NEWS,27. AND 28.02.2013

News of the Day From Across the Globe

1 Premier ousted: Slovenia's Parliament ousted Prime Minister Janez Jansa and his conservative government Wednesday, designating a financial expert from the opposition to try to form a new administration. The moves come amid corruption allegations against Jansa and growing public anger over the struggling economy and austerity measures that have seen living standards fall and unemployment rise. The 55-33 no-confidence vote named Alenka Bratusek as prime minister-designate. Bratusek, 42, would be the first woman to lead Slovenia's government since its secession from Yugoslavia in 1991.

2 Iraq warning: Iraqi Prime Minister Nouri al-Maliki warned Wednesday that a victory for rebels in the Syrian civil war would create a new extremist haven and destabilize the wider Middle East, sparking sectarian wars in his own country and in Lebanon. The prime minister's remarks reflect fears by many Shiite Muslims in Iraq and elsewhere that Sunni Muslims would come to dominate Syria should President Bashar Assad be toppled. 

3 Corruption case: Vassilis Papageorgopoulos, the former mayor of Greece's second city, Thessaloniki, and two of his top aides were sentenced to life in jail Wednesday after being found guilty of embezzling almost $23.5 million in state funds. It's a rare conviction in a country where political corruption has contributed to Greece's dysfunction and economic decline.

4 Swiss shooting: A longtime employee opened fire at a wood-processing company in central Switzerland on Wednesday, leaving three people dead, including the assailant, in the country's second multiple-fatality shooting in two months, police said. Seven other people were wounded, six of them seriously, in the shooting at the premises of the company Kronospan, in the small town of Menznau. The incident occurred as the Swiss Parliament prepares to consider tightening some aspects of the country's famously lax gun legislation.

5 Shark attack: About 150 friends and family of 46-year-old Adam Strange wrote messages to him in the sand and stepped into the water Thursday at a New Zealand beach to say goodbye after he was killed Wednesday by a large shark. Strange, an award-winning television and short film director, was swimming near popular Muriwai Beach Wednesday when he was attacked by a shark that may have been 14 feet long. The fatal attack is one of only about a dozen in New Zealand in the past 180 years.

6 Lethal fire: A fire broke out at an illegal six-story plastics market in the Indian city of Kolkata on Wednesday, killing at least 19 people, police said. The blaze was likely caused by a short circuit, police said.

7 Lion gangster: Authorities have removed four lions and two bears from the Bucharest estate of a notorious Romanian gangster. Ian Balint, who reportedly used the animals to threaten his victims, was arrested Feb. 22 with dozens of others on charges of attempted murder, kidnapping, blackmail and possessing illegal weapons. Environmental authorities tranquilized the animals Wednesday and transported them to a zoo.

8 Tallest hotel: The JW Marriott's Marquis Dubai formally opened this week after gaining the title of tallest hotel from Guinness World Records. At 1,099 feet, the 72-story hotel towers over the skylines of most cities.

 

US economy shows strength

 

Even with automatic spending cuts looming, the outlook for the US economy brightened a bit Tuesday after reports showed that Americans are more confident and are buying more new homes.Home prices are also rising steadily, and banks are lending more. Such improvements suggest that the economy is resilient enough to withstand the deep government cuts that will kick in Friday.That's especially encouraging because uncertainty over the federal budget could persist for months."The stars are lining up for stronger private sector growth this year," said Craig Alexander, chief economist at TD Bank.Sales of new homes jumped nearly 16% in January to their highest level in 4 years, adding momentum to the housing recovery. Consumer confidence rose in February after three months of declines. And home prices increased in December from the same month in 2011 by the largest amount in more than six years.The upbeat economic news contributed to a rally on Wall Street. The Dow Jones industrial average jumped more than 100 points.Consumers still face numerous burdens. Among them is a sharp increase in gas prices. The national average for a gallon, $3.78 ($1 a litre), has surged 44 cents in a month.And Social Security taxes rose 2 percentage points beginning January 1. This year, the increase will cost a typical household that earns $50 000 about $1 000. Income taxes for the highest-earning Americans also rose.Both factors could reduce overall spending.On Friday, about $85 billion in automatic spending cuts are to kick in, and there's little sign that the White House and Congress will reach a budget deal to avoid them. The cuts will cause furloughs and temporary layoffs of government workers and contractors and sharply reduce spending on defense and domestic programs.For about 2 million long-term unemployed, benefits now averaging $300 a week could shrink by about $30. Payments that subsidize clean energy, school construction and state and local public works projects could be cut. Low-income Americans seeking heating or housing aid might face longer waits.Overall, the tax increases and spending cuts could shave up to 1.2 percentage points from growth this year, economists estimate. Alexander estimates that without the spending cuts or tax increases, the economy would expand more than 3 percent this year. Instead, he predicts growth of only 2%.But growth should accelerate later this year as the effects of the government cutbacks ease, he and other economists say. And several reports on Tuesday suggest that the economy's underlying health is improving despite the prospect of lower government spending and further budget stalemates:

• The Standard & Poor's/Case-Shiller 20-city home price index rose 6.8% in December from a year earlier. That was the biggest year-over-year increase since July 2006. Rising home prices tend to make homeowners feel wealthier and encourage more spending. They also cause more people to buy before prices rise further. And banks are more likely to provide mortgages if they foresee higher home prices.

• Consumer confidence rose after three months of declines, according to the Conference Board, a business research group. Confidence had plunged in January after higher taxes cut most Americans' take-home pay. The rebound, though, suggests that some consumers have begun to adjust to smaller paychecks. The consumer confidence index rose to 69.6 in February from 58.4 in January. That's higher than last year's average of 67.1.

• Bank lending rose 1.7% in the October-December quarter, the Federal Deposit Insurance said. It was the sixth rise in seven quarters. Banks made more commercial and industrial loans to businesses and auto loans to consumers. More lending means the Federal Reserve's policy of keeping interest rates at record lows will benefit more people. Chairman Ben Bernanke reiterated to Congress on Tuesday that the Fed's efforts are helping the economy and signaled that they will continue.

• Sales of new homes rose to a seasonally adjusted annual rate of 437 000, the Commerce Department said. That's the highest level since July 2008. The gain will likely encourage more construction. Higher sales are keeping the supply of new homes low, even as builders have tried to keep up. At the current sales pace, it would take only 4.1 months to exhaust the supply of new homes for sale. That's the lowest such figure in nearly eight years.

"Builders are not putting up homes fast enough to meet underlying demand," said Patrick Newport, an economist at IHS Global Insight.New homes have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90 000 in tax revenue, according to data from the National Association of Homebuilders.Construction hiring has picked up in recent months. The industry has gained 98,000 jobs since September, its best stretch since the spring of 2006 - before the housing bubble burst.

Will Italian Politics Be a Threat for International Financial Stability?

Mr. Grillo and the Five Star movement is part of a trend across the developed world, as electorates become disenchanted with established parties and vote for a protest party. From Occupy Wall Street to the Tea Party to the EU's Pirate Party, an increasing number of transatlantic voters tire of the options presented by established two party systems. This may be driven by the failure of governing parties to adapt to societal tensions raised by the current economic crisis. In that light, the strong protest vote in Italy should not be seen as an outlier.Despite the current uncertainty in the composition of the next government, Italy remains an important ally for the United States, and a key strategic partner in all future discussions about Europe and transatlantic relations. For this reasons America should follow carefully what happens in Italy. The demand for renewal and change that is the real message of recent elections is something too important to be considered just a local case. Understanding the political process of how Italian governments are formed is therefore key.On February 25th the results of the political elections in Italy stunned all commentators by presenting a country apparently deeply divided and a parliament that seems not to allow any reasonably stable coalition for leading the country.The polls gave a limited majority to the leftwing coalition (29.5% in the lower house) leading on Silvio Berlusconi's rightwing coalition (29.1%). But the surprise was the significant result of the "Five Stars movement" of Mr Beppe Grillo (25.5%) and the relatively low result achieved by current Prime Minister Mario Monti (10.5%).The new electoral law (approved late in 2012, just few months ahead of the elections), allows the left to gain a solid majority in the lower house (with 55% of the legislature, although they led the right-wing coalition by only 0.4% of the vote), but in the upper house, there is an apparent stalemate, as the left elected 123 senators, the right 117, Five Stars 54 and Monti 18. A coalition government must include two of the first three parties mentioned, as a government requires a majority in both houses.The problem is that, at the moment, there is not much appetite for an agreement. The left-wing coalition does not seem interested in a deal with Berlusconi and the Five Stars leader, Mr Beppe Grillo, suggested that he would not make any deal with anyone at all. It now appears that Mr Bersani would like to open a bridge to Mr Grillo rather than trying a grand coalition with Mr Berlusconi. It is unclear if he will succeed, but in any case it will be hard to imagine that Italy will have a strong government in this situation.As the new parliament assumes office on March 15th, there is time for negotiations and compromise. But in the meantime, talks need to be held also in order to designate the new leadership of the lower house and Senate and its constituent committees and to elect the new president of the Republic, as the incumbent's mandate is expiring in May.Who will govern Italy in the meantime? Currently, there is still a caretaker government in office, which is the existing cabinet of Prime Minister Monti. It is nevertheless expected that after the new parliament is fully operational, the president of the republic, Mr Giorgio Napolitano, will try to facilitate the forming of a government and is likely to give a mandate to a designate Prime Minister. As Bersani's leftwing coalition has the majority in the lower house, unless the coalition otherwise indicates, Bersani remains the likely next Prime Minister. But with no agreements for a majority, he will be rather unlikely to succeed.The Italian system is a parliamentary democracy, and the new government, that formally takes office at the moment the ministers are sworn in, needs to win a vote of confidence from both houses of the parliament immediately after taking office. In the past, the tradition has been that, if the designated Prime Minister, after having made his consultations, realizes that there is no support for his government, he will indicate so to the President and resign his post. That meant that the previous government remained as caretaker until a new Prime Minister was selected and then formed the government, or, if no solution was available, the president of the republic called for new elections and dissolved the government.Currently, Monti stays in office as Prime Minister until an alternative is selected, and the need for stability would suggest that until a solution is found the best is for him to stay. However, things are so uncertain, no one can predict when or if a new government would be formed.

Wall Street gains despite IMF warning

Wall Street advanced, with gains tempered by expectations that Congress will not act to stop automatic federal spending cuts that are widely expected to put the brakes on the pace of expansion in the world's largest economy.The International Monetary Fund warned it will downgrade its economic forecast for the US if US$85 billion of schedule federal spending cuts take effect on March 1.If all cuts go ahead, the IMF would lower its current estimate for a 2% expansion for US gross domestic product this year by at least 0.5%, IMF spokesman William Murray told reporters at a news briefing. Global growth also would be hit.In afternoon trading in New York, the Dow Jones Industrial Average rose 0.14%, the Standard & Poor's 500 Index gained 0.18%, while the Nasdaq Composite Index climbed 0.37%.Expectations of a slowdown in the pace of growth buoyed US Treasuries.Commerce Department data released today showed GDP expanded at an annual rate of 0.1% in the final three months of 2012, compared with a previously estimated 0.1% contraction. That was below the 0.5% growth forecast by economists polled by Reuters."It's pretty well baked into the cake that no action is likely to be taken on the sequestration tomorrow," Thomas Simons, a government debt economist in New York at Jefferies Group, one of 21 primary dealers that trade with the Fed, told Bloomberg. "GDP was weaker than expected. It's nice to see the negative sign go away, but it's still pretty weak."The negative sentiment was offset by the latest news on the labour market. Applications for jobless benefits surprisingly dropped 22,000 last week to 344,000. Economists polled by Reuters had expected first-time applications to fall to 360,000.Shares of JC Penney sank, last down 14%, after the company reported a net loss of US$552 million in the quarter ended February 2, compared with US$87 million a year earlier.In Europe, the Stoxx 600 Index finished the day with a 1% gain from the previous close. The index has advanced for the ninth straight month and is up 3.7% so far this year, according to Bloomberg.Good news on Europe's largest economy helped as German unemployment posted a surprise drop February.Benchmark stock indexes rose in Frankfurt and Paris, both advancing 0.6%, while the UK's FTSE 100 added 0.6%.The political impasse in Italy remains a concern for all of Europe. In Berlin, Italian President Giorgio Napolitano said the formation of a new government would take time and that it's important to keep in mind that the Monti government remains in office for now.

NEWS,17.10.2012

Putin says Russia will not be dictated to on arms sales

President Vladimir Putin said today that only the UN Security Council could restrict Russian weapons sales abroad, a remark that appeared aimed at defending the Kremlin against criticism of its arms supplies to the Syrian government."Only sanctions imposed by the UN Security Council can serve as a basis for limiting weapons supplies," Putin said, according to state-run Itar-Tass news agency."In all other cases, nobody can use any pretext to dictate to Russia on how it should trade and with whom," he was quoted as telling a meeting of a state commission on the arms trade.The West has criticised Russia for vetoing, along with China, three UN Security Council resolutions aimed at putting pressure on Syrian President Bashar al-Assad to end a conflict that has killed an estimated 30,000 people in 19 months.Russia sold Syria $1 billion worth of weapons last year and has made clear it would oppose an arms embargo in the Security Council because of what it says are concerns rebels fighting Assad's government would get weapons illegally anyway.Putin said in June that Russia was not delivering any weapons to Syria that could be used in a civil conflict.Turkey said on October 11 that a Syrian passenger plane grounded en route from Moscow to Damascus was carrying weapons. Moscow said the cargo included radar parts that were of dual civilian and military use but were fully legal.Moscow in 2010 scrapped plans to deliver high-precision air defence missile systems to Iran, citing sanctions imposed by the UN Security Council over Tehran's nuclear programme, a move welcomed by the United States and its European allies.Russia denies trying to prop up Assad, who allows Russia to maintain a naval supply facility in the port of Tartus that is its only military base outside the former Soviet Union.But Moscow says Syria's crisis must be resolved without foreign interference, particularly military intervention.

Greece declares progress as inspectors depart

Inspectors from Greece's international lenders will leave Athens after making substantial progress on talks to unlock aid for the near-bankrupt country but without agreement on crucial labour reforms, officials said today.After months of often heated and testy negotiations, Athens and its European Union and International Monetary Fund lenders appeared to be in the home stretch toward a comprehensive deal on spending cuts and reforms needed to avoid a Greek bankruptcy."I'm confident we're doing everything we have to do in order to get it (a deal) and get it soon, so that we can move towards a recovery," Prime Minister Antonis Samaras said at a meeting of European centre-right parties in Bucharest.A senior Greek government official earlier said the two sides had reached agreement on all issues except labour reforms.In a rare statement to reporters during talks late on Tuesday, the IMF's mission chief for Greece, Poul Thomsen, also declared that the two sides had agreed on "most policy issues", with agreement on the rest expected soon.Thomsen and his European Commission and European Central Bank counterparts are due to depart Athens today in order to brief leaders at a two-day European Union summit, where Greece's future will loom large despite not being the focus of talks.Once a deal on the austerity package and reforms is clinched, the so-called troika of EU, ECB and IMF lenders are due to present a report on Greece's progress in meeting the terms of its bailout and whether it can cut its debt down to sustainable levels.That report is expected to show that Greece is hugely off track on its commitments, which critics blame on a lack of political will, political paralysis during repeat elections this year and a deeper than expected recession.But with Greece due to run out of money next month and Europe determined to avoid fresh market turmoil that drags down bigger economies like Spain and Italy, Athens is expected to ultimately secure its next 31.5 billion euro aid tranche.Still, Athens needs the blessing of the troika on a 11.5 billion euro austerity package as well as a long list of reforms first to be able to unlock that aid.Talks on both fronts have moved slowly since July, with signs of progress tempered by tension and mistrust over the ability of Greece's political brass to push through public sector reform and generate savings."Hard red line" On Tuesday, the two sides resolved differences on the extent of Greece's recession next year and issues related to health spending cuts after hitting an impasse on labour reforms during an earlier round of talks, officials said.They agreed Greece's economy would contract 4.2% next year - a key estimate in calculations to determine whether Greek debt will be viable - after Athens initially predicted a 3.8% tumble and lenders forecast a 5% contraction.Officials also suggested that most of the issues related to the long-discussed spending cuts package had been resolved apart from disagreement over the use of brand name or generic drugs in the state healthcare system."There has been substantial progress on all fronts and only some issues remain open, mainly labour and structural," a second Greek government official said."We are confident these will also be resolved in time."

Wall Street rises on US housing data

Global stocks rose and the euro hit a one-month high today, helped by brighter prospects for resolving Spain's debt woes, while better-than-expected housing data and gains among financials lifted the US equity market.US and German government debt prices fell after Spain avoided a damaging ratings downgrade from Moody's and stronger-than-expected US housing data pointed to an improving economy, which reduced safe-haven demand.Growing speculation that Spain will ask for a bailout next month lifted the euro. A possible line of credit to Spain and some easing of German opposition to aid for Greece and Spain were also likely to support the euro in the near term.Wall Street was mostly higher, putting the S&P 500 on track for a third day of gains, but disappointing results from Intel Corp and IBM weighed on the Dow.Intel slumped 3.0% to $21.68 while IBM lost 5.2% to $200.08. Both were among the biggest drags on the Dow and Nasdaq 100.M&T Bank jumped 5.2% to $102.48 after posting third-quarter results, helping to lift the KBW Bank index 1.5%, while the S&P financial services index rose 1.1%, the biggest gainer among the 10 S&P 500 sectors."It seems like it's a classic earnings period reaction. Either people are too exuberant and expectations are raised too high to beat when the actual number comes out or people are too pessimistic and the earnings are just not as low," said Rick Meckler, president of hedge fund Liberty View Capital Management in Jersey City, New Jersey.The Dow Jones industrial average was down 7.52 points, or 0.06%, at 13,544.26. The Standard & Poor's 500 Index was up 6.30 points, or 0.43%, at 1,461.22. The Nasdaq Composite Index was up 10.01 points, or 0.32%, at 3,111.19.European shares rose for a third consecutive session after Spain clung to its top grade credit rating, bolstering expectations the euro debt crisis can be contained."Spain is in a better place for now," said Richard Robinson, a fund manager at Ashburton who recently bought shares of Spanish bank Bankinter and Italian bank Intesa on prospects of improved euro zone economic problems.The FTSE Eurofirst 300 index of top European shares gained 0.5% to close at 1,118.62. MSCI's all-country world equity index rose 0.8% to 338.24, extending Tuesday's 1.2% gain.The euro was up 0.55% at $1.3124, its highest since mid-September.Bond losses accelerated after data showed that groundbreaking on new US homes surged in September to its fastest pace in more than four years, another sign that the housing sector's budding recovery is gaining traction."The housing starts and permits are both up a ton. The market was already selling off, it started overnight with Moody's affirming Spain's investment grade rating," said James Newman, head of Treasuries and Agency trading at Keefe, Bruyette and Woods in New York.Benchmark 10-year notes fell 19/32 in price to yield 1.79%.Brent crude futures fell further and US crude turned lower in choppy trading after a report from the Energy Information Administration showed US crude oil stocks rose more than consensus expectations last week.December Brent fell 92 cents to $113.08 a barrel. US oil for November fell 21 cents to $92.88.