Australian sharemarket closes with losses as miners drop - The Australian

AUSTRALIAN shares closed with sharp losses, with miners by far the worst performers, as Europe's debt woes hit commodity prices.
The benchmark S&P/ASX 200 index ended the day down 1.2 per cent at 4142.30. The Australian dollar traded at US98.92 cents.
Shares came off their worst intraday levels after HSBC's Chinese purchasing managers' index came in at 49 in December, from a final reading of 47.7 in November.
However, markets remain transfixed by Europe’s unfolding debt woes. Overnight, Italy’s borrowing costs rose to a euro-era record at a bond auction, sending the euro to an 11-month low against the US dollar. The euro traded at $US1.2991 in Asian hours, according to FactSet data.
The Italian bond auction underlined that borrowing costs are at near-unsustainable levels for some European governments, even after last week’s key summit.
European financial institutions are seeing high funding costs as well, noted Abdullah Karatash, head of US fixed income credit trading at French brokerage Natixis, and “are in a race to shed assets and reduce financing lines to corporations”.
“This has the unintended consequence of forcing many commodity players that had hedged themselves against future price increases to unwind and sell their positions, thus sharply depressing commodity prices,” he added.
Gold futures skidded nearly 5 per cent overnight, settling down $US76.20 an ounce in New York. Gold extended losses in Asian hours, trading down $US11.40 at $US1575.50 an ounce.
Barclays Capital strategists highlighted the broader risk-averse nature of markets in light of Europe's troubles and said: “Concerns about the outlook for eurozone are leading portfolios away from risk and even growth stories into safe havens.”
Along with cash and the Japanese yen, the US dollar is seen as a relative safe-haven. The US dollar index - which measures the greenback against a basket of six major currencies - traded at 80.527 in Asian hours.
Commodities are priced in US dollars and generally don’t respond well to a stronger greenback. Commodity-sector firms were by far the worst performers in Australia, with miners down 2.3 per cent.
Gold miner Newcrest Mining dropped 2.9 per cent while Perseus Mining fell 5.6 per cent and PanAust shares were down 4.1 per cent. Mineral giant Rio Tinto dropped 2.8 per cent while rival BHP Billiton fell 1.8 per cent.
Banks were also seeing some weakness, with National Australia Bank down 1.6 per cent and Commonwealth Bank shedding 1.5 per cent.

Gold will recover in 2012, says Smith & Williamson's Markova - Citywire

Gold had a historic run this year, with prices peaking above $1,900 in September before sliding below $1,600. As volatility continues to wreak havoc on world markets, fund manager Ani Markova says it looks set to retain its safe-haven status.
Markova, who co-manages the Smith & Williamson Global Gold & Resources fund with Bob Lyon, says gold will continue to grow in value as it’s the only asset governments cannot print. She also thinks undervalued shares in gold miners will rally.
Markova's fund has returned 262% over the past three years to outperform the FTSE gold mines benchmark, which returned 159%, and all other funds in its class.
The fund invests in gold bullion, equities and other precious metals, along with diamonds and rare earth metals. 

Gold bull market not dead: Goldcorp CEO - BNN Business News Network

Dennis Gartman declared the death of the bull market for gold. But the head of Goldcorp remains bullish on bullion, saying the fundamentals that drove the price of gold up are still in place.

CEO Chuck Jeannes tells BNN he tends to be a long-term thinker when it comes to the price of gold. “We’re operating mines that last for many years, so we have to think long term.”

“All of the fundamentals -- the macroeconomic factors -- that have contributed to the gold price bull market over the last ten years remain fully in place,” he says.

Jeannes points to negative interest rates and increasing physical demand in emerging markets and by central banks, as fundamentals that will continue to drive gold. “All of those factors will lend themselves to long-term strength in the bull market.”
On Wednesday gold futures fell more $100 to around $1,563 an ounce, hitting their lowest level since September 26.

Stocks Tumble as Euro, Oil, Gold All Fall - The Street

The euro fell below $1.30 to an 11-month low, amid fears that the credit ratings of some European nations might be downgraded. The dollar index, which measures the dollar against six currencies, was up 0.38%.
A stronger greenback pressured commodities prices. January oil futures finished down $5.19 to $94.95 a barrel, and February gold futures lost $76.20 to $1586.90 an ounce. The benchmark 10-year Treasury was up 21/32, diluting the yield to 1.899%.
Energy and tech stocks were among the worst performers. Twenty-three of the Dow's 30 components were down, led by Caterpillar, Walt Disney, and Chevron. Blue-chip gainers included Merck, General Electric and JPMorgan Chase.
Italy paid a euro-era record yield at a long-term debt auction Wednesday, suggesting that the market isn't convinced that European leaders have taken enough steps to stem the debt crisis. Yields on the five-year bond soared to 6.47%, up from 6.29% at a similar auction a month ago. This follows mixed reaction from investors after European leaders introduced new agreements last week to boost funding to support troubled countries and prevent future debt problems.
Germany's DAX closed down 1.7%, while London's FTSE finished 2.3% lower. Overnight, Japan's Nikkei average settled 0.4% lower, and Hong Kong's Hang Seng index closed down 0.5%.
"Things are still focused on Europe," said Doug Roberts, chief investment strategist with Channel Capital Research. "The market is coming to the conclusion that there's not going to be any change of major importance from the leaders there, at least not until next year.
"As people start to go on vacation, you start seeing futures back off, especially on a day like today when the economic data suggests easing inflation," he added. However, "when people get too negative, that squeezes the shorts so the market essentially alternates between euphoria and despair. We've been repeating this cycle the last month."
Stocks were weak on Tuesday after the Federal Reserve held back on laying any groundwork for quantitative easing in the near future. Although the market didn't expect any policy changes from the central bank, it seemed that investors wanted at least some hint from the Fed that it was ready to boost the economy if it worsened. The Fed also reiterated that "strains in global financial markets continue to pose significant downside risks to the economic outlook."

In U.S. economic news, import prices increased 0.7%, less than the 0.9% economists surveyed by Thomson Reuters had predicted, as food and metal costs declined. The Labor Department also said that export prices rose 0.1%, less than the 0.3% economists expected, after falling 2.1% in the prior month.
U.S. lawmakers in Washington are stuck in a fight over whether to extend aid to the long-term unemployed and a payroll tax cut that expires at the end of the year. The deadlock increases the risk of a tax hike for 160 million Americans and losses of benefits for the unemployed, although market participants say the outcome will likely have limited effect on the stock market. However, investors are tuning in for more news as the New Year draws closer.
In corporate news, Avon Products(AVP), the New York-based beauty products seller, is looking for a new CEO. Current CEO Andrea Jung is being named executive chairman as part of Avon's decision to separate the chairman and CEO roles. The company plans to conduct an external search for a new CEO. The stock rose 5% to $16.96.
First Solar(FSLR) forecast 2011 net sales of $2.8 billion to $2.9 billion, down from its prior guidance of $3 billion to $3.3 billion. The company also lowered its earnings expectations, citing delays of certain projects in its business "due to weather and other factors." Shares closed down 21.4% to $33.45.

Euro slides despite Merkel’s call for ‘patience’ - The Globe and Mail

The euro zone will survive, Ms. Merkel insisted, “if we have the necessary patience and endurance, if we do not let reversals get us down, if we consistently move toward a fiscal and stability union.”
But Ms. Merkel’s comments did nothing to help the euro, which fell to its lowest level since January, or fend off concerns that governments aren’t moving quickly enough to restore confidence that their heavy debt loads are manageable. Italy, one of the world’s most-indebted nations, paid a record high interest rate on a €3-billion ($4-billion) issue of 5-year bonds Monday.
At the heart of the euro zone crisis is the concern that major banks are at risk of failing, partly due to slumping values of their major holdings of government debt. Shares of Commerzbank AG tumbled more than 5 per cent, fuelled by speculation that Germany’s second-largest lender may soon need a state bailout to meet new capital requirements set by Europe’s top banking regulator. Germany already holds a 25-per-cent stake in Commerzbank.
“We are treading across a minefield,” Toronto-Dominion Bank economists Beata Caranci and Martin Schwerdtfeger warned in a research report. “If Europe takes the wrong step, it will set off a global financial crisis.”
The consequences could be more damaging to the global economy than that the financial panic of late 2008, triggered by the collapse of U.S. investment bank Lehman Brothers, the economists said.
“We are heading for this outcome unless euro zone leaders change their current approach and their resistance to bold decisive action,” according to TD.
Some economists and politicians in Europe say the ECB could defuse the debt crisis by launching a massive U.S. Federal Reserve-style campaign of buying sovereign bonds, collectively backstopping euro zone debts. But Germany, financially the strongest among major European nations, has consistently resisted such calls, fearing such a move would lead to rampant inflation.
The leaders summit last week failed to impress investors long seeking a clear plan to quickly deal with Europe’s financial crisis. At the summit, 23 of the 27 EU member countries agreed to a new, long-term fiscal pact. Britain, which isn’t part of the euro zone, opted out, worried that it would mean sacrificing safeguards for its banking industry. Countries must still ratify the agreement over the next few months.
Bundesbank chief Jens Weidmann echoed Ms. Merkel’s reluctance to let the ECB dramatically ramp up bond purchases. He said Germany is uncomfortable with the ECB’s existing modest bond-buying program. Mr. Weidmann pointed out that the ECB’s mandate prohibits unlimited bond buying – essentially, printing money.
But many of the euro zone’s ailing members say it’s time for drastic action. Ireland’s European Affairs Minister Lucinda Creighton told reporters in Paris that the fiscal compact is “desirable” but won’t “save the euro.”
The answer, she said, lies in giving the ECB a green light to do “whatever is necessary.”
Experts worry that the limited backstop offered to date would be too small to cope with a default of a major economy, such as Italy, let alone defaults by several smaller troubled countries.
In trading Wednesday, the value of the euro fell below $1.30 (U.S.) for the first time since January, continuing a wave of selling that began last Friday. Investors continue to worry that credit rating agencies may soon downgrade the debts of one or more euro zone countries and that France could lose its coveted triple-A rating.
Nervous investors forced Italy to pay rates of 6.47 per cent on an issue of five-year bonds, a new high. Rates on German bonds, considered a haven, are also rising.
Bank of Montreal chief economist Sherry Cooper is predicting a “a protracted period of recession and hardship” for Europe. She worried that neither a stronger fiscal union, nor greater ECB support, will ease the crisis.
“Competitiveness is the fundamental problem,” she argued. “It gets far too little attention and is far tougher to deal with.”

Economic optimism grows, but risks remain - USA Today

Four years after the recession officially began in December 2007, economists, businesses and consumers alike have expressed a growing optimism about the recovery in recent weeks. The more confident, if still tempered, outlook is taking shape as the nation seems to be navigating past some big stumbling blocks — such as high gasoline prices — that have impeded growth most of this year. Some recent encouraging signs:

•Vehicle sales in November rose 14% from a year ago to an annual rate of 13.6 million — their best showing since cash-for-clunker incentives drove purchases in August 2009. Economists cite, in part, the recent easing of auto shipment disruptions that followed the Japanese earthquake early this year, as well as a less diffident consumer.

"We're getting some pent-up demand kicking in where people who have not replaced for a long, long time, particularly if they're still working … are deciding it's time," says Nigel Gault, chief U.S. economist at IHS Global Insight.

•The unemployment rate last month fell 0.4 points to 8.6%, lowest since March 2009. Although the decline was partly due to a 315,000 drop in the labor force as discouraged job seekers simply gave up, employment is up an average 321,000 a month since August, according to the Labor Department's household survey. Most encouraging: Much of the hiring appears to be by small businesses, which typically fuel job growth in a recovery.

•The housing market, though still anemic and weighed down by foreclosures, is showing small signs of life. In October, pending home sales jumped 10.4% from September and permits for new single-family homes were highest since May 2010. Builder sentiment also has edged up the last two months and is at an 18-month high.

"We're finally getting back on course," says Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi.

Worries about Europe

Even so, the recovery remains relatively tepid amid lackluster household income growth and still lacks sufficient momentum to generate enough jobs to significantly lower unemployment next year.

And financial turmoil in Europe could still derail the upswing. Stocks have fallen more than 3% this week after Fitch Ratings and Moody's said an agreement at a European summit last week does little to alleviate the massive debt burdens of some countries.

Many economists consider a European recession almost certain. That would hobble U.S. exports and cut economic growth slightly , but only a meltdown that paralyzes global credit markets would push the U.S. back into recession, Gault says.

On the plus side, Democrats and Republicans in Congress now seem committed to continuing this year's Social Security payroll tax cut and extended jobless benefits for the long-term unemployed through 2012, though they still disagree on how to pay for it. A bill passed by the House this week ties the extensions to approval of a controversial oil pipeline — a move Democrats oppose. Failure to extend the tax break would shave about half a point off economic growth next year and reduce employment by 450,000, says Mark Zandi, chief economist of Moody's Analytics.

The more buoyant outlook has lifted stocks. The Standard & Poor's 500 index is up 9.3% since hitting a recent low Oct. 3.

After expanding at an annual rate of just 1% in the first half of this year, the economy grew 2% in the third quarter and is on pace for 3% growth in the fourth quarter. Most economists expect uninspiring growth of about 2% next year — far short of the 3%-plus needed to make a dent in unemployment. Zandi says many businesses will not ramp up hiring significantly because they'll remain uncertain about taxes, federal spending and regulatory reform until after next year's election shuffles a politically divided government.

Some are more bullish. Dean Maki, chief U.S. economist of Barclays Capital, expects the economy to grow about 2.75% next year as it hits a 3% pace by the second half on stronger income growth, higher stocks since 2009 and lower inflation. That should be enough, he says, to generate about 215,000 jobs a month in the last six months of 2012 — more than the 150,000 or so that many economists expect — and cut unemployment to 8% by year's end.

Small businesses accelerate hiring

A big reason for the fresh optimism is a pickup in small-business hiring. In November, small-firm owners increased employment slightly for the first time in five months, according to a survey by the National Federation of Independent Business (NFIB). Small businesses also accounted for more than half of the 206,000 jump in private employment last month reported by payroll processor ADP. Many of those firms are start-ups, says Diane Swonk, chief economist of Mesirow Financial.

"It smells like things are getting better," says Bill Dunkelberg, NFIB's chief economist.

Credit conditions for small businesses have gradually improved in recent months, according to the Federal Reserve. Ami Kassar, CEO of MultiFunding, a loan adviser for small businesses, says the number of start-ups that seek his help has more than doubled over last year, but loans are still very difficult to obtain.

In Evanston, Ill., Mitch Dulin, a serial restaurant entrepreneur, opened Central Street Café in August largely because he wanted to take advantage of low lease rates and sensed the local economy turning up. "I saw things getting better," Dulin says. "If I were to wait a year, the lease would cost me 20% more."

Dulin says he paid cash for the renovation of the space — at a cost of $500,000 to $1 million — and might not have gone ahead with the project if he had needed to get a loan. The 60-seat restaurant, he says, is full for both lunch and dinner, and he turns away more customers than he serves. All 14 full-time workers were previously jobless, Dulin says.

In Mount Kisco, N.Y., Mike Wolfe launched a social-media marketing company after he lost his job as a commercial insurance salesman in February and couldn't find a similar position. It started as a part-time gig in his home, but revenue quadrupled as cost-conscious businesses cut marketing staff and outsourced projects to him. "Next thing I knew I didn't need to find a job anymore — I had this," he says. Wolfe has hired three full-time employees, plans to add five workers next year and is seeking office space.

Nurse Next Door, with 46 franchise locations in Canada, has been planning to expand to the U.S. since its founding 10 years ago, says co-CEO John DeHart. The initiative became more viable the past year partly because the fall in the U.S. dollar made it less expensive, he says.

Each franchisee must spend $125,000, including franchise fee and building costs, to open a location. In August, when the debt-ceiling crisis, U.S. credit-rating downgrade and European turmoil sent the stock market tumbling, several prospective franchisees put their plans on hold. As stocks have been rising recently, inquiries have surged. "We're seeing more potential partners coming back to the table saying, 'We're ready, we have this cash,' " he says.

Two U.S. locations, in Colorado and Oregon, are slated to open early next year, and the company plans to launch 25 by next October — each employing 50 to 100 home health aides and nurses. Therrell Oglesby, 50, is starting a franchise in Fort Collins, Colo., in February. Noting that her investments recently recovered, she says, "I'm able to do it now."

The pickup in business start-ups has been a boon for Jacobs, the Radnor, Pa., commercial real estate broker. His firm has handled 20% more leases the past six months than it did the first half of the year, and he plans to open a second office in Philadelphia. Many of his clients are laid-off executives who are launching their own businesses. Landlords who were holding out for higher rents despite the decline in property values and occupancy rates "finally realize they have to be aggressive on a deal to bring the tenant in," Jacobs says.

Large companies, meanwhile, are experiencing steady growth. Cargo volumes for Union Pacific, the No. 1 freight railroad, are up 3% this year, and CEO Jim Young expects "more of the same" in 2012. "Until you see some meaningful change in employment levels, I think it's going to be very tough to see the economy moving in a strong direction," Young says.

Still, next year the company plans to exceed 2011's record $3.3 billion in capital spending and double the number of locomotives it will buy to 200. Besides girding for growth, the company wants to take advantage of low contractor prices while they last, Young says.

The housing market is ticking up as new households are created. Young adults who have been living with their parents are moving into their own homes amid somewhat stronger job growth. Household formation totaled 1.1 million in the 12 months ending last March, up from 357,000 the previous 12 months.

At the same time, the inventory of new homes has reached a record low, says economist Patrick Newport of IHS Global Insight. "At some point you need to ramp up housing starts in a big way," he says. He expects 675,000 single- and multifamily starts next year, up from 600,000 this year — still less than half the 1.5 million in a normal year — and 960,000 in 2013.

After adding virtually nothing to — or subtracting from — economic growth in recent years, "You're talking about housing finally being a meaningful contributor to the overall economy" in 2012 , Mesirow Financial's Swonk says.

Kosse Maykus, the Fort Worth-area contractor, built 14 homes this year, about double last year's pace. Until recently, customers had been putting off construction of their dream homes in the hopes of getting a better price for their existing houses, Maykus says. "Folks I see today are more realistic," he says.

Consumers are also slightly more confident. In the past three months, Pat Tormey, 64, of Scarsdale, N.Y., has bought a $1,200 high-definition TV, a $129 coffee maker, a $239 cellphone and two pairs of $300 Mephisto shoes. "I think my portfolio is on a gradual slight incline," says Tormey, an adjunct professor of business at local colleges. "You feel a little richer. I have a lot of confidence in the future."

Commodities fall on eurozone fears, weigh on TSX - Canada Financial News

High-level summits, agreements reached to increase bailout packages, limit deficits and form a closer fiscal union — none of it has managed to assuage investors’ fears about the impact the eurozone debt crisis could have on the larger global economy.
Canada’s benchmark stock index declined for a third day on Wednesday as the prices of energy and raw materials dropped sharply. The S&P/TSX composite index dropped 216.90 points, or 1.84%, to 11,543.05. All 10 of the sub-indexes fell, with materials, down 3.29%, and energy, down 2.43%, the most heavily weighted decliners.
The price of crude oil dropped to US$96.95 a barrel, down US$5.19, and gold fell to US$1,586.90 an ounce, a decline of US$76.20.
“It’s very frustrating,” John Carey, a Boston-based money manager at Pioneer Investments, told Bloomberg. “There’s just a hypersensitivity to stories coming out of Europe, ratings, downgrades, what have you. Any indication is seen as something as a basis to trade. That’s continuing to cause anxiety among investors. Nobody sees a way through this at the moment.”
Markets continued to react the previous day’s U.S. Federal Reserve statement that held no indication the central bank was prepared to inject more stimulus into the economy. That had followed European Central Bank president Mario Draghi’s comments that the ECB wasn’t launching a program to buy sovereign debt.
“Meanwhile, the (Munich-based) Ifo (Institute) cutting its 2012 GDP forecast to almost zero growth, eurozone industrial production disappointing, more rumours Italian bond yields continuing to rise at auction and more rumours for a French downgrade circling created a witches’ brew that dragged on sentiment,” wrote CMC analyst Colin Cieszynski in an afternoon note, adding there have been indications European countries may have trouble ratifying last week’s summit deal.
“With the holidays approaching and many markets way down on the year, it appears that many have decided to throw in the towel ahead of the holidays and take their tax losses early. Although this negativity may persist for some time don’t forget that we saw similar action just before the U.S. Thanksgiving holiday last month where extreme pre-holiday jitters and selling ended up setting the stage for a significant rebound.”
The Canadian dollar fell another 50 basis points on Wednesday to 96.19 US cents as commodity prices fell.
“Commodities are taking it on the chin,” Shane Enright, executive director at CIBC World Markets in Toronto, told Bloomberg. “Most of the fallout in Canada has been from that. It’s been a tough few days for gold in particular.”
In the U.S., the Dow Jones industrial average fell 131.46 points, or 1.10%, to 11,823.48, and the Nasdaq composite slipped 39.96 points, or 1.55%, to 2,539.31.
Canada’s junior Venture exchange lost 52.50 points, or 3.60%, to 1,405.93.

The eurozone is likely to slip back into recession next year, according to a report by Ernst & Young - SKY News

The audit firm said it expects the economies of the 17 member countries to shrink in the first two quarters of 2012.

The report predicts growth of just 0.1% for the whole of the year and warns unemployment in the eurozone is unlikely to fall below 10% before 2015.
The warning was backed up by economic data from Markit suggesting output continued to contract across the 17-nation bloc over the past month.
Although the headline Purchasing Managers Index (PMI) figure rose slightly, at 47.9 it remained below 50 which separates economic growth from a slowdown.
The survey compiler said the slight improvement was down to strength in France and Germany, with peripheral eurozone economies still struggling.
Last week, 26 of the 27 members of the EU backed new fiscal rules to keep budgets in line, with only the UK abstaining.
Many also fear the pact will still not be enough to prevent more countries from needing a bailout like Ireland and Greece.
The euro fell to an 11-month low on the back of the concerns on Wednesday, dropping below $1.30 (84p) for the first time since January, while gold - usually seen as a safe -haven for investors - lost 3.5%, before stabilising.
Asian markets also reflected weak sentiment with Tokyo's Nikkei down 1.7% and Hong Kong's Hang Seng index 1.8% lower overnight.

FTSE 100 1-Day Chart

But in Europe, markets fared better on Thursday's open, with Britain's FTSE 100, Germany's DAX and France's CAC all edging up by nearly 1%.
"The reforms agreed at the summit on December 9 were a step in the right direction and the response seems to have been mildly positive," Ernst & Young said.
It added: "Investors remain very concerned about the commitment and ability of eurozone governments to implement reforms quickly."
Nonetheless, the leading economist and chairman of Goldman Sachs Asset Management has expressed his confidence in the single currency.
Meanwhile, the head of Britain's armed forces, General Sir David Richards, has said the eurozone crisis is of "huge importance" to defence chiefs as well as the City.

Chief of the Defence Staff General Sir David Richards

In a lecture to the Royal United Services Institute in London, he said: "I am clear that the single biggest strategic risk facing the UK today is economic rather than military.
"Over time, a thriving economy must be the central ingredient in any UK grand strategy.
"This is why the eurozone crisis is of such huge importance, not just to the City of London, but rightly to the whole country, and to military planners like me."
He added: "The country's main effort must be the economy. No country can defend itself if bankrupt."

Britain to resist EU call for £30bn top-up to IMF bailout fund to prop up ailing euro - This Is Money

Eurozone leaders have launched a bid to get Britain to pay another £30billion to prop up the single currency.
The cash would be part of a new bail-out of the euro nations by the International Monetary Fund which David Cameron has pledged to fight.
Officials said Britain could be prepared to hand over another £10billion to the IMF – but only if the eurozone does more to sort out its economic problems.
However, in a highly provocative act, the IMF yesterday endorsed a eurozone proposal to funnel a massive 200billion euros – around £170billion – to the crisis-hit countries in the single currency.
IMF boss Christine Lagarde, the former French finance minister, piled pressure on to the UK, briefing the IMF’s official Survey Magazine that non eurozone countries like Britain should be asked to contribute more than £40billion.
As the biggest economy of the ten EU nations not in the single currency, the UK’s share would be some £30billion.
That would require a new vote in Parliament since MPs have authorised only £40billion to go to the IMF. Of that sum, £30billion has been used already, leaving just a £10billion cushion that can be used immediately.

Britain has repeatedly refused to join bail-out funds for the single currency and has argued that it is not for the IMF to prop up the ailing currency.
Mr Cameron’s spokesman made clear he does not think the eurozone has yet done enough to prop up the single currency, calling that ‘the most pressing need’.
Privately officials are furious that France and Germany spent last week’s summit drawing up laborious new plans for European integration while ‘doing nothing’ to boost the eurozone bail-out fund to reassure the markets or help recapitalise Europe’s banks.

How much? Other European countries are watching the Bank of England closely to see what move Britain will make

Asked whether the IMF was supporting the eurozone’s call for more resources, the spokesman said: ‘I have seen the information on their website. It seems to be a sort of cut and paste from the eurozone statement at the end of last week. But there hasn’t been a discussion.
There would have to be a process by which any increase in IMF resources was agreed.
‘We have not made any specific commitment to increase resources. We did not agree any increase in bilateral resources last week. We made very clear in that meeting that we were not contributing to that 200billion euros.’
Britain could simply block the request but that would cause a new rift with France and other eurozone countries at a time when Mr Cameron’s Lib Dem Coalition partners are trying to patch up relations with the EU.
The prospects of a deal appeared to be gathering pace yesterday when the German Bundesbank revealed it is prepared to stump up £35billion to the IMF – provided countries outside the eurozone agree to help out too.
Eurozone nations are said to want to strike a deal within the next ten days.
Downing Street said eurozone countries were ‘welcome’ to make bilateral loans to the IMF but insisted that they have given no approval for any more money since making a general pledge to help swell the IMF’s coffers at the G20 meeting in Cannes last month.
The Treasury reacted with irritation to the developments. A spokesman said: ‘We will provide more resources for the IMF only if the eurozone do more to strengthen their firewall and we will not contribute to something that is only available to eurozone countries. Nor will we participate in an increase in IMF resources that only comes from EU countries without the participation of other G20 countries.’
That means America and China would also have to be signed up before a deal can go ahead.
Reporting back on the summit to Parliament on Monday, Mr Cameron said: ‘Alongside non-European G20 countries, we are ready to look positively at strengthening the IMF’s capacity to help countries in difficulty across the world.
‘But IMF resources are for countries not currencies, and can’t be used specifically to support the euro. Global action cannot be a substitute for concrete action by the eurozone to stand behind their currency and by implementing what they’ve agreed.’
The report in Survey Magazine said: ‘European leaders agreed to make bilateral loans to the IMF of as much as 200billion euros – with 150billion euros contributed by eurozone members and 50billion euros from other members of the EU.’
Indicating that it would not take part unless London chipped in too, the German Bundesbank said in a letter to Germany’s finance ministry: ‘It is assumed that other EU countries contribute to the financing according to their IMF quota.’
German press reports say the Bundesbank is watching the Bank of England carefully, as well as the U.S. Federal Reserve, and even the Bank of France.

US stocks slide lower as euro worries persist - The Money Radio 1510

U.S. stocks are slipping early Wednesday as worries over Europe hang over financial markets. Energy companies fell hard as oil dropped 3 percent.

Italy's borrowing rates ratcheted higher and the euro slid below $1.30 for the first time since January, two signs that the debt crisis continues to pressure Europe's governments.

Italy had to pay higher borrowing rates in its last bond auction of the year Wednesday. The euro zone's third-largest economy paid 6.47 percent interest to borrow €3 billion ($3.95 billion) for five years, up from 6.30 percent just a month ago.

The Dow Jones industrial average fell 61 points, or 0.5 percent to 11,893 as of 10 a.m. Eastern time. Caterpillar Inc. fell 3.4 percent, the most of the 30 stocks in the Dow. The Dow closed down both Monday and Tuesday.

The Standard & Poor's 500 index fell 8, or 0.7 percent, to 1,217. The Nasdaq fell 24, or 0.9 percent to 2,554.

In Europe, Germany's DAX dropped 1.3 percent; France's main stock index fell 1.9 percent.

The drop in crude prices pulled down Cabot Oil & Gas Corp, Alpha Natural Resources Inc. and Apache Corp. All three were down more than 3 percent in early trading.

First Solar Inc. plunged 19 percent, the biggest drop in the S&P 500, after the country's largest solar company slashed its earnings estimate for the year. The solar industry has been hit hard by slower economic growth around the world and as government funding for alternative energy projects has dried up.

Avon jumped 8.7 percent, the largest gain in the S&P 500. The company announced late Tuesday that its CEO, Andrea Jung, will step down. The cosmetics company has been struggling with erratic financial results and is under scrutiny by regulators.

The Dow and S&P are down more than 2 percent for the week. The Nasdaq is down 3 percent.

Eurozone faces winter recession, Ernst & Young says - BBC

The eurozone is facing a "bleak" winter, audit firm Ernst & Young says.

A "mild" recession is likely in the first half of next year, leading to economic growth of just 0.1% for the whole of 2012, it predicted.
Ernst & Young also said unemployment in the eurozone was unlikely to fall below 10% until 2015.
Meanwhile, Greece - Europe's most indebted country - said that it was on course to have its worst recession ever in 2011.
Greek Prime Minister Lucas Papademos warned on Wednesday that his country's contraction would be greater than the 5.5% currently forecast.
Greece's economy shrank by 4.5% in 2010, when it received its first bailout from the EU and International Monetary Fund.
'Uncertainties'
Last week, 26 of the 27 members of the European Union backed new fiscal rules to keep budgets in line, with only the UK abstaining.
But many fear that the budget pact will still not be enough to prevent more countries from seeking a bailout.
On Wednesday, the euro fell below $1.30 for the first time since January.
"The reforms agreed at the summit on 9 December were a step in the right direction and the response seems to have been mildly positive," according to Ernst & Young.
"Yet investors remain very concerned about the commitment and ability of eurozone governments to implement reforms quickly."
The audit firm predicts that eurozone growth will recover to between 1.5% and 2% in 2013.
"The uncertainties hanging over the Eurozone can only continue to dampen the enthusiasm for European companies to make long term investment and recruitment decisions," said Mark Otty, Ernst & Young's managing partner for Europe, Middle East, India and Africa.

Willing To Sacrifice After A Long Time Out Of Work - NPR

In the past three years, the ability and willingness of Americans to move across town or to another state have fallen to their lowest level in more than half a century.
An NPR/Kaiser Family Foundation survey examined mobility among the long-term unemployed and underemployed. Of those two groups combined, 40 percent said they would be willing to move to another state to find a job.
Brek Lawson is among them. He was student body president at his well-regarded liberal arts college, and after graduating in 1990, he anticipated becoming part of the well-paid middle class. But over the past decade and a series of jobs and attempts to start his own business, nothing has quite worked out. He now finds himself saddled with debt and no job in sight.
"I've got a decent home. My wife is supporting us. I'm grateful for what I have," he says. "But ... when it comes to finding a job that I could support my family [with], I feel — I don't know, it's not cornered, it's not hopeless — it's just, I want more. I want a way out."

Looking For A Job

The NPR/Kaiser Family Long-Term Unemployment poll asked participants if they were willing to make different life or career changes to find a new job.

Percent Willing To Make Certain Sacrifices

Source: Kaiser Family Foundation/NPR Long‐Term Unemployed Survey
Credit: Nelson Hsu/NPR

'You Say Yes To Any Shift, Any Time'
So Lawson is considering a pretty radical step: moving from the Seattle suburbs to North Dakota. That state is in the midst of an energy boom and has the nation's lowest unemployment rate.
Lawson — who participated in the NPR/Kaiser survey — knows the checkered work history on his resume is problematic. But he thinks he'll have better luck in a place where there are more job openings, and where the bar to getting hired may be lower.
"You show up at the door, you get past the resume, and you're there, you're ready to work, you've sacrificed by leaving family behind, you [say] yes to any shift, to any time, to any pay and work — within reason — and I feel like in that situation, I'll shine," he says.
The 44-year-old would like to work in marketing, supply chain management or some kind of accounting. He sees this as a way to get back on track, but it won't be easy. He would be away from his family and very likely living in a trailer with someone else who needed a job.
"The fact that these folks are willing to make these kinds of compromises tells you the kind of situation we are in," says William Frey, a demographer at the Brookings Institution.
He suggests that this sort of thing wouldn't be happening as much in a normal economic climate.
"What really keeps people stable are these social and family relationships. [By] picking up and moving you're changing your whole world," Frey says. "It's not just that you're changing a job: You're ... changing your whole manner of existence."
The Problem Of Uprooting Families
While a sizable number of individuals in the NPR/Kaiser survey said they would make a long-distance move to find a job, for many, moving is not an option.
Micki De Los Rayes, for example, is among the ranks of the long-term underemployed. A paraprofessional educator in a school district in central Washington state, her hours have been cut from about 30 a week to just over 20.
"I've been really lucky," she says. "I could have lost my job. But it's been ugly, and it's scary."
De Los Rayes is a single mother in her 50s raising five children. They're not her biological kids, but kids who needed a home. Some of them have special needs, so moving would be extremely difficult.
"The resources that I have in this community for my kids are really important," she says. "[The] medical care here is wonderful; I wouldn't want to interrupt that."
In addition, De Los Rayes lives with her daughter and son-in-law, who help care for the kids, so if she moved, they'd all have to move.
Others don't move because they can't find jobs anywhere, or they're living rent-free with family members or they can't sell their home.
In addition to a question about moving, individuals who have been unemployed or underemployed for more than a year were asked what other steps they might take to find a job. About 80 percent said they would work night and weekend shifts. Slightly more said they would take an entry-level job in a new field.

HHS grants $14M for school-based health centres - Healthcare Finance News

The Department of Health and Human Services granted more than $14 million Thursday to 45 school-based health centers across the country, increasing the number of children served at the centers by nearly 50 percent.
Clinics receiving the awards are already providing healthcare services to 112,000 children. Funded through the Affordable Care Act, the grants will enable the centers to expand their capacity and modernize their facilities, which will allow them to treat an estimated additional 53,000 children in 29 states.
“Children are the foundation upon which this country will grow,” said HHS Secretary Kathleen Sebelius, in a press release announcing the grants. “The Affordable Care Act will help ensure our children get the high-quality healthcare they need and deserve.”
School-based health centers enable children with acute or chronic illnesses to attend school, and improve the overall health and wellness of all children through health screenings, health promotion and disease prevention activities.
Typically, a school-based clinic provides a combination of primary care, mental health care, substance abuse counseling, case management, dental health, nutrition education, health education and health promotion activities.
The Affordable Care Act provides $200 million in funding from 2010 – 2013 for the School-Based Health Center Capital Program to address significant and pressing capital needs and to improve delivery and support expansion of services at school-based health centers.
Theses grants are the second in the series of awards that will be made available to school-based health centers under the Affordable Care Act. The Health Resources and Services Administration (HRSA) oversees the School-Based Health Center Capital Program.
“These grants will enable school-based health centers to establish new sites or upgrade their current facilities, which will increase their ability to provide preventive and primary healthcare services, and help children improve their health and remain healthy,” said HRSA Administrator Mary K. Wakefield, PhD., RN.

The Graph That Proves Economic Forecasters Are Almost Always Wrong - The Atlantic

As the saying goes: "It's hard to make predictions. Especially about the future." Thirty years ago, it was obvious to everybody that oil prices would keep going up forever. Twenty years ago, it was obvious that Japan would own the 21st century. Ten years ago, it was obvious that our economic stewards had mastered a kind of thermostatic control over business cycles to prevent great recessions. We were wrong, wrong, and wrong.

So, how wrong are economic forecasters about their big predictions today? Fortunately, we have a way to measure that sort of thing -- the gap between expectations and reality. It's called the Citigroup Economic Surprise Index.

A high Surprise Index indicates that economic figures have been stronger than analysts projected. A low Surprise Index indicates that the economy is doing much worse than analysts predict.

Today, economic data are outperforming predictions by the most in almost a year, Bloomberg reported this week. Compare with this summer, when experts thought the economy should be slowly improving, whereas indicators suggested we were in fact nearing a recession.

Here is your roller coaster on the Surprise Index for the last three years:

There are a few lessons to glean from the Surprise Index, which I was only made aware of this week. First, predictions are often reported as news. They're not. They're predictions, and they're almost always wrong. Full disclosure: I've been as guilty as anyone for breathlessly passing along predictions without the qualifying them as conjecture. Second, to be fair to the analysts, sometimes the first draft of the economic figures aren't any better than the predictions. A great example: We initially estimated GDP falling 3.8% in the last three months of 2008. Instead, it fell nearly 9%. That's a horrible miscalculation that had a real impact on decisions made by Congress and the Federal Reserve to fix the economy. I wonder what the Economic Surprise Index would say about first readings of GDP and unemployment numbers.

Why Social Security Is Still Falling Apart - Daily Finance

Social Security is in dire financial straits, but that's nothing new for this long-troubled program.

Social Security spent $49 billion more in 2010 than it took in as tax collections. By the time 2011 ends, it expects to outspend collections by another $46 billion. At this rate, the program's much-touted "Trust Fund" is expected to be depleted by 2036; without that fund, benefits are expected to fall to about three-quarters of current promised levels.

As bad as that may sound, it's actually business as usual. To cover the massive obligations of the plan, tax rates have risen repeatedly over its history. What started as 2% of the first $3,000 of income (half paid by you, half by your employer) is now scheduled to be 12.4% of the first $110,100 of income in 2012. On top of that, the "full retirement age" is creeping up from 65 to 67, which effectively means younger workers will be paying more for a longer time to get their full benefits.

Even with repeated efforts to shore up the program by raising taxes and cutting benefits, Social Security's collapse seems virtually inevitable.

The Perils of Aging

A huge part of the problem is driven by demographics.

• People are living longer and having fewer children. Those who were born in and before the 1930s -- the era when Social Security got started -- simply weren't expected to live all that far into their 60s, much less past the retirement age of 65.
• The American birthrate has fallen steadily, too -- from 18.7 live births per 1,000 population in 1935 to 13.8 per 1,000 in 2009.
• To top it off, the economy has of course been less than stellar for the past few years, resulting in a smaller percentage of the working age population actually working. The civilian labor-force participation rate is down to 63.9% as of November 2011 -- down from 66.6% a decade earlier.

These demographic trends have been a long-term challenge for Social Security, the solvency of which depends heavily on having a large workforce supporting a small number of retirees. The economic weakness only makes it worse.

About That "Trust Fund"...

Now that Social Security is paying out more than it collects in taxes, another problem with its funding mechanism is becoming apparent.

The Trust Fund is something of an accounting fiction, stuffed with U.S. Treasury debt. The taxes collected have long ago been spent, with any Social Security-specific surplus collections going to fund other programs.

As Social Security no longer provides surplus funds to the Treasury, its deficit is something of a double whammy. First, the Treasury loses that source of revenue, and second, it needs to make up the IOUs being redeemed. That results in an even deeper general revenue deficit, higher taxes, and/or the need to lower spending on other government programs.

Put it all together, and the one thing becomes abundantly clear: Social Security won't last forever in its current form. The key questions are "What will change?" and "When will it happen?"

The Risks to Your Retirement

While nothing is certain until the laws actually change, those who are currently receiving Social Security will likely be spared the brunt of the changes. About the biggest risk facing current recipients is the potential that the "Cost of Living Adjustment" may be altered in a way that lowers the rate at which benefits are adjusted upward for inflation. Nobody is seriously talking about cuts to current recipients' benefits, just slowing the rate of growth for those payments.

It's those who are more than 10 years from retirement that have the most to worry about. If nothing changes, benefits will be forcibly reduced (in nominal terms, not just inflation-adjusted ones) when the Trust Fund's accounting value vanishes about 15 years after that point. People more than 10 years from retirement have a real chance of still being around to feel the pain of those reductions and/or of still working as taxes are raised to try to cover the shortfall.

If you are in the age group staring down likely substantial cuts in your future benefits, the sooner you get started saving to cover that gap, the better your own retirement can be. Start with these three steps you can take to improve your chances of winding up financially comfortable, even if Social Security does eventually fall apart completely.

Shares fall on downgrade fears - Business Day

Shares fall on downgrade fears

Australian shares closed sharply lower, notching up a third straight day of losses after a sell-off swept through commodities on concerns that Europe's debt burden will crimp economic growth for years.
At the close, the benchmark S&P/ASX200 index was down 50.7 points, or 1.2 per cent, at 4139.8, while the broader All Ordinaries index was down 52 points, or 1.2 per cent, at 4197.8.
Stocks closed lower for the fifth day out of six after more dismal news from Europe overnight saw Italian bond yields rise to a euro-era record, triggering a sharp selloff in commodities as investors rushed to the perceived safe haven of the dollar.

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Data showing that China’s manufacturing sector continued to contract in December as exports slowed compounded fears that the euro zone debt crisis is already slowing growth in Asia.
'Nowhere to hide'
‘‘There is a feeling that there is nowhere to hide at the moment,’’ CMC Markets sales trader Ben Taylor said.
‘‘The once safe haven of gold has been hijacked in US dollar strength, US bonds give you little to no real return and equity markets are quickly losing their appeal.’’
Miners and energy stocks led the market lower as the resource-heavy ASX became the worst performing index in the region. Gold miners were the worst performers, shedding 3.8 per cent as the yellow metal lost its shine.
Newcrest Mining lost 2.9 per cent to $30.88 while BHP Billiton was down 64 cents, or 1.8 per cent, at $35.06, while Rio Tinto shed $1.76 to hit $61.40.
‘‘The colossal falls in gold over the past few days have broken several support levels on the way down,’’ said IG Market’s market analyst Stan Shamu. ‘‘If we see a break lower ... the assumption could be that the gold super-cycle is over.’’
Banks suffered too after ratings agency Fitch downgraded major French banks Credit Agricole and Rabobank on the back of escalating problems in Europe, along with France’s Banque Federative du Credit Mutuel Denmark’s Danske Bank and Finland’s OP Pohjola Group.
On the local stage, National Australia Bank chairman Michael Chaney joined Westpac this week by warning that Europe’s debt crisis is pushing up the costs of funding for banks and the problem is far from over. The comments, which are expected to be echoed on Friday by ANZ, came as NAB closed down 38 cents, or 1.6 per cent, at $23.48.
Westpac was down 34 cents at $20.46, Commonwealth Bank was down 75 cents at $48.63 and ANZ was down 19 cents at $20.78.
BlueScope Steel says retail shareholders took up less than half of the new shares available under a $600 million capital raising share offer. The stock last traded at 43.5 cents before going into a trading halt on Thursday.
'2012 just as tough'
Damien Boey, equity strategist at Credit Suisse in Sydney, expected 2012 to be "just as tough" as the past 12 months. US stocks could fall as much as 20 per cent, and the dollar could drop to 80 US cents.
"I'd be staying out of equities for the next six months. Next quarter will be a tough one. Looking into the second half of next year - that will probably be where the buying opportunity starts to present itself," Mr Boey said.
Credit Suisse recommended Australian government bonds, which may benefit from any further interest rate cuts, as well as high-yielding defensives such as Telstra and banks, and perhaps Metcash and Stockland.
"There aren't that many stocks and sectors to be in at the moment. There's no place to hide globally. It should be more about capital preservation at this stage than really looking for strong growth and recovery," Mr Boey said.

Do forex trading with the four most efficient tips - Finance News Pro

s forex trading too complicated to understand or does it sound like a scam. Well, if this is the case, then you will find many others feeling the same like you. Millions of traders have lost their money in the forex market numerous times. Forex trading is definitely not a scam. At times, it is quite confusing to understand. If you are finding hard to understand something, it does not mean that it is a scam. The forex market cannot be mastered with only few basic suggestions, you can start to get a better understanding of how to get successful in the market with the following four tips.

Stop looking for fool’s gold: One of the most common reasons of why people lose in the forex market is because they are preoccupied searching for fool’s gold. They believe in the hype that snake oil salesmen try to sell. The sales letters that claim instant forex riches mislead these traders and make them believe that they can get something for nothing. Most of the forex software sellers sell their products for just $149. Can it cost just this much? While there are some quality pieces of forex software out there, they are usually few and far between. Don’t get fooled in the market.

Invest your time: If you really want to successful and trade efficiently in the forex market, you need to invest your time. You should study the market and learn the basics of it. You cannot becomes successful in this market overnight. You have to spend years practicing and losing money before you can start making more money and consistently

Practice with a forex demo account: Once you have learned the basics of the forex market, you need to open a demo account and start practicing. You can easily get a demo account from forex brokers throughout the world. Download a demo account for free and start trading the market just like you would with a regular account. Many people have put their money in the live forex trading and lost it completely. This is usually a recipe for disaster. Do not open a live account before trying a demo account.

Use forex money management: If you want to make good money in the forex trading market, it is necessary that you strictly follow money management rules. Before opening a trade, you need to figure out exactly how much you are risking. Risking between one and three percent on each trade is a good proportion. If you can make this decision ahead of time, you will be very successful in the forex market. You must set up a money management system for yourself and stick to the rules.

Stock markets slump as euro hits 11-month low against the dollar - The Guardian

Stock markets slump as euro hits 11-month low against the dollar

Italy's crucial 10-year bond rate rises to 7.17% amid fears it will be forced to seek bailout

Angela Merkel, the German chancellor, attending a session in the Bundestag, Berlin, earlier today. Photograph: Tobias Schwarz/Reuters

Stock markets slumped and the euro hit a fresh 11-month low against the dollar amid renewed fears that Europe will be forced to rescue Italy and Spain from a lending boycott by international investors.
The FTSE index of Britain's top 100 companies dropped 2.25% to lead falls on continental exchanges and the US markets in a day of volatile trading. France's CAC 40 was the worst performer among major European indexes, falling 3.3%, followed by Italy's FTSE MIB, which dropped 2.8%.
Investors singled out Italy for more pain as they sent the interest rate on the all-important 10-year bond past 7% to hit 7.17%. The euro fell to €1.30 against the dollar, the lowest since January.
French lenders Société Générale, BNP Paribas and Credit Agricole fell between 6.7% and 8% as rumours persisted that the extent of their bad loans to indebted eurozone countries would lead to France losing its AAA status within the next few days. Credit Agricole, which gave a second profits warning this year, said it would record a €2.5bn (£2.09bn) loss this year, chiefly due to writedowns in its investment banking unit, and it would not pay a dividend in order to retain capital.
Analysts warned that Italy would be forced to turn to Brussels for bailout funds unless member states agreed a more coherent rescue package with more firepower to protect the currency union. An agreement last week to move towards greater harmonisation of fiscal rules initially pleased markets but in recent days investors have viewed the deal as weak and subject to wrangling and delay.
A sense of confusion inside the eurozone was exacerbated after Angela Merkel, the German chancellor, renewed her opposition to expanding the bailout fund for the euro, insisting that €500bn was the limit. Merkel, speaking to the German parliament for the first time since the a package of measures was agreed in Brussels last week without the support of Britain, said the fund was capable of providing a firewall to protect indebted countries such as Italy, despite widespread concerns that the fund needs access to at least €2tn to reassure investors.
Another key element of the deal, an agreement to boost the International Monetary Fund through €200bn in bilateral loans from EU central banks, has also run into trouble.
Jens Weidmann, Germany's central bank chief, threatened to boycott the move unless non-eurozone IMF contributors, such as the US and Britain, also provided additional loans. In a letter to the German finance minister, he insisted that the German contribution of €43bn has to be endorsed by the German parliament.
Analysts Tobias Blattner and Emily Nicol of Daiwa Capital Markets said: "With the US, UK, Canada and Japan already having ruled out an increase in their lending to the IMF, comments by Weidmann appear to kill off the €200bn of additional IMF resources promised last week."
They added that the dire situation with the euro and the flight of savings to safe havens means "a downgrade by Standard & Poor's of most of the euro area's sovereign and bank credit ratings looks increasingly likely".
The regional government in Catalonia and Italy's largest bank added to the confusion after they appeared to undermine the thrust of policies agreed in Brussels.
The Catalonian government, one of 17 semi-autonomous regions in Spain, launched a legal case to force the central Madrid administration of Mariano Rajoy to send €759m in unpaid tax monies back to Barcelona. In the first case of its kind, the Catalan government will take the recently elected central government to court to recover the funds. The Spanish treasury has withheld the funds as part of its austerity effort. Officials have accused regions of overspending their budgets and jeopardising an austerity programme designed to meet targets set in Brussels.
Federico Ghizzoni, the chief executive of Italian bank Unicredit, said calls for banks to use cheap loans from the European Central Bank to buy Italian debt were misguided. He said Unicredit, the largest bank by value in Italy, would not use the extra liquidity aimed at lowering their borrowing costs to buy government bonds.
The comments contradict a statement by Nicolas Sarkozy, the French president, who said at the EU summit that the ECB's increased liquidity provisions for lenders meant countries such as Italy and Spain could look to their banks to buy their sovereign debt.

German think-tank sees economy growing only 0.4 per cent next year - Canadian Business

A leading German think-tank is forecasting that the country's economy — Europe's biggest — will grow by only 0.4 per cent next year because of the continent's debt crisis and a cooling global economy.

The forecast Wednesday by the Ifo institute compared with a prediction last month from the government's independent economic advisers that output would expand by 0.9 per cent in 2012. Both forecast growth of 3 per cent this year.

Despite the modest growth, Ifo says Germany's average unemployment rate should edge down to 6.7 per cent from 7.1 per cent in 2011.

Ifo says its forecast that Germany will avoid recession next year is based on the assumption that the eurozone debt crisis doesn't escalate further and Italy, in particular, can continue financing itself in the markets.

No end to crisis in sight: Merkel - Financial Review

German Chancellor Angela Merkel has said it could take Europe years to solve its debt crisis, as growing scepticism about the outcome of last week’s EU summit weighed on financial markets.
In a speech to the German Bundestag or lower house of parliament on Wednesday, Merkel defended the move for tighter budget policing in the European Union, saying Europe and the eurozone would emerge stronger from the crisis.
“Getting over the state debt crisis is ... a process. This process won’t last weeks, it won’t last months, it will last years,” she said.
There could be “setbacks but if we don’t let ourselves be discouraged ... Europe won’t just overcome the crisis but will emerge from it strengthened,” she added.
European Union leaders from 26 of the 27 member states agreed at a high-stakes Brussels summit last week to back a Franco-German drive for tighter budget policing in a bid to save the eurozone.
After Britain, which does not use the euro, blocked changes to an EU-wide treaty, the other 26 EU states signalled their willingness to join a “new fiscal compact” imposing tougher budget rules.
Merkel said that with such a fiscal compact: “The vision of a real political union is beginning to take on contours.”
Nevertheless, markets remained sceptical whether the moves decided in Brussels will be enough to prevent a break-up of the euro area.
European shares fell and the euro fell below $US1.30 for the first time in nearly a year.
Ratings agency Moody’s has said the crisis talks failed to produce “decisive policy measures” and threatened to review the credit ratings of all EU states within the next three months.
Standard & Poor’s is expected to decide this week whether or not to downgrade 15 of the 17 eurozone members.
Adding to the negative sentiment were comments by Merkel herself, in which she ruled out an increase in the European Stability Mechanism, the eurozone’s future permanent bailout fund.
The lending limit of the EMS, which EU leaders agreed at last week’s summit will be up and running a year earlier than planned, should remain at 500 billion euros ($654.15 billion), Merkel said on Tuesday.
Her stance underscores a rift among some European leaders over boosting the fund’s firepower and how best to tackle the eurozone’s fiscal woes.
With experts saying the amount will not be enough to rescue a country such as Italy, analysts at Moneycorp saw the remark as “the latest in a series of psychological blows to confidence in euroland and its sovereign borrowers.
“The German chancellor dropped another brick on the euro’s foot,” the analysts said in a daily investors’ note.
In Australia, deputy central bank chief Ric Battellino warned that markets appeared to be pricing in the possibility of a break-up of the eurozone.
“The formation of the euro area brought convergence of interest rates towards the low levels previously enjoyed only by Germany, but pre-euro relativities are now re-asserting themselves,” the Reserve Bank of Australia deputy said.
In two separate bond auctions on Wednesday, Germany saw the yield or rate of return on new two-year treasury notes decline amid strong demand for the issue, while yields on Italian five-year bonds rose to a euro-era record.
Such growing gaps in interest rates “suggests that markets are pricing in the possibility of a break-up of the euro area or a significant risk of default by some governments, or both”, Battellino said.
UK TO RESIST GIVING IMF MORE EURO BAILOUT FUNDS
Highlighting the numerous battles the eurozone faces in its attempt to extinguish the debt crisis, the British government has said it will resist any attempt by eurozone countries to press the UK to hand more cash to the International Monetary Fund to help fund a euro-bailout fund.
The IMF reported this week that eurozone countries at last week’s EU summit had agreed in principle to raise €200 billion for the IMF, including €50 billion from non-eurozone countries.
But the UK prime minister David Cameron’s spokesman said the prime minister had made it clear he had not agreed to this proposal and it had not been approved by the IMF board.
Cameron said at the Cannes G20 summit he would be willing to put more money to the IMF, but indicated the additional contribution could not exceed the €40 billion ceiling that has already been approved by British MPs in a vote earlier this year.
The UK has already committed a €30 billion contribution, meaning the UK could not commit more than an extra €10 billion without a further vote in parliament, something Cameron will want to avoid.
Any attempt to give the eurozone extra loans, even via the IMF, would be fiercely resisted by Eurosceptics in Cameron’s own Conservative party.
The reference to €200 billion fund was not made in the summit statement agreed last week but appeared in the official IMF magazine, Survey.
It said: “European leaders agreed to make bilateral loans to the IMF of as much as €200 billion - with €150 billion contributed by eurozone members and €50 billion from other members of EU.”
In the House of Commons in London, Cameron made no reference to specific sum, telling MPs: “Alongside non-European G20 countries we are ready to look positively at strengthening the IMF’s capacity to help countries in difficulty across the world. But IMF resources are for countries, not currencies, and cannot be used specifically to support the euro.”
The idea behind the IMF plan is to draw on the reserves of Europe’s central banks.
The President of the German Bundesbank, Jens Weidmann, said his bank was willing to provide loans to the IMF so long as nations outside the euro-area also contribute.
He said the Bundesbank has stated its readiness to provide up to €45 billion as long as there was a fair distribution of the burden among IMF members. If these conditions are not fulfilled, then we cannot agree to loan to the IMF.
He said it would be problematic if the US did not contribute.
There is a quiet satisfaction among UK government circles that the agreement made by the EU countries last week is coming under closer scrutiny and markets are starting to realise that it does not represent a major step forward.
GERMAN CABINET REACTIVATES BANK RESCUE FUND
While wrangling continued over Britain’s role in resolving the debt crisis, Germany reactivated its financial sector rescue fund as increasing questions about how banks can cover their capital needs are asked.
Merkel spokesman Steffen Seibert said the cabinet decided on Wednesday to reopen the €360 billion fund, first established at the height of the 2008 financial crisis.
The fund closed to new applications at the end of 2010. But much of the money - which totalled €60 billion for potential capital injections and €300 billion for loan guarantees - remains untapped.
European authorities have determined that German banks require a total of €13.1 billion in new capital to comply with tougher new requirements. The country’s second-biggest bank, Commerzbank, has been told it needs €5.3 billion.
Commerzbank said on Wednesday that a repurchase of securities will beef up its core capital by more than 700 million euros.
The repurchase of 1.27 billion euros of so-called trust preferred securities “will have a one-off positive effect of more than 700 million euros on our consolidated results and will result in a respective increase of Core Tier 1 capital,” Commerzbank said in a statement.
“The transaction marks another step in optimising our capital structure in light of the transition to the new regulatory requirements.”
Investors had from December 5-13 to decided whether to sell the securities back to Commerzbank.
Last week, the European Banking Authority said German banks needed to raise 13.1 billion euros in new capital to withstand future financial shocks.
According to the EBA’s calculations, Deutsche Bank, the country’s biggest, needed 3.2 billion euros and Commerzbank, the number two, needed 5.3 billion euros.
Analysts and investors have speculated about whether Commerzbank would be in a position to raise the capital under its own steam, or require state funding after it already had to be bailed out in the 2008-2009 financial crisis, which left the government with a 25 per cent stake.
The bank has said it can manage on its own.
CREDIT AGRICOLE TO CUT 2350 JOBS: UNION
A Commerzbank moved to shore up its capital, a French union claimed banking group Credit Agricole will cut 2350 jobs around the world, including 850 positions in France, mainly at its Cacib investment bank.
At Cacib, 1750 jobs will be cut globally, including 550 in France, said union Force Ouvriere’s (FO) representative for the bank, Bernard Pechard.
The bank’s consumer credit branch, CACF, will see 600 jobs cut, half in France and half in the rest of the world. Bank management held meetings on Wednesday with union officials representing staff at Cacib and CACF.
Pechard said he expected more job cuts would be announced when similar meetings are held at other Credit Agricole subsidiaries, including leasing arm Calef, which has 3100 employees, and equity broker Chevreux, which has 800.

Reserve Bank of Australia deputy chief Ric Battelino says financial markets appear to be pricing in a break-up of the eurozone.

Photo: Lee Besford

On Tuesday union sources had said they expected “several hundred” jobs to be cut at Credit Agricole, which last month reported a 65 per cent drop in net attributable quarterly profit.
Credit Agricole, one of the biggest banks in Europe by capitalisation, employs 160,000 people around the world, a third of them outside of France, while Cacib employs about 15,000 people globally, including 4600 in France.
Like other French banks, Credit Agricole has been hit by its exposure to Greek sovereign debt amid the eurozone debt crisis and last month revealed a 60 per cent write-down of its holdings of Greek bonds.
The Moody’s agency earlier this month downgraded its credit rating on Credit Agricole’s long-term debt by one notch to Aa3, as it also announced downgrades on two other leading French banks, BNP Paribas and Societe Generale.
BNP Paribas expects to cut 1400 jobs globally, mainly in its corporate and investment bank CIB, unions said last month, while Societe Generale has also warned unions of plans to cut several hundred jobs.
FRANCE LOSING TRIPLE-A ‘NOT A CATACLYSM’
France also continues to prepare for the possibility that it will lose its triple-A debt rating, which Foreign Minister Alain Juppe maintained would be bad news but “not a cataclysm”.
Since the weekend, French officials have been preparing the ground for a ratings agency to decide that the nation’s public finances no longer merit a perfect debt rating, a result once seen as a disaster.
“It wouldn’t be good news, but it wouldn’t be a cataclysm either,” Juppe told the financial daily Les Echos, in an interview conducted on Tuesday. “The United States lost their triple-A and still manage to borrow on the markets in good conditions.”
Ratings agencies Standard & Poors and Moody’s have warned they are looking again at all eurozone member states - even triple-A powers like France and Germany - amid fears the bloc’s sovereign debts are unsustainable.
Eurozone members have tried to reassure markets by adopting austerity measures and promising to sign a new “fiscal compact” by March that would bind them to tighter budgetary discipline.
But many commentators believe the measures are insufficient to counter the sheer weight of debt being held by countries such as Greece and Italy - and in turn by private banks in France and elsewhere.
All member states have been warned but France is thought particularly vulnerable, despite President Nicolas Sarkozy’s vow to defend its rating.
AUSTERITY SHOULD NOT BE DONE TOO FAST: IMF
As France braced for a credit downgrade, the International Monetary Fund’s chief economist cautioned against countries exacting tough austerity measures too quickly, saying instead he favours a longer process as countries around the world grapple with high debt levels.
The IMF’s Olivier Blanchard said he was surprised over the debate over whether the best way forward was more stimulus to boost economic growth or tighter measures to deal with deficits, saying in most circumstances austerity would lead to contraction.

Public employees take part in a demonstration called by the main Spanish trade unions against austerity measures planned by the regional government of Catalonia, the Generalitat, on December 14.

Photo: AFP

“The hope that fiscal consolidation will make people optimistic about the future and lead to a boom in the economy next year I think is something we should give up,” said Blanchard, speaking on a panel at the Council on Foreign Relations in New York.
Blanchard noted that there are some dire situations that have been improved by greater government responsibility, but the United States and most of Europe are not in such bad shape as to warrant that.
“It seems to me everybody should agree that the fiscal adjustment should be a long, drawn out, credible, medium-term process,” said Blanchard, who also said austerity was clearly needed.
He said he was worried that governments feel pressure to satisfy markets through very strong and very fast fiscal consolidation.
Asked about the debt crisis in the euro zone, Blanchard said that if Europe does not contain its short-run crisis, clearly the world will be affected in major ways.
But even assuming the region is able to get its debt problems under control, next year “is not going to be nice” for Europe, as bank deleveraging and fiscal consolidation will be a major drag on the economy.
As to the impact of the crisis on the rest of the world, “There is enormous ambiguity,” said Blanchard.
IMF SEEKS JOB CUTS IN DEBT-RIDDEN GREECE
However, even as Blanchard spoke, Greece’s rescue creditors pressed the debt-shackled country to fire excess public servants and further scale back workers’ pay rights.
The IMF’s top official in Greece warned the government it would not escape high budget deficits unless it switches efforts to spending cuts, arguing that the country’s taxpayers had reached the limit.
“There are no more low-hanging fruits,” Poul Thomsen told a financial conference in Athens on Wednesday. “We have clearly reached the limit of what can be achieved through raising taxes ... Lesson: We have to move the expenditure side.”
Thomsen urged the government to “move aggressively” reduce the size of the public sector.
“We are also warning that unless there is an acceleration of reform in the public sector - the deficit will get stuck at around 10 per cent,” he said.
“Greece might have to accept involuntary redundancies ... and address the legacy of too high and inflexible wages,” he said. “I cannot see how fiscal recovery can proceed without addressing these taboos.”
The IMF and eurozone countries have been propping up Greece’s economy with rescue loans since May, 2010 - imposing harsh spending-cut demands that have driven the country into recession.
Greece has admitted it will miss its deficit targets this year, with revenues still weak despite draconian tax hikes.
Greece is currently negotiating the terms of a second, massive rescue package, worth 130 billion euros, with eurozone partners and private bondholders.
Finance Minister Evangelos Venizelos said the terms of that agreement cannot be amended by future governments - effectively locking the country into the deal through 2015.
Venizelos is part of a month-old coalition government tasked with negotiating the deal ahead of a general election expected in the spring.
“Now is the hour to negotiate the new program that will shield us with (euro) 130 billion in additional assistance from our partners, that will cover our funding needs till 2015,” Venizelos told the finance conference. “After the agreement is signed and ratified, a renegotiation cannot be foreseen - these are terms set with our partners to more than double financial support for Greece, and retain our position in the euro.”
Venizelos said he believed talks with banks for a voluntary bond writedown could be concluded “without much difficulty”.
But nervousness over the state of the Greek economy is unlikely to fade soon as Prime Minister Lucas Papademos warned of a contraction greater than the 5.5 per cent forecast.
“2011 will be the worst recession here ever” with gross domestic product (GDP) contracting by “over 5.5 per cent” as the government has officially forecast, Papademos said at a dinner organised by the American-Greek Chamber of Commerce.
Greece’s economy shrank by 4.5 per cent in 2010.
“We have a hard way to go,” said Papademos.
The head of the IMF mission in Greece, Poul Thomsen, said earlier Wednesday that the Greek economy will go down “six per cent and maybe more” in 2011.
UNEMPLOYMENT AT 17-YEAR HIGH IN THE UK
In Britain, economic woes also continue to mount, with the nation’s unemployment hitting its highest level for 17 years. Women and young people are bearing the brunt of the deepening jobs crisis in the wake of the government’s austerity measures and the economy’s general weakness.
Figures from the Office for National Statistics showed that 2.64 million people were unemployed in Britain at the end of October - that’s the highest level since 1994 and 128,000 more than in the previous quarter.

Britain's Prime Minister David Cameron insists the government is trying to reduce joblessness.

Photo: Reuters

Following the increase, Britain’s unemployment rate is now 8.3 per cent, up 0.4 per cent on the quarter and at its highest level since 1996.
Unemployment among 16 to 24 year olds increased by 54,000 to 1.03 million - the highest level since records of youth employment started to be kept in 1992. And the number of women unemployed swelled by 45,000 to 1.1 million, the highest since 1988.
The British government has been heavily criticised for cutting programs that help young people break into the job market, and opposition leader Ed Miliband has said in the past that the country faces having a “lost generation” of people who find it impossible to get work.
Prime Minister David Cameron told MPs the government was trying to reduce joblessness.
“Any increase in unemployment is bad news and a tragedy for those involved,” he said. “We will do all we can to help people back in to work.”
The statistics office also revealed that public sector employment had also fallen by 67,000 to just below six million - the first time the level has been that low since 2003.
Cutting costs in the public sector has been a key part of the British government’s strategy to reduce the country’s debt. It has clashed with public sector unions over its austerity measures, with unions saying the cuts are unfair and hit poorly paid workers the hardest.
Dave Prentis, leader of the public sector union Unison, said the latest unemployment figures showed the government strategy is failing.
“The government continues to ignore the human cost and push ahead with its hard and fast cuts, clinging to the hope that a struggling private sector can pick up the pieces,” he said. “These figures deliver a cold hard dose of reality. It is shameful to see that yet again women, who make up the majority of low-paid public sector workers, are the hardest hit by job losses.”
The government had hoped that the private sector would create jobs to compensate for those lost in the public sector but the ongoing economic crisis has meant that a number of companies are struggling to stay afloat.
Tour operator Thomas Cook added to the bad news with an announcement on Wednesday that it will close 200 stores and cut more than 660 jobs in Britain as families with young children decide to stay home instead of holidaying at its all inclusive beach resorts.
Thomas Cook also reported its final year results on Wednesday, after postponing their release as it sought new agreements with its creditors. It said its operating profit fell 16 per cent to £303.6 million ($472.7 million).

Euro worries, plunge in oil prices helps stocks end down - The Bottom Line MSNBC

Stocks and the euro fell Wednesday as worries about Europe hang over financial markets. Energy companies fell hard as the price of crude oil plunged 4 percent. The dollar and Treasury prices rose as traders shifted money into lower-risk investments.
Italy's borrowing rates ratcheted higher and the euro slid below $1.30 for the first time since January, two signs that the debt crisis continues to pressure Europe's governments. The euro has lost more than 3 percent in three days.
Italy had to pay higher borrowing rates in its last bond auction of the year Wednesday. The euro zone's third-largest economy paid 6.47 percent interest to borrow euro3 billion ($3.95 billion) for five years, up from 6.30 percent just a month ago. The higher rates make it more expensive for Italy to borrow money and reflect weakening confidence by investors in the country's ability to repay its debts.
According to preliminary calculations, the Dow Jones industrial average fell 131.46 points, or 1.1 percent, to 11,823.48
The market appears to be in "sell now and ask questions later mode," said John Canally, investment strategist at LPL Financial. The fear that another bank failure will lead to a wider financial crisis like Lehman Brothers did in 2008 overshadows everything else, he said.
In traders' minds, a slight drop in the euro or a small rise in Italian government bond yields is seen as a step toward a banking collapse. "Just the hint of bad news becomes 'Oh my gosh. The world is going to end,' " Canally said.
The Standard & Poor's 500 index fell 13.91, or 1.13 percent, to 1,211.82. The Nasdaq fell 39.96 points, or 1.55 percent to 2,539.31.
The yield on the 10-year Treasury note fell to 1.92 percent from 1.96 percent late Tuesday as demand increased for ultrasafe assets. The dollar also rose against other currencies. The euro lost about out penny against the dollar to $1.29.
European markets fell broadly, and the losses accelerated in the last hour of trading. Germany's DAX dropped 1.7 percent; France's main stock index fell 3.3 percent.
Energy stocks led the market lower after the price of crude oil plunged $4 to $96 a barrel. Schlumberger Ltd. lost 3.8 percent; Apache Corp. fell 4.3 percent and Cabot Oil & Gas Corp. fell 5.4 percent.

Michigan unemployment rate falls below 10% - CNN Money

In another sign of the turnaround of the U.S. auto industry, the unemployment rate in Michigan has dropped below 10% November, the first time it's been that low in three years.
Figures released by the state Monday put unemployment at 9.8%, down from 10.6% in October and 11.4% a year ago. The last time unemployment was below 10% in the state was November 2008, when federal bailouts and bankruptcies loomed for General Motors (GM, Fortune 500) and Chrysler Group. Unemployment in the state peaked at 14.1% in August and September of 2009.
Earlier this year GM, Ford (F, Fortune 500) and Chrysler were all profitable -- the first time that's happened since 2004.
As auto sales have rebounded along with profitability, the auto sector has added 6,200 jobs over the 12 months ending in October. Overall manufacturing jobs in Michigan reached 500,000 in November, adding 21,000 from the previous year.
Still, while the unemployment rate fell sharply in November there was relatively little gain in actual employment compared to October. Only 1,000 jobs were added and those were spread across different sectors.
The big one-month drop in the unemployment rate was due more to unemployed workers moving out of the state, retiring, or not actively searching for a job during the month.
The Michigan results mirrored the drop in national unemployment, reported earlier this month, that was helped by modest gains in payrolls coupled with a drop in those people actively looking for work.
Still with a gain of 59,000 jobs over the last 12 months, 2011 is poised to be the first year that Michigan has added jobs since 2000.