NEWS,18 AND 19.06.2013

Ranks of the rich swelling - report

The number of millionaires in the world jumped 9.2% to 12 million last year, in part because of simultaneous strength in the stock, bond and real estate markets, according to a study of the high-net-worth population.
The survey, released on Tuesday by RBC Wealth Management and Capgemini Financial Services, tracked high-net-worth people, whom it defined as those with more than $1m that they can invest.
North America was home to the highest number of millionaires - 3.7m. But the study projected that the Asia-Pacific region, which held the top spot in 2011, would reclaim it.
Part of the strength in North America came from rising equities markets - the Standard & Poor's 500 stock index gained 13% in 2012. North American investors put 37% of their money into stocks, a higher proportion than people in the Asia-Pacific region, where investors tend to be more conservative, the study said.
The amount of wealth held by the world's richest people also increased substantially, rising 10% to $46.2 trillion, well above the pre-economic crisis level of $40.7 trillion in 2007.
The study forecast high-net-worth wealth would increase 6.5% annually to $55.8 trillion by 2015, mainly because of growth in the Asia-Pacific region.
The survey found that 53% of wealthy US individuals would prefer to have a single firm handle their financial accounts.
However, a 2011 study from Boston-based research firm Aite Group showed more than half of high-net worth investors held their money in four or more financial institutions.
"Having one super-adviser would be preferred, but finding someone who can do that well is hard," said Aite analyst Sophie Schmitt.
The RBC-Capgemini survey polled more than 4 000 high-net-worth people globally in February and March, including 736 Americans.

Switzerland buries US tax law

Swiss lawmakers dealt a death blow on Wednesday to a draft law which aimed to protect the country's banks from criminal charges in the United States for helping wealthy Americans evade tax.
The Swiss government has warned that the bill's failure could prompt impatient US prosecutors to indict banks, though it could still use an executive order to allow them to hand over data to try to avoid criminal charges.
The bill, which lawmakers from both the centre-left and right opposed for widely differing reasons, was designed to let banks sidestep Swiss secrecy laws by disclosing their US dealings so they could avoid prosecution. With or without the law, they will still seek out of court settlements with US authorities that could cost the industry as much as $10bn.
Parliament's lower house voted 123 to 63 against debating the legislation, effectively killing the law, even though the upper house had confirmed its support earlier in the day.
Switzerland's banking lobby expressed regret about the vote and urged the government to do everything possible to help banks reach settlements under a US Department of Justice programme.
"Switzerland must not take the risk of a further indictment of a bank lightly," the Swiss Bankers Association said in a statement.
Finance Minister Eveline Widmer-Schlumpf said the government would do everything in its power but its options were limited without the bill.
The protection of client information has helped to make Switzerland the world's biggest offshore financial centre, with $2 trillion in assets. But the haven has come under fire as other countries have tried to plug budget deficits by clamping down on tax evasion, with authorities investigating Swiss banks in Germany and France as well as the United States.
Experts were divided over the threat posed to Swiss banks by parliament's decision to oppose the law.
"The Americans will get the data they want. They will not stop until they have it," said Martin Naville, head of the Swiss-American Chamber of Commerce. "It is taxing the patience of our American friends. When their patience is over, there will be indictments, perhaps just one or two, but it will be more than enough to create chaos."
No one was immediately available for comment at the US Department of Justice.
Wegelin precedent
Earlier this year a U.S. indictment felled Switzerland's oldest private bank, Wegelin. It paid a $58m fine and closed its doors for good after pleading guilty to helping wealthy Americans evade taxes through secret accounts.
Shares in Basler Kantonalbank, one of the banks under US investigation seen at immediate risk, closed down 2.5%, compared with broadly positive Swiss stocks.
But Peter V. Kunz, professor for business law at Berne University, was more sanguine.
"I think bankers will be indicted, but I don't really see banks getting indicted... as there may not be enough evidence to accuse them of systematically violating US law," he said.
"Wegelin was indicted and settled but in my view this was a singular case. I don't see it as a model case for Swiss banks."
The government's attempt to fast-track the legislation through parliament to meet a US ultimatum angered many lawmakers in the fiercely independent country.
Right-wing lawmakers opposed the bill on the grounds that it could set a precedent that might prompt other countries to seek concessions from Switzerland. The centre-left also rejected it for different reasons, believing Swiss banks should be forced to face the music for aiding tax evasion.
Lawmakers from both the lower and upper house endorsed a statement saying they supported a solution to the long-running tax dispute despite the defeat, and called on the government to allow banks to cooperate under existing laws.
Protracted negotiations
Switzerland's biggest bank, UBS, was forced to pay a $780m fine in 2009 and deliver the names of more than 4,000 clients to avoid indictment, giving the US authorities information that allowed them to pursue other banks.
Since then, the government has tried to reach a settlement for the whole financial industry, but has been hamstrung by Swiss secrecy laws and bickering among banks over who should pay the heavy fines.
US authorities have more than a dozen banks under formal investigation, including Credit Suisse, Julius Baer, the Swiss arm of Britain's HSBC, privately held Pictet in Geneva and local government-backed Zuercher Kantonalbank and Basler Kantonalbank.

UK backs jail time for reckless bankers

Bankers who are reckless with customers' or taxpayers' money could face criminal charges and have bonuses and pensions clawed back, according to proposals backed by Britain's prime minister on Wednesday.
Many Britons blame bankers' risk-taking for the 2008 financial crisis and subsequent economic slump and were furious when the former boss of RBS left the bank with a pension of almost £17m even after a state rescue.
He later agreed to a cut and was stripped of his knighthood but it was one in a series of banking scandals that increased pressure on Prime Minister David Cameron to get tougher on a sector contributing billions of pounds to the British economy.
The parliamentary commission on banking standards he set up last year after Barclays was fined for manipulating interest rate benchmarks said on Wednesday the law should be changed so that bankers found guilty of "reckless misconduct in the management of a bank" could face jail.
The UK Treasury said the new rules could be in place before the end of 2015 but lawyers said it would be hard to prove when a banker had taken too much risk or simply made a mistake.
Asked in parliament whether he supported the report's recommendations on criminal penalties and pay, Cameron said: "Penalising, including criminal penalties ... bankers who behave irresponsibly, I say yes."
Lawyers doubted that new laws would be effective.
"There is likely to be a considerable burden of proof - merely miscalculating or being negligent in an assessment of risk most likely won't be enough," said Michael Isaacs, head of banking litigation at law firm Pinsent Masons.
The commission also recommended a new pay code to better balance risk and reward, with bonuses deferred for up to ten years with the aim of preventing bankers taking risks for short term reward, one of the factors blamed for the crisis.
It also proposed that the UK financial regulator would be granted a new power enabling it to cancel all bonuses and pension rights not yet paid out to senior executives in the event of their banks needing taxpayer support.
Watered down
Banking industry sources said banks were likely to accept many of the proposals in principle, including the threat of criminal sanctions, but will lobby for some to be watered down, including the 10-year deferral on bonuses.
"The commission's conclusions contain many constructive proposals to help fix the issues which have afflicted the industry, most importantly in the emphasis on personal responsibility and accountability," said HSBC Chairman Douglas Flint.
The cross-party commission, which includes former British finance minister Nigel Lawson and Justin Welby, head of the Anglican church, recommended senior bankers are held personally responsible and regulators granted greater powers.
Commission member Pat McFadden said it would be "pressing the government very hard in the coming weeks" to make sure the proposals are implemented. The government has set itself a four week deadline to give a formal response.
"I think all of us who were engaged in this process over the last year very much hope this is not a report which is going to gather dust," he told Reuters.
The British Bankers Association, a lobby group, said it would work with government and regulators to take forward proposals from what it described as the "most significant report into banking for a generation".
Unpopular
Bankers are deeply unpopular in Britain where the economy has narrowly avoided a triple-dip recession and is expected to show tepid growth at best through next year.
"I think jail sentences would be suitable," Ben Stewart, a 34-year-old cabinet maker said in Whitechapel, not far from the City of London, the traditional financial heartland.
"It's fraud a lot of what they've done. Even if it's not legally fraud, I think by most people's moral compass, they'd find it quite distasteful."
The commission recommended the industry adopt two new registers for senior bankers and other employees to make sure the most important responsibilities within banks were assigned to specific individuals.
The 'Senior Persons Regime' would enable those responsible for failures to be identified more easily and provide a stronger basis for action to be taken against them, the report said.
The Financial Conduct Authority, the financial services industry watchdog which took over regulation of banks in April, said it was "learning from the regulatory mistakes of the past".
The commission also urged the government to immediately consider a range of strategies for RBS, which is 81% state-owned, including a possible break-up.
Some commission members, including Lawson, have advocated hiving off RBS's toxic loans into a 'bad bank' leaving the remaining 'good bank' better able to lend to British businesses and households. But Finance Minister George Osborne said such a move would be complicated, time consuming and costly.
The report said the government had interfered in the running of RBS and Lloyds Banking Group, in which it holds a 39% stake, and said RBS was being held back by having the government as its main shareholder.
The level of the government's influence over RBS has come under scrutiny since chief executive Stephen Hester was ousted last week with the Treasury's approval.
Osborne is set to lay out strategies for returning RBS and Lloyds Banking Group to full private ownership in his annual speech to financiers in the City of London on Wednesday.

Big expectations for Obama Berlin speech

Five years and 50 years. As President Barack Obama revisits Berlin, he can't escape those anniversaries and the inevitable comparisons to history and personal achievement.

His 26-hour whirlwind visit to the German capital caps three days of international summitry for the president and marks his return to a place where he once summoned a throng of 200 000 to share his ambitious vision for American leadership.

That was 2008, when Obama was running for president and those who supported him at home and abroad saw the young mixed-race American as a unifying and transformational figure who signified hope and change.

Five years later, Obama comes to deliver a highly anticipated speech to a country that's a bit more sober about his aspirations and the extent of his successes, yet still eager to receive his attention at a time that many here feel that Europe, and Germany in particular, are no longer US priorities. A Pew Research Centre poll of Germans found that while their views of the US have slipped since Obama's first year in office, he has managed to retain his popularity, with 88% of those surveyed approving of his foreign policies.

Obama also has an arc of history to fulfil.

Fifty years ago next week, President John F Kennedy addressed a crowd of 450 000 in that then-divided city to denounce the Soviet bloc and famously declare "Ich bin ein Berliner", German for "I am a Berliner". Since then, presidents from Ronald Reagan to Bill Clinton have used Berlin speeches to articulate broad themes about freedom and international alliances.

Need for activism

Obama, fresh from a two-day summit of the Group of Eight industrial economies, will speak at the Brandenburg Gate, a symbol of Germany's division and later reunification. It is a venue that German Chancellor Angela Merkel denied him in 2008, saying only sitting presidents were granted such an honour.

The past context and the weight of it are not lost on the White House.

"This is a place where US presidents have gone to talk about the role of the free world essentially," said Obama's deputy national security adviser, Ben Rhodes. "He is seeking to summon the energy and legacy of what's been done in the past and apply it to the issues that we face today."

Rhodes said Obama will make the case that even though the Berlin Wall came down 23 years ago and the threat of nuclear war has dissipated, the type of activism apparent during the Cold War needs to be applied to such current challenges as climate change, counterterrorism and the push for democratic values beyond the United States and Europe.

A senior administration official said Obama will also renew his call to reduce the world's nuclear stockpiles, including a proposed one-third reduction in US and Russian arsenals. He is not expected to outline a timeline for this renewed push. The official insisted on anonymity in order to preview the issue before the president's speech.

Obama will also hold a joint news conference with Merkel.

Merkel surprised by scope of spying

The visit was attracting widespread attention in Germany. People waved and snapped photos as Obama sped by after his arrival and a thick cluster awaited the motorcade as it passed the Brandenburg Gate. An evening news show in Berlin devoted itself to the president's visit, highlighting "Das Biest", or "The Beast", as the president's armoured limousine is called.

There have been a few small protests, including one directed against the National Security Agency's surveillance of foreign communications, where about 50 people waved placards taunting, "Yes, we scan."

Merkel has said she was surprised at the scope of the spying that was revealed and said the US must clarify what information is monitored. But she also said US intelligence was key to foiling a large-scale terror plot and acknowledged her country is "dependent" on co-operating with American spy services.

For Merkel, the visit presents an opportunity to bolster her domestic standing ahead of a general election in September.

The US and the Germans have clashed on economic issues, with Obama pressing for Europe to prime the economy with government stimulus measures, while Merkel has insisted on pressing debt-ridden countries to stabilise their fiscal situations first.

But the two sides have found common ground on a trans-Atlantic trade pact between the European Union and the US At the just-completed G8 summit, the leaders agreed to hold the first talks next month in the US.

Obama calls for nuclear reductions

Issuing an appeal for a new citizen activism in the free world, President Barack Obama renewed his call on Wednesday to reduce US and Russian nuclear stockpiles and to confront climate change, a danger he called "the global threat of our time."

In a wide-ranging speech that enumerates a litany of challenges facing the world, Obama said he wanted to reignite the spirit that Berlin displayed when it fought to reunite itself during the Cold War.
"Today's threats are not as stark as they were half a century ago, but the struggle for freedom and security and human dignity, that struggle goes on," Obama said at the city's historic Brandenburg Gate before a crowd of 6 000 invited guests under a bright, hot sun.
"And I come here for this city of hope because the test of our time demands the same fighting spirit that defined Berlin a half-century ago."
He called for a one-third reduction of US and Russian nuclear stockpiles, saying it is possible to ensure American security and a strong deterrent while also limiting nuclear weapons.
Obama's address, delivered from behind bullet-proof glass, comes nearly 50 years after John F Kennedy's famous Cold War speech in this once-divided city.
The president has previously called for reductions to nuclear stockpiles. But by addressing the issue in a major foreign policy speech, Obama signalled a desire to rekindle an issue that was a centrepiece of his early first-term national security agenda.
The president discussed non-proliferation with Russian President Vladimir Putin when they met on Monday on the sidelines of the Group of 8 summit in Northern Ireland. During Obama's first term, the US and Russia agreed to limit their stockpiles to 1 550 as part of the New START Treaty.
In Moscow, Russian foreign policy aide Yuri Ushakov said that plans for any further arms reduction would have to involve countries beyond Russia and the United States.
"The situation is now far from what it was in the '60s and '70s, when only the USA and the Soviet Union discussed arms reduction," Ushakov said.
Withdrawal
Obama's calls for co-operation with Moscow come at a time of tension between the US and Russia, which are supporting opposite sides in Syria's civil war. Russia also remains wary of US missile defence plans in Europe, despite US assurances that the shield is not aimed at Moscow.
Germany's foreign minister, Guido Westerwelle, is a strong advocate of nuclear disarmament and has long called for the removal of the last US nuclear weapons from German territory, a legacy of the Cold War.
The Buechel Air Base in western Germany is one of a few remaining sites in Europe where they are based.
Under an agreement drawn up when they formed a coalition government in 2009, Merkel's conservatives and Westerwelle's Free Democratic Party agreed to press Nato and Washington for the nuclear weapons to be withdrawn, but did not set any time frame.
Nuclear stockpile numbers are closely guarded secrets in most nations that possess them, but private nuclear policy experts say no countries other than the US and Russia are thought to have more than 300.
The Federation of American Scientists estimates that France has about 300, China about 240, Britain about 225, and Israel, India and Pakistan roughly 100 each.

Obama defends terrorism tactics in Berlin

President Barack Obama defended US intelligence methods on a visit to Berlin on Wednesday, telling Chancellor Angela Merkel and wary Germans that Washington was not monitoring the e-mails of ordinary citizens or damaging civil liberties.

Obama is popular in Germany but revelations before the trip that the United States has a covert internet surveillance programme, codenamed Prism, have caused outrage in a country where memories of the eavesdropping East German Stasi secret police are still fresh.

Merkel said at a joint news conference that also touched on Afghanistan, Syria and the global economy, that the two leaders had held "long and intensive" talks on the spying issue, and pointed out that some questions still need to be cleared up.

"This is not a situation in which we are rifling through the ordinary e-mails of German citizens or American citizens or French citizens or anybody else," said Obama, on his first visit to the German capital as president.

"This is not a situation where we simply go into the internet and start searching any way we want. This is a circumscribed system directed at us being able to protect our people and all of it is done under the oversight of the courts."

Obama was later due to speak to a crowd of roughly 4 000 invited guests at the Brandenburg Gate, which used to stand alongside the Berlin Wall dividing communist East Berlin from the capitalist West of the city.

Tension in Afghanistan

His visit comes on the 50th anniversary of John F Kennedy's famous Ich bin ein Berliner speech. Seizing on the Cold War theme, Obama is expected to announce plans to sharply reduce nuclear arms stockpiles, an initiative he kicked off with a speech in Prague in 2009 but which involves complex negotiations with Russia.

At the news conference, he touched on tensions with Afghan President Hamid Karzai over US plans to begin talks with the Taliban to try to seek a negotiated peace after 12 years of war, acknowledging "huge mistrust" between the Western-backed government in Kabul and its arch-foes.

"We do think that ultimately we're going to need to see Afghans talking to Afghans about how they can move forward and end the cycle of violence there so they can start actually building their country," Obama said.

As a sign of displeasure with the US move, Karzai has suspended talks with Washington on a troop agreement. But Obama said he welcomed Karzai's announcement that Afghan forces would soon take responsibility for security from the US-led Nato peacekeeping force.

On Syria, Obama said reports that the United States was ready to "go all in" to war in the country were exaggerated. He reiterated his view that President Bashar Assad's government had used chemical weapons, while acknowledging that Russia was sceptical on this point.

For her part, Merkel said Germany would not deliver weapons to the rebels, even though a European Union arms embargo on Syria has lapsed.

Pragmatic relationship

Obama arrived in Germany from a two-day summit with Group of Eight leaders in Northern Ireland where he and other leaders clashed with Russian President Vladimir Putin over Syria.

He last came to Berlin in 2008, during his first campaign for the presidency. Back then, Merkel refused to allow him to speak at the Brandenburg Gate. Instead he spoke down the road in Berlin's Tiergarten park, attracting a crowd of 200 000 - largely enthusiastic admirers.

The Democrat has forged a pragmatic - if not warm - relationship with the conservative Merkel, who is hoping to get a boost out of the visit months before a German election.

In a message which seemed designed for her domestic audience, she told Obama at the news conference that balance was essential in government monitoring of Internet communications.

"I made clear that although we do see the need for gathering information, the topic of proportionality is always an important one and the free democratic order is based on people feeling safe," said Merkel, who grew up in the communist East and experienced the Stasi first hand.

Obama said the US had thwarted at least 50 threats because of its monitoring programme, including planned attacks in Germany.

Reassurance on drones

"So lives have been saved and the encroachment on privacy has been strictly limited," he said.

A poll last week showed 82% of Germans approve of Obama, but the magic of 2008, when he was feted like a rock star, has faded amid concerns about his tactics in combating terrorism.

In a nod to the criticism, Obama defended his failure to close the Guantanamo Bay prison on Cuba that his predecessor George W Bush opened after the invasion of Afghanistan in 2001, shortly after the 11 September attacks in New York and Washington.

He also reassured Germans that the US military was not using German bases to launch unmanned drone attacks.

For Obama, who grew up in Hawaii and spent part of his childhood in Indonesia, Europe has sometimes seemed an after-thought. The signature foreign policy initiative of his first term was his "pivot" to Asia.

But analysts say plans to create a free-trade zone between the United States and European Union are a sign that he is repositioning policy to focus on Europe.

Enduring bonds

"The Obama administration has found it harder than expected to work with emerging powers and has fallen back to a more traditional reliance on European allies," said Charles Kupchan, professor of international affairs at Georgetown University.

"Washington doesn't have better options. And when it comes to who to engage in Europe, Germany grows stronger and stronger."

Obama spoke of "enduring bonds based on common values" that linked the United States to Europe.

Peacekeeping: Ban warns of new threats

UN Secretary General Ban Ki-moon said on Wednesday the world body's peacekeeping efforts face growing dangers from non-traditional threats such as suicide bombers and improvised explosive devices.

Ban told reporters on a visit to a peacekeeping training base near the Chinese capital that the UN must ensure that peacekeepers have the necessary training and specialised skills to face the threats.

These threats "are not new to the UN, but they are more intense," Ban said.

Ban's comments came at the start of a three-day visit to China to meet with newly appointed President Xi Jinping and Premier Li Keqiang. Their discussions are expected to include China's growing involvement in UN affairs, along with international topics including tensions on the Korean Peninsula.

He said peacekeepers need to react rapidly and gather and analyze information on remote areas. In order to ensure that capability, the UN is deploying drones for the first time to its mission in the Democratic Republic of the Congo, Ban said.

Ban also praised China's commitment to peacekeeping efforts. China has dispatched 22 000 troops to 23 missions, more than the other four permanent members of the UN Security Council combined.

"I applaud this solidarity," Ban said, noting 14 Chinese peacekeepers have died while serving.

Threatened

In all, nearly 3 000 peacekeepers have died in the line of duty since the first were deployed 65 years ago - 103 of them last year in Congo, Darfur, Sudan, Ivory Coast and other countries. Eight more civilian contractors, such as pilots, also died during deployment with peacekeeping missions in 2012.

The United Nations currently has more than 113 000 personnel serving in 16 UN peacekeeping and political missions.

In the latest crisis to hit peacekeeping efforts, Austria announced it would pull out its 377 peacekeepers from the 911-member UN force in the Golan Heights after fighting from the Syrian civil war threatened their positions earlier this month.

That will leave just 341 Philippine soldiers and 193 from India in the strategic area along the border with Israel.

Philippine Foreign Secretary Albert del Rosario told reporters on Wednesday that his country will keep its peacekeepers in place at least until 3 August. It will then consider a request from Ban to stay on, del Rosario said.

NEWS,30.09.2012

Wall Street: Spain, central bankers, US jobs

Wall Street will open October with a busy week, highlighted by low expectations for global manufacturing data and the US jobs report. Any positive surprises may help lift the market.Spain is the wild card. And if it's played well, then the bulls might dance.The S&P 500 finished its third positive quarter in the last four on Friday, despite suffering its largest weekly percentage decline since June. For the past three months, the S&P 500 gained 5.9% - its best third quarter since 2010. In contrast, the index was down 1.3% for the week.The benchmark S&P 500 earlier this month reached its highest level since late 2007. Yet uncertainty remains over whether stocks can hold their gains against the headwinds of a struggling economy. That explains, in part, the retreat over the last several days.The S&P 500 hit a high of 1474.51 in mid-September before pulling back by a bit more than 2%. A run at 1500 seems possible, but the flurry of economic and world events ahead probably will prevent a major advance in the coming week.Bulls are betting that last week's Spanish budget proposals will be a preamble to a bailout request by Mariano Rajoy's government. The move would be seen as a first step to get the finances of the euro zone's fourth-largest economy in order and would clear some of the market uncertainty regarding the euro zone crisis.Monetary policy is also on the list of market catalysts this week. Federal Reserve Chairman Ben Bernanke is scheduled to speak today and the minutes of the latest FOMC meeting are set for release on Thursday. The week's agenda includes meetings of the European Central Bank, the Bank of England and the Bank of Japan.Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin, said he believes "we could see a rebound" this week "if we get some of the stars aligning and have Spain ask for a bailout, the ECB announcing favourable terms for that bailout, and if we see the Bank of Japan announce further monetary intervention."If Spain and the ECB don't deliver, we could set ourselves up for a further lateral move in the markets," Jacobsen added. "A negative would be if Rajoy flat-out denies that they need a bailout."The ECB and BOJ are set to meet on Thursday, with the Bank of Japan's meeting extending until Friday.Factories, jobs and the US election Chinese factory and business conditions data will kick off a numbers-heavy calendar for markets. Manufacturing PMI, due on Monday, is expected to show a second straight month of contraction.A snapshot of US manufacturing activity will be provided today when the Institute for Supply Management releases its September index. The September ISM reading is expected to show another month of contraction, but at a slightly slower pace than in August. On Wednesday, the ISM will release its US services-sector Purchasing Managers' Index, which could show a slight deceleration in the pace of growth in the non-manufacturing sector."We have Chinese economic data over the weekend, and we'll see how markets react on Monday," said Wasif Latif, vice president of equity investments at San Antonio, Texas-based USAA Investment Management."It seems like the market is bracing for bad numbers, meaning if they're not as bad, it could be market-positive," Latif said.Non-farm payrolls for September, due on Friday, are forecast to gain 115,000, while the US unemployment rate is seen ticking up 0.1% from August to 8.2% in September.The jobs data will come on the heels of the first of three US presidential debates, scheduled for Wednesday night.With just one month to go before election day on November 6, Wall Street will watch the economic data more closely than it usually does. In a year when the incumbent president is campaigning for a second term, the country's economic numbers tend to become more positive as election day approaches.The US stock market also tends to gain in years when incumbents are re-elected, according to the Stock Trader's Almanac.For the year, the Dow Jones industrial average is up 10%, while the Standard & Poor's 500 Index is up 14.6% and the Nasdaq Composite Index is up 19.6%.Recent poll numbers point to a strengthening lead by President Barack Obama, but a weak payrolls reading could give some hope to Republican challenger Mitt Romney."If Romney doesn't turn the ship with a very strong (debate) performance, the president is going to win," said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.He said the trend in the polls has taken away some of the market uncertainty regarding the presidential election. He added that an ECB- or Spain-related headline out of Europe on Thursday could overcome almost anything that would happen Wednesday night during the debate."I think the market is coming to terms with the fact the president is ahead, and unless something significant changes, (he) will prevail.

France's Hollande faces protests over EU fiscal pact

Thousands have marched through Paris to protest against a European fiscal pact, the first major display of public anger to face President Francois Hollande since his May election.The march organised by the Left Front coalition drew trade unionists, far-left sympathisers and other opponents of the EU accord, two days before lawmakers start to debate a draft law of the budget pact in the lower house of parliament.The budget discipline pact, which Hollande supports, is expected to pass in both houses of parliament thanks to support from Socialist lawmakers helped by advocates of fiscal discipline in the centre-right opposition.But the vote has exposed rifts in Hollande's ruling coalition, with far-left allies and Greens planning to vote against it in a challenge to the increasingly unpopular Socialist leader's authority.If Hollande has to rely on opponents to pass the pact, the vote could deepen the rift in his alliance and embolden left-wing allies seeking a change of course from strict adherence to European deficit targets."To him (Hollande), this vote was a formality that simply needed to be rushed through," said Jean-Luc Melenchon, a fiery leftist orator who ranked fourth in an April presidential vote."Now he will understand this is not the case, that in France and in the rest of Europe there is an organised opposition to this pact and to all austerity policies."Wearing his signature red scarf, Melenchon marched at the head of protesters among giant banners bearing slogans such as "Francois Hollande, We Don't Want Your Treaty" and "In Greece and in France, Let's Fight Against Finance".It was the latest in a series of protests across southern Europe this week as tens of thousands took to streets in Spain, Italy, Greece and Portugal to voice their anger over hardship imposed by austerity policies.For Hollande, the outcry from many people who voted him into power highlights the difficulty of pleasing a largely left-wing support base even as he shuns painful cuts to welfare programmes.A 2013 budget unveiled on Friday shaves 30 billion euros off the public deficit, largely through tax increases on big businesses and the wealthy. But it avoids the type of painful austerity measures imposed elsewhere in Europe.Efforts to preserve the generous public safety net have done little to preserve Hollande's approval rating, which has plummeted since his election, hitting a low of 43 percent in one poll last week."This treaty will considerably worsen the situation in the European Union and in France," said one protester, Pierre Khalfa. "We can already see that austerity policies in Europe are leading to recession, so we need to start a movement against these policies, which will lead our country into a wall."Left Front organisers said some 40,000 people joined the Paris protest. Police declined to provide an estimate.

Economic protests in Spain, Portugal

Tens of thousands of Spaniards and Portuguese rallied in the streets of their countries' capitals on Saturday to protest enduring deep economic pain from austerity measure, and the demonstration in Madrid turned violent after Spaniards enraged over a long-lasting recession and sky-high unemployment clashed with riot police for the third time in less than a week near Parliament.The latest violence came after thousands of Spaniards who had marched close to the Parliament building in downtown Madrid protested peacefully for hours. Police with batons later moved in just before midnight to clear out those who remained late because no permission had been obtained from authorities to hold the demonstration.Some protesters responded by throwing bottles and rocks. An Associated Press photographer saw police severely beat one protester who was taken away in an ambulance.Spain's state TV said early on Sunday that two people were hurt and 12 detained near the barricades erected in downtown Madrid to shield the Parliament building. Television images showed police charging protesters and hitting them with their batons, but the violence did not appear as severe as a protest on Tuesday when 38 people were arrested and 64 injured.Earlier, the boisterous crowds let off ear-splitting whistles and yelled "Fire them, fire them!" referring to the conservative government of Prime Minister Mariano Rajoy, and venting their anger against tax hikes, government spending cuts and the highest unemployment rate among the 17 nations that use the euro currency.Freezing salariesOn Friday, Rajoy's administration presented a 2013 draft budget that will cut overall spending by $51.7bn, freezing the salaries of public workers, cutting spending for unemployment benefits and even reducing spending for Spain's royal family next year by 4%.Pablo Rodriguez, a 24-year-old student doing a master's in agricultural development in Denmark, said the austerity measures and bad economy mean most of his friends in Spain are unemployed or doing work they didn't train for.He doubts he will put his education to use in Spain until he is 35 or 40, if ever, will probably get job abroad and stay."I would love to work here, but there is nothing for me here," Rodriguez said. "By the time the economy improves it will be too late. I will be settled somewhere else with a family. One of the disasters in Spain is they spent so much to educate me and so many others and they will lose us."Madrid authorities put the number of protesters at 4 500 though demonstrators said the crowd was larger. In neighbouring Portugal, tens of thousands took to the streets of Lisbon on Saturday afternoon to peacefully protest against even deeper austerity cutbacks than Spain has imposed.Retired banker Antonio Trinidade said the budget cuts Portugal is locked into in return for the nation's $101bn bailout are making the country's economy the worst he has seen in his lifetime. His pension has been cut, and he said countless young Portuguese are increasingly heading abroad because they can't make a living at home.Robbing the people"The government and the troika controlling what we do because of the bailout just want to cut more and more and rob from us," Trinidade said, referring to the troika of creditors -the European Commission, the European Central Bank and the International Monetary Fund. "The young don't have any future, and the country is on the edge of an abyss. I'm getting toward the end of my life, but these people in their 20s or 30s don't have jobs, or a future."In Spain, Rajoy has an absolute majority and has pushed through waves of austerity measures over the last nine months - trying to prevent Spain from being forced into the same kind of bailouts taken by Portugal, Ireland and Greece. But the country has an unemployment rate of nearly 25%, and the jobless rate is more than 50% for those under age 25.Investors worried about Spain's economic viability have forced up the interest rate they are willing to pay to buy Spanish bonds.Finance Minister Cristobal Montoro said on Saturday that the budget cuts for next year were necessary to ease market tensions and try to bring down high interest rates Spain must pay to get investors to buy its bonds.

NEWS,20.08.2012

ECB: Greek exit viable but undesirable

A Greek exit from the eurozone would be manageable, European Central Bank (ECB) policymaker Joerg Asmussen was quoted on Monday as saying, although he would prefer it if the crisis-stricken country remained within the single currency bloc. He also said that the Bundesbank, whose chief ECB President Mario Draghi singled out earlier this month for expressing reservations over the bank's new bond-buying plans, was not isolated in Europe.The comments on Greece from the ECB executive board member, Germany's deputy finance minister until he took the post at the end of last year, sum up a growing debate in Berlin on the possibility of cutting Greece free. Most would prefer not to, but an increasing number of MPs and influential figures have come out of the woodwork saying the eurozone is strong enough to deal with the fallout. "Firstly, my clear preference is that Greece should remain in the currency union," Asmussen was quoted as saying in an advance copy of an interview due to appear in Germany's Frankfurter Rundschau on Monday. "Secondly, it is in Greece's hands to ensure that. Thirdly, a Greek exit would be manageable."But Asmussen also warned that a so-called Grexit would not be as orderly as some imagined: "It would be associated with a loss of growth and higher unemployment and it would be very expensive - in Greece, Europe as a whole and even in Germany."He also said it would be good if the eurozone's permanent bailout mechanism, the European Stability Mechanism (ESM), successor to the European Financial Stability Facility (EFSF), were up and running as soon as possible."The ESM is a better instrument for dealing with the crisis than the EFSF," he was quoted as saying.Germany's Constitutional Court has said it will deliver its ruling on whether the ESM and the fiscal pact are compatible with the German constitution on September 12. Germany cannot legally ratify the two treaties without the go-ahead from the court and the ESM cannot come into effect without German backing.On eurozone bonds, Asmussen said such common debt was only logical in a full fiscal union and added that they were not crisis management tools.Draghi indicated earlier this month that the euro zone's central bank may again start buying government bonds to reduce crippling Spanish and Italian borrowing costs but not before September and only if governments activated the euro zone's bailout funds to join the ECB in buying bonds.Whether the plan goes ahead at all, however, remains largely a question of whether leaders in Germany, whose own central bank opposes bond-buying, agrees over the course of a series of key meetings next month.Whereas Draghi said that Bundesbank chief Jens Weidmann had been the only ECB policymaker to register reservations against the bond-buying proposals at this month's meeting, Asmussen hinted that the division may not be as clear cut."No-one should try to give the impression that the Bundesbank or its president is isolated," said Asmussen, adding that he and Weidmann worked closely together and trusted each other.Noting that Draghi had not said the new bond-buying programme would be limited in terms of time and volume, the paper asked Asmussen if this meant it could be successful as it would be unlimited."You heard him correctly. But wait and see. We are working on further details of the new programme and we will discuss this at our next meeting," Asmussen replied.

The Unrepentant and Unreformed Bankers

These days, the business sections of newspapers read like rap sheets. GE Capital, JPMorgan Chase, UBS, Wells Fargo and Bank of America tied to a bid-rigging scheme to bilk cities and towns out of interest earnings. ING Direct, HSBC and Standard Chartered Bank facing charges of money laundering. Barclays caught manipulating a key interest rate, costing savers and investors dearly, with a raft of other big banks also under investigation. Not to speak of the unprecedented wrongdoing that precipitated the financial crisis of 2008.Evidence gathered by the Financial Crisis Inquiry Commission clearly demonstrated that the financial crisis was avoidable and due, in no small part, to recklessness and ethical breaches on Wall Street. Yet, it's clear that the unrepentant and the unreformed are still all too present within our banking system.A June survey of 500 senior financial services executives in the United States and Britain turned up stunning results. Some 24 percent said that they believed that financial services professionals may need to engage in illegal or unethical conduct to succeed, 26 percent said that they had observed or had firsthand knowledge of wrongdoing in the workplace, and 16 percent said they would engage in insider trading if they could get away with it.That too much of Wall Street remains unchanged is not surprising. Simply stated, the banks and their leaders have paid no real economic, legal or political price for their wrongdoing and thus have not felt compelled to change.On the economic front, the financial sector has rebounded nicely from its brush with death, thanks to an enormous taxpayer bailout. By 2010, compensation at publicly traded Wall Street firms had hit a record $135 billion.Last year, the profits of the nation's five biggest banks exceeded $51 billion, with their chief executives all enjoying pay increases. By 2011, the 10 biggest U.S. banks held 77 percent of the nation's banking assets.On the legal front, enforcement has been woefully inadequate. Federal criminal financial fraud prosecutions have fallen to a two-decade low. Violations are settled for pennies on the dollar  the mere cost of doing business, with no admission of wrongdoing and with the bill invariably picked up by insurers or shareholders. (When it's shareholders, that's not someone else far away, that's your 401(k), pension fund or mutual fund.) When Goldman Sachs was charged with failing to set policies to prevent insider trading, it was fined $22 million, an amount the bank collects in about seven hours of trading. Goldman's record $550 million penalty for securities fraud in 2010 amounted to less than 2 percent of that year's revenue.On the political front, after a brief stint in the penalty box, the big banks have resumed the political muscling that got them two decades of deregulation.To block reform, the financial industry has spent more than $317 million on lobbying in Washington over the past two years and more than $230 million in federal political contributions in the 2010 and 2012 election cycles.It's been to good effect. Two-thirds of the regulations called for in the financial reform law passed two years ago are still not in place. And the House Republicans, the banks' sturdiest allies, have slashed at the budgets of the Securities and Exchange Commission and the Commodities Futures Trading Commission to impede their ability to investigate wrongdoing.Clearly, the present order is unsustainable. We need to demand fundamental changes now, breaking up the big banks to snap their stranglehold on our markets and our democracy, ensuring that the newly minted financial reform laws are implemented, and wringing out rampant speculation.But true reform can only occur if we root out the corruption that has distorted our banking system and undermined the productive work of the many good people in the financial sector.The system of financial law enforcement is clearly broken. Think of it this way: If someone robbed a 7-Eleven of $1,000 but could settle a few days later for $25 and no admission of guilt, would they do it again?Only enforcement with real consequences will work. That means vigorous pursuit of criminal cases against individuals involved in wrongdoing, the surest method to deter malfeasance.It means enforcement agencies eschewing weak settlements in civil cases and seeking remedies with teeth such as civil penalties, restitution and executives forfeiting their jobs. And, it means tougher financial fraud laws. In that regard, the bipartisan proposal by Sens. Jack Reed, D-R.I., and Charles Grassley, R-Iowa, to increase fines for securities fraud is a place to start.To make any of this a reality, the U.S. Department of Justice and the federal regulators must have the will and the resources to do the job. President Obama has asked for additional funds for the Department of Justice, the SEC and the Commodities Futures Trading Commission. Giving these agencies the tools to detect and prosecute wrongdoing will more than pay for itself  the Commodities Futures Trading Commission's fine against Barclays for interest rate manipulation alone will pay for almost an entire year of that agency's budget.None of these changes will come easily, but this much is clear: We cannot allow Wall Street to continually flout our sense of right and wrong, to erode faith in our legal and political systems, and to put our financial system and economy in jeopardy.

NEWS,22.06.2012

Extra cash needed to bailout Spanish banks

 

Independent auditors said Spanish banks may need up to 62 billion euros in extra capital, to be filled mostly by a euro zone bailout, after Spain's medium-term borrowing costs spiralled to a euro-era record on Friday.Euro zone finance ministers met in Luxembourg to discuss how to channel up to 100 billion euros in aid to Spanish lenders weighed down by bad debts from a burst property bubble. Madrid's economy minister said a formal request would be made in days for the bailout, which was agreed two weeks ago.Many in the markets see the package as a mere prelude to a full programme for the Spanish state, which Madrid vehemently denies it will need.Spain's financial plight took centre stage a week before a European Union summit tackles long-term plans for closer fiscal and banking union in a bid to strengthen the euro's foundations, after bailouts for Greece, Ireland and Portugal failed to end a 2-1/2-year old debt crisis.To pave the way, the leaders of Germany, Italy, France and Spain will meet in Rome."We are clearly seeing additional tension and acute stress applying to both banks and sovereigns in the euro area," International Monetary Fund chief Christine Lagarde, who attended the Luxembourg meeting, told reporters."With that in mind, the IMF believes that a determined and forceful move towards complete European monetary union should be reaffirmed."Two independent audits by consultants Roland Berger and Oliver Wyman found that Spanish banks would need between 51 and 62 billion euros in extra capital to weather a serious downturn in the economy and new losses on their books.The Bank of Spain said the 100 billion euros offered to Madrid two weeks ago would give a wide margin of error. Spain's three biggest banks would not need extra capital even in a stressed scenario, it said. The government said it did not expect to shut any banks and would restructure those in trouble.In Luxembourg, the finance ministers decided Spain should initially apply to the euro zone's temporary rescue fund, the European Financial Stability Facility, with the loan taken over by the permanent bailout fund the European Stability Mechanism (ESM) once it is up and running after July 9."The financial assistance will be provided by the EFSF until the ESM becomes available, and then it will be transferred to the ESM," Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, told a news conference."We would expect the Spanish authorities to put forward a formal request for financial assistance by next Monday," he said.Such a solution should avert a problem which had scared investors: debt issued by the ESM must be paid back first in case of a Spanish default, relegating private creditors lower in the pecking order. Because the new bailout debt will originate from the EFSF it will be issued without that requirement.Earlier on Thursday, Madrid sold 2.2 billion euros in medium-term bonds, drawing strong demand almost entirely from domestic banks. Yields on 5-year paper rose to a 15-year high of 6.07%, a level regarded by analysts as unaffordable for any prolonged period."They raised 2.2 billion versus a 2 billion target, so they can raise the money," said Achilleas Georgolopoulos, a strategist at Lloyds in London."Then the (question is), are the yields threatening for the medium term? And yes, clearly they are much higher than the previous auction ... But still they can continue for a few months to fund at these levels."The finance ministers also signalled there may be some leeway for Greece, following the formation of a coalition of mainstream parties committed to the country's 130 billion euro EU/IMF bailout but determined to renegotiate some of its terms.Athens will ask lenders for two more years to hit fiscal targets and an extension to unemployment benefits as it seeks to soften the punishing terms of the bailout that saved the country from bankruptcy.Greece's euro zone partners, in particular paymaster Germany, have offered modifications but no radical re-write of the conditions attached to the lifeline agreed in March.Juncker said nothing would be decided until the troika of EU, IMF and European Central Bankers had returned to Athens for a look at the books, starting on Monday."We will have a look into the findings of the troika and then we will discuss in detail the different means and instruments which can be used," he said. "It doesn't make sense for the time being to give more precise indications on the content of the programme."

Fuel companies should justify pump prices - AA

 

Fuel companies need to tell the public why their margins are creeping higher though oil costs are dropping, the AA says.AA petrol watch spokesperson Mark Stockdale told  there is a lag between what fuel companies pay for petrol and what consumers pay at the pump."Over time margins are certainly increasing," he said."If the fuel companies are saying historically margins haven't been high enough, then they need to go to the public and explain why they think margins should be rising."Stockdale's comments follow BP's claim that the company gets bad press even though prices have fallen back under $2 for the first time in nearly a year.BP's External Affairs manager Jonty Mills told  yesterday that "there's a bit of scepticism out there and it's hard for us to get a good rap in the media"."However I think we've shown, we've dropped the price six times consecutively in the last month and a half. BP have led four of those," he said.One of BP's rivals, Gull, further cut prices for regular 91 Octane petrol to $1.959 today.But Stockdale said the rise in margin of three to four cents in the last couple of months is "too much too soon" and he does not understand what has happened over that period to justify it.Though petrol cuts have been coming "thick and fast"be paying too much at the pump."We're basing it on the margin as it was in March, and based on those numbers we think there could be a cut of about three cents per litre," he said.Stockdale thinks there should be another price cut within the next week.