“Three of the five largest U.S. money-market fund managers, signaling they can’t stop a second attempt by regulators to overhaul rules for the $2.7 trillion industry, are fighting instead to limit the scope of any changes.

Fidelity Investments, Vanguard Group Inc. and Charles Schwab Corp. (SCHW) are urging regulators to exempt retail-oriented funds and focus on those that cater to institutional clients and buy corporate debt, a category that absorbed the bulk of an investor run in 2008. Known as prime institutional funds, they hold $987 billion, or 37 percent of U.S. money-market mutual- fund assets, according to research firm iMoneyNet……..

Fidelity last week drew regulators’ attention to data showing funds that cater to small investors, and those that invest solely in municipal or U.S. government-backed debt, were more stable than institutional prime funds. In the four weeks after the bankruptcy of Lehman Brothers Holdings Inc., retail funds had $41 billion in withdrawals compared with $453 billion from institutional funds, according to the letter.

“If, based on findings from its study, the SEC determines that further reform is necessary, then such reform should be narrowly tailored, so as to minimize disruption to short-term markets and lessen adverse impacts on long-term economic activity,” Fidelity, the largest U.S. money fund manager, wrote in a Jan. 24 letter to the SEC….”

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Investment-management giant BlackRock Inc. BLK +0.04% has offered to buy around $80 million of Twitter Inc. stock in a transaction that would value the short-messaging service at more than $9 billion, according to people familiar with the deal.

Some of the people said BlackRock’s offer is to purchase Twitter stock from some of the company’s early employees, and perhaps from others.

Twitter wouldn’t make any money from the transaction. If completed, the stock sale would bump up the San Francisco company’s valuation from the $8.4 billion that stemmed from 2011 stock purchases by private investors.

One the people familiar with transaction said BlackRock is offering to buy shares at about $17 each, compared with the 2011 stock sales at $16.09 each.

The Financial Times earlier reported news of BlackRock’s offer for Twitter shares.

The transaction spotlight’s Twitter’s growth and amps up pressure on the company to justify a rich valuation before it goes public in a year or so.

Twitter in the last two years has built an advertising business from essentially nonexistent to an estimated $288.3 million in 2012 advertising revenue, according to research firm eMarketer Inc.

The BlackRock investment also is likely to fuel questions about whether rich valuations for young companies can pay off with even richer IPOs, sales or stock-market appreciations down the road. The worries have been fueled by limp stock market debuts, such as those of Facebook Inc. FB +1.48% and Zynga Inc.,ZNGA +0.81% whose stock price have dropped by 17% and 75%, respectively, since their IPOs.

Since Twitter launched nearly seven years ago, the company has raised more than $1 billion from investors including Union Square Ventures, Benchmark Capital, Spark Capital and Charles River Ventures. Twitter Chief Executive Dick Costolo has said the company has plenty of money and doesn’t need to raise more by selling stock….”

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“DAVOS, Switzerland (Reuters) – Japan’s economy minister rejected criticism on Saturday that his country’s extraordinary fiscal and monetary stimulus program was aimed at weakening the yen and undermined central bank independence.

Akira Amari told the World Economic Forum in Davos it was up to the market to determine the currency’s exchange rate, and theBank of Japan had chosen independently to sign a joint statement with the government on actions to fight deflation and revive economic growth.

“You might think there’s a deliberate policy to drive down the value of the yen but we in government refrain from commenting on the exchange rate of the yen,” Amari said in response to criticism of Japanese action.

South Korea’s central bank governor questioned the efficacy of Japan’s easing of monetary policy and said the BOJ’s decision to start buying unlimited amounts of assets in 2014 could have unintended long-term consequences.

“What they did created a couple of problems,” Bank of Korea Governor Kim Chong-soo told Reuters in an interview in Davos. “One is that the level (of the currency) is affected, and the pace of change is also a problem. They did it too hastily.”

A stable exchange rate is key for the Bank of Korea, Kim added.

The yen has come under pressure since reports on Thursday quoted deputy economy minister Yasutoshi Nishimura as saying the yen’s decline was not over, and that a dollar/yen level of 100 would not be a concern.

The Japanese currency is now trading around a 2-1/2 year low against the dollar at around 90 yen, as the market remained focused on Japan’s pursuit of a reflationary economic policy.

BREAK CYCLE OF DEFLATION

Amari said the government and the BOJ had agreed on exceptional measures because Japan had to break a prolonged cycle of deflation and economic contraction.

Appearing on the same panel, International Monetary Fund Managing Director Christine Lagarde refrained from direct criticism but urged Japan to put forward a medium-term plan to reduce its public debt after this week’s measures.

“Japan has made very important decisions. We are very interested in these policies. We would like them to complement it with a mid-term plan on how the debt would be reduced,” Lagarde said.

Japan’s debt stood at 235 percent of gross domestic product before new Prime Minister Shinzo Abe announced a new deficit-financed stimulus program this month. The BOJ said it was doubling its inflation target to 2 percent and would take new monetary stimulus measures….”

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“The European Central Bank said banks will next week repay more of its emergency three-year loans than economists forecast in another sign the euro region’s debt crisis is abating.

Some 278 financial institutions will return 137.2 billion euros ($184.4 billion) on Jan. 30, the first opportunity for early repayment of the initial three-year loan, the Frankfurt- based ECB said in a statement today. That compares with the median forecast of 84 billion euros in a Bloomberg News survey of economists. The ECB’s first loan totalled 489 billion euros and banks can continue to make early repayments in coming weeks.

“The ECB is taking back some of the extra liquidity it injected into the banking system a year ago,” said Christian Schulz, senior economist at Berenberg Bank in London. “This is a stark contrast to other central banks such as the U.S. Federal Reserve, the Bank of England and the Bank of Japan, who are still blowing up their balance sheets. No wonder that the euro exchange rate is going up.”

The euro rose about half a cent after the report to $1.3465, the highest since February last year. It traded at $1.3437 at 1:15 p.m. in Frankfurt.

The ECB flooded financial markets with two tranches of so- called Longer Term Refinancing Operations totaling more than 1 trillion euros a year ago after banks stopped lending to each other because of Europe’s debt crisis. Banks have the option of repaying the loans, which were offered at the average of the ECB’s benchmark rate over their duration, after a year.

Euribor Futures…”

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“The ongoing stalemate in Washington between Republicans and Democrats to forge long-term budget and deficit-reduction solutions has made international investors leery of American markets.

A new Bloomberg poll of 921 subscribers to Bloomberg Professional service revealed that 47% of global investors surveyed said they are reducing their investments in the U.S. as a direct result of “repeated confrontations between the U.S. Congress and President Obama.”

More than a third of respondents said the nation’s fiscal problems pose the biggest threat to the world economy, while 29% chose Europe’s sovereign debt crisis and 15% named China’s slowing economy.

Investors also indicated that they doubt President Barack Obama and congressional Republicans will agree this year on major changes to federal entitlement programs or to government tax policies.

Nonetheless, the United States still ranked higher than any other country as a place for investment opportunities.”

“LONDON (MarketWatch) — Central banks around the world have tried just about everything to drag their economies out of recession. They have slashed interest rates to three-century lows, printed money in vast quantities, and recapitalized banks with soft loans.

So far, however, they haven’t had much success. Now they have one last weapon left in the armory — a currency depreciation.

All-out currency wars are now looming.

A series of central banks, both large and small, have begun to target a lower exchange rate as a way of boosting their economies. Read: The warning from the Bundesbank’s Weidmann about currency wars.

Whether it works remains to be seen. For investors, however, that may be less important than figuring out which countries will be successful in getting their currencies down — and which other assets will go up in value if an all-out currency war does break out.

In the immediate wake of the financial crisis of 2008 and 2009, policy makers agreed not to engage in competitive devaluations.

Beggar-my-neighbor trade polices are part of the textbook explanation for the Great Depression of the 1930s and no one wanted to repeat the mistakes of that decade.

The British managed to slip through a 25% drop in the value of sterling GBPUSD +0.23% without anyone noticing very much (a sign perhaps of the pound’s diminished importance in the world). But otherwise, currencies stayed much were they were before the crisis struck. Indeed, the main feature of the foreign-exchange markets in their last five years has been their extraordinary stability; while every other asset price went haywire, most currencies stayed where they were….”

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“Molycorp Inc. (NYSE: MCP) may have had some serious problems of late, but now the company is raising new capital and the move is adding pressure on the stock as this will be dilutive to earnings. So what if this capital may be needed as a buffer. So what if this proves to the market that Molycorp also can still attract new investment capital.

The rare earth metals leader in the United States plans a sale of $200 million in equity and another $100 million in a note offering. Molycorp plans to use the capital to fund its capital expenditure plans that include its Mountain Pass facility in California….”

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“DAVOS, Switzerland (Reuters) – Business leaders in Davos have plenty to worry about, from the euro zone to global geopolitical upheavals, but at heart their problem is simple: how to find new revenue in a low-growth world.

Half a decade on from the financial crisis, investors want to see earnings driven by more than just cost cutting. Their focus now is on a return to sales growth, which presents the world’s largest corporations with a $5 trillion challenge.

That is the amount of extra revenue the 1,200 top global companies need to find each year simply to meet analysts’ expectations, according to consulting firm Accenture.

“The trouble is that stock markets’ expectations of the ability of companies to grow far exceeds the underlying macroeconomic growth rates,” said Mark Spelman, Accenture’s global head of strategy.

“So companies need to get beyond just thinking about emerging markets and rising middle classes and start to look at those segments where you are seeing significant consumer change, because there is a lot of latent growth in those segments.”

Increasingly, companies are seeking specific pockets of opportunity for sales growth. They remain cautious about major new investments, however, with confidence among managers in the near-term outlook for their businesses still weak….”

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“Robert Bosch GmbH, the world’s biggest car-parts maker, said it will hold back on investments this year as a recession in Europe caused profitability in 2012 to miss targets and sales rose only because of currency effects.

The operating return on sales was about 2 percent last year, compared with a long-term goal of 8 percent, Chief Executive Officer Volkmar Denner said at a press briefing. Revenue, which increased 1.6 percent to 52.3 billion euros ($69.5 billion) from 51.5 billion euros in 2011, would have fallen without a boost from exchange rates, he said.

“We can’t be satisfied with the business year 2012,” Denner said at the press conference in Bosch’s headquarters city of Stuttgart, Germany. “We’re looking at fixed costs very closely, and will be restrictive regarding investments and acquisitions.”

The European auto market contracted by 16 percent last year to the lowest in almost two decades, and carmakers such as PSA Peugeot Citroen (UG) and General Motors Co. (GM)have announced factory shutdowns in response. Bosch also said today that it wrote down 600 million euro in assets at its unprofitable solar-panel division, a unit whose future it’s reviewing…”

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“Bank of England policy makers said the pound’s level may prove an obstacle to rebalancing the economy and David Miles cited the currency as he repeated his call for an expansion of stimulus.

The Monetary Policy Committee voted 8-1 to keep their bond- purchase plan unchanged at 375 billion pounds ($595 billion), according to minutes of the Jan. 10 decision published in London today. Members diverged on the risks to the economy, with some saying there was scope for wages to pick up while others noting that the economy could grow faster without generating inflation.

“Substantial headwinds to recovery remained, including the drag to activity from fiscal consolidation, a further squeeze in household real incomes, and the deterioration in U.K. competitiveness over the past couple of years,” the minutes said. “The sterling real exchange rate might be above the level compatible with the necessary rebalancing of the economy.”

The Bank of England halted bond purchases in November and is relying on its so-called Funding for Lending Scheme to aid the recovery. Bank of England Governor Mervyn King said yesterday that credit conditions have improved, and “should improve further as the impact of the FLS kicks in.”

The pound rose after today’s minutes report and data showing falling unemployment. The currency was up 0.2 percent today at $1.5871 as of 9:35 a.m. in London.

King’s View…”

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“Billionaire Leon Black’s Apollo Global Management LLC (APO) is among the private-equity firms gearing up to invest in mining after valuations fell and a decline in financing left some companies short of cash.

Apollo, which is setting up its first natural-resources fund, is assessing at least four potential mining deals, said Gareth Turner, a senior partner in London. Commodity trader Trafigura Beeher BV is planning its first metals and mining private-equity deals and firms Denham Capital Management LP and Waterton Global Resource Management say they have billions of dollars to deploy in the industry…”

“Goldman Sachs has boosted its bottom line on the backs of people struggling to pay for food, according to a new report in The Independent.

The bank made about $400 million last year by betting on the prices of food staples, according to an analysis for The Independent by the World Development Movement. This speculation is fueling rising food prices, according to the report.

In an email to The Huffington Post, Goldman Sachs spokesman Michael DuVally accused the report of relying on “uninformed speculation” and noted that the rise in food prices can be attributed to a variety of factors.

“Research by respected international bodies like the OECD demonstrates clearly that long-term trends, including increased meat consumption by the growing middle class in the emerging markets and the increased use of biofuels in the developed markets, have created a backdrop for global food shortages,” DuVally wrote.

This is not the first time that Goldman has faced accusations of contributing to the hunger crisis. A 2011 article in Foreign Policy argued that food price speculation by Goldman and other banks has caused the cost of food to surge.

However, there is evidence that rising food prices may not be Wall Street’s fault….”

“The Bank of Japan made its strongest commitment yet to end two decades of stagnation, shifting to Federal Reserve-style open-ended asset purchases while disappointing investors by delaying the program until next year.

Governor Masaaki Shirakawa and six of nine board members voted for a 2 percent inflation target, to be achieved “at the earliest possible time” — a pace not sustained in Japan since the early 1990s. While judging that the economy is “relatively weak,” and that consumer prices will be flat for the time being, the BOJ refrained from adding immediate stimulus.

With a planned 13 trillion yen a month ($145 billion) in extra securities buying on hold until January 2014, the yen rose and stocks fell. The currency has slid and shares climbed the past 10 straight weeks in anticipation of the BOJ joining Prime Minister Shinzo Abe’s administration in strengthening measures to lift the economy out of its third recession in five years.

“What disappoints me was we can see the BOJ’s hesitance to step up monetary stimulus,” said Takahiro Sekido, a strategist in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. who formerly worked at the Bank of Japan. (8301) “Abe will keep pressing the BOJ but today’s decisions indicate that Abe will probably wait for the next governor to make a significant shift in monetary policy….”

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We all need more paper…

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“The fiscal gloom hanging over U.S. cities and local governments will lift slightly in 2013 as the pace of spending cuts slows, according to an economic assessment presented on Thursday to a mayors’ conference in the U.S. capital.

Real state and local government spending will decline by 0.5 percent this year, compared to a 1.3 percent drop in 2012, said James Diffley, director of regional economics for IHS Global Insight.

“In the state and local government sector the pace of budget tightening has eased slightly and revenues have begun to improve, but as you all know all too well, municipalities remain under severe pressure,” he said.

In December, local governments shed 14,000 jobs, compared to state governments that gained 4,000 jobs, according to the Labor Department, showing that cities and counties continue to struggle with spending.

“Many of the problems we have stem from an economy that still has not kicked in and got back to where we were,” said Scott Smith, the mayor of Mesa, Arizona, at the meeting of the U.S. Conference of Mayors.

“We still have too many of our citizens who are out of work – who are unemployed or underemployed.”

Cities rely primarily on property taxes for revenues, and when the housing bubble burst, their income slowly collapsed. Property tax assessments have not picked up yet, while states and the federal government have pared the aid they send to local governments, forcing many cities to continue to slash spending….”
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” Sony’s U.S. unit is selling its NYC headquarters to a group of investors led by Chetrit Group for $1.1 billion, the cash-strapped companyannounced today. Sony said it will use the proceeds to “undertake a range of initiatives to strengthen its financial foundation and business competitiveness and for future growth….”

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“Speculation that banks will start repaying European Central Bank loans early prompted futures traders to step up bets that borrowing costs will rise as liquidity is drained from the system.

The implied rate on Euribor futures expiring in December rose as much as 18 basis points over the past two days to 0.54 percent, the highest since July 10, according to data compiled by Bloomberg. That’s the biggest jump since the yield started climbing in December, after a 29 basis-point drop in the preceding three months.

Banks can soon start repaying about 1 trillion euros ($1.3 trillion) of cheap loans that the ECB provided under its longer- term refinancing operations to avert a credit crunch. Concern the Frankfurt-based central bank will tighten its collateral rules also helped push indicators of future interbank borrowing costs higher.

“The repayment of the LTRO money has the potential to throw key market trends into reverse,”Christoph Rieger, head of fixed-rate strategy at Commerzbank AG in Frankfurt, wrote in a note. “Reportedly the ECB is mulling plans to restrict loan collateral. This would add to the pressure on peripheral banks to reduce ECB funding,” though only marginally, he wrote.

The implied rate on three-month euro interbank offered rate futures due in December rose 0.5 basis point today to 0.46 percent at 11:38 a.m. in London. That’s after paring its earlier increase.

Euribor Rising…”

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“Jan 18 (Reuters) – The Bank of Japan will next week mull scrapping its 0.1 percent floor on short-term interest rates and pledging to buy assets open-endedly until 2 percent inflation is foreseen, sources familiar with the central bank’s thinking said.

Such steps would surprise the markets, which have been expecting the central bank to settle on the more conventional step of topping up its asset-buying and lending programme by another 10 trillion yen ($113 billion).

Under relentless pressure from Prime Minister Shinzo Abe for bolder steps to beat deflation, the central bank is likely to double its inflation target to 2 percent and consider expanding monetary stimulus again at its two-day rate review that ends next Tuesday, sources told Reuters last week.

Instead of topping up the asset-buying and lending programme again, the BOJ may pledge to buy assets open-endedly until 2 percent inflation is in sight, without setting a specific date for completing the purchases, the sources said….”

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“Brazil’s central bank signaled it will keep borrowing costs at a record low this year as it tries to manage faster inflation amid a slower than expected recovery.

The central bank board, led by Alexandre Tombini, kept the benchmark interest rate at 7.25 percent for the second straight meeting yesterday, matching the forecast of all 56 analysts surveyed by Bloomberg. In the statement accompanying the unanimous decision, policy makers reiterated that the best strategy is to keep monetary policy conditions unchanged for a “prolonged period.”

While inflation is slowing in Mexico and Chile, price pressures are building in Brazil as the government pumps demand by reducing taxes and expanding credit amid record low unemployment. At the same time, a contraction in investment and industrial output is complicating President Dilma Rousseff’s efforts to revive the slowest growth in three years….”

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“Deutsche Bank AG (DBK) designed a derivative for Banca Monte dei Paschi di Siena SpA at the height of the financial crisis that obscured losses at the world’s oldest lender before it sought a taxpayer bailout.

Germany’s largest bank loaned Monte Paschi about 1.5 billion euros ($2 billion) in December 2008 through the transaction, dubbed Project Santorini, according to more than 70 pages of documents outlining the deal and obtained by Bloomberg News. The trade helped Monte Paschi mitigate a 367 million-euro loss from an older derivative contract with Deutsche Bank. As part of the arrangement, the Italian lender made a losing bet on the value of the country’s government bonds, said six derivatives specialists who reviewed the files….”

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