Germany blocks ECB, France wants last resort lending

BERLIN/FRANKFURT (Reuters) – Germany’s chancellor and central banker urged Europe to stick to stricter budget discipline and forget about one-shot solutions after financial markets judged that another EU summit had failed to resolve the euro zone’s debt crisis.

Chancellor Angela Merkel and Bundesbank chief Jens Weidmann, speaking separately, rebuffed pressure for the European Central Bank to intervene decisively to stop the crisis escalating.

Merkel told parliament on Wednesday it would take years, not weeks, to overcome the debt problems but Europe would emerge stronger “if we have the necessary patience and endurance, if we do not let reversals get us down, if we consistently move towards a fiscal and stability union”.

“The German government has always made it clear that the European debt crisis is not to be solved with a single blow. There is no such single blow,” she said.

Weidmann, an influential voice in the ECB, made clear his opposition to ramping up purchases of troubled euro zone states’ debt, saying he was “no fan” of the existing limited bond-buying program and even its supporters were growing skeptical.

He also said the Bundesbank would only provide fresh funds for the International Monetary Fund to help fight the euro zone crisis if countries beyond Europe did so too.

The euro fell below $1.30 for the first time since January, stocks slid and Italy had to pay a euro era record yield to sell bonds as nervous investors awaited a possible credit rating downgrade for one or more euro zone countries.

Rome had to pay 6.47 percent to sell 3 billion euros of 5-year bonds, highlighting fierce market pressure ahead of a year in which Italy has a gross funding goal of 440 billion euros, starting in late January.

Safe-haven German Bund futures rose by more than one full point due to renewed doubts about the effectiveness of last week’s agreement on deeper fiscal union.

Ireland’s European Affairs Minister, Lucinda Creighton, said last week’s summit agreement by 26 European Union states, with Britain dissenting, to negotiate a new fiscal pact to enforce EU budget rules more strictly was not going to stop the rot.

“Having the fiscal compact in place by March is desirable but I don’t think it’s going to save the euro,” she told reporters on a visit to Paris.

“Ideally (I would like to see) a very clear declaration from the ECB that it is prepared to do whatever is necessary to save the currency, and it is the ultimate backstop,” Creighton said. “I don’t think we’re there yet but I feel we will end up there.”

Ireland and France saw eye-to-eye about the need for the central bank to act as lender of last resort, but there was no consensus on this yet, she said. Paris has toned down calls for ECB action, stressing its respect for the bank’s independence partly in deference to its close alliance with Germany.

Creighton warned that the crisis was likely to accelerate when countries such as Italy and Spain went to market in January and February to raise funds. “They will be challenged. We’ve yet to see the scale of that challenge,” she said.

Weidmann told journalists the ECB’s mandate prevented it from embarking on unlimited bond purchases and experience showed this would inevitably lead to inflation anyway.

“I think the idea is astonishing that one can win confidence by breaking rules,” he said.

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I will interpret for you:

(CNN) — Iranian President Mahmoud Ahmadinejad said Tuesday that his country has “been able to control” the U.S. drone that Iran claims it recently brought down, Venezuelan state TV reported.

They have figured out how to turn it on.

“There are people here who have been able to control this spy plane,” Ahmadinejad told VTV. “Those who have been in control of this spy plane surely will analyze the plane’s system. Furthermore, the systems of Iran are so advanced also, like the system of this plane.”

This is the most complicated thing they have ever seen. It is blowing their collective mind.

Ahmadinejad did not elaborate or specify what precisely he meant when he referred to people “who have been able to control” the drone. He spoke in Farsi, which VTV translated into Spanish. The Farsi portion of the interview was not audible.

President Barack Obama said Monday that the United States has asked Iran to return the drone aircraft that Iran claims it recently brought down in Iranian territory.

“We’ve asked for it back. We’ll see how the Iranians respond,” Obama said.

Our president is a huge pussy.

Will Iran share stealth tech with China? Ahmadinejad’s comments to VTV seemed to suggest that Iran did not plan to return the aircraft.

“The North Americans at best have decided to give us this spy plane,” Ahmadinejad said. “In the unpiloted planes, we have had many advances, much progress and now we have this spy plane.”

Good luck with that.

More importantly, the Iranians should be very cautious about trying to steal technology they aren’t experienced with. A friend of mine once told me a story about a certain Soviet country that stole a certain pipeline pressure regulator from the U.S. during a certain Cold War.

What this country didn’t know was that the U.S. was very much aware of Soviet thievery, and intentionally planted a flawed plan, which the Soviets, in copying, then applied to their entire system.

Ka-BOOM!

I would love nothing less than for Iran to mass produce drones which the U.S. has the ability to seize control of at will. Let the tech games begin.

WASHINGTON (AP) — Congress is putting the finishing touches on a sweeping $1 trillion-plus spending bill wrapping together the day-to-day operating budgets of 10 Cabinet departments with funding for the war in Afghanistan.

The catchall measure has been drafted by the powerful Appropriations committees behind closed doors. It cuts environmental programs and foreign aid, while limiting the Pentagon to just a 1 percent budget hike.

The measure implements this summer’s hard-fought budget pact between President Barack Obama and GOP leaders, essentially freezing agency budgets, on average, at levels enacted in April for the recently completed budget year. Disaster money and war funding are getting some additional leeway.

WASHINGTON (AP) — National home sales figures will be lowered dating back to 2007 after the private trade group that collects them said the numbers were too high.

The National Association of Realtors said Monday it will release the downward revisions for previously occupied homes on Dec. 21.

Among the reasons for the inflated figures, the Realtors group says: changes in the way the Census Bureau collects data, population shifts and some sales being counted twice. Last year’s total sales figure of 4.91 million was the worst in 13 years.

The Realtors consulted with several government and private housing market experts, including the Federal Reserve, the Department of Housing and Urban Development, the Mortgage Bankers Association, the National Association of Home Builders, mortgage giants Fannie Mae and Freddie Mac and CoreLogic, the California-based data firm that first raised doubts about the annual numbers earlier this year.

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Analysts have long warned that the $1.32 area was the only thing standing between the euro and chartist Armageddon. Well, don’t look now…

In the event of a convincing break of the euro below that technical support, Bank of America and Scotia Capital are targeting a re-test of the common currency’s Oct. 4 low at $1.3145, with Scotia’s analysts saying a test of 1.30 is all but a near-term certainty.

Credit Suisse is even more bearish: The bank’s analysts wrote this morning that they expect the euro to hit $1.25 by early next year.

The euro today off about 1.5% to trade recently near $1.3196 after hitting intraday low — and the lowest point since early October — of $1.3178.

A euro break of $1.3145 would take common currency back to levels not seen since January.

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As the Occupy Wall Street movement continues to evolve, protestors have employed a myriad of ways to get their populist message across. There were the various occupations of public spaces, starting with Zuccotti Park; there was also Occupy Friday, a boycott of big retailers like Target (TGT), Sears (SHLD) and Macy’s (M) on Black Friday and a similar Occupy Christmas planned for later this month.

The latest method of protest that Occupy Wall Street activists have come up with is a plan West Coast port blockade. On Monday, protestors on the West Coast are planning to shut down all ports along the West Coast in an effort to disrupt the businesses of the big companies like EGT (of which Bunge Ltd (BG) is the largest partner), Goldman Sachs (GS), Walmart (WMT) and Maersk that do business at the ports. Blockades are planned in cities like San Francisco, Los Angeles, Portland and Anchorage, among others.

According to the movement’s website, one key reason, besides the movement’s central message of fighting corporate power, behind this planned blockage, was to demonstrate solidarity with the workers at the port.

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Hypermarcas SA, the maker of more than 190 consumer products, agreed to sell some brands to Bunge Ltd. (BG) and Quimica Amparo Ltda. for as much as 305 million reais ($169.6 million).

The Salsaretti, Puropure and Etti food brand were sold to U.S.-based Bunge for 180 million reais, the Sao Paulo-based company said today in a statement to Brazil’s securities regulator.

In a separate statement, Hypermarcas said it sold its Perfex, Cross Hatch and the Assolan cleaning brand to Quimica Amparo for as much as 125 million reais.

The deal with Bunge is expected to close by Dec. 30.

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Argentina could be nearing a shale oil and gas boom similar to the one that transformed the US energy landscape as former state monopoly YPF eyes another 1bn barrel discovery adjacent to a Patagonian field whose reserves were more than six times bigger than thought.

YPF has almost finished drilling a 502 sq km area just north of the discovery zone and believes full results will be equally vast. Two of the three wells are in production and “the yield is exactly the same,” says Tomás García Blanco, YPF’s executive director for upstream.

Asked if this heralded another 1bn barrel discovery, Mr García Blanco says: “Yes. But until the third well is drilled … I would like to be cautious. We hope to know by the end of the year or January 2012.”

The group, which is 57.43 per cent owned by Spain’s Repsol, announced in November that it had discovered 927m barrels of oil equivalent in a 428 sq km zone of the Vaca Muerta (“Dead Cow”) formation in south-western Argentina – more than six times higher than its initial estimate in May of 150m barrels. The discovery is three-quarters oil and one-quarter gas, it says.

That, Mr García Blanco notes, is based on “conservative” estimates that only 4 per cent of all the hydrocarbons will be extracted. Some in the US believe recovery rates of 8 per cent or even 15 per cent may be possible in time – something that will lead to eye-popping estimates of the potential for shale worldwide.

Argentina has some of the world’s biggest and best-quality reserves of shale hydrocarbons, which are trapped thousands of metres underground and released by fracturing rocks using high-pressured water, sand and chemicals. The US Energy Information Administration this year ranked Argentina third globally in terms of technically recoverable shale gas resources with 774,000bn cubic feet.

VIENNA (Reuters) – OPEC began negotiations on Monday on a new production deal aimed at healing the rift caused by a bad-tempered failure to agree an output target when it last met in June.

At stake for the Organization of the Petroleum Exporting Countries at its Wednesday meeting is a credible output policy heading into a year when sluggish global economy could undermine fuel demand and bring down oil prices that now are over $107 a barrel.

“I think they have to agree this time because they need to be credible,” said former Algerian Oil Minister Chakib Khelil ahead of the meeting of the 12-member cartel that pumps more than half the world’s oil exports.

Without a collective supply target, OPEC members with spare capacity – Saudi Arabia and its Gulf Arab allies – will remain free to pump at will.

Leading producer Saudi Arabia made clear its intention to keep oil prices under control, saying last week it was producing a surprisingly high 10 million barrels daily of crude, much more than estimated by most in the oil industry.

That pleased consumer nations worried about the impact of oil prices on global growth.

“OECD stock levels are at historically low levels, plus we are in very fragile economic recovery situation,” said Fatih Birol, chief economist at the International Energy Agency.

But the Saudi position is worrying for the price hawks in OPEC like Iran, Algeria and Venezuela who want to keep oil above $100.

Iran wants a commitment from Saudi Arabia and other Gulf OPEC producers that they cut back to accommodate the restoration of Libyan supply.

“Should OPEC’s present output continue, with the increased production of Libya and Iraq next year we would witness an increase in stockpiling and a drop in crude oil prices,” said Iran’s OPEC representative Mohammad Ali Khatibi.

BIRMINGHAM, Ala.–(BUSINESS WIRE)– Colonial Properties Trust (NYSE: CLP – News), a real estate investment trust (REIT), announced the sale of Colonial Pinnacle Turkey Creek, a 659,000 square foot retail center located in Knoxville, Tenn. for total sales proceeds of $131.7 million. The company had a 50% joint venture interest in the property. The company’s 50% interest was sold for total consideration of $65.9 million, comprised of $27.2 million in cash and the assumption and/or repayment of the company’s $38.7 million share of the existing loans secured by the property. Proceeds from the sale were used to repay a portion of the outstanding balance on the company’s unsecured line of credit and a portion of the proceeds will be used to acquire multifamily apartment communities.

Additionally, the company sold its remaining 5% interest in Colonial Promenade Alabaster II/Tutwiler II, a 420,000 square foot retail center located in Birmingham, Ala. to its joint venture partner. The company’s interest was sold for total consideration of $2.4 million, comprised of $0.4 million in cash and the joint venture partner’s assumption of the company’s $2.0 million share of the existing loan secured by the property. Proceeds from the sale were used to repay a portion of the outstanding balance on the company’s unsecured line of credit.

“The disposition of our joint venture interests in these retail assets is another step in the execution of our strategy to simplify the business and sell our non-core assets,” stated Thomas H. Lowder, Chairman and Chief Executive Officer.

(CNN) — Almost half of German people believe that their country’s economy would be in a better position today if it hadn’t joined the euro, according to the findings of a survey commissioned by CNN.

About the same number of Germans is also opposed to a more tight-knit “United States of Europe,” along lines favored by their leader, Chancellor Angela Merkel. The concept enjoys stronger backing in poorer countries such as Spain and Greece, the study found.

The research conducted by ComRes and released on a day that saw European leaders agree to strengthen financial ties to ward off financial crisis, shows opinions broadly divided along lines of national wealth across the continent.

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While most of the country is still mired in a troubled economy, North Dakota is riding an unprecedented boom that has jobs looking for people, rather than the other way around.

“And largely that’s driven by the oil play in what we call the Bakkan Formation,” Lynn Helms, Director of North Dakota Dept. of Natural Resources explains.

“We’re estimating now about 18,000 square miles of western North Dakota, another 6,000 square miles in Montana, Saskatchewan and Manitoba that is mature oil-source rock. It can be drilled up almost (like) an oil-producing factory. We did not drill a single dry hole in the last year-and-a-half,” she said.

WASHINGTON – House Republicans are on a collision course with the White House and potentially the Senate over an emerging proposal to extend the payroll tax cut, teeing up a protracted debate that could keep lawmakers in Washington for the holidays as they try to avert a Jan. 1 tax increase.

The Senate on Thursday afternoon rejected rival Democratic and GOP plans for extending the cut. The failure was expected, cueing the House to step in with a new plan.

Details of that proposal, expected to be unveiled in full on Friday, suggest its Republican authors are preparing for a showdown with President Obama. The bill includes a controversial provision to move along the construction of an oil pipeline from Canada to Texas — the Obama administration recently put that project on hold until after the 2012 election, citing environmental and safety concerns.

The provision pertaining to the Keystone pipeline helped sweeten the deal for House conservatives skeptical of a payroll tax extension.

PARIS (AP) – The Moody’s rating agency downgraded three leading French banks on Friday, saying that the spiraling debt crisis in Europe was making it hard for them to get loans and that the situation may get worse.

After a review, Moody’s lowered the overall financial strength ratings of BNP Paribas, Societe Generale and Credit Agricole SA. The banks’ long-term debt ratings were also downgraded, saying they were “affected by the fragile operating environment for European banks.”

Banks are at the front-line of the debt crisis raging across the 17-country eurozone that has threatened to drag the global economy back into recession.

It took action a day after a regulator said European banks have to raise about €115 billion ($154 billion) — more than expected — to meet a new standard meant to shore up the lenders against market turmoil.

BEIJING (Reuters) – China’s industrial output growth dropped in November to its slowest pace in more than two years and inflation tumbled as economic conditions deteriorated, raising expectations that Beijing will pursue a more pro-growth policy to support jobs.

Easing inflation pressure on consumers at the same time as data signals a serious risk of a sharp industrial slowdown is potentially perilous for policymakers trying to engineer a soft economic landing against a backdrop of a deepening crisis in China’s main export market — debt-ridden Europe.

“The sharp contraction in the real economy, the external uncertainties lingering on, plus the easing inflationary pressure all point to a larger scope for further policy easing. So the basic tone of the macro policy will lean towards the pro-growth side,” said Nie Wen, analyst at Hwabao Trust in Shanghai.

A deluge of data on Friday showed China’s annual consumer inflation rate tumbled in November to 4.2 percent, the lowest level since September 2010 and slightly below expectations. It was the first time since February it had fallen below 5 percent.

Inflation has dropped from a three-year high of 6.5 percent in July, allowing Beijing to shift its policy stance towards offering support for the economy, especially as CPI is now closer to the full-year government target for 2011 of 4 percent.

TOKYO (Reuters) – Toyota, set to lose its crown as the world’s top-selling automaker this year, more than halved its annual profit forecast to $2.6 billion, reeling from a strong yen and Thai floods that severed its supply lines.

Toyota Motor Corp’s (7203.T) inability to make enough cars – production was also ruptured by the earthquake and tsunami in Japan in March – is expected to see it overtaken in sales this year by General Motors Co (NYSE:GM) and probably Volkswagen AG (VOWG_p.DE).

While Toyota is poised for record production next year as it rebuilds depleted inventories, the yen’s persistent strength against virtually every major currency means profit recovery will continue to be slow given its huge exposure to exports.

“Toyota is hitting a trough,” said Cho Soo-Hong, auto analyst at Woori Investment & Securities in Seoul.

BOSTON (MarketWatch) — If you want to understand the latest Franco-German proposal to “save” the euro, imagine this.

Imagine the governments of China and Japan demanding they be given the legal right to override the U.S. budget’s legislative process if needed, and to impose tax hikes and spending cuts on the American people as needed.

After all, China and Japan are our biggest creditors. The U.S. government owes them trillions. We’re not quite as deeply in debt as a share of our economic output, as Europe’s naughtiest Nellies. But we’re not far behind either.

Markets rallied this week on hopes that the leaders of the European Union will at long last solve the region’s budget crisis. Center stage is the new proposal from Angela Merkel and Nicolas Sarkozy. They want to turn Europe into, effectively, a federal government, with the power to impose budget discipline on wayward members.

Their proposal is preposterous. Anything can happen in this life, but it would be remarkable indeed if this idea got off the ground. Anyone pinning their hopes that this will solve the crisis needs to think it through.

Why would the Portuguese accept the right of Germany to impose budget cuts on their country? Why would the Greeks?

Would we accept that role for the Chinese and the Japanese, the biggest holders of Treasury debt? How would you feel if you opened the paper to be told that the new Sino-Japanese “Fiscal Stability Commission” in Washington had just slashed your grandma’s Social Security checks by one-third, scaled back federal highway repairs, and that it would impose a 10% national sales tax?

That is, after all, effectively what is being offered to the people of Greece, Italy, Spain, Portugal and Ireland.

It’s absurd. There is no reason why these countries should have to surrender sovereignty. They can simply, where necessary, default. A default by, say, Louisiana would not destroy the dollar. Neither did the bankruptcy of Enron or Lehman.

The British look smarter and smarter for staying out of the euro area in the first place. Prime Minister John Major, and then, later, Chancellor of the Exchequer Gordon Brown, each took the decision to keep the British pound free. At the time fashionable opinion predicted disaster for the Brits. So much for that.

(Predictably, fashionable opinion now says the Brits look “isolated” for staying out. Really, you couldn’t make it up).

It has long been clear the Franco-German duo wanted to use their shared currency to bludgeon the continent into something closer to a federal system.

Any investor pinning their hopes on this bird flying needs to be aware it looks a lot more like a turkey than an eagle.

This week’s meeting of European leaders already marks the fifth “summit” to solve the region’s debt crisis since early 2009.

My favorite comment this time: “After a series of ‘final’ summits, it would be nice this time to have a real ‘final’ summit.” That was from Standard & Poor’s chief European economist, appropriately-enough named Jean-Michel Six. What’s the betting Mr. Six will be attending Summit No. Six in the new year?

WASHINGTON (AP) — The U.S. trade deficit narrowed in October to its lowest point of the year after Americans bought fewer foreign cars and imported less oil.

The shrinking trade gap boosted growth over the summer and may do so again in the final three months of the year.

The Commerce Department said Friday that the trade deficit shrank 1.6 percent to $43.5 billion. It was the fourth straight monthly decline.

Overall imports fell 1 percent to $222.6 billion, which largely reflected a 5 percent decline in oil imports. The average price of imported oil fell for the fifth straight month to the lowest level since March. Oil prices rose last winter because of turmoil in the Middle East and North Africa.

Exports slipped 0.8 percent to $179.2 billion, the first drop after three months of gains. Shipments of industrial supplies, such as natural gas, copper and chemicals, fell. Exports of autos and agricultural goods also dropped.

NEW YORK (Reuters) – Consumer sentiment rose to its highest level in six months in early December due to signs of better labor conditions and an improving outlook on the economy.

The Thomson Reuters/University of Michigan’s preliminary reading on their overall index of consumer confidence climbed for a fourth straight month to 67.7. This compared with 64.1 in November and a low of 55.7 back in August.

The early December figure exceeded the 65.5 predicted by analysts recently polled by Reuters.

LONDON (AP) — A deal to get almost all EU countries to tie their economies closer together received some support in the markets on Friday, even though European leaders failed to reach unanimity on the plan, with Britain opposing the plan.

Following the summit, German Chancellor Angela Merkel confirmed Britain was the only country in the 27-nation European Union to hold out against supporting the new treaty.

The new treaty will penalize overspending governments in a bid to avoid a repeat of Europe’s debt crisis. Germany and France, the two biggest economies in the 17-nation eurozone, had hoped to persuade the whole European Union to back a change to the current EU treaty. Britain’s refusal means they will have to settle for a new intergovernmental agreement instead.

Following losses in Asia and an early retreat in Europe, market sentiment improved somewhat.

“The principle of a strong commitment to a new ‘fiscal compact’ — tough discipline and sanctions in case rules are breached — and stronger coordination of economic policies has been established,” said Herve Goulletquer, an analyst at Credit Agricole. “This is a significant step forward. What markets want now is to be sure that it will work. The devil is too often in the detail.”