Must-Know News - Feb. 05

• 1) Cost of Insuring Greek Debt Soars

“LONDON—The pressure in sovereign debt markets continued Friday with the cost of insuring Greek and Portuguese debt against default remaining at record wide levels.”

“”With sovereign debt and fiscal difficulties remaining a concern, sovereign spread volatility will not disappear soon,” said Tim Brunne at UniCredit SpA. ”

“”The crisis in euro-area sovereigns is reaching new proportions, and the contagion is getting more serious,” said analysts at Royal Bank of Scotland in a note. ”

(Note: The Wall Street Journal changed the story. Original headline still shows up on Google News search here)

• 2) Greece ‘Dress Rehearsal’ for U.S., U.K. Debt, Deutsche Bank Says

“Feb. 5 (Bloomberg) — The cost of insuring against U.S. and U.K. debt defaults may rise in the same way as it has for so- called European peripheral nations including Greece and Portugal, Deutsche Bank AG said.

“The problems currently faced by peripheral Europe could be a dress rehearsal for what the U.S. and U.K. may face further down the road,” Jim Reid, a strategist at Deutsche Bank in London, wrote in a research note today.

“These countries have similar issues to those facing peripheral Europe but have the luxury of a flexible currency up their sleeves as a first defense if the market wants to attack them,” Reid said. “Such a defense means that the market, for now, thinks there are easier targets.””

• 3) Asian Currencies Slide for a Fourth Week on Europe Deficit Woes

“This is basically payback time for the rescue of the global economy last year, which was through government over- spending,” said Dariusz Kowalczyk, chief investment strategist in Hong Kong at SJS Markets Ltd. “Because of exposure to exports and high foreign debt, the Korean won is vulnerable to what’s happening with European sovereign credit.”

• 4) Euro slumps to lowest level against dollar since May

“LONDON — The euro tumbled on Friday to the lowest point against the dollar in since May as concerns mounted about a potential sovereign debt default in Europe, dealers said.”

• 5) Euro plunges below $1.38

“LONDON: The euro sank under the 1.38-dollar mark for the first time in seven months yesterday as the debt troubles in some eurozone countries weighed down on the single European currency, analysts said. ”

“The European currency has been under pressure for weeks due to persistent concerns about the health of Greece’s public finances and analyst have warned that the problem could spread to Spain and Portugal. “It would appear the sovereign debt problem is turning into a contagion in the Euro zone,” said Michael Hewson of CMC Markets. The European Central Bank welcomed Greece’s plan to tackle its debt crisis but warned all eurozone countries to get their finances in order.

“It is of paramount importance that the stability programme of each euro area country clearly defines the fiscal exit and consolidation strategies,” the ECB said after holding interest rates steady at a record low of 1.0 percent. ”

• 6) Asia-Pacific Bond Risk Surges on Sovereign Woes

“Feb. 5 (Bloomberg) — The cost of protecting Asia-Pacific corporate and sovereign bonds from default surged on concerns that weak U.S. jobs data and sovereign debt risk in Europe may stifle the global economic recovery.

The Markit iTraxx Australia index jumped 11 basis points to 107 basis points as of 9:14 a.m. in Sydney, according to prices from Westpac Banking Corp. That’s the biggest increase since Aug. 17 and takes the index to its highest since Oct. 9, according to prices from CMA DataVision in New York. Benchmarks in Asia and Japan also rose.”

• 7) Official says Fed might buy more mortgage-backed securities

“The Federal Reserve would consider reopening its program to support the mortgage market if interest rates spiked or the economy showed new weakness, Federal Reserve Bank of New York President William C. Dudley said in two new interviews. ”

• 8) Personal insolvency hits ‘record high’ (UK)

“The number of people who were declared insolvent in England and Wales hit a record high in the last quarter of 2009 and during the year in full.

The figures from the Insolvency Service marked the depth of the recession, with 35,574 people declared insolvent in the last three months of the year.

That was a rise of 25% on the same period a year earlier. ”

• 9) China Defaulting Loans Soar, Insolvency Lawyer Says

“Feb. 5 (Bloomberg) — Non-performing loans in China have risen into the “trillions of renminbi” because of poor lending practices, an insolvency lawyer said.

“We work really closely with SASAC, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China that no one is doing anything about,” Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said at an Asia-Pacific Loan Market Association conference yesterday. “At some point there’s going to be a reckoning for that.””

• 10) Financial turmoil strikes as G-7 officials gather

“U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke were meeting with their counterparts from the other G-7 countries.

Geithner is expected to urge other G-7 nations to keep providing stimulus through the rest of this year, arguing that without continued government support the fledgling recoveries could falter, plunging the world back into recession. ”

• 11)  Payrolls fall in January, jobless rate at 5-month low

“A sharp increase in the number of people giving up looking for work helped to depress the jobless rate. The number of ‘discouraged job seekers’ rose to 1.1 million in January from 734,000 a year ago.”

“Last month, the services sector added 40,000 jobs after shedding 96,000 positions. The figure included a rise in federal government employment, partly as a result of the hiring of staff for the 2010 Census. Temporary help employment rose 52,000, maintaining a rising trend seen in the past month.”

• 12) Senate Democrats press $80 billion economic package

“The Senate shifted into jobs gear on Thursday, priming the pump for a new $80 billion economic injection Democrats hope to pass next week.

With the Dow plummeting 268 points on word that unemployment unexpectedly rose last week, Senate leaders unveiled the rough outlines of their package of tax breaks and new spending to spur a recovering but still-sluggish economy.”

• 13) New Jersey’s state budget deficit could reach $11 billion

“The budget crisis New Jersey is facing appears to only be getting worse.

David J. Rosen, the Grim Reaper of the New Jersey state government’s fiscal nightmare, appeared before the Senate Budget and Appropriations Committee Thursday and told them the deficit legislators and the governor must overcome when crafting the 2010-11 budget by June 30 could climb as high as $11 billion.

Rosen, the budget and finance officer for the non-partisan state Office of Legislative Services, also warned the legislators that even if tax revenue should grow at a rate of 4 percent or 5 percent annually, it will take until 2014 for the government to recover to where it was financially in 2008.”

……………………………13A) Wealth is leaving New Jersey, BC study shows

“From 2004 through 2008, $70 billion dollars in wealth left New Jersey while the state’s charitable capacity declined by $1.13 billion, according to a new report from Boston College’s Center on Wealth and Philanthropy.

“Wealth began to leave New Jersey around the time when a series of changes to the state’s tax structure made it less competitive for charitable families compared to neighboring states,” a press release on the BC report said. “New Jersey’s state income taxes have risen to levels above New York, Pennsylvania, and Connecticut, and there is not a deduction on state income taxes for charitable giving.”"

• 14) France Budget Deficit Widens In December

“France’s budget deficit stood at EUR 137.99 billion in December, the Budget Ministry said on Friday. This compares to a budget deficit of EUR 56.27 billion recorded in the same month a year ago.

State expenditure totaled EUR 367.10 billion in December, up 5.5% from a year ago. At the same time, state revenue came to EUR 237.25 billion, down 18.5%. ”

• 15) German MOF: Projected 2010 Budget Deficit 5.5% Of GDP

“Joerg Asmussen told reporters that the deficit is projected to climb to 5.5% of GDP this year as the government continues stimulus programs and other measures to battle the financial crisis. He said “2010 is still a crisis year.” ”

• 16) U.S. commercial property prices hit new cycle low

“NEW YORK, Feb 5 (Reuters) - U.S. commercial real estate prices fell 4.9 percent in the fourth quarter, setting a new low for the current downturn, according to a leading property index released on Friday.

The slide to 139.25 points wiped out a 4 percent rise recorded in the third quarter and takes the index — by the MIT Center for Real Estate (MIT/CRE) — below 140.06, the cycle’s previous low reached in the second quarter.

For the year, the index, which includes prices for commercial property sold by major institutional investors, is down 22.5 percent since the end of 2008. At the end of the 2009, the index was 39.5 percent below the second quarter 2007 peak of 230.26.”

• 17) Commercial property loans to hit small banks-Moody’s

“NEW YORK, Feb 4 (Reuters) - Smaller-sized U.S. banks will be hardest hit by their exposure to commercial real estate loans, and many of those banks will collapse, Moody’s Investors Service said in a report released on Thursday.

A large number of smaller-sized banks, which are not rated by Moody’s, make up only 15 percent of U.S. bank system assets but carry 50 percent of commercial real estate loans outstanding, and will struggle under the weight of that exposure, Moody’s said.”

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