Monday, October 20, 2008

Roundup: October 20


Overnight dollar Libor fixed at 1.5125, down 15.725bp, with three-month Libor down 36bp to 4.05875%: signs taken for wonders by the equity markets. Bernanke encouraged Congress to consider another fiscal stimulus this morning.

The Netherlands has agreed to inject EUR10bn of capital from its EUR20bn bailout fund into ING (nonvoting perpetual preferreds paying up to 8.5%, callable at 150% of par and convertible in three years), and will take two seats on the board. Terms of Germany's EUR500bn bailout package have been finalized, with BayernLB likely to be the first bank to take advantage of state aid. South Korea will back $100bn in new bank debt and offer $30bn of aid to banks as part of a bid to protect the won against speculative attack. Sweden has announced a financial stability package of $205bn to protect its banks, which are heavily exposed to the declining Baltic economies. Hungary's government is trying to demonstrate fiscal probity as its currency falls -- most Hungarians, who earn wages in forint, borrow abroad in Euros or Swiss Francs. The French body set up to guarantee new bank debt issues is 66% capitalized by banks and 34% by the state -- meaning the guarantees can be secured significantly cheaper than in countries where the state is directly backing debt. Alistair Darling is calling for the UK government to bring forward billions of pounds of capital expenditure from planned 2010-11 budgets, in advance of what is likely to be a negative Q3 GDP growth number. The Reserve Bank of India lowered its target rates by 1% - much further and much faster than expected. Iceland is said to be about to announce a $6bn IMF-led rescue package; Pakistan is lobbying the IMF for assistance. The European Bank for Reconstruction and Development is calling on western countries to support Eastern Europe. The press is full of idle speculation on a coming "Second Bretton Woods" to be held by Bush after the election -- they forget to mention, this time without Keynes, and with Sarko slavering to score points. The NYT runs a nice visualization of the US bailout so far.

Amidst an almost total media blackout on the crisis in Russia, there are rumors of major economic measures to be taken this week by the Russian financial authorities. CDS on Gazprom were trading wider than 10% on Friday, and Bank Globex was quasi-nationalized (bought by Vneshekonombank) as the state announced it would be buying domestic securities. Russian politicians are calling for aid to the airlines. Bloomberg speculates Putin may be delaying state action to alleviate the crisis in order to "destroy" the power of Russia's oligarchs, including Oleg Deripaska - said to be in frantic negotiations over $2bn in debt.

Venezuela's dependence on oil prices is no different today than at any point in the nation's recent history. In Brazil, Petrobras is delaying its investment and business plan while it waits for clarity in the oil markets.

Art sales at Christie's, Sotheby's, and Phillips de Pury brought in only about half their estimates at the weekend in London, signalling the art market has finally been hit by the financial downturn. Russian oligarchs were, one presumes, conspicuous in their absence. Meanwhile, museums are planning to deal with funding pressures ahead.

Food stamp benefits lag consumer prices by as much as 15 months -- a lag which asymmetrically exposes the poorest Americans to food price inflation and means that the benefit is not currently large enough to buy the USDA Thrifty Food Plan.

The US District Attorney for the SDNY, Michael Garcia, and Andrew Cuomo are cooperating to investigate whether CDS market participants reported fictitious trades to data providers to drive CDS spreads up and cast doubt on the shares of financial institutions.

US states face budget shortfalls of at least $11bn, but
state politics being what they are, some states are considering cutting taxes.

GM can't find financing for a bid for Chrysler, the WSJ reports; the companies are said to be lobbying Washington for help to do a deal before the election. There have been no US IPOs since August. Exelon's $6.2bn bid for NRG is a ray of light in the darkness of US dealmaking.

Circuit City is considering closing 150 stores and cutting thousands of jobs, says the WSJ. Yahoo is also drafting cost-cutting plans to be announced as soon as tomorrow. Mervyns, which went bankrupt in July, is to close its remaining 149 locations. And Merrill is anticipating thousands of layoffs after the merger with BofA is complete.

Chinese GDP growth slowed to 9.0% YoY (lower than consensus of 9.7%), driven by a decline in domestic demand.


Morgan Tsvangirai has been unable to attend the SADC regional talks being held today in Mbabane, Swaziland, because Zimbabwe has not issued him a passport and he was unable to get a visa for South Africa in time. Arthur Mutambara, who leads a faction of the MDC, says his party will not be part of talks from which Tsvangirai is barred. ZANU-PF spokesmen are stonewalling over cabinet posts with members of Tsvangirai's camp saying Mbeki is likely to favor Mugabe. Meanwhile, the education system is collapsing.

Seven years after the American invasion of Afghanistan, Rolling Stone's Nir Rosen tours Ghazni in the company of the Taliban.

The rumored land-reform decisions made at the Third Plenum of the Chinese People's Congress have been announced. Farmers will be "allowed to lease their contracted farmland or transfer their land use right" and barriers to internal migration will gradually be lowered, under the slogan "gradually transform the farmers who live and work in cities to urban residents."

Beijing is targeting universal health care by 2020.

Israel and Lebanon are considering a "long-term non-belligerence pact," reportedly backed by Tzipi Livni. The plan would settle outstanding border disputes and provide for coordination between the IDF, the Lebanese army, and UNIFIL. Livni has been granted an extension of 14 days from today to finalize the formation of a government.

The IHT's Serge Schmemann writes on the unjust imprisonment of Yukos's Mikhail Khodorkovsky. Meanwhile Gorbachev is appealing to Medvedev to pardon Yukos lawyer Svetlana Bakhmina. And the Globe and Mail weighs in in support of Karinna Moskalenko, Anna Politkovskaya's lawyer, poisoned by mercury in her car last week on the eve of the inquest into Politkovskaya's murder.

Pakistan has secured a nuclear cooperation deal with China, which will help it build two nuclear reactors.

The New Yorker has the story of Sarah Palin's route to the Vice Presidential nomination -- a maverick, outsider route, of course.

Uganda's Yoweri Museveni is blaming starvation in that country on climate change.

Shiite politicians appear to be standing in the way of an agreement between the US and Iraq over the deployment of American troops in the country. But the WSJ reports that a draft of the agreement is going to the Iraqi cabinet anyway.

This Day (Lagos) reports Nigeria will have to import all of its fuel as all four domestic refineries are now shut.

Sachin Tendulkar has broken Brian Lara's record for the most runs scored in test cricket, and is the first batsman to score more than 12,000 runs -- and likely the most idolized sportsman in the world.


The IEA has recognized that current investment in carbon capture and storage (CCS) is grossly insufficient for the technologies to have a substantial impact on carbon emissions before 2030. This is worrisome, as it is likely that without CCS it will be impossible to keep atmospheric CO2e concentrations below 550ppm, a potentially critical threshold.

The EEA in Europe says Europe is likely to meet its GHG reduction targets for 2012-2013, but the extended targets for 2020 and beyond will not be met without more investment and new regulation, like the proposed extension and strengthening of the rules for the European ETS that passed committee last week. Europe has relied on building emissions reduction projects outside of her boundaries (whose emissions reductions can be credited to the sponsoring country) at the expense of failing to reduce her own emissions.

DARPA is planning a massive new video surveillance system.

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