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Business, Finance, Occupation & Industry

Talks with Russia to Avert Cyprus Crisis Fail

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By CNNMoney

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Petros Giannakouris/AP An employee of Laiki bank, center, reacts during a rally outside the Cypriot parliament on Friday. Cypriot authorities were putting the final touches Friday to a plan they hope will avoid bankruptcy.

By Charles Riley and Mark Thompson

It looks like a Russian rescue of Cyprus is off the table, at least for now.

Talks between Russian officials and the government of Cyprus broke up early Friday, with no agreement on a cash infusion that could have helped the tiny island nation to secure an EU bailout.

Russian investors were ultimately not interested in the plans proposed by the Cypriot finance minister during a trip to Moscow, Russia‘s finance minister said Friday, according to state run news agency RIA Novosti.

One proposal was for Russian investors to develop the country’s natural gas reserves. But the Russians will stand aside while Cyprus tries to find a way to recapitalize its insolvent banks with help from the so-called troika of European Central Bank, European Commission and International Monetary Fund.

Another way Russia could contribute is by relaxing the terms of an existing €2.5 billion loan to Cyprus.

“We’re waiting for a decision by the troika, based on which we will react and make a decision on our participation in the debt restructuring,” Russian Finance Minister Anton Siluanov said.

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Cyprus is racing against the clock to secure a €10 billion bailout from the European Union to avoid financial collapse.

The island nation’s banks are being kept afloat by emergency funding from the ECB, but that will end on Tuesday without a deal.

The fear is a full-on run on Cyprus‘ banks — a development that could ultimately threaten the country’s membership in the eurozone.

Officials have been scrambling to find ways to raise €5.8 billion since the country’s parliament threw out an unprecedented plan to tax bank deposits earlier this week. Without the money, Cyprus can’t access the rescue offered by the EU, and two of its biggest banks are likely to fail.

The Cyprus parliament is set Friday to vote on the latest plan to restructure the country’s banks, a critical step towards securing an EU bailout. A government spokesman implored the parliament to pass the plan.

“The next few hours will determine the future of this country,” the spokesman said.

—

CNN’s Alla Eshchenko in Moscow contributed to this report.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Cisco and Europe Spur the Dow's Big Losses

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By Dan Carroll, The Motley Fool

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All the optimism surrounding the run to record market highs has worn off today as stocks dive and the Dow Jones Industrial Average plunges into the red. As of 2:20 p.m. EDT, the index has fallen 77 points, or 0.53%, with just six of its 30 components recording small gains. Unsurprisingly, Europe‘s back in Wall Street‘s focus and is prompting investors to pull back after the recent gains. Let’s check out why.

Cyprus battles the ECB
The European Central Bank isn’t pleased with Cyprus after the island nation rejected the bailout deal that would have imposed a levy on bank depositors in order to shore up its financial sector. The ECB has now threatened to suspend aid to Cyprus‘ banks unless the country finalizes a bailout deal by Monday, although the country also continues to seek aid from Russia as well. Combined with a disappointing manufacturing report out of Europe‘s economic safe house, Germany, this news has only hurt investor confidence that anything resembling stability will emerge in Europe anytime soon.

It has also put a dent in the financial sector. The Dow’s two big banks, Bank of America and JPMorgan , have fallen 1.2% and 1.2%, respectively. While Cyprus‘ economic crisis won’t impact these and other major banks too badly considering the country’s minuscule share of the EU economy, any spreading of the panic to larger nations in the eurozone would be bad news.

It’s especially bad timing for JPMorgan after the Office of the Comptroller of the Currency downgraded the company’s management rating in the ongoing fallout of the “London Whale” trading fiasco. The OCC, which slashed JPMorgan’s rating to a three on its five-point scale, now ranks the company in a position where leadership is considered to “need improvement.” That’s a sharp change for the bank that emerged from the recession stronger than some of its financial rivals, though fellow Fool analyst John Grgurich notes that now may be the best time to buy JP Morgan and its standout fundamentals.

Tech’s also on the downswing today, with shares of Cisco and IBM leading the Dow lower with respective losses of 3.8% and 1.7%. Cisco has taken the biggest hit after it was downgraded by FBR & Co. from “market perform” to “underperform.” An FBR analyst cited Cisco’s increasing challenges in evolving into a service-oriented business as demand for routing and switching lags. Still, Cisco’s a cheap tech giant at a P/E of less than 12, and it appeals to income investors with its 2.6% dividend yield at a modest 25% payout ratio. It’s not the time to sell this strong stock just yet, even if shares have climbed more than 14% in the past six months.

Once a high-flying tech darling, Cisco is now on the radar of value-oriented dividend lovers. Get the lowdown on the routing juggernaut in The Motley Fool’s premium report. Click here now to get started.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Barclays Recommends Continued Exposure to Equities over Fixed Income

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By Business Wirevia The Motley Fool

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Barclays Recommends Continued Exposure to Equities over Fixed Income

Global Outlook favors developed market equities, especially in the US, Japan, UK and Spain

NEW YORK & LONDON–(BUSINESS WIRE)– Investors should stay with an equity rich portfolio and focus more on idiosyncratic factors within asset classes than on the potential for major risk-on, risk-off market swings, according to Barclays’ latest flagship quarterly research publication, Global Outlook: Stay with equities for now. Despite the recent rally in equities, recommendations made in Barclays’ December 2012 Global Outlook favoring equities over bonds continue to hold true, with equities outperforming almost all other assets by a wide margin.

“The predominant risks today are that the market has come too far too fast, and that investor sentiment has become overly optimistic,” said Larry Kantor, Head of Research. “However, we expect any correction to be contained given persistent fundamental support for equities, including extraordinary monetary stimulus, low risk of a cyclical downturn and attractive valuations relative to fixed income.”

The resolution of US fiscal issues in the direction of near-term restraint is occurring against a background of better-than-expected economic momentum, thus moderating growth enough for the Fed to maintain aggressive asset buying. However, as signs of improving US growth prospects are confirmed, there is a risk that investors begin to price in an end to the Fed’s massive bond-buying program – although this is unlikely to be an issue for the next few months.

In Europe, Barclays has revised down forecasts of growth in Q4 2012 and Q1 2013. However, against the background of continued recession, what is surprising is how little impact events such as the Italian elections and the Cyprus bailout have had on markets. This reflects the success of policy measures – especially the backstop provided by the ECB – in stabilizing country and bank funding and the cautious stance of market positioning.

In Japan, with the government‘s commitment to ease monetary policy, the Bank of Japan appears set to join the Fed in applying extraordinary monetary stimulus. The Global Outlook now expects Japan to be the one developed economy showing truly robust growth this year.

Other recommendations in Barclays’ Global Outlook include:

  • Prefer developed market over emerging market equities
    • Maintain equity exposure in both the US and Japan; UK stocks are appealing; Spanish equities look cheap
  • In fixed income, there are probably more opportunities in emerging markets than in the developed markets, where yields …read more
    Source: FULL ARTICLE at DailyFinance
Business, Finance, Occupation & Industry

Cyprus Still Being Pressed to Avoid Default

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By 24/7 Wall St.

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The debate over what will happen to Cyprus quickened as a rescue by the European Union, European Central Bank and International Monetary Fund appeared to fall apart after the small country’s parliament rejected plans to “tax” the savings accounts of most of it citizens.

The EU does not want Cyprus to default, which would serve as proof that Europe still cannot manage its own financial matters. But another bailout of a country that almost certainly will never return to prosperity raises the chance there will be a precedent for future solutions to problems in nations such as Greece and Spain.

Bloomberg reports:

Germany and its euro-area allies maintained pressure on the island’s politicians today to raise a planned 5.8 billion euros by drawing funds from Cyprus bank accounts in return for 10 billion euros in external aid.

Austrian Finance Minister Maria Fekter said the demand for Cyprus‘s share of the rescue stands and raised the threat of an ECB funding cutoff. Cyprus‘s “business model is no longer tenable” and “must be restructured,” German Finance Minister Wolfgang Schaeuble said on ZDF television.

The offer made last weekend “remains on the table,” Schaeuble said in a separate statement. “Adequate precautions” have been taken to ensure the Cyprus vote “will have no negative effect on the rest of the euro zone,” he said. Dutch Finance Minister Jeroen Dijsselbloem, who chairs the meetings of finance ministers, said in a text message that the euro group “stands ready to assist Cyprus in its reform efforts.”

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Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Links 18 March: After 48 Hours Near No One Likes The Cyprus Bail Out

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By Tim Worstall, Contributor It’s now some 48 hours since the terms of the EU bail out of Cyprus became clear and it’s becoming very difficult indeed to find anyone at all who likes it. As the Economist points out: As the piece notes, this is hardly the first time bail-out concessions and other policy changes have been extracted with threats of ECB retribution. This sort of hardball is the more worrying given the euro zone’s failure to follow through on the institutional deepening everyone agreed was absolutely necessary to solve the crisis; that commitment has faded as bond yields have fallen. …read more
Source: FULL ARTICLE at Forbes Latest

News, Politics, Government

Cypress Surprise Savings Tax. Europe's Core Problems Back to the Front Burner.

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By Chuck Jones, Contributor The European Central Bank, International Monetary Fund and Cypress announced an immediate and surprise tax of 6.75% to 9.95% on savings accounts that will be withdrawn on Tuesday morning (Monday is a holiday in Cypress).  It should raise about 5.8 billion Euros or $7.5 billon.  It seems the ECB and IMF have decided to take depositors money vs. restructuring debt so that Cypress could qualify for a 10 billion Euro (about $13 billon) bailout. …read more
Source: FULL ARTICLE at Forbes Latest

News, Politics, Government

Europe eases the austerity whip _ a little

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Three and a half years into its government-debt crisis, there are signs that Europe is adopting a gentler approach toward austerity.

Political leaders aren’t backing away aggressively from budget cuts and higher taxes, but they are increasingly trying to temper these policies, which have stifled growth and made it harder for many countries to bring their deficits under control.

The European Union is relaxing its enforcement of deficit limits until the region’s economy turns around; countries that were bailed out by their European neighbors are being given more time to repay loans, easing the pressure to cut budgets further; and financial leaders, including the head of the European Central Bank, say it’s time to place more emphasis on reviving growth.

“There has clearly been a shift in thinking,” says Christian Schulz, economist at Berenberg Bank in London.

After the crisis broke out in late 2009, governments dramatically slashed spending — either to meet conditions for bailout loans, or to reassure jittery bond markets that they were trustworthy borrowers. This fiscal belt-tightening was introduced to help countries reduce their deficits and pave the way for critical financial aid.

Promises of austerity gave the ECB political breathing room to get more aggressive. The bank’s pledge last summer to buy unlimited amounts of government bonds is largely responsible for taming Europe‘s financial crisis.

But austerity also inflicted severe economic pain in places like Greece, Ireland, Portugal, Spain and Italy. Over time — as the economy of the 17 European Union countries that use the euro descended into recession — evidence grew that slashing spending and raising taxes were less effective at reducing deficits than initially thought, and perhaps counter-productive.

Why? Because as economies shrink, so do tax revenues, making it harder to close budget gaps.

The latest eurozone recession, which began last year, is forecast to end in the second half of this year and was the main focus of Thursday’s summit of European Union leaders in Brussels.

“We are all fully conscious of the debate, the mounting frustrations and even despair of people,” said Herman Van Rompuy, president of the European Council, after the meeting ended.

“We also know there are no easy answers.”

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Source: FULL ARTICLE at Fox World News

News, Politics, Government

French minister: ECB must do more for jobless

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A French official says the European Central Bank is shirking its responsibilities toward Europe‘s unemployed and should do more to weaken the euro to help exports.

Industrial Recovery Minister Arnaud Montebourg‘s comments go against a custom that politicians not meddle in the ECB‘s work.

Montebourg told Europe 1 radio Sunday: “It’s not dealing with growth. It’s not taking care of the unemployed. It’s not taking care of the European people. And it has a duty to do so.”

He called on ECB President Mario Draghi to buy the debt of European countries. The ECB has a program to do just that — but countries must first agree to reforms.

Montebourg also said the bank’s policies are not doing anything to weaken the euro, which is hurting exports.

“What I am asking (Draghi) is to give us the weapons to fight unfair offshoring,” he said.

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Source: FULL ARTICLE at Fox World News

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Portugal raises $2B in debt sale, cuts forecasts

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Portugal raised €1.5 billion ($2 billion) in a debt sale at sharply lower rates Wednesday as the bailed-out country continues to benefit from improving market confidence, despite forecasts its recession will deepen.

Finance Minister Vitor Gaspar said Wednesday the government expects an economic contraction this year of 2 percent — double its earlier prediction. It will be Portugal‘s third straight year of recession as austerity measures including steep tax hikes and welfare cuts are blamed for a crunch on spending and investment, as well as an unemployment rate that has hit a record 16.9 percent.

Portugal needed a €78 billion bailout in 2011 when a decade of average growth below 1 percent and mounting debts pushed it close to bankruptcy. Investor faith in Portugal has returned in recent months — a trend reflected in falling interest rates on its debt — as the European Central Bank has indicated it is willing to help eurozone countries that, like Portugal, are abiding by debt-reduction programs. Portugal hopes to be able to finance itself without help by the end of the year.

In the third quarter of last year, the latest figure available, the deficit stood at 3.2 percent of annual GDP. In 2010, it was 10.1 percent.

Given Portugal‘s recent record on slashing debt, Gaspar told a parliamentary committee hearing it was “reasonable” to expect that its bailout lenders — the so-called troika of the ECB, the European Commission and the International Monetary Fund — will grant Portugal an extra year to meet its debt targets.

He did not elaborate but Portugal is currently aiming for a deficit of 2.5 percent of gross domestic product in 2014.

A longer time span to reduce the deficit would potentially allow the government time to ease off on its contested cuts and tax hikes.

Gaspar said the government‘s priority this year will be to encourage investment, with possible policies due to be discussed with troika officials next week when they begin their regular quarterly assessment of the country’s progress.

The government debt agency, meanwhile, said it sold €1.155 billion in 12-month debt at a rate of 1.277 percent, down from 1.61 percent last month. It said there was market demand for more than double the amount offered.

It also …read more
Source: FULL ARTICLE at Fox World News

News, Politics, Government

Oil falls after ECB says eurozone economy weak

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The price of crude oil fell Tuesday after the head of the European Central Bank described the economic outlook of the 17 countries that use the euro as weak in the near term.

Benchmark crude for March delivery was down 34 cents to $95.52 per barrel at midday Bangkok time in electronic trading on the New York Mercantile Exchange. Nymex floor trading was closed Monday for the Presidents Day holiday. The contract fell $1.45 to finish at $95.86 a barrel on the Nymex on Friday.

European Central Bank President Mario Draghi told European lawmakers on Monday that the economic outlook for euro nations remained weak at the start of 2013 but the bank expects “a gradual recovery later this year.” The ECB forecasts the region’s economy will shrink 0.3 percent in 2013.

Political developments in two of the region’s struggling economies have also heightened investor concerns. In Spain, charges of bribery have put pressure on Prime Minister Mariano Rajoy to resign. In Italy, polls favor Silvio Berlusconi in elections next week. Berlusconi, a former premier, has called for billions in tax rebates and amnesty for Italians who haven’t paid them.

Brent crude, used to price many international varieties of oil, was down 19 cents to $117.47 a barrel on the ICE Futures exchange in London.

In other energy futures trading on the Nymex:

— Heating oil fell 0.2 cent to $3.20 a gallon.

— Wholesale gasoline rose 1.5 cents to $3.329 a gallon.

— Natural gas added 3.2 cents to $3.182 per 1,000 cubic feet.

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Source: FULL ARTICLE at Fox World News

News, Politics, Government

ECB's Draghi pushes for European bank bailout fund

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The president of the European Central Bank says the 17-country eurozone must move swiftly in setting up a joint fund to restructure and wind down troubled banks, claiming it is needed to stabilize the financial system.

Mario Draghi on Monday told European lawmakers the fund should be financed by levies on financial institutions to ensure it will not have to tap taxpayers’ money over the medium term.

He says the fund is the logical and necessary step to complete a banking union once the ECB takes over the oversight of the bloc’s banks — a step planned for next year.

A joint bailout entity is met with skepticism in countries like Germany, Europe‘s biggest economy, where leaders fear their money could be used to bail out banks in other countries.

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Source: FULL ARTICLE at Fox World News

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ECB: Cyprus aid with anti-money-laundering control

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The European Central Bank chief says a financial rescue package for Cyprus must be accompanied by close and continuous monitoring of its progress in implementing anti-money-laundering policies.

Mario Draghi on Monday told European lawmakers that it is not sufficient to put all relevant laws on the books, adding the crucial part is implementing them.

Cyprus is seeking a bailout from its European partners to stabilize its ailing banks and keep the government afloat, likely totaling as much as €17 billion ($23 billion), or roughly the equivalent of the country’s annual gross domestic product.

Germany and other nations have voiced skepticism on the bailout, alleging Cypriot banks have failed to halt money-laundering by their many Russian clients.

Cyprus rejects the allegations saying it has enacted the necessary EU laws.

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Source: FULL ARTICLE at Fox World News

News, Politics, Government

ECB member warns against trying to weaken euro

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A member of the European Central Bank‘s governing council has warned that any government attempts to push the euro lower could backfire.

Jens Weidmann said Monday in the text of a speech that “politically brought about devaluations” do not lead to improved economic competitiveness. He also said indicators suggest the euro is “not seriously overvalued.”

The euro has strengthened recently, raising concern it will hurt exports from the 17 euro countries. French President Francois Hollande has suggested the eurozone needs to manage its exchange rate.

Weidmann sits on the ECB‘s 23-member rate setting council and heads Germany’s Bundesbank national central bank.

ECB President Mario Draghi indicated the bank does not seek any particular exchange rate, which is set by markets, but is monitoring the stronger euro’s effect on inflation.

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Source: FULL ARTICLE at Fox World News

News, Politics, Government

ECB Very Concerned About US Budget Deficit

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By Karl Smith, Contributor The ECB decided to hold rates constant this morning underscoring the long term concern the institution has had over the US budget deficit. Despite slowing growth throughout the Eurozone and a tighter credit conditions resulting from the wind down of the ECB emergency financing operations, the central bank opted not to ease monetary policy. Instead the ECB will continue to pursue its strategy of increasing US export growth by tightening Euro credit and putting upward pressure on the Euro/Dollar exchange rate. Further, bolstering the ECB enthusiasm for slow growth were the renewed prospects for comprehensive immigration reform to pass the US Congress. Such US immigration reform succeeds it would allow millions of Europeans to flee ever rising unemployment on the continent for the prospect of a better life in the United States. “For the past 200 years the most effective strategy at improving economic conditions for working class Europeans has been to ship them off to the United States. With our lack of action today we hope to continue that tradition” a Facebook friend of mine who is not a senior ECB official was quoted as saying. Large scale European immigration would bolster GDP growth in the United States and bring down the US debt-to-GDP ratio. Such a decline in the debt ratio would mean that increasing tax revenues from real economic growth would not be offset by increased interest payments on the national debt, creating a smaller budget deficit for generations to come. …read more
Source: FULL ARTICLE at Forbes Latest