“European political chiefs paved the way for finance ministers to wrangle a rescue for Cyprus today as the euro area seeks progress toward a bailout that’s been batted about for nine months.

“I can’t imagine that we’ll let the weekend go by without resolving the Cyprus problem,” Luxembourg Prime Minister Jean- Claude Juncker said early today after euro leaders met midway through a two-day European Union summit in Brussels. The EU gathering ends today with a 27-nation discussion of foreign policy, to be followed by a euro-area ministers’ meeting.

Cyprus requested a bailout in June and a deal on aid has been delayed by debate on how to cut the island nation’s debt. The previous government had rejected key demands by the so- called troika that oversees euro-area bailouts. Yesterday’s summit was the first for new President Nicos Anastasiades.

Finnish Prime Minister Jyrki Katainen said finance chiefs didn’t receive specific instructions from leaders ahead of today’s talks on Cyprus. He reiterated that any deal must offer a path to sustainable debt and include a role for the International Monetary Fund.

“We need IMF in the package because of two reasons,” he said. “We need their know how” and “of course it’s better if there are more payers than just the euro-area countries.”

Leaders yesterday welcomed Anastasiades, elected last month, who pledged “decisive” action to comply with whatever terms are agreed on for his country, the fifth euro-area nation to seek aid. Katainen said yesterday the new government has “more credibility” than its predecessor.

Uncertainty Persists….”

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“Toyota Motor Corp. (7203)’s Prius hybrid is emerging as the likeliest winner from China’s faltering attempt to dictate the future of world motoring.

Policies favoring Warren Buffett-backed BYD Co. (1211) and other electric-vehicle makers were meant to help China vie for global leadership in a technology the government expected to replace clunkers that run on gasoline. Except, as Chairman Mao Zedong put it, “seek truth from facts,” and the fact is: EVs flopped….”

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“The Dow Jones Industrial Average is at an all-time high, the jobless rate has fallen to a four-year low and the housing market is seeing a recovery. But for many lower income and middle class Americans, the improving economy has yet to take hold.

Instead, they are anxious enough about higher gasoline prices and a payroll tax increase to slash their spending.

An online poll of 1,538 people conducted March 4-8 by Reuters/Ipsos found that two-thirds of adults say they are cutting their monthly spending and almost all of the rest say their spending is little changed.

The biggest reason given by those who said they are cutting spending—72 percent of those polled—was increasing savings and paying off debts. The second biggest was higher gas prices, cited by 63 percent.

Of those cutting back specifically because of gas prices or tax increases, 81 percent said they are cutting down on meals at restaurants, 73 percent are reducing entertainment costs such as movies and concerts and 62 percent are spending less on travel and vacations.

At the same time, affluent consumers are showing signs of increased confidence, according to at least one recent survey. This bifurcation may play into concerns about income inequality and could add to pressure on President Barack Obamaand Democrat lawmakers in Congress to resist any budget deficit cutting deal that reduces spending on the social safety net and doesn’t include further taxes on the wealthy….”

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GE, NOK, BAC, VZ, ANR, MCD, AAPL, RIMM, MSFT, DELL, GMCR, CSCO,

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“Germany’s Bundesbank almost doubled its risk provisions in 2012, citing increased potential for losses stemming from the European Central Bank’s monetary policy.

The Frankfurt-based central bank increased provisions for general risks by 6.7 billion euros ($8.7 billion) to 14.4 billion euros, it said in an e-mailed statement today when releasing its 2012 annual report. Due to higher interest income, the Bundesbank’s profit rose to 664 million euros from 643 million euros in 2011. The increase in provisions stems from the ECB’s enhanced support of the financial sector over the course of the year, the Bundesbank said.

“The past year had seen an overall increase in counterparty credit risks stemming from refinancing loans and purchasing bonds,” Bundesbank President Jens Weidmann said in the statement.

The ECB injected more than 1 trillion euros into the banking system with two three-year refinancing loans designed to avoid a credit crunch. Some 22 percent of those loans have since been paid back as the ECB’s pledge to buy unlimitedgovernment bonds if certain conditions are met eased tensions on financial markets.

Weidmann reiterated in a foreword to the annual report that the Bundesbank is critical of some of the measures taken by the ECB because “they blur too much the responsibilities of monetary and fiscal policies.”

Declining Inflation…”

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“WASHINGTON (Reuters) – Illinois agreed on Monday to settle federal civil securities fraud charges alleging the state misled municipal bond investors about how it funded its pension fund obligations.

Illinois was not ordered to pay a penalty under the terms of the settlement with the U.S. Securities and Exchange Commission. However, the state implemented a number of remedial actions beginning in 2009 and cooperated with the SEC’s probe. It settled the case without admitting to or denying the SEC’s charges….”

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“Norway’s $713 billion sovereign wealth fund is turning away from the world’s biggest currencies and their debt-laden governments as policy makers undermine their exchange rates through unprecedented stimulus measures.

The Government Pension Fund Global, the world’s largest wealth fund, cut its holdings in French and U.K. government bonds by almost half last year as it raised its share of government bonds in emerging-market currencies to 10 percent of its fixed-income holdings by adding investments in Turkey, Russia and Taiwan.

“It’s what we perceive as a risk-reducing investment strategy,” Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, said in a March 8 interview in Oslo. Cutting dollar, yen, euro and pound investments is a “prudent” move, he said. “These four major currencies all have structural issues, with regards to government debt, to private sector debt, to unconventional monetary policy, and to growth and the demographic profile of the countries.”

At issue is how central bankers across the globe will eventually unwind the uncharted stimulus measures enacted to prop up global growth since the onset of the financial crisis in 2008. Debt levels have soared for governments across much of the developed world. In Europe, political leaders are trying to save the region from a fiscal crisis now in its fourth year.

Monetary Easing….”

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“Another refugee looking to escape US taxes?

According to Bloomberg’s Stephanie Ruhle, Katherine Burton, and Zachary Mider, hedge fund manager John Paulson is considering leaving New York to go to Puerto Rico, where a tax loophole would let him reduce taxes on the $9.5 billion he has in his own hedge fund.

Ten wealthy Americans have already taken advantage….”

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“European leaders grappling with political deadlock in Italy and spiraling unemployment in Francewill turn to a financial rescue for Cyprus in an effort to stave off a return of market turmoil over the debt crisis.

European Union leaders will meet for a March 14-15 summit in Brussels to discuss terms for Cyprus, including the island nation’s debt sustainability and possibly imposing losses on depositors. That comes as Italy struggles to form a government after an inconclusive Feb. 24-25 election and as concern over the French economy mounts with unemployment at a 13-year high.

“We haven’t turned the corner yet, but we’re on a good path,” German Finance Minister Wolfgang Schaeuble told Austria’sDer Standard newspaper in a March 8 interview. “It would be wrong at this point to change course.”

The European Central Bank’s pledge to intervene in bond markets and the prospect of an economic recovery by the end of the year are holding the three-year-old sovereign debt crisis in check. Still, gridlock in Italy has raised the specter of renewed turmoil in the euro area’s third-largest economy, while growth has ground to a halt in France, the second-largest.

European bonds held steady last week, with Spanish debt advancing for a fourth week and Italian yields sliding. Spanish10-year yields declined for the ninth straight day, sliding 3 basis points to 4.73 percent at 9:12 a.m. in Madrid. Italian yields with the same maturity climbed 3 basis points to 4.63 percent.

Euro’s Retreat…”

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“WASHINGTON (AP) — It took 5½ years.

Surging stock prices and steady home-price increases have finally allowed Americans to regain the $16 trillion in wealth they lost to the Great Recession. The gains are helping support the economy and could lead to further spending and growth.

The regained wealth — most of it from higher stock prices — has been flowing mainly to richer Americans. By contrast, middle class wealth is mostly in the form of home equity, which has risen much less.

Household wealth amounted to $66.1 trillion at the end of 2012, the Federal Reserve said Thursday. That was $1.2 trillion more than three months earlier and 98 percent of the pre-recession peak.

Further increases in stock and home prices this year mean that Americans’ net worth has since topped the pre-recession peak of $67.4 trillion, private economists say. Wealth had bottomed at $51.4 trillion in early 2009.

“It’s all but certain that we surpassed that peak in the first quarter,” said Aaron Smith, senior economist at Moody’s Analytics.

Household wealth, or net worth, reflects the value of assets like homes, stocks and bank accounts minus debts like mortgages and credit cards. National home prices have extended their gains this year. And the Standard & Poor’s 500 index, a broad gauge of the stock market, has surged 8% so far this year.

Some economists caution that the recovered wealth might spur less consumer spending than it did before the recession. Dana Saporta, an economist at Credit Suisse, notes that Americans are now less likely to use the equity in their homes to fuel spending. The value of home equity Americans are cashing out has fallen 90% in six years, she said….”

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“The Bank of England kept its benchmark interest rate unchanged at 0.5 percent and maintained the size of its asset purchase program at 375 billion pounds on Thursday.

The pound rose to 1.5061 against the dollar after the news.

While most analysts had expected the BoE to keep policy unchanged, some analysts were braced for a surprise after minutes from the bank’s last meeting showed three of the nine committee members had voted in favor of expanding bond buying by a further 25 billion pounds ($38 billion).

Amid fears of a triple-dip recession, the bank’s deputy governor Paul Tucker last month went so far as to suggest negative interest rates on money parked at the central bank in order to encourage the financial system to step up lending.

“The decision this month was obviously to hold, it doesn’t mean that next month they won’t go and buy another 25 billion [pounds],” Marcus Ashworth, head of fixed income at Espirito Santo Investment bank said.

The pound has weakened in recent months after weak economic data and expectations of further quantitative easing. HSBC warned earlier this week, the currency could get “smoked” from new monetary stimulus. But Jan Randolph, head of sovereign risk at IHS global insight said the pound weakness might have actually helped the BoE stand pat….”

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“The European Central Bank left interest rates on hold as it gauges how big a threat Italy poses to the economic recovery.

Policy makers meeting in Frankfurt today kept the benchmark rate at a record low of 0.75 percent, as forecast by 56 of 61 economists in a Bloomberg News survey. President Mario Draghi holds a press conference at 2:30 p.m. to explain the decision.

Budget cuts and economic reforms were rejected by more than half of voters in an Italian election last month, undermining optimism that the euro area will shake off the sovereign debt crisis and gradually climb out of recession this year. With economists predicting the ECB will lower its growth and inflation forecasts today, investors are looking for signs from Draghi that the ECB will do more to foster a recovery.

“It’s up to governments to implement structural reforms and Draghi will make clear what the ECB can do compared to what governments can do,” said Marco Valli, chief Eurozone economist at UniCredit Global Research in Milan. “But if the Italian situation impacts monetary policy or poses a downside risk to inflation, they’ll have to act.”

Policy options available to the ECB include rate cuts, more long-term loans to banks, and measures to encourage bank lending to small and medium-sized companies that are struggling to gain access to credit, economists said.

Italy Concern….”

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“The Bank of Japan (8301) rejected a call for an immediate start to open-ended asset purchases in Governor Masaaki Shirakawa’s final meeting before a new leadership takes over at the central bank.

The board voted eight-to-one against the proposal by member Sayuri Shirai, the BOJ said in a statement in Tokyo today after a two-day meeting. Policy makers left an asset-purchase fund unchanged at 76 trillion yen ($810 billion) as forecast by all 23 analysts in a Bloomberg News survey….”

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“Equity allocations nearly reached a two-year high last month, according to the February AAII Asset Allocation survey. Conversely, fixed-income allocations declined to a 10-month low.

Stock and stock fund allocations rose 1.1 percentage points to 62.5%. This was the largest allocation to equities since April 2011. The historical average is 60%.

Bond and bond fund allocations declined 1.0 percentage points to 19.2%. This is the smallest allocation to fixed-income since April 2012. It is also the first time in seven months that bond and bond fund allocations are below 20%. Even with the drop, fixed-income allocations are above their historical average of 16% for the 44th consecutive month.

Cash allocations slipped 0.2 percentage points to 18.2%. Cash allocations have been at or near this level during five out of the past seven months. This was the 15th consecutive month that cash allocations are below their historical average of 24%…..”

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“Bondholders are replacing the International Monetary Fund in bailing out some of eastern Europe’s most indebted nations.

Hungary, Romania, Serbia and Ukraine, taking advantage of record low borrowing costs, sold $7.25 billion of notes last month, snubbing fiscal requirements from the Washington-based IMF for loans. At yields as high as 7.60 percent, the securities lured investors seeking better returns than the average 4.70 percent for emerging-market dollar bonds.

The sales are helping the former communist nations raise financing without accepting the budget discipline demanded by IMF loans. From Bucharest to Belgrade, the debt is luring demand as zero percent interest rates and increased monetary easing in developed nations push investors to search for higher yields in riskier securities.

“We see a few countries with worsening economic policies and the market is not punishing them,” Viktor Szabo, who helps manage $11.8 billion at Aberdeen Asset Management in London, said by e-mail Feb. 15. “In the current abundant liquidity environment, the anchor role of the IMF and other international financial institutions is less important as investors are desperately looking for yields.”

Hungary’s dollar bonds have returned 20 percent in the past year, almost twice the 11 percent average for emerging-market debt in JPMorgan Chase & Co.’s EMBI Global Diversified Index. The rally cut Hungarian yields by 196 basis points, or 1.96 percentage point, to 5.36 percent, while the EMBI average dropped 70 basis points. Ten-year U.S. Treasury yields fell to 1.90 percent from 1.94 percent while the S&P 500 Index rose 13 percent in the past 12 months.

‘Hugely Dangerous’….”

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“European finance ministers left open the possibility of saddling bank depositors and bondholders with some of the costs of an aid package for Cyprus, potentially unsettling markets as the bailout negotiations drag on.

Dutch Finance Minister Jeroen Dijsselbloem declined to rule out a “bail in” of Cypriot depositors, even after concern over the treatment of bank account holders prompted the first signs of capital flight from the island.

“All the questions on the elements” will be dealt with by late March, Dijsselbloem told reporters after chairing a meeting of euro-area finance ministers in Brussels yesterday. “That is my answer to all these questions, I’m afraid.”

By leaving the treatment of bank depositors in doubt, European governments risked replaying earlier clashes over imposing losses on bondholders. Creditors used that tactic for Greece and then pledged never to do so again because it shattered market confidence.

A week after Nicos Anastasiades took over as Cypriot president, finance ministers said the pieces of an aid package have yet to fall into place and probably won’t do so until late March.

Deposits Drop…”

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“Australia’s central bank kept its benchmark interest rate unchanged at a half-century low and said policy is appropriate. The local currency climbed as traders pared bets on further reductions in borrowing costs.

Governor Glenn Stevens and his board left the overnight cash-rate target at 3 percent, theReserve Bank of Australia said in a statement today in Melbourne, as predicted by 27 of 29 economists surveyed by Bloomberg. He said “there are signs that the easier conditions are having some of the expected effects” after 1.25 percentage points of cuts in 2012….”

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“The last time we looked at the “hazardous” days for shorting in January and February, we found something very simple – being a bear on POMO days, or those days in which Ben Bernanke makes it his life’s mission to personally annihilate anyone who dares to face his money-spewing helicopter-printer with something as pathetic as a sense of reality and a frontal lobe, leads to certain immediate or eventual destruction, depending on one’s margin level. So thanks to the most recent monthly update of POMO days covering the month of March, here is Ben Bernanke at his most helpful, providing the schedule in which he, the NY Fed, and the Primary Dealers will proceed to rip the heads off those who happen to be short in the face of what are the now daily GETCO stop hunts that send the S&P higher by 5-15 point in minutes on, well, absolutely no news, except for the usual deluge of between $1 and $5 billion in additional purchasing handed over by Chairman Ben to the banks because, you see, they need the money. And sooner or later it will trickle down on everyone else.

Below are the March POMO days….”

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“Italy’s public debt rose to the highest level since Benito Mussolini won elections 89 years ago, paving the way for his 20-year dictatorship.

The CHART OF THE DAY shows debt jumped in 2012 to 127 percent of gross domestic product from 120.8 percent a year earlier. That’s the most since 1924, when Mussolini won 64 percent of the popular vote in elections that opposition members said were marked by irregularities. The chart is based on data from the Bank of Italy and national statistics office Istat.

“Nowadays, reducing debt-to-GDP ratio is challenging, much more than it used to be,” said Fabio Fois, an economist at Barclays in Milan. “Cutting unproductive public expenditures and increasing growth potential are the only viable measures. Maintaining a large primary surplus position over the medium term must remain a policy goal.”

As the spending cuts and tax increases passed by outgoing Prime Minister Mario Monti helped Italy raise its primary surplus to 2.5 percent of GDP last year, the euro region’s third-biggest economy contracted 2.4 percent. Still, interests on debt rose last year by 10.7 percent and thebudget deficit amounted to 3 percent of GDP, within European Union limits. The national debt was also increased by the cost of bailing out the euro region’s distressed countries including Greece and 1.9 billion euros ($2.5 billion) in derivatives…..”

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“Investors reduced bearish stock bets to the lowest level since at least 2007 as the bull market in American equities begins its fifth year.

Short sales in the Standard & Poor’s Composite 1,500 Index fell to 5.6 percent of shares available for trading in February, down from a record 12 percent during the credit crisis and the lowest ever in data compiled by Bespoke Investment Group and Bloomberg starting six years ago. The last time the number of shares borrowed and sold short approached this level, the equity gauge lost 3.3 percent in the next three months.

Bulls say the capitulation by market bears shows the rallyremains intact and that more money will flow into stocks after individuals sent $37.9 billion to mutual funds in January, the most since 2004. It also means a source of demand is diminishing, a traditional signal for caution in an aging bull market. Less than one percent of the shares of Ford Motor Co. and Cabot Oil & Gas Corp. (COG) have been borrowed and sold short by speculators hoping to return them to owners once prices fall.

“When you look at short interest, and it’s low like right now, it means people are very, very bullish about the market,” Uri Landesman, president of New York-based hedge fund Platinum Partners, which manages $1.15 billion, said in a Feb. 28 phone interview. “When that happens, it’s a bearish sign, because if all minds change, there’s downside, not upside.” …”

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