a fifth of the world oil passes through the narrow waterway, and the U.S. and others have warned Iran they will not allow it to impede the free flow of traffic in the area.

Iran is OPEC’s fourth largest producer and most of its crude goes to Europe and Asia.

WASHINGTON (Reuters) – The U.S. Federal Reserve on Wednesday said it will not raise interest rates until at least late 2014, even later than investors expected, in an effort to support a sluggish economic recovery.

Without making major shifts to its outlook for the economy, the central bank described the unemployment rate as still elevated and said it expects inflation to remain at levels consistent with stable prices.

It depicted business investment as having slowed, dowgrading its assessment from the December meeting.

Economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014,” the central bank said in a statement.

Richmond Fed President Jeffrey Lacker, an inflation hawk who rotated into a voting seat this year, dissented against the decision. He preferred to omit the description of the time period for ultra-low rates.