US trade body to probe HTC's Apple technology complaint

Most HTC phones are based on Google's Android
operating system

A US trade watchdog will investigate a claim by Taiwanese phone firm HTC that its rival Apple has infringed its patents.

HTC filed the complaint with the US International Trade Commission (USITC) in August.

It is one of three that HTC has filed against Apple.

Apple has also accused HTC of copying its technology, and other global companies are also involved in what is being called a global patent war.

Korea's Samsung is currently fighting Apple in a number of European courts, as well as Australia.

In HTC's claim, which the US International Trade Commission (USITC) will investigate, the Taiwanese firm alleges that Apple has infringed its patents in smart phones, tablet computers and computers.

HTC is seeking to block the import of Apple products into the US.

Larger Europe Bailout Fund Could Weigh on Ratings: S&P

Europe's efforts to ramp up its fight against the euro zone debt crisis could potentially trigger credit rating downgrades in the region, a top Standard & Poor's official warned.

David Beers, the head of S&P's sovereign rating group, said it is still too soon to know how European policymakers will boost the European Financial Stability Facility, how effective that will be and its possible credit implications. 

But he said the various alternatives could have "potential credit implications in different ways," including for leading euro zone countries such as France and Germany. 

European officials, seeking more resources to protect the euro zone against fallout from its debt crisis, are considering ways to increase the impact of the 440 billion-euro fund by leveraging, although it remains unclear exactly how. 

Beers said it was evident, however, that policymakers cannot leverage the EFSF without limits. 

"There is some recognition in the euro zone that there is no cheap, risk-free leveraging options for the EFSF any more," Beers told Reuters. 

Some analysts say at least 2 trillion euros would be needed to safeguard Italy and Spain if the Greek crisis spreads. 

"We're getting to a point where the guarantee approach of the sort that the EFSF highlights is running out of road." -- Beers said in an interview late on Saturday. 

Euro zone member states provide guarantees to the EFSF, which makes loans to struggling member countries such as Greece. But countries such as Germany have signaled they will not commit to making more of their own money available. 

Beers said that reluctance is why policymakers are now discussing options such as leveraging the fund via the European Central Bank or via markets, or even the possibility of deeper fiscal integration in the euro zone. 

Beers declined to comment on implications of each of the scenarios for boosting the EFSF. 

However, one option could involve backing up the fund with money from the European Central Bank, eliminating the need for politically unpopular cash injections from hard-up European governments. 

That solution, although potentially reducing the impact on sovereign ratings, would probably increase liabilities in the ECB's balance sheet and possibly leave euro zone countries on the hook for restoring the bank's capital in the event of losses caused by an euro zone default. 

Leveraging the EFSF could also result in a downgrade of its own AAA credit rating. 

A deeper fiscal union between members of the euro zone, on the other hand, would increase borrowing costs for core European countries such as France and Germany, while providing relief to the more debt-heavy peripheral countries. 

S&P's warning echoes concerns expressed by some European policy-makers at semiannual meetings this weekend at the International Monetary Fund and World Bank in Washington. 

"We should not think of leveraging a public pot of funds as a free lunch," ECB Governing Council member Patrick Honohan told reporters. 

S&P, which cut Greece's credit rating deeper into junk territory in July, believes European policymakers are also finally realizing that Greece's debt restructuring will take place with significant haircuts. 

"Therefore, there are going to be some banks that might require additional capital," -- Beers said. 

S&P believes, however, that banks can still raise money in the market rather than relying only on government support. 

"The banks have to go out and talk with potential investors. There have been interesting developments this year, certainly banks in Europe have been raising capital," -- Beers said in the interview. 

Recession Risk 

On the economic outlook, S&P sees rising risks of recession in the United States and parts of Europe as their economies struggle to recover at the same time that major emerging market countries such as China and India tighten monetary policies. 

The implications of a double-dip recession for ratings of developed countries would depend on how governments respond to the crisis of confidence that is at the root of the economic weakness, Beers said. 

That response, he added, needs to go beyond lowering fiscal deficits and should include addressing market concerns about bank capital cushions and focusing on the structural drivers of the fiscal deficits, typically health care and state pensions. 

"If governments are unable to focus on the long-standing impediments to growth, then austerity alone is not going to give you growth," Beers said, citing the case of Italy. 

He also had a warning for Germany. Many economists, he said, had initially overestimated the country's growth performance for this year and are finally realizing that its fate is "inexorably linked to that of all its neighbors." 

"The idea that they could somehow decouple is now mostly discredited in terms of both its growth performance and, to some degree, their fiscal performance."

Overcoming a Greek tragedy

It’s time to stop kidding ourselves about Greece.

On the third anniversary of the Lehman Brothers collapse, the heavy brigade — the Federal Reserve, European Central Bank, Bank of England, and Japanese and Swiss central banks — moved decisively on September 15 to avert a liquidity crisis in European banks that, as Greece heads for Hades, has found American investors understandably leery about lending greenbacks to banks with hefty portfolios of Greece’s worthless bonds. Between now and Christmas, the big five will hold joint auctions, providing unlimited quantities of dollars.

Coming in the wake of collapsing EU bank stocks and a Moody’s downgrade of two of France’s biggest banks, this display of firepower was a stout, badly needed riposte to the feckless Micawberism in eurozone capitals. The central banks are arming the financial world against the Greek default that everyone — other than Angela Merkel, Nicolas Sarkozy, and George Papandreou — now expects.

In Wonderland, the White Queen told Alice that believing “six impossible things before breakfast” is quite in order; but in Europe it is not. Over the past 18 months, the fiction that chronically dysfunctional, spendthrift Greece could, even with massive handouts, reform its way back to economic health has cost Europe’s taxpayers billions that would have been better spent on offsetting the costs of an early and orderly write-down of the unpayable debts of a country of little importance.

Worse still, the political pussyfooting over Greece has cost governments vital credibility at home and abroad and magnified the risks to the euro that they sought to avoid.

If the idea was that pouring money into Greece would divert attention from Portugal, Spain, or Italy, the strategy backfired: financial markets reasoned that if politicians lacked the courage to face the facts in Greece, what confidence could there be that peer pressure would compel Italy and Spain to put their appalling finances in order, starting with taking a wrecking ball to demolish their extravagant publicly funded networks of political patronage? The more Merkel and Sarkozy insist that Greece’s future lies squarely within the eurozone, the more they put the euro at risk.

Contagion has now reached the Rhine and is mightily roiling German politics, making it uncertain whether Merkel can even get the second Greek bailout through the Bundestag. That is by now, however, all but irrelevant because in Greece itself, the game is up. Its economy is collapsing, the interest bill on its soaring debt will absorb a quarter of state revenue next year, and the taxmen who should be collecting around €40 billion in unpaid Greek taxes are all but on strike. Reforms have been woefully timid but are still bitterly resented. The vaunted sale of state assets has never left the drawing board, a run is developing on Greek banks, and unless the EU and IMF cough up the next €8 billion within a fortnight, Athens will run out of cash to pay next month’s bloated public-sector salary bill. In a desperate throw of the dice, the government has announced a property tax to be paid through domestic electricity bills — which the mighty electricians’ union has said it will refuse to collect.

The only uncertainties now are the terms of a Greek default, what the wider damage will be, and how to limit it. The fact that politicians have painted default as an unthinkable catastrophe does not help. It will be messy — yet no less messy than the political confusion that has stymied decisions for the past 18 months.

Writing down Greek debt by, say, 60 per cent would saddle the European Central Bank with a big bill; create holes in the balance sheets of some big French, German, and Belgian banks; and, to an unknown extent, expose British and American holders of credit default swaps. But as Timothy Geithner has observed, the eurozone is not exactly penniless, and should be able to recapitalise banks that need it. The harder task will be to calm the European bond market, starting by providing Ireland and Portugal, which are in the recovery ward, with sufficient liquidity to ride out the storm. The European Central Bank will also need to buy Spanish and Italian bonds — but on the condition that their pampered politicians take the sort of steps Italy balked at this summer, notably the total abolition of Italy’s pointless and costly layer of provincial government.

The biggest risk is political. Rather than buckle down to restoring confidence, Europe’s politicians are bent on another time-consuming redesign. José Manuel Barroso, the European Commission president, asserts that the “fight for the economic and political future of Europe” requires “a new federal moment.” What nonsense: it requires apologies to the eurozone’s furious voters. The Greek debacle is the result of joining together incompatible economies.

The 19th-century Latin Monetary Union embracing France, Italy, Spain, and Greece collapsed when the Greeks (and the pope) were caught debasing the common silver coinage, and the world did not end. The euro cannot be dismantled without huge danger, in today’s turbulent conditions, but its long-term future is another matter. The colossal resentments generated by euro membership, in its debtor and creditor members alike, pose the real threat to Europe as an ideal. Eurozone turmoil is a headache the world did not need. But headaches are seldom fatal.

Stock indices crash over global growth pangs

Frenzied selling in domestic equities on Thursday over fears of stammering recovery in US and European economies after debt crisis and worries of higher interest rates to hit corporate profits, led to stock markets tumbling by over 2 per cent on Thursday.

Investor sentiment in D-Street has been weighed down adversely by weakness in global stocks and also by data showing sustained selling by foreign funds this month. After three days of relative calm this week the NSE Nifty closed below 5000 for the first-time since June 2010. It lost 112 points or 2.22 per cent to settle at 4,944 while the BSE Sensex also lost 371 points at the close of the day’s trade.

Global cues

“The sharp sell-off in the Indian markets came as a surprise as the global cues were not very negative. The markets opened in the positive zone but soon slipped into the red led mainly by banks. Banks came under selling pressure on concerns over damage to asset quality given significant exposure to the infrastructure sector,” said Kotak Securities Vice President Sanjeev Zarbade.

The BSE Sensex tumbled 2.2 per cent to close at settle at 16,470, its lowest closing level since May 26, 2010. Frontline IT stocks were down between 3-4 per cent mainly on the back of expectations that the developed world is slipping into recession.

Morgan Stanley slashed its global growth forecast for 2011 and 2012, saying the US and the euro zone were “dangerously close to a recession.”

“The participation from retail investor is absolutely thin but the fund investors are also remaining cautious, generating cash in the portfolio,” said KR Choksey Shares & Securities chief Deven Choksey, who advised his clients to “stay in cash as long as market under pressure.”  The market breadth was quite weak with as many 2,200 shares fell on BSE and 669 shares rose, while a total of 96 shares remained unchanged.

Broader indices wise, the BSE Mid-Cap index declined 2.05 per cent, while the BSE Small-Cap index fell 2.62 per cent.  The total turnover on BSE amounted to Rs 2229 crore, lower than Rs 2369.48 crore on Wednesday. In retrospect, from a recent high of 18,871.29 on July 25, 2011, the Sensex has tanked 2,401points or 12.72 per cent in seventeen trading sessions.

'Rogue trader' losses climb to £1.5bn

UBS equities trader Kweku Adoboli has been
remanded in custody

UBS lost £191m more than it initially thought after falling victim to what may be the largest rogue trading scandal ever to hit the City. 

The Swiss banking giant had estimated the losses at £1.3bn when confirming the unauthorised trades last week, but after unwinding the positions of alleged rogue trader Kweku Adoboli, it announced yesterday that the sum was closer to £1.5bn. 

UBS also said they had approached Mr Adoboli with questions after reviewing some of his positions. All of the losses relate to trades made in the past three months, it said, and the bank has set up a special committee to investigate how it failed to pick up on the unauthorised trading. 

Mr Adoboli was arrested last week after it emerged that huge losses had been run up from a series of unauthorised trades. He has been remanded in custody until a hearing later this month. 

The trader wept in the dock of City of London magistrates court on Friday as he was charged over offences dating back to 2008. Yet as these did not lose UBS any money, the bank's special committee will not investigate them. 

UBS yesterday also lifted the lid on the nature of the trades carried out. "The loss resulted from unauthorised trading in various S&P500, DAX and EuroStoxx index futures over the past three months," the statement said. 

It added that the true magnitude of the risk exposure had been distorted because the positions had been hedged with "fictitious trades", obscuring the fact that they violated the bank's risk limits. 

It emerged over the weekend that bets totalling £6.4bn had been made at UBS last week. Mr Adoboli's boss John Hughes is understood to have left the bank after the news emerged on Thursday morning. 

UBS brought together a team dubbed Project Bronze to unwind existing trading positions, preventing it from further losses. 

Mr Adoboli's lawyers Kingsley Napley, who also represented the UK's most notorious rogue trader Nick Leeson following the scandal that brought down Barings, are yet to release a comment on Mr Adoboli's behalf. 

In Switzerland, the management team has come under increasing pressure since the incident. Chief Executive Oswald Gruebel, who was brought in two years ago as the bank struggled to cope during the credit crunch, said he would not step down in light of the scandal. 

He told one domestic newspaper: "If you ask me whether I feel guilty, I say no," adding: "I am not thinking of stepping down." It is understood that significant shareholders including the Singapore sovereign wealth fund and the Government of Singapore Investment Corporation were backing the embattled chief executive. 

Just three weeks before, the bank announced a major cost-cutting drive with as many as 3,500 employees facing the sack. Rumours have been rife that not only will most of the bank's staff not receive bonuses but there may be more cuts in the wake of the losses. 

There has also been focus on the bank's risk systems. Peter Norris, Mr Leeson's boss at the time of the Barings collapse, called for reform of such protocol. In an interview with The Independent on Sunday, he said the fallout for UBS and Mr Adoboli's colleagues "will be huge".

EU warned of credit crunch threat

People walk over a world map engraved in marble
in Lisbon, September 14, 2011.

European finance ministers have been warned confidentially of the danger of a renewed credit crunch as a "systemic" crisis in euro zone sovereign debt spills over to banks, according to documents obtained by Reuters on Wednesday.

In a report prepared for ministers meeting in Poland on Friday and Saturday, senior EU officials said the 17-nation currency area faces a "risk of a vicious circle between sovereign debt, bank funding and negative growth."

"While tensions in sovereign debt markets have intensified and bank funding risks have increased over the summer, contagion has spread across markets and countries and the crisis has become systemic," the influential Economic and Financial Committee said.

"A further reinforcement of bank resources is advisable," ministers were told in language that echoed an International Monetary Fund call for urgent action to recapitalize European banks.

The report highlighted European policymakers' challenge to restore confidence as the leaders of Germany, France and Greece held a crucial conference call on efforts to avert a Greek default that could cause a global financial shock.

Moody's Investors Service downgraded two of France's top banks, Societe Generale and Credit Agricole, saying its concerns about their funding and liquidity profiles had increased in the light of worsening refinancing conditions.

The ratings agency left France's largest bank, BNP Paribas, on review, saying its profitability and capital base gave it an adequate cushion to support its Greek, Portuguese and Irish exposure.

The euro and European stocks were earlier boosted by an announcement by the head of the European Commission that the EU executive would soon present options for issuing a common euro zone bond, despite fierce resistance in Germany.

Many investors see joint debt issuance as the best way out since it would reassure markets that Europe's strongest economies were taking responsibility for weaker states.

But there is strong political opposition in northern Europe to underwriting the debts of what are seen as profligate southern states, making euro bonds a distant prospect.

European Commission President Jose Manuel Barroso told the European Parliament that closer union, particularly in the euro area, was the only way to reverse the negative cycle in financial markets.

"Today I want to confirm that the Commission will soon present options for the introduction of eurobonds. Some of these could be implemented within the terms of the current treaty, and others would require treaty change," he said.

But he warned that such bonds were no silver bullet to end the crisis, and could only be part of a comprehensive plan.

China added its voice to U.S. concerns over Europe's apparent inability to stop debt contagion spreading, while Indian and Brazilian officials said major emerging economies were discussing increasing their euro sovereign holdings.

U.S. Treasury Secretary Tim Geithner urged European leaders to act more forcefully to solve the escalating crisis, saying they have the economic and financial capacity to do so.

With senior EU and IMF inspectors due in Athens on Monday to check Greece's faltering compliance with its bailout plan, Chancellor Angela Merkel and President Nicolas Sarkozy urged Prime Minister George Papandreou to implement austerity measures to meet fiscal targets, a French statement said.

"Despite recent rumors, all parties stressed Greece will remain in the euro zone," Greek government spokesman Ilias Mossialos said after the 25-minute telephone call.

A Greek official said after the call that Athens now expected the EU/IMF "troika" to report that Greece was on track to meet its 2011-12 targets after the latest additional austerity measures announced last weekend.

EU Economic Affairs Commissioner Olli Rehn said issuing common euro zone bonds would require much more intrusive surveillance of member states' fiscal and economic policies, which would have to be fully debated in each country.

A German Finance Ministry spokesman reaffirmed Berlin's opposition to the idea but said it awaited the proposals.

STOP CRISIS SPREADING

China and the United States both voiced concern that euro zone governments may be losing control of the debt crisis.

Chinese Premier Wen Jiabao said Beijing was willing to help its biggest trading partner, but added that Europe must stop the crisis -- which now threatens Italy -- from growing.

"What we have to take note of now is to prevent the sovereign debt crises from spreading and expanding further," Wen said on Wednesday in an apparent response to pleas to buy more euro zone government bonds.

Chinese state media said the EU should recognize Beijing's help with the debt crisis by giving China market economy status, which would give better protection against European anti-dumping penalties -- a major irritant.

A senior Indian official said finance ministers of Brazil, Russia, India, China and South Africa would discuss a Brazilian proposal to increase their holdings of euro zone bonds when they meet in Washington on September 22.

But Greece's deputy finance minister injected a note of skepticism, saying those countries had shown little or no interest in buying short-term Greek debt despite invitations to do so.

Credit markets are factoring in a 90 percent chance Greece will default on its debts and they demanded the highest risk premium on Italian five-year bonds at auction on Tuesday since the country joined the euro.

Italian Prime Minister Silvio Berlusconi's government won a parliamentary confidence vote on a 54-billion-euro austerity package, which lawmakers were to finalize later in the day. The moves have done little so far to stem doubts about whether the euro area's third-biggest economy can manage its debts.

Greece, Ireland and Portugal have all received EU/IMF rescue packages, but many see Italy as too big to bail out.

RATINGS CUT

BNP Paribas announced a plan to sell 70 billion euros in assets to help ease investor fears about leverage and funding that hit its two main rivals.

Bank of France Governor Christian Noyer said the Moody's action on French banks was relatively good news, noting it put them on a par with other major European lenders regarded as healthy such as HSBC, Barclays and Deutsche Bank.

"It's a very small downgrade and Moody's had a higher rating than the other agencies so it's just put them on the same level or slightly better than the others," Noyer said.

Some analysts and industrialists say a combination of a Greek default and a financial meltdown in Italy could engender a banking crisis akin to the 2007-8 global credit crunch and risk tearing the euro zone apart.

Greece has said it will run out of cash within weeks unless it gets the next 8 billion euro aid tranche in October to pay wages and pensions.

In a measure of Washington's concern, Geithner will attend the meeting of EU finance ministers in Poland on Friday -- his second trip to Europe in a week.

Geithner tried to shore up confidence in Europe's ability to solve the crisis, telling CNBC television the strongest euro zone states have the financial capacity to hold the currency area together.
"There is no chance that the major countries of Europe will let their institutions be at risk in the eyes of the market," he said, adding the United States had an interest in seeing the crisis resolved because it was causing economic uncertainty.

Two unidentified banks tapped the European Central Bank for dollar funding on Wednesday in the latest sign of stress as U.S. money market funds and other traditional dollar providers cut back on lending to Europe.

UK CPI inflation rate rises to 4.5% in August

The clothing and footwear category was one of
the major contributors to inflation

The UK government's targeted rate of inflation rose in August, following higher prices for clothing and footwear, petrol and energy. The rate of Consumer Prices Index (CPI) inflation rose to 4.5% from 4.4% in July, according to figures from the Office for National Statistics (ONS). 

The Retail Prices Index (RPI) measure increased to 5.2% from 5%. The Bank of England's target rate for CPI is 2%, and it expects inflation to return to target in the next two years. The Bank argues that inflation is above target primarily because of the rise in VAT to 20% at the start of this year and past increases in global energy prices. 

Separate figures from the ONS showed that the UK's trade deficit in goods and services was £4.45bn in August, unchanged from July. The deficit on trade in goods was £8.92bn, while the surplus on services was £4.47bn. Computer games The ONS said clothing and footwear had provided the biggest uplift to prices, with the 3.7% monthly increase a record between July and August. 

Petrol and heating costs also contributed to higher overall prices. Downward pressure from transport services, particularly the cost of flying, helped to offset some of these price rises. 

Air fares rose by 11% on the month, but this was less than the record 16% rise seen a year earlier. Recreation, particularly computer games and games consoles, saw prices fall between July and August. Interest rates Many analysts think the rate of CPI inflation may rise further, possibly touching 5%, before falling back towards the end of the year or at the beginning of next year. 

"The rate is likely to move higher in coming months as utility bills continue to increase, putting further pressure on already-strained household budgets," said Chris Williamson, chief economist at Markit. "However, inflation should start to fall by the end of the year, and drop significantly next year as those factors which have driven the rate up this year, such as January's hike in VAT from 17.5% to 20%, high oil and food prices and the depreciation of sterling all move into reverse." 

Jonathan Loynes at Capital Economics said: "August's consumer prices figures brought further hope that the peak in inflation is close. "We still expect inflation to be well below its 2% target at the end of next year.

" The price comparison website, Moneyfacts, said it was all but impossible for savers to maintain the value of their money. Its spokesperson, Sylvia Waycot, said: "Over the last year the number of savings accounts that beat inflation for basic rate taxpayers has dropped successively from 91 to a measly five today." 

Earlier this summer, three of the nine members of the Bank's Monetary Policy Committee were voting to increase interest rates in order to combat rising prices. 

However, weaker economic growth in the UK and concerns about the strength of the global economic recovery meant that all nine members voted for rates to stay at a record low of 0.5% last month. Any increase in rates is seen by many as too risky given the fragile state of the economy.

Europe turmoil deepens as ECB official departs

Jorgen Stark, a member of the ECB's executive board, has been
a vocal critic of the central bank's bond buying program.

NEW YORK -- European financial markets were rocked Friday following a shakeup at the European Central Bank.

Stock markets in London, Frankfurt and Paris all fell between 2% and 4%. The euro plunged 1.6% against the dollar. The yield on the benchmark German bond fell to an all-time low as investors hunkered down in safe haven assets.

The upheaval came after Jürgen Stark, a member of the ECB's executive board, announced plans to step down before the end of his term in 2014. Stark will remain in his current position until a successor is named, according to a statement issued by the ECB.

Germany has proposed its deputy finance minister, Jörg Asmussen, to replace Stark, Finance Minister Wolfgang Schaeuble said Saturday. 

The statement said Jürgen was resigning for "personal reasons." But the former German central banker had opposed a controversial emergency bond buying program the ECB reactivated earlier this year.

Europe's debt crisis: 5 things you need to know

The departure "suggests an increasing split within the ECB over additional bond buying going forward," said Nick Stamenkovic, a market strategist at Ria Capital Markets in London.

The ECB has been buying bonds issued by troubled European governments in an attempt to stabilize volatile sovereign debt markets. Investors have driven up borrowing costs for several European nations struggling to reduce unsustainable debts as the economic recovery slows. 

In August, the program was expanded to include bonds issued by Italy and Spain, two of Europe's largest economies.

But the bond-buying program has been criticized for overstepping the ECB's sole mandate to maintain price stability. 

ECB President Jean-Claude Trichet declined to comment on future bond purchases at a press conference Thursday in Frankfurt. 

Stark's decision to step down comes weeks before Trichet's eight-year term ends. Trichet will be succeeded by Italian Bank Governor Mario Draghi on Oct. 31.

The shake up at the ECB comes as Europe continues to wrestle with a debt crisis that pushed Greece to the brink of default earlier this year and is threatening to spread to other EU nations. 

The long-running crisis has intensified this year as investors have lost confidence in the ability of EU policymakers to come up with a long-term solution. The big worry is that one or more of the 17 nations that use the euro could abandon, or be forced out of, the 12-year old currency union. 

"This is another sign of the tensions among policymakers about what to do about the periphery crisis," said Jennifer McKeown, a senior economist at Capital Economics in London. "It doesn't bode well for future policy measures." 

The intensifying crisis has roiled financial markets around the world, with U.S. stocks plunging Friday following Europe's slide.

On Thursday, the ECB lowered its forecast for European economic growth this year and next. It now expects growth of only 1.4% and 1.8% in 2011, and between 0.4% and 2.2% in 2012. 

Both are down from earlier forecasts, and the risks to that gloomier outlook are now to the downside, rather than balanced as the ECB had previously said.

The European debt crisis will be the first topic of discussion when finance ministers and central bankers from the Group of Seven rich economies kick off a two-day meeting in France later Friday.  

Bernanke disappointment pushes Wall Street lower

A trader works on the floor of the New York Stock exchange.

Stocks closed sharply lower on Thursday after Federal Reserve Chairman Ben Bernanke gave no indications of new stimulus measures to boost the flagging economy in a keenly awaited speech.

Investors have been looking to Bernanke, who gave his outlook on the U.S. economy on Thursday, and other policymakers to address a host of concerns from slowing global growth to Europe's debt crisis.
A rise in jobless claims reported earlier in the day underscored the weakness in the U.S. economy and came ahead of a speech by President Barack Obama. Obama is due to speak at 7 p.m. and is expected lay out a plan for creating jobs.

"The Fed hasn't come out with more options or tools that the market wants or was expecting," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. "The market was disappointed because this wasn't a game changer."

Banks were the biggest decliners after sharp gains on Wednesday. They have been one of the most turbulent sectors in the volatility that has engulfed equity markets this summer. The KBW Bank Index .BKX fell nearly 3 percent.

The Dow Jones industrial average .DJI dropped 119.05 points, or 1.04 percent, to 11,295.81. The Standard & Poor's 500 Index .SPX fell 12.72 points, or 1.06 percent, to 1,185.90. The Nasdaq Composite Index .IXIC lost 19.80 points, or 0.78 percent, to 2,529.14.

Among bank shares, JPMorgan (JPM.N) fell 3.8 percent to $33.51, the biggest decliner on the Dow. Bank of America Corp (BAC.N) fell 3.7 percent to $7.20. The S&P 500 financial sector index .GSPF lost 2.3 percent.

The VIX volatility index .VIX, a measure of expected market turbulence, rose 2.8 percent to 34.32. Although down from levels seen in August, it is still elevated compared with early in the year.
Volume on the NYSE, the Nasdaq and Amex was 7.46 billion shares, 13 percent below the 20-day moving average, a sign that participation is weakening after the high volume sell-off in August. About 76 percent of NYSE shares fell.

The current market conditions mean that short-term views are dominating and company fundamentals are taking a back seat.
"All of a sudden everybody is a trader, now, nobody is an investor," said Sam Ginzburg, a senior trader at First New York Securities. "Everything is trading macro, everything is trading on psychology, and everybody is staring at charts."

Stocks of health insurers fell The Morgan Stanley Healthcare payor index .HMO fell 2.4 percent, while Aetna Inc (AET.N) fell 1.9 percent to $39.19.

A U.S. appeals court on Thursday overturned a lower court ruling that the federal government could not compel people to buy health insurance or face paying a penalty. The appeals court ruled only that Virginia did not have standing to challenge the federal law. It did not rule on whether the mandate itself was constitutional.
The S&P 500 struggled to hold up the 1,200 mark although it broke above that level earlier in the day, which could mark a significant resistance level for the market.

On the upside, Yahoo shares (YHOO.O) rose 6.1 percent to $14.44 after a top shareholder, Third Point LLC, demanded that Yahoo overhaul its board of directors.

Shares of SanDisk Corp (SNDK.O) , a flash memory maker, jumped 2.4 percent to $38.52.

Separately, the government said the U.S. trade deficit narrowed considerably in July, a positive signal for economic growth in the third quarter after a sluggish first half.

Royal Alliance Focus On Mining

 

 Focus on Mining                                                                                               

 Anthony Chapman     

 Mining Analyst

 Royal Alliance Capital

 September 8, 2011

The board of directors at Australian producer Macarthur Coal Ltd has backed an improved takeover offer for the company by Peabody Energy Corp and ArcelorMittal SA. The offering price has increased to A$ 16/share for Macarthur, up from the A$ 15.50 share bid made earlier this month.

South African miner Optimum Coal Holdings Ltd has confirmed it recently received unsolicited non binding expression of interest from third parties reported to be Glencore to acquire a controlling interest in the company.

Glencore International Plc has made an off-market cash takeover offer for all of the shares of Minara Resources Ltd that it does not already own.

UC Rusal has rejected an offer by OAO Norilsk Nickel to buy back just over half of its’s 25% stake in the company.

BHP Billiton’s full year profit has surged by 86%.

The Eritrian National Mining Corporation will pay US$ 253.5 million for a 30% interest in the Bisha Polymetallic Mine owned by Nevsun Resources Ltd.

Canada’s Aurico Gold Inc has trumped an offer from Primero Mining Corp., for Northgate Minerals Corp by counter-bidding $ 1.5 billion USD for the company in the latest North American gold consolidation.

A feasibility study has concluded development of Indo Mines Ltd’s 70% owned Jogjakarta iron sands project on Java, Indonesia, would be technically and economically viable.

Stratex International Plc has intersected significant widths of gold mineralisation at the joint-venture Oksut property in Turkey.

Dimaond drilling at Atac Resources Ltd’s Rackla gold property in Canada’s Yukon Territory has intersected mineralisation at the Osiris zone, one of four Carlin type targets.

Strait Resources Ltd has reached an agreement with Ancoa NL for the latter to acquire Straits 100% owned Hillgrove antimony gold project in New South Wales.

GGG Resources Plc has reached an agreement with Auzex Resources Ltd to consolidate ownership of their Ballabulling gold joint venture in Western Australia.

Rangold Resources Ltd’s production guidance for 2011 has been cut due to the effect of heavy rainfall at its Loulo and Gounkoto operations in Mali.

Anglo American Plc is reported to be blocking a 10 year diamond marketing agreement between DeBeers and the government of Botswana.

Gem Diamonds Ltd has recovered a 553ct diamond from its Letseng mine in Lestho.

Voyager Resources Ltd is continuing to follow up the discovery of copper-silver mineralisation at the Cughur prospect of its KM property in Mongolia’s South Gobi region.

Rio Tinto has increased its stake in Ivanhoe mines by 2% for C$ 529.5 million.

Silver Wheaton Corp has announced a year on year doubling of revenue in the three months to end June 2011.

Euro loses momentum, Aussie stung by jobs surprise

The euro slipped in Asia on Thursday and faces headwinds from suspicions that Europe's efforts to fix its debt crisis may not be fast enough to keep markets happy, while the Australian dollar was knocked by a surprise decline in the country's employment levels.

Still, any zeal to sell the common currency is, at least for now, being countered by expectations that Federal Reserve Chairman Ben Bernanke might drop clearer hints on the likelihood of more stimulus later this month.

The market's immediate focus is on the European Central Bank, which is expected to signal a change in policy direction by halting an interest-rate rise cycle as the euro zone debt crisis weighs on the region's economy.

Market players will also be looking at what the central bank says about its buying of southern European and Irish bonds given that the ECB is internally divided over the program.

"If Trichet makes cautious remarks on bond buying, Italian and Spanish spreads could rise again and hurt investor sentiment," said Junya Tanase, chief strategist at JPMorgan Chase.

The bank's chief, Jean-Claude Trichet, will hold a news conference at 1230 GMT.

Constant difficulty in getting all 17 member countries to agree on policies, including whether to take collateral from Greece for aid, has even given rise to concerns among some market players that the euro zone may eventually need to break up.

Fuelling such speculation, the Dutch government, increasingly critical over euro zone bailouts, said on Wednesday it wants countries which break the budget rules to be given the option to leave the single currency area.

The euro shed 0.3 percent in Asia to trade at $1.4058, down about a full cent from a high hit on relief after a German court did not block the country's involvement in eurozone bailouts on Wednesday.

Major resistance for the euro is seen at around $1.4200, the 38.2 retracement of its fall from late August to early September.

But the currency is still holding above a seven-week low of $1.3972 hit on Monday, having managed to recover above its 200-day moving average around $1.4015.

The euro slipped 0.1 percent to 1.2075 franc but stayed above the minimum exchange rate the Swiss central bank imposed on Monday.

"The euro is being supported by the possibility that the market's focus will shift back to the dollar later today," said Ayako Sera, a market strategist at Sumitomo Trust Bank.

Many market players expect the U.S. central bank chief to drop more hints that the Fed will adopt further easing steps in his speech due at 1730 GMT, hampering the dollar.

Traders also noted that initial excitement over U.S. President Barack Obama's plan to propose new job measures, due also later on Thursday, has begun to wear off amid doubts over how much Washington will be able to spend after the acrimonious debt ceiling saga in Congress just over a month ago.

Against the yen, the greenback stood at 77.31 yen and is seen stuck around that level as selling from Japanese exporters is seen capping the pair, likely below 77.50 yen in Thursday' Asian trade. Wariness about Japanese intervention is also supporting the dollar.

The Australian dollar fell 0.6 percent to $1.0595, after Australian employment unexpectedly fell in August while the jobless rate ticked up to a 10-month high.

The disappointing report prompted the Australian money market futures to price in rate cuts of nearly 0.75 percentage points by the end of the year, even though the country's economy had seen robust growth so far thanks to strong demand for raw materials from China.

In Europe, the Bank of England also holds a rate meeting, though it is expected to hold fire as inflation is stubbornly high despite a faltering recovery in the UK economy.

Swiss National Bank acts to weaken strong franc

The Swiss National Bank (SNB) has set a minimum exchange rate of 1.20 francs to the euro, saying the current value of the franc is a threat to the economy.
 

The Swiss National Bank (SNB) has set
a minimum exchange rate

The SNB said it would enforce the minimum rate by buying foreign currency in unlimited quantities.

The move had an immediate effect, with the euro rising from about 1.10 francs before the announcement to 1.21 francs.

It is the latest attempt by the central bank to weaken its currency, which has been at export-damaging record highs.

The SNB has previously said that it would increase available deposits to commercial banks, as well as cut interest rates.

The Swiss government has also said it would increase its spending by 2bn francs to help boost the domestic economy.

'Utmost determination' In a statement, the SNB said: "The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development.

"The Swiss National Bank is therefore aiming for a substantial and sustained weakening of the Swiss franc. With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. 

"The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities."

The Swiss stock market, the Zurich SMI, rose 4% after the announcement, with exporters the biggest risers.

'Grand scale' The European Central Bank issued a short statement saying the decision had been taken by the Swiss National Bank "under its own responsibility". 

Jeremy Cook, chief economist at World First, said the resulting currency movement was "the single largest foreign exchange move I have ever seen". 

Against the franc, the euro climbed 9%, the dollar rose 7.7% and sterling gained 7.8% within minutes of the announcement.

"This dwarfs moves seen post-Lehman Brothers, 7/7, and other major geopolitical events in the past decade," Mr Cook said.

"The Swiss have had enough. This is intervention on a grand scale.
"This turns up the heat on the eurozone and other economies who have benefited from weakening their currency in the past couple of years."

But some analysts feared the move could have damaging consequences for Switzerland.

"If the markets decide to test the SNB's determination, the task of defending the franc will not be easy and there could be some possible, very damaging, effects to the Swiss economy such as a dramatic increase in inflation," said Nuno Fernandes, professor of finance at the Swiss business school IMD.

"Switzerland actually imports more from the EU than it exports and there is a danger that a rising euro will mean imports become more costly than without the cap."

Yen action?

HSBC's head of foreign exchange strategy, David Bloom,
says gold is the "only safe haven"

The Swiss franc, seen as a safe investment, particularly in times of uncertainty, has soared over the last month, at one point heading towards parity with the euro.

But the strong currency has been hitting Swiss exporters, making goods more expensive for foreign buyers and hurting their profits when they repatriate their foreign earnings back home.

Japan has been experiencing similar problems, with authorities there taking steps to weaken the strong yen.

The move by Switzerland to peg the franc to the euro has prompted some analysts to speculate that Japan might take further action, particularly if more investors flock to the yen.

Big oil tanker groups vulnerable, warn bosses

At least one leading oil tanker operator is likely to
follow collapsed smaller operators into insolvency,
industry sources say.

At least one leading oil tanker operator is likely to follow collapsed smaller operators into insolvency, senior figures in the industry believe, as the sector is swamped by oversupply.

The executives were speaking amid a slump that has sent the rates paid to charter ships way below vessel operating expenses. The average short-term spot market rate to charter a very large crude carrier -- the largest widely-used class -- from the Gulf to Far East on Friday stood at just $1,795 per day, compared with the $29,800 that Frontline, the biggest listed tanker operator by fleet capacity, recently said such vessels needed to break even.

Nasdaq-listed Omega Navigation, Netherlands-based Marco Polo Seatrade and several other small operators have already been forced into bankruptcy protection. Cyprus-based Ocean Tankers, which made a €19.6m net loss for the first half on €9.77m income, has had several of its ships arrested -- held under court orders by creditors -- during port calls this year.

Now executives predict that far larger names are likely to follow. 

Moody's last week downgraded one operator facing acute challenges -- New York-listed General Maritime -- to Caa3, only just above default.

Jens Martin Jensen, Frontline's chief executive, said his company was running its vessels more slowly to conserve fuel and spending extra time waiting in port before accepting cargoes in an effort to ride out the poor market.

"We could see bigger players than [the ones that have already collapsed] disappearing," he said.

Morten Arntzen, chief executive of Overseas Shipholding Group, said the most vulnerable companies were those that had entered the downturn with significant ship orders under way and poor corporate governance. The market has been depressed by the rapid expansion of the world tanker fleet, which is growing far faster than oil demand, as vessels ordered before the financial crisis are delivered.

"When banks have to start putting out money for operations and working capital, that's when companies go out of business," Mr Arntzen said.

Bruce Chan, chief executive of New York-listed Teekay Tankers, said a range of sizes of companies would suffer.

"Companies that have a significant amount of spot market exposure and a lot of debt will not have the cash flow capacity to weather a prolonged downturn," Mr Chan said.

Nobody from General Maritime was available to discuss its prospects. The company said when it announced a $36.8m first-half net loss on July 27 that it complied with all its banking covenants.