Tuesday, June 29, 2010

Double-Dip Recession, Possible according to IMF

Tuesday, June 29, 2010

According to IMF's Strauss-Kahn: A double-dip recession isn't the baseline forecast, but possible. This announcement came after US stocks tumbled again on Tuesday 268 points on the DOW, as US data, and China reports its spur flight from risk. Gold futures have erased slight losses as a broad market swoon leads investors to the perceived safety of the metal.

Recovery faces a tough road, double dip or not. Now, especially after Tuesday's alarming 9.8-point drop in the Conference Board's index of U.S. consumer confidence,and additional pressures make that option viable.

While that's not a consensus forecast among economists, both the data and the gloom pervading financial markets suggest the current recovery will be a long, painful process.

As some observers pointed out during the recession of 2008-2009, this recovery would not match the fast rebound that followed the past two recessions. Whereas those involved a traditional business cycle reversal, this one was provoked by a financial crisis and so would be dogged by the spending restraint with which consumers, businesses and governments pared down debt.

It's why Steven Ricchiuto, chief economist for Mizhuo Securities U.S.A., believes the U.S. economy is destined for another contraction soon.

"Europe is going into a deflationary environment, Japan is in deflation, and we teeter with deflation," Ricchiuto said. "In this environment, are China and Brazil strong enough to counter that? I don't think so."

If there's a bright side to such predictions, it's that many in the double-dip camp don't see another contraction in the order of the 6.4% seen in the first quarter of 2009. Ricchiuto talks only of "a couple of quarters of down 0.5 to 1.0%."

Tuesday's most-actively traded gold contract, for August delivery, recently was up $6.30, or 0.5%, at $1,244.90 an ounce on the Comex division of the New York Mercantile Exchange. "Everything is getting hit today," said Bart Melek, global commodity strategist with BMO Capital Markets.

Gold prices lagged behind U.S. Treasurys and the yen--also viewed as refuge investments--but the yellow metal is now gaining momentum as investors seek to broaden their base of safe-haven holdings.

"Investors have kind of run out of room to run," said Dan Cook, a Chicago-based senior market analyst with London-based brokerage firm IG Markets. "You don't want to carry all your eggs in one basket."

U.S. stocks fell sharply Tuesday as intensifying concerns over a slowdown in global growth spurred investors to seek safer assets. Bank fees in the Financial Overhaul Bill are estimated at $18Billion US Dollars if the Banking Bill is approved, and that upset investors that are pursuing the banking sector as a safe haven.

Worries about the global economic outlook have been building for a while. Tuesday, signs that growth is slowing in China sent investors seeking safety in the government bond markets, with the 10-year Treasury yield falling overnight to its lowest level since April 2009, and the two-year yield hitting a record low. Bond yields fall when prices rise.

European stocks tumbled Tuesday, nearing their lows for the year as fears grew that the global recovery is fading. At the same time, investors braced for any fallout from the end of the European Central Bank's extraordinary bank lending program.

The euro fell against the dollar despite a sharp drop in U.S. consumer confidence, gold prices bounced back from the day's lows to end little changed and oil prices fell.

Asian trading set the tone for the European session after Shanghai stocks ended at a 14-month low. The market slumped after a Chinese growth indicator was revised downward and the domestic part of the Agricultural Bank of China's initial public offering was priced lower than expected.

Riskier stocks tumbled Tuesday and investors flooding Treasurys sent the yield on the 10-year note below 3 percent, to its lowest level in more than a year.

Markets are jittery too about euro-zone sovereign debt ahead of Thursday's expiration of a 442 billion ($542.53 billion) European Central Bank bank-lending program as well as the potential fallout from bank stress tests by European governments. Investors also were spooked by the prospect of a slowdown in China as a surprise revision to a leading indicator contributed to a sharp fall in Chinese equities.

The selloff accelerated as U.S. consumer confidence fell more than expected and concerns mounted over European banks, dimming prospects for growth. Hopes that demand from China could help offset weakness in the U.S. and Europe also were hurt, as the Conference Board revised its April leading economic indicator for the country sharply lower.

"There's some concern that China's not the growth engine we thought it was," said Len Blum, managing partner at Westwood Capital LLC. "A lot of investors have been hooking their dreams to China's growth engine to pull us out of our problems. There's certainly a fly in that ointment this morning."

The Dow Jones Industrial Average fell below 10000, sinking 243 points, or 2.4%, to 9896 in recent trading. All 30 of its components were in the red, led by a 5.1% drop in Boeing. Components with significant overseas exposure led the broad decline. Caterpillar tumbled 4.8%, while Alcoa fell 4.4% and General Electric shed 4%.

The Standard & Poor's 500-share index fell 2.7% to 1045, its lowest intraday level since May 25, when it hit its weakest intraday level of the year at 1040.78. The S&P 500 was on track recently to finish below its lowest close of 2010 of 1050.47 on June 7.

All of the S&P 500's sectors were negative, led by declines in the riskier industrials, technology and financial sectors. Safer consumer staples and health-care stocks posted the smallest losses. The Nasdaq Composite slid 3% to 2154, stung by a 4.3% drop in Apple, a 3.7% slide in Microsoft and a 5.2% decline in Amazon.com.

Selloffs in Europe and Asia fed the U.S. market's decline. Investors sought the safety of gold futures and Treasurys, and the yield of the benchmark 10-year Treasury dropped below 3%.

Concerns surrounding the end of the European Central Bank's 12-month liquidity facility on Thursday also weighed on European markets and the euro.

The euro was recently trading at $1.2195, down from $1.2274 late Monday in New York. The U.S. Dollar Index, which tracks the U.S. currency against a basket of six others, jumped 0.5%.

Worries about global growth mounted after the Conference Board sharply revised lower its April leading economic indicator for China, raising fears that a key driver of the global economy could slow. The Shanghai Composite lost 4.3%, with the move by Agricultural Bank of China to cut the price range for the local portion of its estimated $23 billion initial public offering also weighing on Chinese equities.

Investors said renewed concerns that China's demand for materials and commodities could sink if its economy cools. Crude-oil prices tumbled more than 3% on Tuesday, falling below $76 a barrel.

New data on the U.S. housing market did little to encourage investors, despite the S&P/Case-Shiller Home Price Indices' slight improvement in April over the previous month, mostly thanks to the demand for homes ahead of the expiration of the federal tax credit.

The latest readings come on the heels of disappointing data last week on home-sales activity, including both new and existing units. Traders are particularly interested in the housing market as a harbinger of possible recovery or struggle in the U.S. economy, since the sector's meltdown was a key catalyst in causing the recent recession.

Investors' optimism dimmed Tuesday, with many looking ahead to Friday's key jobs report.

"The things that pulled us into the recession haven't been fully solved," Blum said, noting the continuing weakness in the jobs report. "There's a very good chance we could have a double dip or very slow economic growth, which will feel recessionary," he said.

Then add the U.N.s call to demote the US Dollar as the World currency Tuesday. It seemed like all the economic forces were taking their turn. According to a report released Tuesday, the Dollar should be replaced as the main Reserve Currency.

"The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency," said the World Economic and Social Survey 2010.

The report said a new system should be developed, which "must not be based on a single currency or even multiple national currencies." Instead, the report advocates the increased use of International Monetary Fund accounting units called Special Drawing Rights as a reserve asset.

SDRs are based on a basket of four currencies: the dollar, the euro, the yen and the U.K. pound. The weight of each currency in the basket stems from the value of exports and the amount of reserves denominated in the respective currencies held by other members of the IMF.

The U.N.'s suggestion is the latest in a series of proposals that have gained prominence since the financial crisis. Last year, Nobel laureate economist Joseph Stiglitz led a U.N.-appointed panel that also urged the replacement of the dollar as the world's reserve currency. Developing nations with high currency reserves, led by China, have also been vocal about the need to create a new global reserve currency.

The recommendation is only a small part of the 200-page U.N. report, which is mainly focused on sustainable economic growth. The U.N. cannot directly act upon the report's recommendation to replace the dollar as the main global reserve currency since increased use of SDRs falls under the purview of the IMF and World Bank.

The panel chaired by Stiglitz published a report in March 2009 that also proposed a SDR-based reserve system, arguing this "could contribute to global stability, economic strength, and global equity."

Earlier this year, Dominique Strauss-Kahn, managing director of the IMF, also envisioned the prospect that the fund could one day be the global provider of reserves. In a broad-ranging speech on the future mandate of the IMF, Strauss-Kahn stopped short of calling for a fund-created reserve asset, but said it is a longer-term issue worth considering.

A truly global reserve currency, he said, "would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country."

And then there were rumors of changes to the U.S. financial overhaul bill are flying fast and furious on Capitol Hill, sowing confusion among lobbyists, lawmakers, and the press, according to the Dow Jones News sources. An alleged 2 p.m. EDT meeting of lawmakers on the "conference" committee working on the bill turned out to be a false alarm, but that didn't stop television cameras, top bank lobbyists, and even Rep. Darrell Issa (R., Calif.) from arriving at a locked House committee room.

BANK BILL: Current Senate Vote Tally
The current U.S. Senate vote tally on the "Dodd-Frank Wall Street Reform and Consumer Protection Act," which would overhaul Wall Street regulation.

Senators:
Daniel Akaka (D., Hawaii) No Answer

Lamar Alexander (R., Tenn.) No Answer
John Barrasso (R., Wyo.) No
Max Baucus (D., Mont.) No Answer
Evan Bayh (D., Ind.) Undecided
Mark Begich (D., Ark.) No Answer
Michael Bennet (D., Colo.) No Answer
Robert Bennett (R. Utah.) No Answer
Jeff Bingaman (D., N.M.) No Answer
Christopher Bond (R., Mo.) No Answer
Barbara Boxer (D., Calif.) No Answer
Sherrod Brown (D., Ohio) Yes
Scott Brown (R., Mass.) No
Sam Brownback (R., Kan.) No Answer
Jim Bunning (R., Ky.) No Answer
Richard Burr (R., N.C.) No Answer
Roland Burris (D., Ill.) No Answer
Maria Cantwell (D., Wash.) No Answer
Benjamin Cardin (D., Md.) Yes
Thomas Carper (D., Del.) Yes

Robert Casey, Jr. (D., Pa.) No Answer
Saxby Chambliss (R., Ga.) No Answer
Tom Coburn (R., Okla.) No Answer
Thad Cochran (R., Miss.) No
Susan Collins (R., Maine) Undecided
Kent Conrad (D., N.D.) Undecided
Bob Corker (R., Tenn.) Undecided
John Cornyn (R., Texas) No Answer
Mike Crapo (R., Idaho) No
Jim DeMint (R., S.C.) No

Christopher Dodd (D., Conn.) Yes
Byron Dorgan (D., N.D.) No Answer
Richard Durbin (D., Ill.) Yes
John Ensign (R., Nev.) No Answer
Michael Enzi (R., Wyo.) No Answer

Russell Feinfold (D., Wis.) No

Dianne Feinstein (D., Calif.)Yes
Al Franken (D., Minn.) No Answer

Kirsten Gillibrand (D., N.Y.)No Answer
Lindsey Graham (R., S.C.) No Answer

Charles Grassley (R., Iowa) No Answer
Judd Gregg (R., N.H.) No
Kay Hagan (D., N.C.) No Answer
Tom Harkin (D., Iowa) Yes
Orrin Hatch (R., Utah) No

Kay Bailey Hutchison
(R., Texas) No
James Inhofe (R., Okla.) No Answer
Daniel Inouye (D., Hawaii) No Answer
Johnny Isakson (R., Ga.) No Answer
Mike Johanns (R., Neb.) No
Tim Johnson (D., S.D.) Yes
Edward Kaufman (D., Del) Yes
John Kerry (D., Mass.) Yes
Amy Klobuchar (D., Minn.) No Answer
Herb Kohl (D., Wis.) Undecided
John Kyl (R., Ariz) No
Mary Landrieu (D., La.) Yes

Frank Lautenberg (D., N.J.) Yes
Patrick Leahy (D., Vt.) Yes
George LeMieux (R., Fla.) No Answer
Carl Levin (D., Mich.) No Answer

Joseph Lieberman (I., Conn.) No Answer
Blanche Lincoln (D., Ark.) Yes
Richard Lugar (R., Ind.) No Answer
John McCain (R., Ariz.) No
Claire McCaskill (D., Mo.) Yes
Mitch McConnell (R., Ky.) No Answer
Robert Menendez (D., N.J.) No Answer
Jeff Merkley (D., Ore.) Yes
Barbara Mikulski (D., Md.) Yes

Lisa Murkowski (R., Alaska) No Answer
Patty Murray (D., Wash.) Yes
Ben Nelson (D., Neb.) No Answer
Bill Nelson (D., Fla.) No Answer
Mark Pryor (D., Ark.) No Answer
Jack Reed (D., R.I.) Yes
Harry Reid (D., Nev.) Yes
James Risch (R., Idaho) No Answer
Pat Roberts (R., Kan.) No

John Rockefeller (D., W.Va.) No Answer
Bernard Sanders (I., Vt.) Yes
Charles Schumer (D., N.Y.) No Answer
Jeff Sessions (R., Ala.) No Answer
Jeanne Shaheen (D., N.H.) Yes
Richard Shelby (R., Ala.) No
Olympia Snowe (R., Maine) Undecided
Arlen Specter (D., Pa.) No Answer

Debbie Stabenow (D., Mich.) No Answer
Jon Tester (D., Mont.) No Answer
John Thune (R., S.D.) No Answer
Mark Udall (D., Colo.) Yes
Tom Udall (D., N.M.) No Answer
David Vitter (R., La.) No Answer

George Voinovich (R., Ohio) No Answer
Mark Warner (D., Va.) No Answer
Jim Webb (D., Va.) No Answer

Sheldon Whitehouse (D., R.I.)No Answer
Roger Wicker (R., Miss.) No Answer
Ron Wyden (D., Ore.) No Answer

The seat of the late Sen. Robert Byrd (D., W.Va.) remains vacant.

(The tabulation is based on interviews by Dow Jones Newswires reporters with 44 senators or their offices. Senators marked undecided are those who say they are undecided.)

Don't be surprised if the final bill has no Bank fees, and that the World stock markets make a recovery over night.

Good Evening.


Thursday, June 24, 2010

Economic Recovery Losing Momentum Precious Metals Gain Ground

Thursday, June 24, 2010

CPB: World Trade Flows Fell 1.7% In April

LONDON (Dow Jones)--World trade volumes fell in April for the first time since January, an indication that the economic recovery may be losing momentum.

Figures released by the Netherlands Bureau for Economic Policy Analysis, also known as the CPB, Thursday showed trade volumes fell 1.7% in April from the month earlier, having risen 4.0% in March.

"Import volumes decreased worldwide in April, with the notable exception of Japanese imports--quite the opposite of last month's pattern," the CPB said. "On the export side, growth was remarkably high in...Japan, while Central and Eastern Europe and Latin America continue to perform well also."

The CPB's figures are closely watched by policy makers, including a number of central banks because they provide the earliest available measure of global trade.

World trade flows plummeted in the final months of 2008 and the early months of 2009, declining at the sharpest rate since the Great Depression. Flows began to level out in the second quarter of last year, and rose in the second half of the year.

The decline in April means trade flows are now 6% below the all-time peak reached in April 2008, and are up 19% from their recent low in May 2009.

In the three months to the end of April, trade flows rose 4.9% on the three months to the end of January.

European shares saw their declines accelerate at the close of trading Thursday after the U.S. Federal Reserve highlighted the region's debt woes as it provided a less upbeat outlook on growth.

"A reassessment of yesterday's poor U.S. housing numbers and general debt and deficit worries [have] gained the upper hand as far as investor sentiment is concerned," said RBC Capital Markets.

Federal Reserve policymakers said late Wednesday that the European debt crisis was negatively impacting the U.S. recovery as they kept interest rates on hold at ultra-low levels and signaled rates are likely to say low for some time.

In a statement at the end of its two-day meeting, policy makers downgraded their outlook for the U.S. economy, saying that the recovery was "proceeding"--not strengthening, as they had said in April.

European banks, which are big holders of European government debt declined Thursday, with BNP Paribas shares down 5% and Santander shares down 3.8%.

The focus on Europe's debt woes put Greece back in the frame and the cost of insuring Greek sovereign debt against default hit a fresh record high on Thursday.

Greek stocks were the worst performers by a long way, with the Greek ASE Composite Index down 3.7% at 1,469.

US stocks drop on worries over retail earnings, and financial reform. U.S. stocks declined Thursday as weak earnings and forecasts from retailers weighed, along with final negotiations for the financial overhaul bill.

Demand for U.S. durable-good orders fell, pushed down by civilian aircraft in May, casting a shadow on an otherwise positive report.

Oil futures were slightly weaker amid lingering concern about the U.S. economy's recovery after disappointing U.S. economic and oil-inventory data.

The Dow's financial components were also among its top decliners, with J.P. Morgan Chase off 2% and Bank of America down 1.6%, as U.S. House and Senate lawmakers sought to reach agreement Thursday on the final pieces of legislation that is expected to tighten oversight of the financial industry more than many had expected.

On Thursday, lawmakers agreed on new capital requirements that will give large banks five years to stop treating trust-preferred securities as Tier 1 capital, a key measure of a bank's strength.

The Nasdaq Composite declined 1.2% to 2227. The Standard & Poor's 500-stock index slipped 1.1% to 1080, with its consumer-discretionary and financial sectors leading the drop.

U.S. economic data was mixed. Weekly jobless claims fell more than expected, and there was a smaller-than-feared drop in durable-goods orders. However, manufacturing activity in the Federal Reserve Bank of Kansas City's district slowed in June. Of greater worry, producers grew more cautious about the future and employment turned negative again, according to data released by the bank Thursday.

The manufacturing data added to investors' worries a day after the Federal Reserve's policy-making body kept its key interest rate near zero, as expected, but cast its policy statement with more downbeat language. "Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad," namely in Europe, the central bank said in its Wednesday statement.

The euro edged up to $1.2318 recently, reversing earlier declines. The U.S. Dollar Index, reflecting the U.S. currency against a basket of six others, was flat. Treasurys rose, pushing the yield on the 10-year note down to 3.08%. Crude-oil futures fell briefly below $76 a barrel while gold futures advanced.

Precious metals continue to edge up as economic worries impact investors opinion of world market data. Thursday's gold, silver and platinum were moving in tandem with the dollar's decline. Spot gold was trading at $1247, silver $18.65, platinum $1559/troy ounce.

G-20 Protesters preparing major rallies as world leaders meet this Saturday. Canada plays host to both the G-8 and G-20 groups of leading industrialized economies this weekend.

Leaders of the world's biggest economies are expected to begin arriving in Toronto over the next few days. Canada's primary goal at the G-20 summit to held here this weekend is finding the "delicate balance" that leads to stable and sustainable global economic growth, Finance Minister Jim Flaherty said Thursday.

Toronto stocks were lower at midday, led by banks and energy sectors. Worries over the European sovereign debt crisis and the U.S. financial overhaul bill kept investors at bay. Overall, eight of Toronto's 10 sector indexes were lower.

The US can 'no longer drive global growth'. US Treasury Secretary Timothy Geithner, speaking ahead of a G20 meeting this weekend, said the US and Europe "have much more in common than we have differences". The world "cannot depend as much on the US as it did in the past". He also played down any differences in policy between the US and Europe regarding deficit reduction, according to the BBC.

The financial sector was off 1.1%, led by Royal Bank of Canada, down 53 Canadian cents to C$53.22. Toronto-Dominion Bank had fallen 0.94 to 71.69 and Bank of Montreal had declined 1.28 to 60.48.

News out of Europe didn't help. The cost of insuring Greek sovereign debt against default hit a record high Thursday, as fears about forced selling of Greek government bonds and the fate of the European economy weighed on peripheral euro-zone bond markets. Debt-rater Fitch Ratings also said the Greek economy remains at risk of staying weak for an extended period of time.

French Unemployed +0.8% In May To 2.7M. The number of people classified as unemployed in France continued to rise slightly in May, showing the French job market has yet to recover from the global economic downturn.

The number of jobless people in France actively seeking work, rose by 22,600, or 0.8%, in May, to 2.7 million, figures from the French State employment agency Pole d'Emploi and jobs statistics department Dares show. On an annual basis, joblessness was up 7.1%.

The May increase continues a general trend upward in joblessness over the past year and a half, with the government warning that the trend won't start reversing until sometime later in 2010.

In an interview, the German chancellor rebuffed Obama's call for Germans to aid the global recovery by spending more and relying less on exports, even as she warned that Europe's own financial crisis is far from over.


Wednesday, June 23, 2010

G20 To Warn Of 'Uneven And Fragile' Recovery

June 23, 2010

WASHINGTON (AFP) -- Leaders from the group of 20 top economies will warn that the global recovery remains "uneven and fragile" when they meet in Toronto later this week, according to a leaked draft communique.

According to the document, obtained by Greenpeace -- an environmental lobby group -- leaders noted a still patchy recovery from the worst economic crisis in a generation.

"While growth is returning in many countries, the recovery is uneven and fragile, and unemployment remains at unacceptable levels," the text said.

Skirting a contentious issue that has divided Europe and the U.S., leaders were to say stimulus spending had helped stabilize the global economy.

Washington has urged Europe not to cut government spending before the recovery is assured, for fear of plunging a swathe of the world -- including the U.S. -- into a double-dip recession.

European nations, led by Germany, France and Britain, argue drastic cuts are needed to put their books in order and create a firm basis for future growth.

"Fiscal and monetary stimulus has helped restore private demand and lending, and we have taken strong steps toward increasing the stability of our financial systems," said the largely incomplete text.

Leaders were also expected to ask trade ministers to move toward the "endgame" of much-delayed World Trade Organization negotiations.

"We instruct our Trade Ministers to prepare a full assessment of the state of the negotiations and a plan of the way forward for our consideration at the Seoul G20 summit in November of this year."

They will also push forward with a "voluntary" plan to "identifying inefficient fossil fuel subsidies that encourage wasteful consumption.

"We agree to continue working to develop voluntary, member-specific approaches for the rationalization and phase out of such measures."

The Federal Open Market Committee (FOMC), stated today that financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.

Prices of energy and other commodities have declined somewhat in recent months, underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its tools as necessary to promote economic price stability.

New U.S. home sales plunge to a record low, dropping 32.7% to an annual rate of 300,000 in May, as buyers faced a lackluster job market without a longtime government subsidy for purchases. Economists expected sales to drop by 20.6%.

US residential home foreclosure actions, modifications continue to rise as unemployment in the US continues to trouble the economy, potential buyers, banks, Cities and States as taxable income sources continues to fall.

U.S. crude inventories showed a large, unexpected build last week, but the draw seen in gasoline stocks bucked analysts' expectations, according to data released Wednesday by the U.S. Department of Energy.

Crude oil stockpiles rose by 2.0 million barrels to 365.1 million barrels for the week ended June 18, compared with an average survey estimate of a 1-million barrel decline. Late Tuesday, the American Petroleum Institute, an industry group, reported that crude inventories rose by 3.7 million barrels.

On the New York Mercantile Exchange, crude oil futures held on to early losses with August contracts recently down 2.9% at $75.64 a barrel. Benchmark gasoline futures for July were recently down 2.9% at $2.0720 a gallon and July heating oil was down 7.7% at 2.0565 a gallon.

The EIA's weekly data show a smaller-than-expected build in distillate stocks and an unexpected draw in gasoline inventories, but the report failed to stir the markets. Inventories for crude oil and refined products remain at unusually high levels for this time of the year.

Gasoline stockpiles fell by 762,000 barrels to 217.6 million barrels, the department's Energy Information Administration said in its weekly report versus the forecast of a 300,000-barrel build based a Dow Jones Newswires survey of 14 analysts.

Distillate stocks, which include heating oil and diesel fuel, edged up by 297,000 barrels to 156.9 million barrels versus analysts' estimate for a 1.2-million barrel increase.

Refining capacity utilization rose 1.5 percentage points to 89.4%. Analysts had expected it to rise by 0.2 percentage point.

API reported that gasoline stocks had risen by 810,000 barrels and distillate inventories expanded by 1.1 million barrels last week while refinery runs rose by 2.1 percentage points to 87.1% of capacity.

U.S. Oil Inventories:
For week ended June 18:
Crude Distillates Gasoline Refinery Use
EIA data: +2.0 +0.3 -0.8 +1.5
Forecast: -1.0 +1.2 +0.3 +0.2

Figures in millions of barrels, except for refining use, which is reported in percentage points. Forecasts are the average of expectations in a Dow Jones Newswires survey of analysts earlier in the week.

U.K. Prime Minister Cameron says cuts needed to stave off a Double Dip Recession.
The Prime Minister is to argue that far from choking the economic recovery, the spending cuts and tax hikes announced in Tuesday's budget were needed to keep it on track.
Sovereign borrowers sought to play down the potential effects of the 440 billion European Financial Stability Facility at this week's Euro-money debt conference, but a lack of clarity on the issue means it is very hard to tell whether the new vehicle will crowd the market for high-quality debt.


Friday, June 18, 2010

91 Banks Miss May TARP Payment, 68 Banks Miss Multiple Payments more failures loom ahead

More Than 90 Banks Miss TARP Payments
91 Banks Miss May TARP Payment, 68 Banks Miss Multiple Payments

Published: Wednesday, 16 Jun 2010 | 12:36 PM ET
By: Reuters

More than 90 U.S. banks and thrifts missed making a May 17 payment to the U.S. government under its main bank bailout program, signaling a rising number of lenders are struggling to meet their obligations.

The SNL Financial statistics show 91 banks missed their dividend payment under the Troubled Asset Relief Program.

The statistics, compiled by SNL Financial from U.S. Treasury data, showed 91 banks and thrifts skipped the May dividend payment under the Troubled Asset Relief Program, or TARP. It was the first missed payment for 23 of the banks; for the others, it was at least their second miss.

The number of banks missing their TARP payments rose for the third straight quarter. In February, 74 banks deferred their payments; 55 deferred last November.

SNL Financial's analysis found 20 banks have missed four or more payments since the program began in 2008, while eight banks have missed five payments.

Under the TARP program, the U.S. Treasury invested in preferred shares issued banks looking for funds. The banks were to make regular dividend payments to the Treasury, and have the right to repurchase the shares at some point in the future.

While many of the largest U.S. banks easily repaid billions in TARP aid, more than 600 smaller banks still hold $130 billion from the program, created at the height of the financial crisis.

In some cases, small banks are renegotiating the repayment terms. Midwest Banc Holdings [MBHI 0.019 -0.001 (-5%) ], for example, agreed to swap $84.8 million in preferred shares issued under the TARP program in 2008 for $15.5 million in common shares. That would have meant an 80 percent loss for the government—and the U.S. taxpayer—on the initial investment. But the swap was contingent on the bank raising more private capital, which it failed to do. Regulators seized the bank in May.