Data Saves Dollar after Bernanke's Dovish Display

Tue, Mar 27 2012, 14:29 GMT

Fed Chairman, Bernanke

by Nicky Ong - Traders Corner
The S&P/Case-Shiller index showed houses prices dropped in line with expectation, and more importantly at a slower rate than last month. As a result the dollar managed to reverse some of the losses it has experienced over the past couple of days.

Similarly CB Consumer confidence came in at 70.2, slightly off the 70.3 expected, but still close to the highest levels since this time last year. Positive data has been welcomed by dollar bulls as the cloud of ‘QE3’ has given license to sell the dollar over the past 24 hours.

The dollar has been under heavy selling pressure as Federal Reserve Chairman was surprisingly dovish when he addressed the Association for business economist yesterday. Despite the improvements in the U.S labour market Bernanke warned unemployment remained far from normal and required a continuation of accommodative monetary policy, essentially opening the door for ‘QE3’.

Over the past few months the greenback has strengthened against the likes of the Aussie, Kiwi and Yen as traders adjusted their view on monetary policy, with interest rate futures pricing in a potential rate hike before the 2014 forecast. However, Bernanke put a dent in these expectations yesterday.

This development may well reduce the positive sentiment towards the dollar somewhat, but there is no masking the improvement in the U.S economy and labour market which will be bullish for the greenback.

The Euro was propelled higher yesterday against the dollar on the back of Bernanke’s rhetoric, and a continuation of these gains were experienced in early European trade as Italy managed a successful bond auction. But gains were halted as GFK German Consumer Climate missed expectation, showing confidence dropped for the 1st time in seven months as higher oil prices reduce spending power for households.

Also helping the single currency gain against the dollar is a report suggesting German Chancellor Angela Merkel is willing to increase support for the debt ridden region by running both the temporary and permanent rescue funds in parallel. The meeting scheduled on the 30th March will provide the platform for EU Finance Ministers to discuss additional supportive measures.

Finally, it appears the Japanese Yen is set for more weakness. The Yen has been by far the worst performer of 2012 as the Bank of Japan’s monetary policies aimed at weakening their currency, combined with ultra-low rates have made the Yen an attractive funding currency for carry trades.

On Work, School, Soccer and how hard it is to get a fast internet connection in the 21st Century

Sunday
Woke up with a rumbling tummy threatening to spoil my day. Decided to skip lunch.I weighed my options early in the morning-what to skip between work and lunch.

Monday
Learned of Fabrice Muamba's situation with shock-fortunately the news from his hospital is encouraging. The Red is now 4 points ahead in the league table. Not much in the way of new hirings. Need to get a new modem to start a fresh challenge (read job) start.

Tuesday
Gold ounce looking to go down. Currently at $1694. Submitted a Spirit of Easter Article on Yahoo. Thankfully just beat the deadline.

Wednesday
Glad to be moving closer to performance targets at work. One of our clients is teetering on the brink of bankruptcy and seeking a bailout. Will wait to see how that one goes. Messi scored thrice yesterday- pulling away from the greatest chasing pack which includes Maradona, Pele and Zidane.

Thursday
My sleep-deprived body is threatening to go on strike. Luckily, It's the last day of the week at work. I think that I can do better with my performance targets without anyone breathing down my neck-thank you.
Elsewhere, Man City had a narrow win over Chelsea and they are over the moon. Let's see how they keep up over the weekend.

Friday
Spent most of the day repairing my computer. Can't complain- that's on my weekend schedule but I lost a lot of hours just to establish internet connection. Watching DVD series should be my last resort to wind down the week sort of.

Saturday
Man City lose 2 points to wonder strike from Peter Crouch-the ball didn't even touch the ground from clearance to net-must be contender for goal of the Premiership.
The internet connection is still not established so this can be rated by yours truly a slack weekend. Network providers should really pull up their socks before they cry over lost revenues.

Gold drops as economic optimism boosts dollar

Pre-produced parts of watches on display at a plant of gold refiner & bar manufacturer Argor-Heraeus in the Swiss town of Mendrisio, March 1, 2012

By Amanda Cooper

LONDON | Tue Mar 20, 2012 9:45am EDT

(Reuters) - Gold fell on Tuesday, hurt by strength in the dollar which profited from the growing view in the market that the U.S. economy is on a firmer footing, ending a three-day rally in the bullion price.
The dollar benefited from wariness in the market stemming from talks between Italy's government and unions on the reforms needed to turn around the euro zone's third largest economy, which kept the euro under pressure and dented equities.
Data from the United States in the last couple of weeks has suggested the economy is recovering more quickly than anticipated, lessening the need for the Federal Reserve to buy government bonds to anchor interest rates and support growth.
Adding to the negative mood in gold was a sharp rise in benchmark 10-year U.S. Treasury yields, which have gained more than a third of a percentage point in less than a week, while holdings of the metals in exchange-traded products staged their largest one-day drop since late January.
Spot gold was down 0.65 percent on the day at $1,649.69 an ounce by 1325 GMT, having slid by nearly 3 percent so far this month.
"At the moment, it's not looking great for gold. On the one hand you have the strengthening dollar against the euro hitting the market and you also don't have that much support from the physical market," RBS analyst Nikos Kavalis said.

"We are seeing fairly weak conditions for gold, you can see it in the price. At the same time, we are still standing by our bullish call for the market. We think prices can, and will, go higher later in the year, so I would say at current prices, we would definitely be buyers," he added.
Gold's correlation with Treasuries has reversed in the last week, meaning the bullion price is more likely to move in tandem with Treasury prices than against them.

YIELD APPEAL
A rise in yields increases the appeal of the U.S. dollar for foreign investors, which in turn delivers a double blow to gold, which tends to fall when the dollar strengthens as non-U.S. investors sell their bullion holdings to take greater profit on their position in their local currency and secondly increases the so-called "opportunity cost" of owning the metal.
When interest rates are low, investors forfeit less of a premium for holding gold, which bears no yield or dividend, rather than stocks or bonds. An environment of rising rates increases this opportunity cost.
Holdings of gold in the world's major ETPs saw their largest one-day outflow in two months on Tuesday, falling by over 56,000 ounces to 70.843 million ounces, reflecting some of the desire among investors to hold assets that profit strongly from an upswing in the business cycle, such as equities.
A strike by the jeweler industry in India, the world's largest gold consumer, in protest against a government plan to raise the import duty on bullion, has cut physical demand noticeably this week.
Anne-Laure Tremblay, an analyst at BNP Paribas, said while there were some headwinds for gold in the short-term, she was maintaining her price forecast for this year at $1,850.00/oz.

"Beyond the short term, we remain positive on gold's outlook as the fundamentals are still solid. These include high liquidity, low interest rates and sovereign debt concerns," she said.
In other precious metals, silver fell by 2.8 percent to $32.28 an ounce, while U.S. May silver futures were down 1.9 percent at $32.30.
Platinum fell 1.1 percent to $1,657.00 an ounce while palladium fell 1.0 percent to $695.00 an ounce.

(Reporting by Amanda Cooper; editing by Elaine Hardcastle)

Middle East airlines 'unstoppable'

People walk with their baggage trolleys near the entrance to the Emirates Airlines departures terminal at Dubai International Airport, Feb 6th 2012

By Tim Hepher

PARIS | Mon Mar 12, 2012 6:37am EDT

(Reuters) - A top Emirates executive has delivered a warning to Europe's struggling airlines that they could lose more business to booming Middle East carriers as they pay the price of years of political neglect.

Thierry Antinori, who walked away from the top job at Austrian Airlines to join the largest Arab carrier last year, said airlines such as Emirates were well placed to continue expanding while some rivals lurched into a downward spiral of investment.

"I think with our geographical position and the quality of products and networks we are offering, there is clearly an opportunity for the Middle East airlines to strengthen their position on the global industry map," he told Reuters.

"I even consider the next years as an opportunity for Emirates to increase the gap with some of our competitors, because we are just looking at what the customer wants."

The Frenchman dismissed the possibility that Dubai-based Emirates would step in to bail out or buy European airlines and repeated its reluctance to join one of the major alliances.

In December, Gulf rival Etihad Airways of Abu Dhabi took a stake of almost 30 of Germany's Air Berlin (AB1.DE). There are also reports that Etihad is interested in holding talks with the Irish government over the sale of its 25 percent stake in Aer Lingus (AERL.I).

"We prefer to rely on our product, so we prefer to buy airplanes than airlines," the Emirates official said.

"We do not lose time in discussion with alliances, which are not very clear for the customer to understand. They say 'we offer you seamless travel' but in the end they offer seamless trouble," said Antinori, who joined Emirates as Executive Vice President, Passenger Sales Worldwide, in September.

Antinori's decision to defect from Lufthansa came days before he was due to become chief executive of loss-making Austrian and took the industry by surprise. Six months later, he has a blunt assessment of the malaise gripping European airlines, half a dozen of which have gone bankrupt this year.

"Aviation was made a strategic industry in Dubai 20 years ago. In Europe it is not strategic and it is not important for politicians to win elections. That is why airline lobbying is not heard, investments are blocked, taxes are increasing and as a result airlines do not have modern fleets and then they save money on products."

Recent aircraft improvements have put most of the world's population within a direct flight from the Gulf, resulting in airport and fleet expansion and shifting more of the global network map to large hubs such as Dubai from the U.S. and Europe.

"You cannot stop the Middle East airlines because they are in the centre of the world; they have the best infrastructure... and never save money on product," Antinori said.

"That is the big difference with Europe (where) there is no strategy, and because of that they reduce the quality and the infrastructure, and the fleets become older."

EMISSIONS COST

The critique of European aviation policy comes as the industry faces tough battles over airport expansion in the UK or a new system of European Union charges for jet emissions -- two issues that also affect airlines in the Gulf and elsewhere.

Antinori said the EU's emissions trading scheme would cost Emirates 40 million euros in 2012, rising to half a billion in 2020, and this would ultimately mean higher ticket prices.

Emirates meanwhile remains locked in a battle over access to Germany, where it has long sought to secure landing rights in Berlin and Stuttgart, as well as access in Canada.

Emirates' decision to choose the Berlin Air Show in 2010 to order 32 extra A380s was seen as a reminder of its importance for Airbus jobs, many of which are in Germany. But the airline is still unable to add to four existing German entry points.

"We understand that governments need time to think. We are patient; I am sure we will find a solution," Antinori said.

Emirates is the world's largest buyer of A380s, with a total of 90 on order, and Boeing's 777 mini-jumbos.

European airlines accuse Emirates and others in the Gulf oil region of expanding on the back of subsidies.

Emirates denies this, saying it pays a full price for its fuel and that critics like Air France, which unveiled steep losses last week, should examine their own business models.

Antinori said Emirates was outperforming the industry but was not immune to record fuel prices.

"We were able in the last months to increase our load factor in comparison with previous years. The revenue increase at Emirates is higher than the percentage increase in seats."

Middle East passenger traffic grew 14.5 percent in January, versus 5.3 percent in Europe, according to airlines body IATA.

(Editing by Reed Stevenson)

BP oil spill trial delayed for settlement talks

By Tom Bergin and Jonathan Stempel

LONDON/NEW ORLEANS | Mon Feb 27, 2012 1:57am EST

A BP petrol station sign pictured in west London, April 25 2010-Reuters/Toby Melville

(Reuters) - The trial to decide who should pay for the 2010 Gulf of Mexico oil spill has been delayed by a week, to allow BP Plc to try to cut a deal with tens of thousands of businesses and individuals affected by the disaster.

Less than 24 hours before the case was set to start in a New Orleans federal court, U.S. District Judge Carl Barbier pushed back the date to March 5 from February 27.

The delay allows further talks between BP and the Plaintiffs' Steering Committee (PSC), which represents condominium owners, fishermen, hoteliers, restaurateurs and others who say their livelihoods were damaged by the April 20, 2010, explosion of the Deepwater Horizon drilling rig and subsequent oil spill.

Eleven people were killed, and 4.9 million barrels of oil spewed from the mile-deep Macondo oil well, in by far the worst offshore U.S. oil spill.

"BP and the PSC are working to reach agreement to fairly compensate people and businesses affected by the Deepwater Horizon accident and oil spill," BP said in a statement.

The London-based oil company said there was no assurance that the talks would lead to a settlement.

Bloomberg news agency reported on Monday that BP and the plaintiffs were discussing a $14 billion settlement that was nearing completion. It cited three people familiar with the talks.

A settlement between BP and the businesses would remove a significant portion of the complex litigation, the trial of which was expected to take nearly a year. It could also be a key step toward reaching a global settlement with its drilling partners, and with federal and state governments.

Much work would remain. The U.S. government has sued BP and others for violating the Clean Water Act and other laws, which could result in fines totaling tens of billions of dollars. Gulf states are also seeking compensation for their losses. BP is also suing and being sued by its drilling partners.

"Before today, I had almost given up on the possibility of a global settlement before a trial began," said Edward Sherman, a professor at Tulane University Law School and specialist in complex litigation. "Now, with an extra week, it seems to improve the chances."

Barbier, meanwhile, has kept the highly complex case moving forward, and had not changed the trial date since it was first set more than a year ago.

"Judge Barbier would not have delayed (the) trial unless (a) settlement was within reach," said David Uhlmann, a University of Michigan law professor and former chief of the Justice Department's environmental crimes section, in an email.

In an order dated Sunday, Barbier said the delay made sense "for reasons of judicial efficiency and to allow the parties to make further progress in their settlement discussions." He did not specify which parties he was referring to.

REASONABLE SETTLEMENTS SOUGHT

Apart from BP, which owned 65 percent of the Macondo well, the main corporate defendants are Vernier, Switzerland-based Transocean Ltd, which owned the Deepwater Horizon rig, and Houston-based Halliburton Co, which provided cementing services for the well. They are also suing each other. Several other companies are also involved in the trial.

A BP spokeswoman declined to comment further on the talks.

Transocean spokesman Lou Colasuonno said BP's talks with the PSC "doesn't change the facts of the case," and that Transocean remains prepared for trial.

A spokeswoman for the U.S. Department of Justice declined to comment. The offices of Alabama Attorney General Luther Strange and Louisiana Attorney General James "Buddy" Caldwell, which are coordinating the states' case, did not immediately respond to requests for comment. Halliburton also did not immediately respond to a request for comment.

BP has accepted responsibility for the disaster, and estimated its legal and cleanup costs for the spill will total $43 billion. Some analysts have said that figure could top $60 billion, especially if there were a finding that its activities at the project were "grossly negligent."

Earlier this month, BP said it had set aside $6.1 billion to cover claims by businesses. Lawyers for those plaintiffs said the amount was too low, and that BP should also award punitive damages, which the oil company says are not warranted.

Many industry analysts and experts say a quick settlement is in BP's best interest.

Chief Executive Robert Dudley has said BP is willing to settle for reasonable terms, and on Sunday told The Sunday Telegraph in an interview that he hoped to reach "some agreements" and perhaps avoid litigation.

Other companies in the case are Anadarko Petroleum Corp, which owned 25 percent of the well; Mitsui & Co's MOEX USA unit, which owned 10 percent of the well; Cameron International Corp, which made a blowout preventer, and Schlumberger NV's M-I Swaco venture, which provided mud services. All have settled with BP. MOEX has settled with the government.

The case is In re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 10-md-02179.

(Reporting by Tom Bergin in London and Jonathan Stempel in New Orleans; Additional reporting by Chris Baltimore in Houston, Ransdell Pierson in New York and Jeremy Pelofsky in Washington, D.C.; Editing by Marguerita Choy and Elizabeth Piper)

Advent and Goldman to Buy TransUnion in $3 Billion Deal

February 17, 2012, 9:36 am

TransUnion, one of the nation's three largest consumer credit reporting companies, produce on-demand reports with a person's borrowing history

By BEN PROTESS, NY TIMES

TransUnion, one of the nation’s three largest consumer credit reporting companies, agreed on Friday to sell itself to a pair of private equity funds, including an arm of Goldman Sachs

Advent International and GS Capital Partners, the Goldman Sachs unit, will buy the company from Madison Dearborn Partners and the Pritzker family, the prominent Chicago billionaires. The deal, which values TransUnion at more than $3 billion, is one of the largest private equity transactions of the year.

The sale is the latest shakeup for TransUnion, which was controlled by the Pritzkers until 2010. When the Pritzkers sold their controlling interest to Madison Dearborn Partners, one of Chicago’s largest private equity shops, the company was worth $2 billion.

The deal announced on Friday will not prompt changes to the company’s management team, TransUnion said in a statement. The companies did not announce the full terms of the takeover on Friday.

“I wish the TransUnion management team and all the associates the very best in this next, and very exciting, stage in the evolution of the company,” Penny Pritzker, one of more than 10 heirs to the Prizker family fortune and the chairwoman of TransUnion’s board of directors, said in a statement.

The deal comes as the credit reporting industry faces broad federal oversight for the first time. The Consumer Financial Protection Bureau, the nation’s federal consumer watchdog, unveiled a plan on Thursday to keep a closer eye on credit reporting companies and debt collectors, two industries that have largely flown under the government’s radar. The proposal would ensnare the industry’s 30 largest companies, including TransUnion and its two biggest competitors, Experian and Equifax.

Credit agencies, which produce on-demand reports featuring a consumer’s credit score and a detailed snapshot of a person’s borrowing history, are essential for obtaining a car, a home mortgage or even a cellphone. But the companies have also drawn criticism for producing the occasional error-riddled report and for deferring to creditors at the expense of consumers.

The TransUnion deal is expected to close by early in the second quarter.

“TransUnion has demonstrated strong growth under the support and guidance that Penny Pritzker has provided as our chairman, and we have benefited greatly from the resources, network and expertise of Madison Dearborn Partners,” Bobby Mehta, TransUnion’s president and chief executive, said in a statement. “We look forward to working closely with the Advent and Goldman Sachs teams to continue executing against our strategic blueprint by remaining focused on providing our clients with highly attentive service and the very best information and risk management products.”

TransUnion was advised by Bank of America and Deutsche Bank and the law firm Latham & Watkins. Evercore advised Advent and Goldman Sachs.

Obama’s budget shows he’s no Keynesian

Commentary: He links fast growth with fiscal contraction in Washington

By MarketWatch

WASHINGTON (MarketWatch) — In his 2013 budget proposal released on Monday, President Barack Obama has now fully embraced austerity as the recipe for economic success.

Obama is no longer a Keynesian.

Although the economy remains weak and unemployment is still elevated, Obama proposes the sharpest contraction in fiscal policy in more than 40 years. And, in the midst of those tax increases and spending reductions, he’s predicting a booming economy growing well above the economy’s long-run potential for the next six years — averaging an incredible 3.6%. Read our news coverage of the White House budget plan.

In short, Obama is agreeing with his Republican critics who say that what the economy really needs right now is a rapid move toward balanced budgets. By contrast, Keynesian economists would say that reducing budget deficits now, when we still have so much slack in the economy, would slow growth. They recommend running high deficits until the economy is stronger, and then moving to balance.

Next year, the Obama budget proposal sees federal tax receipts increasing by 2 percentage points of gross domestic product, and federal outlays falling by 1.1 percentage points of GDP. The total drag from fiscal policy would total 3.1% of GDP.

The last time the government tightened fiscal policy that much was in 1969, when a 10% income tax surcharge was implemented to pay for the Vietnam War. The immediate results were terrific in one sense: the federal budget was balanced in 1969, the only time it was balanced between 1960 and 1998.

Unfortunately, the balanced budget was a major cause of the recession that began in December 1969. All too often over the past 90 years, attempts to reduce deficits or increases surplus have contributed to ensuing recessions.

A recession is what the Congressional Budget Office thinks might happen next year if the government goes ahead with deficit-reduction measures already baked into federal law, including the sunsetting of the Bush-era tax cuts and the automatic budget cuts agreed to last year when Obama and Congress settled the debt-ceiling standoff.

For 2013, the CBO projects growth of just 1% (as opposed to 3% in the White House budget), largely because of austerity measures. According to the CBO, growth could be as high as 4.1% next year if the government delayed its plans to reduce the deficits.

It’s hard to fathom how the economy will be able to grow at such a rapid pace over the next three years if fiscal policy is exerting such a powerful drag.

—Rex Nutting

Shilling Strengthens against other currencies

The Kenyan currency continues to hold its own against major currencies after rebounding from its lowest point ever in October 2011. It hit its nadir on October 22nd when it exchanged at Kshs 107 to the greenback.
It then recovered to hit 100 to the US dollar and measured 91.45 against a basket case of 4 major currencies. This basket case is a measure of the units of Kenya's major partners and contains the US dollar, the Sterling pound, the euro and the yen weighting according to trading importance.
The shilling measured 86.53 against the same currencies in September.
On October 26th, a basket case of regional currencies read 8.68 as compared to 8.36 hit on September 22nd. This case holds the South African Rand, the United Arab Emirates' dirham and the 2 East African currencies, the Ugandan and Tanzanian shillings.
The Kenya shilling read 76.27 against the regional currencies on 25th January 2011. These represent a gain of 16.6% and 14.5% respectively on the 2 basket cases.
This has in turn been a result of the treasury's intervention in the markets raising interest rates and also hounding out key players in the banking sector accused of hoarding foreign currencies. These include Equity Bank,Kenya Commercial Bank, Barclays Bank of Kenya, Standard Chartered Bank and Family Bank.


Forex: EUR/USD steadies above 1.3100

Fri, Feb 03 2012, 16:16 GMT
FXstreet.com (Córdoba) - As the dust settles after the surprisingly positive US payrolls report, EUR/USD consolidates above the 1.3100 mark. The pair bottomed at 1.3065 following the data and managed to bounce up although the 1.3130 area capped the recovery confining EUR/USD to sideways consolidation within the last hours.

At time of writing, EUR/USD is quoting around 1.3110, still down 0.3% on the day. The Euro is on track to close the week with modest losses, as despite several attempts to break and hold above 1.3200 within the last days, it has been constantly rejected from those levels.

In terms of technical levels, immediate supports are seen at 1.3070, 1.3020 and 1.2980, while next resistances could be found at 1.3140, 1.3185 and the 1.3200/10 area.