The dollar was weaker against most of the major currencies today as investors bet on the continuation of the “QEII” stimulus spending program. The euro was also boosted on speculation that the European Central Bank will make overtures towards the need to raise interest rates in the Eurozone.
“As long as the Fed retains its stance, the interest-rate differentials will move against the dollar,” said Neil Jones, head of European hedge fund sales at Mizuho Financial Group Inc. in London. “There’s a lot of bullish sentiment that Trichet will move to a more hawkish stance and discuss removing the stimulus. That’s one of the key reasons for euro strength.”
Source: Bloomberg
US consumer spending results for January rose a less-than-predicted 0.2 percent as rising food and fuel prices forced consumers to spend less on other goods and services. Incomes were higher but with the highest gasoline prices in two years, wage and salary gains had less of an impact on spending.
“The consumer has become slightly more cautious,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The extra money for gas prices is coming out of consumers’ pocket. Spending will be positive, but modest.”
Source:
A poll of the members of the National Association for Business Economics has listed the US deficit as the number one threat facing the America economy. The survey released Monday noted that the 2011 federal deficit has increased to an estimated $1.4 trillion from last year’s total of $1.1 trillion.
“Panelists continue to characterize excessive federal indebtedness as their single greatest concern,” with state and local government debt the second-biggest worry, the survey said. It was conducted between January 25 and February 9.
Source: Reuters
A widening of spreads on dollar bonds issued by developers could signal the imminent bursting of China’s property bubble. These bonds have been the worst performing of all US-denominated, non-financial, Asian corporate debt, and are now at a 2.26 percent premium to US Treasuries. This is a clear sign that investors are demanding greater yields to lend to China property firms, as they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending.
As a result, Goldman Sachs Group Inc. and Credit Suisse Group AG cut their profit estimates for Chinese real estate companies after a 12.8 percent jump in real estate prices in April from a year earlier spurred the state to increase regulation.
“New issues by Chinese developers will stall for the time being,” Vince Chan, the Hong Kong-based chief credit strategist with Amias Berman & Co. LLP, said in a phone interview. “Investors need handsome rewards for getting exposed to weaker fundamentals.”
Source: Bloomberg
The International Monetary Fund may ultimately hand Greece an aid program worth about 20 billion euros ($27 billion) over 18 months, according to Goldman Sachs Group Inc.
The cash-strapped nation may ask the Washington-based lender for support within weeks and “very likely” in a few months as it struggles to cut the biggest budget deficit in the European Union, Goldman Sachs’s Chief European Economist Erik Nielsen said in an e-mailed note to clients today. European leaders start talks in Brussels today.
Bloomberg
German Chancellor Angela Merkel said it would be a “scandal” if banks helped Greece massage its budget, as European officials investigate Goldman Sachs Group Inc.’s role in Greek efforts to conceal the size of its deficit.
“It’s a scandal if it turned out that the same banks that brought us to the brink of the abyss helped fake the statistics,” Merkel said in a speech in northern Germany late yesterday, without naming Goldman Sachs directly. Greece “falsified statistics for years.”
Merkel’s comments came as her government questioned whether Goldman Sachs, Wall Street’s most-profitable securities firm, helped Greece hide its deficit as it struggled to comply with European Union limits. Michael Meister, financial affairs spokesman for Merkel’s Christian Democratic Union, said Feb. 15 that a swap agreement managed by New York-based Goldman Sachs in 2002 “broke the spirit of the Maastricht Treaty.”
Bloomberg
The state of the UK’s public finances deteriorated further in January, according to official figures.
The Office for National Statistics said the government had borrowed a further £4.3bn last month.
It is first time the government has borrowed money in January since records began in 1993.
January typically brings the government a large income from tax receipts, giving it a budget surplus and allowing it to repay some of its debts.
But this year tax receipts were significantly lower than expected, the ONS said, with both income tax and capital gains tax income falling sharply.
BBC
Consumer spending in the US rose by 0.2 percent in December to mark the third straight monthly increase. Analysts had predicted a greater increase after November’s 0.7 percent improvement but the result still bodes well for an overall recovery.
“Consumers have the wherewithal to support good spending, however they are going to be reticent until they see a few good months of job gains,” said Craig Thomas, a senior economist at PNC Financial Services Group Inc. in Pittsburgh. “2010 is lined up to be a moderately good year.”
Source: Bloomberg
Geithner is in the hot seat because of a potential cover up of a backdoor bailout of Goldman and others by the NY Fed. Will Obama back away from Geithner? Is Bernanke’s reappointment in danger?
The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.
Bloomberg
CIT Group Inc. filed for Chapter 11 bankruptcy protection yesterday capping a tumultuous year that saw the lending giant struggle with $10 billion in debt. The move wipes out both common and preferred stockholders and means the US government will likely lost the $2.3 billion in invested to save the company earlier in the year.
Associated Press
