NEWS,06.07.2013

Two Koreas hold talks on joint zone

North and South Korea started rare talks Saturday on re-opening a joint industrial zone seen as the last remaining symbol of cross-border reconciliation.
The talks delayed by nearly two hours - follow months of friction and threats of war by Pyongyang after its February nuclear test attracted tougher UN sanctions, further squeezing its struggling economy.
Kaesong was the most high-profile casualty of the elevated tensions on the Korean peninsula but neither side has declared the complex officially closed, instead referring to a temporary shut down.
Both nations say they want to reopen the Seoul-funded industrial zone on the North Korean side of the border but blame each other for its suspension.
"We will do our best to have this meeting result in greater trust and co-operation between the two sides", South Korea's chief delegate, Suh Ho, told reporters in Seoul early Saturday before leaving for Panmunjom.
"Three months have passed since Kaesong came to a halt and damages and difficulties facing businesses are growing", the senior unification ministry official said.
Pyongyang, citing military tensions and the South's hostility toward the North, in April withdrew its 53 000 workers from the 123 Seoul-owned factories at the Kaesong park.
Until then the industrial park a valuable source of hard currency for the impoverished North  had proved remarkably resilient to the regular upheavals in inter-Korean relations.
Technical problems delayed the start of the talks at the border truce village of Panmunjom on Saturday as telephone lines to the South needed repairs, the unification ministry in Seoul said.
Want to work
Seoul is expected to call for a written guarantee aimed at preventing a recurrence of the unilateral shut down, a demand which the North would find it hard to accept as it would amount to Pyongyang swallowing its pride and accepting full responsibility for the suspension.
On the agenda are issues of checking on mothballed factory facilities and equipment, moving finished products and raw materials held up at Kaesong to the South and the reopening of the zone.
At an access road to Panmunjom, Suh encountered a group of businessmen with plants in Kaesong. They carried banners expressing hope that the talks would be successful. One read: "We want to work again. Restart Kaesong."
The meeting comes after a surprise move on Wednesday from North Korea, which restored a cross-border hotline and promised to let South Korean businessmen visit the estate and check on their closed factories.
Representatives of the South Korean companies in the zone have repeatedly urged the two sides to open talks to revive the moribund industrial park. The South wants its businessmen to be able to bring back finished goods and raw materials.
But some firms have threatened to withdraw from Kaesong, complaining they have fallen victim to political bickering between the two rivals.
The South's unification ministry responded cautiously by saying it would try to seek internationally accepted safeguards to develop Kaesong as a politically neutral zone.
"We have clarified our position many times that Kaesong must be developed as an area that follows international standards and where common sense prevails," unification ministry spokesperson Kim Hyung-Suk said.
Opposition parties in Seoul urged South Korean negotiators to exercise flexibility in Saturday's talks.
After repeatedly threatening Seoul and Washington with conventional and nuclear attack, Pyongyang has appeared in recent weeks to want to move towards dialogue.
Analysts say North Korea is mindful of a US demand that it improve ties with Seoul before there can be any talks with Washington.
After plans for high-level talks last month on the future of the Kaesong estate collapsed over a protocol dispute, Pyongyang proposed direct, high-level dialogue with the US.

Nicaragua, Venezuela OK Snowden asylum

The presidents of Nicaragua and Venezuela offered Friday to grant asylum to NSA leaker Edward Snowden, one day after leftist South American leaders gathered to denounce the rerouting of Bolivian President Evo Morales' plane over Europe amid reports that the American was aboard.

Nicolas Maduro of Venezuela and Daniel Ortega of Nicaragua made their offers during separate speeches in their home countries Friday afternoon. Snowden, who is being sought by the United States, has asked for asylum in numerous countries, including Nicaragua and Venezuela.
"As head of state, the government of the Bolivarian Republic of Venezuela decided to offer humanitarian asylum to the young American Edward Snowden so that he can live in the homeland" of independence leader Simon Bolivar and the late President Hugo Chavez without "persecution from the empire," Maduro said, referring to the United States.
Chavez often engaged in similar defiance, criticizing US-style capitalism and policies. In a 2006 speech to the UN General Assembly of world leaders, Chavez called President George W Bush the devil, saying the podium reeked of sulphur after the US president's address. He also accused Washington of plotting against him, expelled several diplomats and drug-enforcement agents and threatened to stop sending oil to the US.
Maduro made the offer during a speech marking the anniversary of Venezuela's independence. It was not immediately clear if there were any conditions to Venezuela's offer. He added that several other Latin American governments have also expressed their intention of taking a similar stance by offering asylum for the cause of "dignity".
But his critics said Maduro's decision is nothing but an attempt to veil the current undignified conditions of Venezuela, including one of the world's highest inflation rates and a shortage of basic products like toilet paper.
"The asylum doesn't fix the economic disaster, the record inflation, an upcoming devaluation [of the currency], and the rising crime rate," Venezuelan opposition leader Henrique Capriles said in his Twitter account. Maduro beat Capriles in April's presidential election, but Capriles has not recognised defeat and has called it an electoral fraud.
Asked earlier this week about the possibility that any countries in the region would offer Snowden asylum, Geoff Thale, program director at the Washington Office on Latin America think tank, said that he thought Ortega would be careful not to damage his country's relationship with the US.
"Ortega has been tremendously successful at exploiting both the Alba relationship and the US relationship," Thale said, referring to the Alba leftist trade bloc that provides Nicaragua with petroleum subsidies. Although Ortega is publicly seen as anti-American, "Nicaragua and the US cooperate very closely on drug interdiction and the US and Nicaraguan militaries work very closely, too," Thale said before the asylum offer was made.
If circumstances allow
Ortega said Friday he was willing to make Maduro's same offer "if circumstances allow it," although he didn't say what the right circumstances would be when he spoke during a speech in Managua.
He said the Nicaraguan embassy in Moscow received Snowden's application for asylum and that it is studying the request.
"We have the sovereign right to help a person who felt remorse after finding out how the United States was using technology to spy on the whole world, and especially its European allies," Ortega said.
The offers came one day after Maduro joined other leftist South American presidents Thursday in Cochabamba, Bolivia, to rally behind Morales and denounce the incident involving the plane.
Spain on Friday said it had been warned along with other European countries that Snowden, a former US intelligence worker, was aboard the Bolivian presidential plane, an acknowledgement that the manhunt for the fugitive leaker had something to do with the plane's unexpected diversion to Austria.
It is unclear whether the United States warned Madrid about the Bolivian president's plane. U.S. officials will not detail their conversations with European countries, except to say that they have stated the U.S.'s general position that it wants Snowden back.
President Barack Obama has publicly displayed a relaxed attitude toward Snowden's movements, saying last month that he wouldn't be "scrambling jets to get a 29-year-old hacker."
But the drama surrounding the flight of Morales, whose plane was abruptly rerouted to Vienna after apparently being denied permission to fly over France, suggests that pressure is being applied behind the scenes.
Spanish Foreign Minister Jose Manuel Garcia-Margallo told Spanish National Television that "they told us that the information was clear, that he was inside."
He did not identify who "they" were and declined to say whether he had been in contact with the U.S. But he said that European countries' decisions were based on the tip. France has since sent a letter of apology to the Bolivian government.
Meanwhile, secret-spilling website WikiLeaks said that Snowden, who is still believed to be stuck in a Moscow airport's transit area, had put in asylum applications to six new countries. He had already sought asylum from more than 20 countries. Many have turned him down.
Wikileaks said in a message posted to Twitter on Friday that it wouldn't be identifying the countries involved "due to attempted US interference."
Icelandic lawmakers introduced a proposal in Parliament on Thursday to grant immediate citizenship to Snowden, but the idea received minimal support.
Galeano reported from Managua, Nicaragua. 

US stocks rise on solid jobs report

\US stocks Friday opened higher following a better-than-expected US jobs report, even as US Treasury yields spiked.
Five minutes into trade, the Dow Jones Industrial Average gained 73.57 (0.49%) to 15 062.12.
The broad-based S&P 500 rose 7.61 (0.47%) to 1 623.02, while the tech-rich Nasdaq Composite Index advanced 16.81 (0.49%) to 3 460.48.
Analysts expected low volumes Friday with many investors off for the long July 4 Independence Day holiday. US markets were closed Thursday.
Friday's gains came after the Labor Department reported that 195 000 jobs were added in June, above the 166 000 analyst estimate. The unemployment rate held steady at 7.6%.
Briefing.com analyst Patrick O'Hare called the jobs report "stronger than expected, but not undeniably strong." He cited some less propitious details in the report, such as a rise in the number of discouraged workers compared with a year ago.
The rise also came in the wake of Thursday's strong gains in European markets after European Central Bank (ECB) chief Mario Draghi said that ECB monetary policy would remain accommodative for "as long as necessary."
Despite the gains, spiking US Treasury yields were a source of concern. The 10-year Treasury rose to 2.70% compared with 2.50% Wednesday. The yield on the 30-year bond rose to 3.65% from 3.50%.

 

Oil dips as supply concerns ease

Oil slipped from a two-week high above $106 a barrel on Thursday after Egypt's armed forces toppled its president, easing concerns over the threat of supply disruption in the Middle East.
The Suez canal, a vital waterway for oil shipments, was not affected by the unrest, but analysts said real and threatened supply disruptions in the Middle East, which pumps a third of the world's oil, and in other regions would support prices.
"It is too early to say that the situation has calmed down, but the safe operation of the Suez, which is in the interest of both Persian Gulf countries and oil-consuming nations, seems to be guaranteed," Tamas Varga, an analyst at oil brokers PVM, said.
Brent crude fell 82c to $104.94 a barrel by lunchtime on Thursday after rising as high as $106.03 on Wednesday.
US crude slipped 48c to $100.76, falling from a 14-month peak of $102.18 earlier.
Besides the perceived risks to Middle East supply due to tension in Egypt, disruption to exports in Libya and Iraq and relatively scarce supply of Russian crude into the Mediterranean have tightened physical oil flows.
"It is still too early to sound the all-clear," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.
"Supply risks are likely to lend continued support to oil prices."
In addition to concerns about Middle East supplies, the US benchmark received a boost when a weekly inventory report showed stockpiles fell by more than 10 million barrels, the biggest drop for the time of year since 2000.

NEWS,23.05.2013

Eurozone slump eases in May

The downturn across eurozone businesses eased slightly this month, although a dearth of new orders means the bloc's economy is likely to contract again in the second quarter, business surveys showed on Thursday.

Markit's flash eurozone Services PMI, which surveys around 2 000 companies ranging from major banks to caterers, rose in May to 47.5, a three-month high, from 47.0 in April.

While that was a little better than economists polled expected, the PMI has now spent 16 straight months below the 50 mark that divides growth and contraction.

French companies continued to fare poorly this month, while activity in German firms effectively stagnated.

Overall, survey compiler Markit said the surveys pointed to a similar economic performance in the second quarter as the 0.3% contraction the eurozone logged in the January-March period.

"There are signs the rate of decline is easing, which does suggest we may be moving into a period of stabilisation, but it's taking a lot longer than most people anticipated," said Chris Williamson, chief economist at Markit.

"It's looking more like the end of the year (until) we're going to see the numbers start to show signs of stabilising."

The new orders services index fell to 45.3 from 46.2, meaning a big upturn in the PMI next month looks unlikely. 

Williamson said there were signs that the rate of decline eased this month in the "peripheral" eurozone countries outside Germany and France.

"But against that we've seen a worrying steep deterioration in service sector expectations for the year ahead."

Although business expectations for the year ahead hit an 11-month high in April, it plummeted in May to its lowest point since December.

The PMI for the manufacturing sector rose to 47.8 this month from 46.7 in April, while showing new orders and output declined at a slower pace, comfortably beating expectations of 47.0 predicted by economists.

Combining both the services and manufacturing reports, the composite PMI hit a three-month high of 47.7 in May, compared with April's 46.9, while showing continuing job losses.

Both the input and output prices index stayed below the 50 mark this month, indicating deflationary pressures.

"The European Central Bank doesn't have anything to worry about in relation to inflation," said Williamson. 

"More likely, it's going to find it difficult to get inflation up to the level it wants," he added, referring to the central bank's target of close to 2%.

Bernanke: No Fed stimulus pullback yet

The Federal Reserve's monetary stimulus is helping the US economy recover but the central bank needs to see further signs of traction before taking its foot off the gas pedal, Fed Chairperson Ben Bernanke said on Wednesday.
A decision to scale back the $85bn in bonds the Fed is buying each month could come at one of the central bank's "next few meetings" if the economy looked set to maintain momentum, Bernanke told Congress.
But minutes from the Fed's most recent meeting released on Wednesday showed the bar was still relatively high.
"Many participants indicated that continued (job market) progress, more confidence in the outlook, or diminished downside risks would be required before slowing the pace of purchases," according to minutes from the April 30-May 1 meeting.
In testimony that showed little immediate desire to retreat from the Fed's third and latest round of bond buying, Bernanke emphasized the high costs of both unemployment and inflation, which respectively continue to run above and below the Fed's targets.
"Monetary policy is providing significant benefits," he told the congressional Joint Economic Committee, citing strong consumer spending on autos and housing, as well as increases in household wealth.
"Monetary policy has also helped offset incipient deflationary pressures and kept inflation from falling even further below the (Fed's) 2% longer-run objective."
Still, financial markets focused on the possibility that Fed purchases will be scaled back later this year. The S&P 500 closed 0.8% lower, the dollar hit a near three-year peak against a broad basket of currencies, and the bond market sold off sharply. Yields on 10-year Treasury notes jumped back above 2% to their highest levels since mid-March.
The central bank is currently buying $45bn in Treasury bonds and $40bn in mortgage-backed debt each month to keep borrowing costs low and encourage investment, hiring and economic growth. It is the third round of asset purchases, or quantitative easing, since the Fed drove interest rates to near zero in late 2008.
"I believe the Fed, while feeling more confident in the economy bottoming, is not yet comfortable with ending QE and the US economic crutch it offers," said Douglas Borthwick, managing director of Chapdelaine Foreign Exchange in New York.
Missing the target
Bernanke noted that the main inflation gauge the Fed monitors rose just 1% in the 12 months through March, just half the central bank's 2% target.
Part of the reason, he said, was a decline in energy prices. But there were also indications of more broad-based disinflation, Bernanke said.
He said the Fed was prepared either to increase or reduce the pace of its bond buys depending on economic conditions, as the central bank stated on May 1 after its last policy meeting.
"If we see continued improvement and we have confidence that that's going to be sustained then we could in the next few meetings ... take a step down in our pace of purchases," he said.
"If we do that it would not mean that we are automatically aiming toward a complete wind down. Rather, we would be looking beyond that to see how the economy evolves and we could either raise or lower our pace of purchases going forward."
US economic growth rose to a 2.5% annual rate in the first quarter following an anemic end to 2012. The unemployment rate has fallen to 7.5% from a peak of 10%, but remains, as Bernanke put it, "well above its longer-run normal level."
Recent economic data have been mixed. Job growth, retail sales and housing have all shown some vigor, but factory output has been contracting.
Bernanke said some headwinds facing the economy, including the debt crisis in Europe, have been dissipating. But he said a sharp tightening of the US government's budget had become too big of a drag on growth for the central bank to offset fully.
Bernanke told the committee the Fed was aware of the risk that keeping monetary policy too easy for too long could fuel asset price bubbles. However, he said the central bank believed major asset prices were justified by the economy's fundamentals.
Further, he warned of the risks to pulling back on stimulus too early.
"A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further," Bernanke said.
He also suggested the Fed could refrain from selling off some of the mortgage-backed securities it has acquired when the time finally came to tighten monetary policy. "I personally believe that we could exit without selling any MBS," he said.
Too soon to taper
In separate remarks, New York Fed President William Dudley stressed that uncertain economic conditions meant it was too early to determine whether to taper the Fed's bond purchases.
"I think three or four months from now you'll have a much better sense of 'Is the economy healthy enough to overcome the fiscal drag or not?'" Dudley said in a Bloomberg TV interview that took place on Tuesday but aired on Wednesday.
Dudley added that it would be possible to dial down the program by the fall "if the economy does better and if the labor market continues to improve."
The minutes of the last Fed meeting said a number of officials expressed a willingness to taper bond purchases as early as the upcoming meeting on June 18-19 if there were signs of "sufficiently strong and sustained growth." But views differed both on how to gauge progress and on how likely it was that that threshold would be met.
Asked whether the Fed would curtail the pace of its bond purchases by the September 2 Labour Day holiday, Bernanke said simply: "I don't know."

US shares recover, but dollar extends losses

US stocks and bonds were little changed on Thursday, with equities rebounding from what traders considered an excessive drop on Wednesday, though concerns remained over the pace of global economic growth.
The midday strength in US equities bucked a worldwide trend of weakness. European shares ended down 2 percent while Japan plummeted 7.2 percent on weak data from China and Europe.
US shares opened sharply lower, extending a sharp decline on Wednesday that came after Federal Reserve chief Ben Bernanke broached the possibility of reducing stimulus if economic conditions improve.
While Fed officials stressed that no action was likely for months, investors are anxious about the timing to any change in monetary policy, which is widely credited with fueling massive gains in stocks and high-yield corporate bonds this year.
"The commentary was very benign and wasn't anything unexpected, the sell-off came because we were looking for an excuse to correct after the big moves this year," said Eric Green, senior portfolio manager at Penn Capital Management in Philadelphia.
The Dow Jones industrial average was up 2.64 points, or 0.02 percent, at 15,309.81. The Standard & Poor's 500 Index was down 4.45 points, or 0.27 percent, at 1,650.90. The Nasdaq Composite Index was down 4.24 points, or 0.12 percent, at 3,459.06.
Thursday's equity rebound continued a recent trend of investors using any market decline as a buying opportunity. A rally in Hewlett-Packard Co, which jumped 14 percent to $24.18 a day after raising its profit outlook, helped limit losses and keep the Dow in mildly positive territory.

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Still, overseas markets were sharply lower, driving investors to safe-haven currencies. At the session peak, the yen rose more than 2 percent against the dollar and the euro, which both lost 1 percent against the Swiss franc , also seen as a safe haven.
Chinese factory activity shrank for the first time in seven months, adding to concerns that the world's second-biggest economy had stalled. European factory sentiment dropped, suggested that the euro zone's economy was likely to contract again in the second quarter.
Japanese shares were hit hardest in overnight action, with the Nikkei losing 7.3 percent, its biggest one-day fall in two years. European shares ended 2.1 percent lower and MSCI's world equity index lost 1.3 percent.
"Even though we were overdue for a correction, the Chinese data certainly didn't help things. If it proves to be part of a trend, that's very concerning for the global economy," said Green, who helps oversee $7 billion in funds.
US light crude oil, which is closely tied to the pace of economic growth, fell 0.5 percent. The U.S. dollar index fell 0.8 percent.
The Euro STOXX 50 Volatility Index, Europe's widely used measure of investor risk aversion, surged nearly 15 percent to a three-week high. The CBOE Volatility Index rose 3 percent.
Concern the Fed will wind down its stimulus initially took its toll on bonds, but investors' sales of equities caused money to flow into safer government debt, leaving yields on US Treasuries and German Bunds down from their highs. The benchmark 10-year U.S. Treasury note was down 2/32 in price, the yield at 2.0281 percent.
Investors expect the bond market will adjust to changing Fed policy, and that suggests higher yields in the coming months.
Demand for riskier euro zone debt softened, although bonds remained underpinned by expectations the European Central Bank may yet ease monetary policy further. That would contrast with any tightening by the Fed but follow a massive stimulus package launched by the Bank of Japan.

Apple has enjoyed Irish tax holiday since 80s

Apple has operated almost tax-free in Ireland since 1980, welcomed by a government keen to bring jobs to what was then one of Europe's poorest countries, former company executives and Irish officials have said.
Chief Executive Tim Cook faced criticism from a Senate subcommittee in Washington over the iPad and iPhone maker's tax practices, which had been shrouded from full view behind secretive tax-exempt Irish-based corporate entities.
Apple, one of Ireland's top multinational employers, denied avoiding billions of dollars in US taxes and said its arrangements helped fund research jobs in the United States.
The committee revealed that Apple's Irish companies, some of which are not tax resident in any jurisdiction, allowed the group to pay no tax on much of its overseas earnings in recent years.
Senator Carl Levin, chairman of the subcommittee, said Apple had sought "the Holy Grail of tax avoidance".
A former company executive and Irish officials the almost tax-free status dates all the way back to Apple's arrival in County Cork 32 years ago.
Apple must have seemed attractive to Ireland and to Cork. Amid a generally moribund Irish economy, Cork had been hard hit by the closure of its shipyards and a Ford car plant, and in 1986 nearly one in four were out of work in the city.
In the early days, Apple's staff sat down to meals together. Now the company employs 4,000 in Ireland and is the country's biggest multinational employer.
"There were tax concessions for us to go there," said Del Yocam, who was Vice President of manufacturing at Apple in the early 1980s.

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"It was a big concession."
In fact, the deal was about as good as a company can get.
"We had a tax holiday for the first 10 years in Ireland. We paid no taxes to the Irish government," one former finance executive, who asked not to be named, said.
Apple wasn't an exception, although it was among the last to enjoy such favourable treatment.
From 1956 to 1980, Ireland attracted foreign companies by offering a zero rate of tax, according to the Irish government's website. Eligible companies arriving in 1980 were given holidays until 1990.
"Any multinational attracted into Ireland that was focusing on the export market paid zero percent corporation tax," said Barry O'Leary, CEO of IDA Ireland, which is charged with attracting investment into Ireland.
Apple said it pays all the tax due in every country where it operates. It declined to comment on the tax treatment it received in the 1980s.
As part of Ireland's accession to the European Economic Community, precursor to the European Union, in 1973, it was forced to stop offering tax holidays to exporters.
From 1981, companies arriving in Ireland had to pay tax, albeit at a low 10 percent rate, providing they qualified for manufacturing status.
Economic coup
Apple's investment was a major coup for Ireland. At the time, the country was struggling with high and rising unemployment, double-digit inflation and a brain drain of the young and educated through emigration.
"We were the first technology company to establish a manufacturing operation in Ireland," recalled John Sculley, Apple's CEO from 1983 to 1993.
He said government subsidies had also played a role in deciding to set up a base in Ireland.
Ireland also offered low wage rates - a big attraction when it came to hiring hundreds of people for the relatively low-skilled work of assembling electronic equipment.
Apple told the subcommittee it could not answer questions about why it chose Ireland as a base since it had lost the paperwork from the period.
The operation in Cork built the company's Apple II computer and would later build disc drives, 'Mac' computers and others. These would be sold in Europe, the Middle East, Africa and Asia.
But having a tax holiday in Ireland would not, in itself, have allowed Apple to operate tax free in these markets.
Equipment assembly is not the kind of activity that economists or tax authorities usually credit with generating a large share of a technology company's profits.
More value has been associated with generating the intellectual property behind the technology - which Apple did in the United States - and with the selling of goods, which was to be done on the ground in France, Britain and India.
But none of these countries offered the tax advantages Ireland did. The key to minimising Apple's tax bill was maximising the amount of profit that could be ascribed to Apple's Irish operations.
Holiday over
In 1990, Apple's tax holiday came to an end, and in that year, the Irish operation's tax rate hit 4 percent, accounts from the period show.
At the same time, Apple's Irish manufacturing activities came under question as the company looked to cut costs by outsourcing.
In 1992, the company announced plans to cut hundreds of jobs after deciding to shift some work to Singapore, which at this time was attracting increasing investment by offering tax holidays.
"They nearly left Ireland altogether," O'Leary said.
By this stage, the European Community had banned tax holidays of the kind given to Apple, so the company and Dublin negotiated an arrangement which had a similar outcome but fell within European rules.

Cautious calm returns to Wall Street

Wall Street has been had mixed trading today, paring sharp early losses after disappointing data from China and a slump in Japanese stocks outweighed better-than-expected reports on US jobs and housing.
In China, the preliminary reading for a Purchasing Managers' Index of manufacturing was 49.6 in May, according to HSBC and Markit Economics data. In Japan, the Topix plunged 6.9%.
Yesterday's comments by US Federal Reserve Chairman Ben Bernanke suggested the central bank might ease back its bond-buying programme as soon as at its next meeting, while also stressing the risk of withdrawing stimulus measures too soon.
Fed officials today sought to soothe investors' concerns. James Bullard, president of the St Louis Fed, said he did not think the bank's policy committee was "that close" to tapering bond purchases and when it did start to pull back it would be slowly.
"The market is struggling with conflicting language from Fed officials as to the timing of potential tapering of asset purchases, slowing growth in China and after Japan's decline in equities," Ryan Larson, the Chicago-based head of US equity trading at RBC Global Asset Management, told Bloomberg News.
In late afternoon trading in New York, the Dow Jones Industrial Average gained 0.18%, while the Standard & Poor's 500 Index fell 0.22% and the Nasdaq Composite Index edged up 0.04%.
US economic data released today were better than anticipated, though failed to brighten the mood. Initial claims for state unemployment benefits fell 23,000 to a seasonally adjusted 340,000 last week, according to Labor Department data.

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New single family home sales increased 2.3% in April to a 454,000-unit pace, while the median sales price for a new home rose 14.9% from a year ago to a record US$271,600.
"All the eggs are in housing and the consumers' baskets this quarter. Outside that, there is going to be little support to growth," Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
Bucking the trend today, shares of Hewlett-Packard jumped, last up 14.7%, after the computer maker lifted its 2013 earnings outlook.
"She [Chief Executive Officer Meg Whitman] clearly has the company focused on profit and cash flow and that's coming through in the earnings," Shannon Cross, an analyst at Cross Research in Millburn, New Jersey, who rates the stock a hold, told Bloomberg. "It shows they're able to drive margin at businesses that are under significant revenue pressure."
Europe's benchmark Stoxx 600 Index shed 2.1%. Yesterday European shares had closed higher, ending the session before Bernanke suggested the US central bank could taper its bond-buying as soon as next month.
The UK's FTSE 100, France's CAC 40 and Germany's DAX each also closed with declines of 2.1%.

NEWS,29.11.2012

The Politics of Fear

To those who were surprised that the European Union received the Nobel Peace Prize, I say: "Think twice." This was not only a deserved award for Europe's contribution to bringing peace and stabilizing democracies in the recent past  the Nobel Committee was also sending a clear warning to contemporary leaders. I could almost hear them saying: "On this difficult odyssey, don't abandon ship. In today's world, the EU is too valuable to squander."It was an indirect but powerful rebuttal to the dangerous nationalist and populist rhetoric some politicians have adopted when describing the recent financial crisis.This message couldn't have come at a better time.Like ghosts from the past, we see political violence, xenophobia, migrants being scapegoated and extreme nationalism creeping into our public debates even into our parliaments. This is a Europe diverging from its founding principles. Principles that rendered nationalistic hatreds an anathema.But it is these politics of fear that seem to have incapacitated Europe. A Europe seemingly incapable of ending this crisis, a fractious Europe. This has undermined a sense of trust between us and in our European institutions. This climate does not inspire confidence either in our citizens or the markets. Nor will our retreat into a renationalization of Europe be the solution.My recent experience in dealing with the financial crisis in Greece and in Europe has confirmed my belief that this is a political crisis more than a financial one.I am convinced that, with the political will, we could have avoided much pain, squelched market fears and stabilized the euro, while at the same time reformed ailing, unsustainable economies such as ours in Greece. Despite media hype to the contrary, it is the Greek people who first and foremost have wanted this change. Instead, we allowed fear and mistrust to overcome us. And fear begets more fear and uncertainty. Instead of understanding, we have name-calling. Instead of collective, transparent action by our institutions, we have moved into a mode where the community method is undermined by makeshift intergovernmental decision-making, with the balance of power tipping dangerously towards the very large member states. Instead of real, necessary reform and fiscal responsibility, we are implementing an overdose of austerity dealing more with symptoms and less with the root causes of the economic woes of Europe. Instead of rewarding superhuman efforts, we are condemned for our shortcomings. More than anything else, it has been this political climate that has undermined our common efforts to deal with today's financial crisis. Whether it is banks or governments, we have adopted a passive, almost defeatist, attitude, which we cloak in the language of "caution and responsibility. "It is our responsibility to break this cycle of fear and mistrust now. We are vastly underestimating our own capacities as a union. Our capacity to calm markets or create jobs. We again need to believe in the great capacity of our peoples north and south, west and east. We must rekindle the spirit that united us in 1989 when the Berlin Wall fell. We know the difficulties we then faced. But we did not cower. We decided to invest in the potential Europe and our peoples had. And there is so much hidden or untapped potential in our youth, our experience, our diversity and our cultures.But this not simply an issue of political will. We must combine this will with an understanding of our real weaknesses. Over the decades we have become more and more interdependent in Europe. This was not by chance, this was by design -- from the days of Monnet and Schuman. It is this interdependence that has made the wars of the past unthinkable.But if interdependence is important to keep the peace, it is not enough to make us effective, adaptive, powerful on the global scene. Neither does interdependence guarantee the democratic empowerment of our citizens and the liberation of our peoples' potential.In fact, this interdependence today is seen by many as a straight jacket, hindering us rather than giving us the capacity to deal with new global challenges. The debate about the breakup of the euro, or even euro-exits, is a case in point.Our citizens, therefore, wonder whether this European structure is still useful or if we should go our own separate, independent ways. As in The Odyssey, the sirens are beckoning that we change course. However sweet their song, we know their purpose is that we crash on the shallow rocks. If we are to avoid these rocks, we need to radically rethink our governance structures and policy responses so that we capitalize on our strengths and neutralize our weaknesses.Three fundamental principles must underpin a more progressive Europe.First, we must strengthen Europe's institutional capacity. Priority today must be in the financial-economic sphere. The eurozone is the world's largest economy, the euro is the world's second reserve currency and on aggregate we have strong economic fundamentals; but we are not able to leverage our strengths due to weak or missing institutions. Despite significant progress such as:

- More robust fiscal monitoring;
- The European Stability Mechanism;
- The Six-Pack to strengthen governance and oversight; and
- A broader mandate for the European Central Bank, with the recent introduction of Outright
Monetary Transactions, we must go one step further. 

We have already pooled our risks, now we must pool our strengths. Eurobonds and a federal banking union are vital tools to safeguard the EU from similar crises and set our economy on a more stable footing. Second, we need to liberate and reenergize Europe's human capacity. High unemployment needs to be offset by investment in our human capital, education, research, green growth and the necessary infrastructure for green energy and a knowledge society. In our race towards competitiveness, we are emulating models that have little to do with our traditions. In many emerging markets, a lack of collective bargaining and democratic accountability, low wages, substandard working conditions and denigration of the environment combined with tax havens which have robbed countries of huge revenues up to 11 billion euros per year in Greece alone may offer a temporary comparative advantage. But in seeking growth, we cannot race to the bottom. We must base our competitiveness on quality, not inequality. Third, we must strengthen our democratic capacity. We need innovative democratic institutions that will empower our citizens and strengthen the legitimacy of our decisions .The EU's complex decision-making process has been an outcome of a delicate historical balance between member states. Today, however, people feel they are sidelined by these decisions. In trying to confront its fiscal deficit, Europe has run up a democratic deficit. As we take the next steps towards European integration, we must give ownership of this process to the people. Policies imposed on citizens without their active consent are doomed to fail. Already, a frustrated, educated but unemployed younger generation is losing faith in our European institutions and values. This vacuum has created fertile ground for populism and extremism. When our citizens feel disempowered, they will turn to saviors or target scapegoats as they do not participate through dialogue and responsible deliberation to understand and solve common problems. Europe can regain the confidence of the markets, but first we must regain the confidence of our citizens. That is why I called for a referendum in Greece, so that people could debate and decide on their own future. There is nothing wrong with European countries ceding sovereignty in the interest of creating a stronger Europe. Indeed, they already have. But as we do so, we need to rethink how our representatives in the Union are elected and how decisions are made. An EU president, elected by a European Parliament (or even a directly elected president), European-wide referenda, forms of more direct citizen participation and the use of social media are ideas already ripe to explore. This new Europe, as I see it, will not be the product of one grandiose decision, dictated by an elite minority of powerful nations or some anonymous bureaucrats in Brussels. Small, incremental but complementary steps -made by each of us individually and all of us together -will build the values and the foundations for the Europe that we want. Democracy and education will give new capacity to our citizens and that, in the end, will empower Europe and reinforce its legitimacy in our societies and around the world. We do have a choice. Either we empower Europe and its citizens and become a catalyst for humanizing our global economy, or globalization will dehumanize our societies and undermine the European project. As a citizen of Europe, I vote for the first choice.

 

EU outlines stop-gap 2013 budget

European Union negotiators have provisionally agreed to fix the bloc's spending at nearly 133 billion euros ($209 billion) in 2013, as part of a deal that adds 6 billion euros to spending this year.The agreement which must now be approved by EU governments and the European Parliament ensures stable funding for EU programmes next year.It also guarantees the continuation of several employment, education and research programmes this year that had been threatened with cancellation because of a funding gap."There was an agreement on the draft package for the 2013 budget that will be submitted to the European Council and Parliament in the coming days," a spokesman for the European Commission said in a statement.But one EU official warned that the approval of governments and lawmakers was far from guaranteed. "I'm not sure that everyone is going to be happy with this package, particularly among some MEPs," said the official, speaking on condition of anonymity. A successful conclusion to the 2013 budget row would allow governments and officials to focus on the far thornier subject of the bloc's next long-term budget, for 2014-2020.EU leaders failed to reach a deal on that 1 trillion euro ($1.57 trillion) budget at a summit in Brussels last week, and are expected to try again early next year.As part of Thursday's deal, EU payments next year will be limited to a maximum of 132.84 billion euros ($US208.97 billion).That would have represented an increase of 2.9% compared with this year far below the rise of 6.8%demanded by the European Parliament and the executive Commission, and only a small real increase after inflation is taken into account. But the extra 6 billion euros agreed for this year means that spending in 2012 will now amount to 135 billion euros the highest level ever and as a result, the budget will actually fall by 1.6% next year. During previous rounds of talks, the Commission had insisted that an extra 9 billion euros was needed to fill the 2012 funding shortfall. But at Thursday's meeting, the EU's executive said it could forgo some of the extra funds while it checked whether all the conditions for payment had been met.About three-quarters of the EU's annual budget is spent on farm subsidies and funding for new motorways, bridges and other public infrastructure projects in poorer eastern and southern European member countries.

BoE urges UK banks to boost capital

British banks need to act now to bolster their defences against financial shocks, as many have underestimated the cost of loans going sour and future fines for misconduct, the Bank of England (BoE) has said.Underlining a growing sense of urgency about capital defences, outgoing BoE Governor Mervyn King said that while the problem was "manageable", he wanted the banks' regulator to report back by March on what steps banks were taking, and warned that he did not want them to cut lending."Our primary concern has been to ensure that UK banks have sufficient capital ... so that they are on a solid footing to support economic growth," King told a news conference."The problem is manageable, and is already understood at least in part by markets. But it does warrant immediate action," he added.King made the comments as he presented the half-yearly report by the BoE's Financial Policy Committee, which from next year will take charge of British bank regulation.He said that the government would not need to put extra money into Royal Bank of Scotland or Lloyds Banking Group, the two banks in which it has held controlling stakes since the financial crisis. Instead, he said banks could raise funds by issuing contingent debt that converts into equity in a crisis, or by restructuring actions - often a euphemism for asset sales. The BoE said that British banks' true capital position was probably worse than relatively healthy official numbers imply, and this was already hurting investors. "Progress by banks in raising capital has slowed and investor confidence remains low," the BoE said in its half-yearly Financial Stability Report. "Market concerns are likely to reflect in part uncertainty about bank capital adequacy."he BoE has repeatedly urged British banks to raise capital levels, and November's report marks a stepping up of these recommendations, despite a slight reduction in the risks facing the financial system due to an easing in euro zone tensions. "UK banks' capital buffers, available to cushion losses and maintain the supply of credit following realisation of a stress scenario, are not as great as headline regulatory capital ratios imply," it said.King also confirmed the new effort would apply to international banks with British subsidiaries which are regulated by the Financial Services Authority.The BoE identified three main areas where banks were over-optimistic about how much capital they had.First, information from supervisors suggested some British banks would suffer bigger losses on loans than they had made provision for, according to the report.Second, it said banks had also persistently underestimated the scale of fines they would face for past misconduct, adding that external analysts had suggested further costs of 4 billion to 10 billion pounds ($7.8 billion to $31 billion) for missold payment protection insurance and the LIBOR rate-rigging scandal. Finally, the BoE criticised the "complex and opaque" system banks use to calculate the riskiness of its assets, with the amount of capital that banks estimated they needed sometimes varying threefold between banks for the same type of assets.The report also revealed muted results from the BoE's June effort to get banks to boost lending, by paving the way for up to 500 billion pounds of liquidity reserves held by the banks to be run down.But it noted that just 31 billion pounds had been released and that it was mostly used to repay debt rather than provide direct support to credit growth.The BoE cautioned that it was "too early" to judge the impact of the initiative.

US stocks and euro sell-off on Boehner comments

US stocks and the euro sold off after US House Speaker John Boehner said there had been "no substantive progress" in talks to avoid the fiscal cliff.Republican Boehner made the comments after speaking with President Barack Obama and Treasury Secretary Timothy Geithner, saying there was a real danger no agreement would be reached to avoid $US607 billion of automatic tax increases and spending cuts that kick in on January 1. Democrats had "yet to get serious about spending cuts," Boehner said.There was no mention of the optimism he cited 24 hours ago that gave a boost to Wall Street and was echoed around the globe.The Congressional Budget Office has warned that falling off the fiscal cliff could drive the US jobless rate back up to 9.1% by the end of 2013 and send the world's biggest economy back into recession.The dollar pared its decline against the euro, which traded recently at $US1.2967, having early touched $US1.30.US stocks did recover some ground after the selloff.The Dow Jones Industrial Average was up 0.2% and the Standard & Poor's 500 Index up 0.4%."One minute the portents for a deal on the fiscal cliff are negative, the next minute they are positive," Mike Mason, a senior trader at Sucden Financial Private Clients in London, told Reuters."This is likely to be the pattern all the way up to the deadline on January 1. Equities are sure to remain volatile and trading subdued until there is any concrete outcome to these negotiations."Economic data in the US was mixed, though the revised reading for gross domestic product in the third quarter was 2.7%, up from the 2% pace previously published.That just missed the estimate in a Bloomberg survey of 2.8% and marks an acceleration from the second quarter's 1.3% growth.Consumers, though, were subdued. Household spending rose a revised 1.4%, down from the first reading of 2%, according to the Commerce Department. Economists were hoping the revision would only be down to 1.9%.Yet the US trade deficit shrank for revised to US$US403 billion from an initial estimate of $US413.7 billion and inventories turned positive.And an index of pending home resales beat estimates by rising 5.2%, according to the National Association of Realtors, while the number of Americans applying for jobless benefits fell 23,000 to 393,000 last week, according to the US Labor Department.Stocks in the UK rallied, as did equity markets across Europe, which closed before Boehner made gloomier noises about the US fiscal cliff.The FTSE 100 advanced 1.2%, with Rio Tinto up 5.1%. Germany's DAX 30 climbed 0.8% and France's CAC 40 was up 1.5%.In the UK, Lord JusticeLeveson's long-awaited report into media ethics that followed the phone hacking scandal at Rupert Murdoch's News Corp called for a new independent media regulator to stamp out unethical behaviour.UK Prime Minister David Cameron, who himself was tarnished by associations with Murdoch's lieutenants in Britain, have a tepid welcome to the report while saying he wouldn't support new law to enshrine such a body.