8 February 2012
Today’s Issue Cluster: NatGas
DATA POINTS
US – Week: MBA mortgage applications jump on refi demand, +7.5% / R
Canada – Jan: Housing starts decline, -2k to 197k / FP
Germany – Dec: Exports down sharply after strong year, -4.3% / dpa / R / AP / B / WSJ / FT
South Africa – Jan: Business confidence index down, 97.1 from 99.1 / R
Japan – 2011: Current account surplus down, -43.9% to ¥9.63t / K / N / FT / WSJ
MARKETS
Greece – ECB Concession Smooths Way Toward a Deal
The European Central Bank has made key concessions over its holdings of Greek government bonds …. The ECB has agreed to exchange the government bonds it purchased in the secondary market last year at a price below face value, provided the debt-restructuring talks have a successful outcome. The ECB won’t take a loss on the transaction, but it isn’t clear whether the bank will exchange the bonds at the below-par price at which it purchased them or whether it will make a profit… The concession appears to be a further sign of the growing pragmatism of the ECB under its new president, Mario Draghi, WSJ
The swap by the E.C.B., if it happened, would gain Greece a reduction in its debt of as much as 10 billion euros. … By receiving bonds issued by the European Financial Stability Facility in return, the E.C.B. would not have to record a loss on the bonds along with private sector investors when the terms of the long awaited restructuring of Greece’s debt are finally imposed. The 440 billion euro E.F.S.F. could then either lend Greece the funds to buy back the bonds at a discount, or it could participate in the debt restructuring deal by swapping the bonds for new longer term securities. NYT
Greece missed another deadline to approve conditions for a second €130bn bail-out on Tuesday night,… Party officials said on Wednesday they had only just received the 50-page document that leaders need to approve and that they would need several hours to study it before any meeting could take place… Greece has already missed two deadlines this week because of the politicians’ brinkmanship, FT
The draft of the bailout includes plans to cut the minimum wage by about 20-22 percent, a government official said. It also gives political leaders the option of cutting pensions over 1,200 euros by up to 20 percent or cutting supplementary pensions by 15 percent on average or a combination of cuts in both main and supplementary pensions, R
A formal offer for the debt swap must be made by Feb. 13 to allow all procedures to be completed before the March 20 bond comes due. B / WSJ
EU – Nerves over Greek wrangling lifts German debt
German 10-year bond yields were 1.5 basis points lower at 1.875 percent. … Italian 10-year yields rose six bps on the day to 5.69 percent while equivalent Spanish yields were five bps up at 5.1 percent, slightly widening their spread over German benchmarks. R
Yuan – Road to Becoming a Reserve Currency
In a new Brookings Institution study, Esward Prasad and Lei Ye of Cornell University say China’s currency will become an international reserve currency within the next decade, “eroding but not displacing the dollar’s dominance.” On some key criteria for becoming a reserve currency, such as government debt, China performs well. It’s far behind on others: Its exchange rate doesn’t trade freely (as other reserve currencies do). wsj
Aussie – The Currency That No One Wants to Bet Against?
The Aussie has been on an upward trend against the U.S. dollar since 2001, one that has only intensified as the 2008 financial crisis turned the Australian dollar into something of a sure bet…. . As a solid, top-rated sovereign borrower, Australia stands out as an increasing rarity …. while other developed markets have cut base rates to the bone, and strongly hinted that they will be there for a long time, Australia’s relatively high rate, stuck at 4.25% this month, offers opportunities for carry traders WSJ
ECONOMICS
US – Auto and Student Loans Drive Borrowing Surge
Household borrowing through credit cards, car loans, student loans and other installment debt—which excludes mortgages—rose at a seasonally adjusted 9.3% annual rate in December, following a 9.9% rise in November, the Fed said Tuesday. That was the biggest two-month surge since late 2001, when auto makers rolled out zero-percent financing after the Sept. 11 terrorist attacks. WSJ
US – Student Debt Could Be Next ‘Bomb’
Almost half of U.S. bankruptcy attorneys representing consumers say that potential clients with student-loan debt have “significantly increased” over the past three to four years… The National Association of Consumer Bankruptcy Attorneys…. Federal and private student-loan debt is approaching $1 trillion and surpassed credit-card debt for the first time in 2010, according to Mark Kantrowitz, publisher of FinAid.org B
POLITICS & FISCAL POLICY
Syria – Ailing economy hits citizens and regime
As attention focuses on the violence around the nation and the international disputes over what to do about it, the ailing economy and its paralysed private sector are a less obtrusive but increasingly potent threat to both the welfare of ordinary Syrians and, potentially, the prospects of President Bashar al-Assad’s regime. Business people describe a perfect storm of troubles linked to sanctions, inflation and insecurity, which have led to plunging demand, lay-offs – and a fear that a dire commercial situation could disintegrate. FT
MONETARY POLICY
Fed – Bernanke Defends Approach
Senate Republicans on Tuesday, like their colleagues in the House last week, expressed concern that the Fed effectively was declaring that it would prioritize job growth over inflation. “Is the Fed sending a signal that keeping inflation in check is a secondary priority to achieving full employment?” asked Senator Charles Grassley, Republican of Iowa. “I want to disabuse any notion that there is a priority for maximum employment,” Mr. Bernanke responded. Instead, he told another questioner, Senator Patrick Toomey, Republican of Pennsylvania, that the Fed’s approach to its dual objectives is “fully balanced and symmetrical.” NYT / R / AP
The jobless rate unexpectedly fell to 8.3 percent in January, a government report showed on Feb. 3. Bernanke’s remarks indicate that his view that the labor market is a “long way” from returning to normal hasn’t changed since he used the same phrase when he testified to the House Budget Committee on Feb. 2. “The 8.3 percent no doubt understates the weakness of the labor market in some broad sense,” B
FINANCE
SK – To beat the bustle, banks head to SE Asia
Korean banks have once again telegraphed their ambitions of expanding overseas, particularly in Southeast Asia, to diversify revenue sources amid the overcrowded domestic market…. none have managed to build a commanding presence outside Korea so far, unlike the manufacturing sector, which has fiercely extended its global market share. …. Korean banks have been seeking to build new profit bases overseas by gradually increasing the number of their foreign branches. They owned a total of 131 branches in 34 countries in the first half of last year, according to the Financial Supervisory Service. JA
REAL ESTATE
China – Beijing office rents outstrip New York
A boom in demand and limited supply of high-quality space catapulted Beijing to fifth place in a list of the world’s priciest office locations which was compiled by Cushman & Wakefield, …. Hong Kong retained the top spot, followed by London, Tokyo and Moscow. New York was sixth, just behind Beijing. … Prime office rents in Beijing’s central business district rose 75 per cent last year, the fastest globally, and up from a 48 per cent increase in 2010, FT
Shanghai had rental growth of 27 percent last year, the second fastest in Asia behind Beijing. AFP
China – Beijing’s land sales income to drop 30% in 2012
Beijing’s income from land sales is expected to fall to 90 billion yuan ($13.6 billion) this year, a 30 percent drop from last year’s 123.4 billion yuan, the municipal finance bureau said Tuesday. This would make it the lowest land sales income on record, the bureau said. CD
SERVICES
US – Big Firms Sidestep Euro-Crisis Damage
Big U.S. companies have largely skirted major damage from the European financial crisis… Revenue from Europe rose 11.4% in the fourth quarter, compared with the same quarter a year earlier, for 39 members of the Standard & Poor’s 500-stock index that have reported sales to the region… the increase suggests that government cutbacks, debt downgrades and uncertainty over the euro didn’t paralyze trans-Atlantic commerce. Sales to Europe accounted for 24.8% of global revenue for the 39 companies, down only slightly from 25.2% in the fourth quarter of 2010. WSJ
MANUFACTURING
Lighting – The Quest for Cheaper & Better
Soraa Inc. on Wednesday plans to disclose the benefits of an unusual technology for manufacturing … LEDs …. Soraa initially plans to target a niche where LEDs haven’t made big inroads, lamps typically made with halogen that are common in track lighting at retail stores and other businesses. Soraa’s lamps use a single chip to produce light—rather than four or more—and don’t require the cooling fans of some comparable LED-based products. …
Most companies fabricate the chips by laying down a material called gallium nitride on wafers of sapphire or silicon carbide. As more current is pumped into such devices, their efficiency at emitting light begins to decrease. The phenomenon, called droop, has been a focus of Mr. Nakamura and other faculty members at University of California…. They opted to use a wafer that is also made of gallium nitride—an approach called GaN on GaN, based on the abbreviation for the material. Mr. Kim starts presentations about Soraa with photographs that show a series of microscopic impurities in LEDs built on sapphire. None are visible with the pure gallium nitride approach. “We call it ‘simply perfect,’” he says. WSJ
TECH
Mobiles – Nokia to Cut 4k Jobs
The cuts will take place at plants in Hungary, Mexico and Finland by the end of the year. Nokia—the world’s largest handset maker by unit shipments—said it will move device assembly closer to component suppliers in Asia, in an attempt to get its products to the market more quickly. WSJ / NYT
The cuts of 8 percent of the phone business workforce bring total planned job cuts at the group since Stephen Elop took over as Chief Executive in September 2010 to more than 30,000. AP / R / FT / B
TRADE & TRANSPORTATION
Auto – US gasoline demand off 5.3% / R
COMMODITIES
Crops – US farmers to plant largest corn area in 68 years
U.S. farmers this spring will seed the largest area with corn since World War Two as a mild and dry winter has raised expectations for a quick planting this spring , a Reuters poll of 24 analysts showed…. The U.S. Agriculture Department will release its first projections of corn and soybean plantings later this month R
Crops – Biotech plantings grow globally in 2011
The United States remained the primary backer of biotech crop technology in 2011, but adoption spread internationally ….Roughly 160 million hectares, or 395.2 million acres, were planted with biotech crops in 2011, up 8 percent from 2010, said the International Service for the Acquisition of Agri-Biotech …. The biotech crops were planted by 16.7 million farmers in 29 countries, up from 15.4 million farmers in the same number of countries in 2010. R
NatGas – Boom Lifts US Economy
The use of new drilling techniques to tap oil and gas in shale rocks far underground helped add about 158,500 new oil and gas jobs over the past five years, and economists think it has created even more jobs in companies supplying the energy industry and in the broader service industry. U.S. oil production is rising for the first time in decades. …
The economic benefits of rising energy production are spreading far beyond the traditional oil patch, to Ohio and Pennsylvania, Nebraska and New York, North Carolina and Idaho. Truck drivers from pretty much anywhere can find work related to the surging energy business. Private-equity firms completed $24.8 billion of energy deals of all types last year, up from $8.5 billion in 2010, according to data tracker Preqin. Manufacturing plants are returning to the U.S. to take advantage of cheap natural gas, spurring major investments in petrochemical and steel production in the Gulf Coast and Midwest. WSJ
The U.S. has reversed a two-decade-long decline in energy independence, increasing the proportion of demand met from domestic sources over the last six years to an estimated 81 percent through the first 10 months of 2011 … U.S. energy self-sufficiency has been steadily rising since 2005, when it hit a low of 70 percent, …. The last time the U.S. achieved energy independence was in 1952. B
NatGas – Fracking Rules on US Lands Seen by Interior as State Model
Federal rules for fracking on public lands, set to be released in a few weeks, may serve as a model for states to get companies to disclose the chemicals used in the drilling process, an Obama administration official said. The proposed federal standards will be compatible with rules already in place in states such as Wyoming and Texas, and will allow limited exemptions for “legitimate trade secrets,” B
NatGas – Cooler weather backs early US gains / R
NatGas – Italy hit by shortage of Russian imports
Italy said it was experiencing “critical” shortages of Russian natural gas, as abnormally cold weather pushed up demand for the fuel to all-time highs. … A brutal cold snap in Russia has forced Gazprom to divert some supplies destined for Europe to meet domestic demand. Last week, some of its largest European customers said gas supplies from Russia were down 30 per cent on normal levels…. Italy had also moved to increase imports from Algeria and Northern Europe to make up for the shortfall … The freezing temperatures across Europe have pushed up natural gas prices in the UK. Gas for delivery on Tuesday traded up to 93 pence per therm – its highest level since March 2006 FT
Pipelines – Pilot flame flickers on Nabucco
The consortium behind one of Europe’s most ambitious infrastructure projects – the Nabucco gas pipeline – is considering ways of scaling back the venture after recent moves by Turkey and Azerbaijan raised questions about its viability. …. its €8bn price tag is high, and its investors, which include Austria’s OMV and German utility RWE, have so far failed to sign any supply contracts. FT
LABOR & EDUCATION
US – Little Room for New Workers
A humming economy usually means a high rate of “churn” in the work force: employees voluntarily leaving one job for another in search of higher pay and new challenges. One worker’s exit from a job opens the way for someone else to jump on to the ladder….. New data released Tuesday showed fewer than two million Americans quit their jobs in December, compared with about three million a month, on average, before the recession. WSJ
US – December Job Openings Highest Since August 2008 / cd / cr
HEALTH
Security – Digital Data on Patients Raises Risk of Breaches
As part of the 2009 stimulus bill, the federal government provides incentive payments to doctors and hospitals to adopt electronic health records. Some 57 percent of office-based physicians now use electronic health records, a 12 percent jump from last year. …. as patient records have been digitized, health data breaches have surged. The number of reported breaches is up 32 percent this year from last year, … Those breaches cost the industry an estimated $6.5 billion last year. In almost half the cases, a lost or stolen phone or personal computer was responsible…..
Health organizations are required by federal law to report data breaches that affect more than 500 people to the Department of Health and Human Services. The department’s Office of Civil Rights publishes the equivalent of a data breach “Wall of Shame” on its Web site — which today includes 380 breaches affecting more than 18 million people. NYT
ENDNOTES
Office supply sculptures
Zachary Abel …. makes those sculptures out of cards, paper clips, lollipop sticks, binder clips, and other similarly mundane things. … the excellent Impenetraball … is made out of 132 binder clips. geek / zabel
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