Spanish stocks up, bond rates dip on Greek vote - The Guardian Spanish stocks up, bond rates dip on Greek vote - The Guardian

Monday, June 18, 2012

Spanish stocks up, bond rates dip on Greek vote - The Guardian

Spanish stocks up, bond rates dip on Greek vote - The Guardian

MADRID (AP) — Spanish markets breathed a sigh of relief Monday with stocks opening higher and the country's borrowing costs dipping slightly after pro-bailout parties won the elections in Greece.

The Ibex-35 stock index opened about 1.5 percent higher while the interest rate Spanish 10-year bonds — a benchmark of market confidence in a country's ability to pay down its debt — was down nearly 7 basis points at 6.86 percent. That is still dangerously close to the 7 percent rate considered by market watchers to be unsustainable over the long term and the point at which Greece, Ireland and Portugal sought a bailout.

Spain is a focus of fears it might be the next eurozone country to need a full bailout. The government is to announce this week how much of a €100 billion fund it will tap to rescue banks that got burned when a real estate bubble popped.

Business Leaders Cry for Urgent Government Action at G20 Meeting - Daily Finance
G20 MeetingLOS CABOS, Mexico -- Top business executives are urging world leaders to show more urgency in addressing economic malaise or risk an even deeper global crisis than in 2008-2009.

CEOs and senior executives from about 350 companies, including Nestle, Zurich Insurance Group and Walmart, pushed leaders at a Group of 20 summit in Mexico to take firm measures to lift the economic gloom.

Jean-Guy Carrier, head of the International Chamber of Commerce business lobby group, said the economic uncertainty was affecting companies "in quite a dire way."

"For the people we talk to, small and medium-sized or large companies involved in trade, the instability is just scaring them," he told Reuters at the summit on Sunday.

"It's having a pretty deleterious effect on the global economy because these companies, a lot of them say we have plans for expansion and plans for investment but we put them on hold ... Replicate this thousands of times in companies across the world and it is one source of investment, growth and jobs which is not happening."

Slowing growth in China and Brazil, fiscal tightening ahead in the United States and a stalling in trade negotiations all meant the economic outlook was already tougher than it was in 2008, he said, calling for G20 countries to send a signal that they understand the severity of the situation.

The ICC gave G20 members a must-do-better score in three of four major areas in a scorecard measuring progress since the G20 became a key global policymaker in 2008, at the height of the financial crisis.

The head of the world's biggest wind turbine maker, Vestas , said although there had been no dramatic, 2008-style crash, business conditions have deteriorated since August 2011 when the United States was struggling with budget negotiations and was downgraded by Standard and Poor's.

"Last week, I spoke to some of the largest pension funds in the world, who are very interested in making infrastructure investments, but they are concerned about doing investments because of regulatory uncertainty," CEO Ditlev Engel said.

"If people are holding back, it becomes a self-fulfilling prophecy."

Vestas itself is struggling with one aspect of U.S. budget policy: the decision to let a tax credit for renewable energy expire at the end of 2012.

The company says it may have to cut 1,600 U.S. jobs, almost half its U.S. workforce, as a result of the change, with a decision due in the third quarter. It also announced plans in January for 2,335 job cuts in Europe.

McGraw-Hill Companies chief executive Terry McGraw said a clear signal from the G20 that countries would pull together to tackle the problems, as they did in 2008 and 2009, would help reassure the business community.

"I hope that the signals from this G20 will be 'what we were doing is not working and we are going to change it'," said McGraw, whose conglomerate includes ratings agency S&P.

Carrier from the ICC said it was crucial for G20 countries to bolster the resources of the International Monetary Fund so that it can help out countries hit hardest by the crisis.

Mexican President Felipe Calderon said on Saturday it was possible extra IMF funding would exceed the $430 billion agreed on in April but Brazil, China, India, Russia and Mexico itself have not yet committed to specific sums.

"If they actually come to an agreement to ... bring the level of funding up, that's money that's talking, it's not just a promise," Carrier said. "This is why the G20 exists. No single country can deal with this by itself."

US STOCKS-Tech outpaces a market bedeviled by Europe - Reuters

Mon Jun 18, 2012 4:32pm EDT

* Tech shares day's top gainers, Facebook rallies again

* Greece election "not a game changer," analyst says

* Spanish bond yields hit euro-era record high

* Dow off 0.2 pct, S&P 500 up 0.1 pct, Nasdaq up 0.8 pct

By Ryan Vlastelica

NEW YORK, June 18 (Reuters) - The Nasdaq advanced on Monday, propelled by a rally in Apple and other big-cap tech stocks, but fears Europe's debt crisis is in danger of worsening limited broader gains.

Positive analyst comments lifted both eBay, up 4.5 percent to $42.49, and Groupon Inc, up 10.8 percent at $11.15. Apple Inc accounted for about half the Nasdaq's rise, climbing 2 percent to $585.78.

The S&P eked out a slight gain as it bumped up against its 50-day moving average around 1,347 while the Dow ended lower.

A weekend election victory by pro-bailout parties in Greece removed one headwind facing the euro zone. But rising bond yields in Spain and Italy reinforced views that Europe has yet to control its debt crisis.

The election "wasn't a game changer and does little to alleviate the larger issues that remain in Europe," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

A senior official with Greece's New Democracy party, the conservatives who won Sunday's election and who back Athens' international bailout plan, told Reuters that Greece would form a government on Tuesday. [ID:nL5E8HI0D0

But there were conflicting signals about the way forward. The leader of New Democracy, Antonis Samaras, pledged his commitment to Greece's international bailout package, but also said there would have to be "some necessary amendments."

Meanwhile, Germany's chancellor, Angela Merkel, said any lo0sening of agreed reform pledges would be unacceptable.

The election results also offered little reprieve from contagion concerns as yields on both Italian and Spanish bonds rose, with Spain's 10-year yield climbing above the 7 percent mark at which other highly indebted euro-zone nations were forced to seek bailouts.

European authorities have already agreed to a 100-billion-euro ($125 billion) rescue for Spain's troubled banks.

Market participants were also reluctant to take bets ahead of the U.S. Federal Reserve's two-day policy meeting, with investors keen to see if the Fed will announce new stimulative measures in its policy statement at the meeting's close on Wednesday afternoon.

"Without knowing what will come from the Fed meeting on Wednesday, the market doesn't want to get ahead of anything," Luschini said.

The Dow Jones industrial average was down 25.28 points, or 0.20 percent, at 12,741.89. The Standard & Poor's 500 Index was up 1.94 points, or 0.14 percent, at 1,344.78. The Nasdaq Composite Index was up 22.53 points, or 0.78 percent, at 2,895.33.

Last week, U.S. stocks rallied on Thursday and Friday on news that central banks of major economies would take steps to stabilize markets if necessary after the Greek vote. As a result, much of the bullish bias of the election news was priced in. The S&P 500 rose 5.1 percent in the last two weeks.

An index of energy shares fell 0.8 percent on Monday, with the sector ranking as the S&P 500's worst performer. U.S. crude futures dropped 1 percent after falling for six of the last seven weeks.

European shares erased early gains and closed flat, with the FTSEurofirst 300 index up 0.04 percent.

Also in the technology sector, Facebook struck a deal to acquire, whose facial-recognition technology has been in use on the social network. Facebook shares jumped 4.7 percent to $31.41, taking its cumulative gains in the last three sessions to about 16 percent.

DSW Inc plunged 11.3 percent to $52.13 after the footwear retailer gave a quarterly earnings outlook below analysts' expectations.

Volume was light, with about 5.78 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 7.84 billion.

About 57 percent of stocks traded on the New York Stock Exchange closed higher while the number of advancers and decliners on the Nasdaq was about even.

Tech boffins: Spend gov money on catching cyber crooks, not on AV - The Register

The UK government should be spending more on catching cybercriminals instead of splurging taxpayers' money on antivirus software, tech boffins have said.

Blighty goes through around £639m a year trying to clean up after attacks or prevent threats – including £108m it spends on antivirus – but the country is only spending £9.6m on techy law enforcement, a University of Cambridge study found.

"Some police forces believe the problem is too large to tackle," Ross Anderson, professor of security engineering at the University of Cambridge’s Computer Laboratory, said in a canned statement.

"In fact, a small number of gangs lie behind many incidents and locking them up would be far more effective than telling the public to fit an anti-phishing toolbar or purchase antivirus software."

The Cabinet Office said it welcomed "this latest contribution to the debate on cybercrime".

"The government believes the threat is serious and needs to be tackled and that is why we have rated cyber as a Tier 1 threat. Raising awareness and building capacity to resist threats continues to be our focus," a spokesperson told The Reg in an emailed statement.

"That includes investing in law enforcement capability to detect and apprehend cyber criminals. But we also think it is important to make sure people have the information they need to take steps to protect themselves."

The study, which was started after a request from the Ministry of Defence, also said that the amount of money the UK was losing as a result of cybercrime was being exaggerated.

"For instance, a report (PDF) released in February 2011 by the BAE subsidiary Detica in partnership with the Cabinet Office’s Office of Cybersecurity and Information Assurance suggested that the overall cost to the UK economy from cyber-crime is £27 billion annually," the research said.

"That report was greeted with widespread scepticism and [was] seen as an attempt to talk up the threat; it estimated Britain's cybercrime losses as £3bn by citizens, £3bn by the government and a whopping £21bn by companies. These corporate losses were claimed to come from IP theft (business secrets, not copied music and films) and espionage, but were widely disbelieved both by experts and in the press."

Using figures ranging from 2007 to 2012, including some which are "extremely rough estimates" based on data or assumption for the reference area, the study reckoned that all the costs of cybercrime both direct and indirect came out at around £11.7bn. – Cybercrime is expensive

The Cabinet Office spokesman said that Detica was best placed to explain its own methodology, but still disagreed somewhat with the study's conclusions.

"The Cyber Security Strategy was clear that a truly robust estimate would probably never be established, but that the costs are high and rising," he said.

"That said, we think there are grounds for believing that the true cost is higher than the £11bn quoted by Cambridge University.

"For example, the authors say that they can't find any hard evidence of the cost of IP theft and have therefore concluded this doesn't impose any costs beyond the defensive measures they refer to elsewhere in the paper. However, there are suspected cases of IP theft in the public domain and the costs are not nil.”

Aside from differing opinions on the cost of cybercrime, the research team also reckoned that some existing meatspace crime was moving online and being tallied up as part of the cyber cost.

The study pointed out that fraud in the welfare and tax systems, which now often takes place online, is probably costing Brits a few hundred pounds a year on average while card and bank fraud cost a few tens of pounds a year per citizen.

However, what they call 'true cybercrime', scams that completely depend on the internet, are only costing a few tens of pence a year, while the cost of antivirus software can be hundreds of times that.

Basically, the indirect costs of folks trying to protect themselves from cybercriminals actually end up costing them more.

"Take credit card fraud," said Richard Clayton, expert in the econometrics of cybercrime in Cambridge’s Computer Lab. "Direct loss is clearly the monetary loss suffered by the victim.

"However, the victim might then lose trust in online banking and make fewer electronic transactions, pushing up the indirect costs for the bank because it now needs to maintain cheque clearing facilities, and this cost is passed on to society.

"Meanwhile, defence costs are incurred through recuperation efforts and the increased security services purchased by the victim. The cost to society is the sum of all of these," he explained.

The research team concluded that there should be less spent on antivirus and firewalls and other preventative measures and "an awful lot more" on catching and punishing the perpetrators.

The study (PDF, 346KB) is due to be presented at the 11th annual Workshop on the Economics of Information Security (WEIS), which takes place in Berlin on 25 and 26 June. ®

Throwing more money at the banks - The Guardian

Larry Elliot (Comment, 18 June) misses the major problem that caused both this crisis and the Great Depression – an excessive and unsustainable rise in private sector debt as a result of excessive growth in commercial bank lending. This resulted in an asset price bubble that has burst and is being followed by necessary attempts by the private sector to increase their savings to pay off their debts. This has lead to contraction of the money supply and collapse of demand.

The real crisis is the failure to understand this core of the problem, and that the solution, as with the Great Depression, is to reverse the contraction in the money supply and collapse in demand through deficit spending supported by central banks. Only by running public sector deficits can demand be restored and private debt levels decreased. Misguided attempts to cut deficit spending while the private sector is trying to reduce their debts are doomed. The problem cannot be solved by improving competitiveness and thus increasing exports. We cannot all increase our exports and decrease our imports simultaneously. Attempts to do so will simply encourage protectionism.
Professor Anton van der Merwe
Sir William Dunn School of Pathology, University of Oxford

• Only the bankers of the money-markets and the wealthy benefit from this austerity. Let's remember that money in the form of paper or credit is only a way to harness the energies and skills of a people by paying it as wages or salaries to provide the goods and services a nation needs – food, clothing, housing and the staffing of factories, schools, hospitals and so on -  a sort of lubricant for society to enable it to function. To take away much of it will make things to grind to a halt, needlessly and pointlessly.

The bankers gambled away vast amounts of the nations' money supply without any apparent benefit to the economies of Europe and America; governments should replace this lost treasure by printing money or providing credit and distributing it directly, via small businesses and government projects, to workers as wages and salaries, without giving it to the banks, which so far have only sat on whatever has been provided or reluctantly parted with it at high interest rates. Printing and distributing money like this would no doubt evoke cries of "inflation" from economists and politicians (who know nothing and have learned nothing) – but so what? There has always been some inflation in capitalist societies – look at the price of bread or of housing over the past 50 years. The money held by banks and the wealthy may then lose some of its buying power, but it would be fair to let them suffer a bit of austerity instead of passing it on to the workers. But the eurozone's bankers have a stranglehold on governments and are unlikely to let them do anything to help the people out of this austerity trap – even if right-wing governments wanted to – if they might lose the chance of making a fat profit.
Tony Cheney
Ipswich, Suffolk

• Does anyone else think the proposed £80bn to be given to British banks on the alleged condition they "pass it on to businesses and households in the form of cheaper loans and mortgages" is simply another government bail-out for a failed and failing banking system? This seems to be another £80bn to throw down the black hole where the other £800bn went at a time when people get jittery at Spain for requesting £100bn. If the government was serious about helping smaller businesses, surely a grant system would make better sense that throwing more money at banks where it, if past history is any indication, will merely be used for bonuses or to benefit shareholders.
Nathan Wild
Beverley, East Riding of Yorkshire

• Why is the government lending the banks more money at a special low rate so that the banks can lend it at a higher rate to the business sector to stimulate growth and thus make extra profit? Why not cut out the middleman and have the government lend it directly to those who want help? I recently heard Professor Steve Keen explaining the weakness of the whole system or, as he put it, the whole ponzi banking system.
David Walters
Oakamoor, Staffordshire

The results of the Federation of Small Business's latest Voice of Small Business Index are not altogether surprising (Squeeze on small firms tightens, 18 June). SMEs want to grow and banks say they want to lend, yet credit still appears to be unavailable. This is not entirely the fault of the banks. They are increasingly constrained by stringent regulation and the effects of the eurozone crisis as well as a depressed demand for any type of finance, caused by negative reports that it is unavailable. The government's conflicting messages of "batten down the hatches" and "invest to boost business growth" are simply incompatible, and SMEs are rendered immobile, not sure where to turn.

Our own statistics show that almost one-third of SMEs have no plans to invest in growth this year. This can't go on. Government, banks and businesses need to wake up to the idea that the traditional bank lending of the past is no longer the only option for business finance. There are other established alternatives such as invoice and asset based finance as well as private equity and business angels. The sooner they stop focusing on quick-fix credit, the sooner SMEs will be able to grasp other opportunities for funding and growth, boosting their own businesses and the wider UK economy.•
Peter Ewen
Managing director, ABN AMRO Commercial Finance

• There is little reason to believe that merely injecting money into the banks will do much to shake the grip of the recession. So far the most notable investment made by the effectively state-owned Royal Bank of Scotland was to finance Kraft's heavily leveraged takeover of Cadbury's. Predictably the deal resulted in both direct and indirect job losses as labour was shaken out to pay for it. At one stroke tax-payers became social security claimants with no perceptible benefit to the real economy of the UK, and British taxpayers, including those rendered unemployed, financed it. There is a sublime lunacy in this misuse of resources and we are about to see more of the same.

Is it so unthinkable that RBS could be turned into the first British state investment bank and the funds injected used to create useful enterprises creating stable employment, stimulating the wider economy and generating tax revenue? Europe is faced with a crisis on a scale rapidly approaching the second world war. The national response to that was the effective mobilisation of capital and labour, highly progressive taxation and an enormous and ultimately transforming economic and social effort. Much of that effort was directed towards the destructive power of the state and resulted in massive losses of life. Could we not devote a similar effort to creation and life enhancement
Phil Turner
Malvern, Worcestershire

US stocks meander as European debt crisis festers - AP -

Crisis-weary investors scoffed Monday at what had appeared to be a hopeful turn in the European debt crisis: a victory for pro-Europe parties in a Greek election. U.S. stocks were little changed, and borrowing costs for Spain surged to alarming levels.

Investors appeared fed up with policy makers' inability to resolve a crisis that has bedeviled markets for more than three years. Leaders of the most developed countries are meeting in Mexico to discuss the crisis and the slowing global economy.

"Even though we avoided the worst-case scenario in Greece, the crisis has entered a new and dangerous phase, and it doesn't end with Greece," said Michelle Gibley, director of international research at the Schwab Center for Financial Research, a division of the Charles Schwab brokerage.

U.S. indexes opened lower then drifted between modest gains and losses. Homebuilders rallied after a measure of confidence among U.S. builders rose to a five-year high.

Spanish borrowing rates spiked Monday above levels that forced other countries to take bailouts, a sign that bond investors fear Spain will default on its debts.

The Dow Jones industrial average closed down 25.35 points, or 0.2 percent, to 12,741.82. The Nasdaq composite index rose 22.53 points, or 0.8 percent, to 2,895.33. It was lifted by Apple, its biggest component, which rose $11.65, or 2 percent, to $585.78.

Rival tech titan Microsoft unveiled its new tablet computer after the market closed. Dubbed "Surface," the gadget will compete with Apple's market-dominating iPad.

The Standard & Poor's 500 index rose 1.94 points, or 0.1 percent, to 1,344.78. Of its 10 major industry categories, only financials and energy stocks fell. Banks would be hit hard if the European crisis spun out of control. Energy companies followed oil prices lower.

On Sunday, Greek voters elected a party that wants to continue a program of international bailout loans that are conditioned on painful budget cuts. Traders had fretted for weeks that a radical leftist party would prevail and reject Europe's unpopular bailout plan.

The next step, traders feared, would be Greece's dropping the shared currency. Anxiety over a Greek exit was so pronounced that many expected bank runs on Monday if political anti-bailout parties had won the election.

Yet Greece's situation remains precarious. The anti-bailout party got a big chunk of the vote. There's also no guarantee that the winners will be able to form a government. Elections a month ago failed to produce a governing coalition, leading to Sunday's do-over.

Many had expected stocks and other risky investments to rally on relief that the conservative party won. But the broader scope of Europe's financial burdens soon overshadowed whatever breathing room the election provided.

Safe investments rose and riskier ones fell as traders continued their long vigil for a more permanent solution in Europe. Leaders there are considering a centralized system of bank regulation and deposit insurance to complement proposals of closer economic coordination.

"It doesn't appear that any lasting solution is a possibility any time soon," Schwab's Gibley said. "Until we get some kind of coming together, volatility is likely to continue."

Attention shifted Monday toward Spain and Italy, both of which will require international help if they can't convince bond investors that their finances are sound. Benchmark stock indexes closed down 3 percent in Spain and 2.8 percent in Italy.

The yield on the 10-year Treasury note fell to 1.58 percent from 1.63 percent earlier Monday as demand increased for low-risk investments.

The yield on Spanish 10-year bonds jumped as high as 7.18 percent, the highest since Spain joined the euro. Only a week ago, Europe unveiled a massive bailout of Spain's banks intended to reassure investors about the nation's finances.

Greece, Ireland and Portugal needed bailouts after their borrowing costs rose above 7 percent. It looks like tiny Cyprus will need a bailout as well.

The Greek election "should be seen as a significant net positive for markets, but markets don't always react in a rational manner," said David Kelly, chief global strategist for JPMorgan Funds.

The ISE Homebuilders index rose 34 cents, or 3.5 percent, to $9.98. Lennar, PulteGroup, D.R. Horton, Toll Brothers and Hovnanian Enterprises all rose strongly.

Giant military contractor SAIC fell 38 cents, or 3.1 percent, to $11.86. The Defense Department said Friday that SAIC had lost its biggest contract to Lockheed Martin, a $4.6 billion deal to run the department's global network.

Energy prices, which are sensitive to investors' expectations of future economic growth, fell. Benchmark crude for July delivery slid 76 cents to $83.27 per barrel in electronic trading on the New York Mercantile Exchange.


Daniel Wagner can be reached at

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

US SMALL/MIDCAPS-Stocks mixed as bearish outlook grows - Reuters

NEW YORK, June 18 | Mon Jun 18, 2012 4:51pm EDT

NEW YORK, June 18 (Reuters) - Mid- and small-cap stocks rose on Monday, but a survey of fund managers showed highly split views about the outlook for the sector as well as a rise in bearishness that could be an early warning signal for the stock market next quarter.

The survey by Credit Suisse showed that although there was an almost even split over the direction of smaller cap stocks over the next three months, the level of bullishness has nearly fallen back to the low seen in the second quarter of 2011. Meanwhile, the level of bearishness has nearly risen to highs seen in the first and second quarters of last year.

As Credit Suisse noted, those views last year were prescient, coming ahead of heavy market losses.

"Though we continue to think that the current period of distress in equity markets is presenting a buying opportunity, this piece of our survey results does cast some doubt in our minds as to whether the Russell 2000 (small-cap index) has seen its lows for the year," wrote Credit Suisse.

The survey was based on answers from 122 small and mid cap focused buy side and primarily long only investors on Credit Suisse's client list.

There is plenty of scope for the bearish scenario. Trading was volatile on Monday after election results in Greece staved off immediate fears of Greece exiting the euro zone but did little to clam concerns about Europe's debt crisis spreading.

On Monday the S&P MidCap 400 index gained 0.84 percent while the S&P SmallCap 600 index added 0.11 percent. In comparison, the benchmark S&P 500 rose 0.14 percent and the Russell 2000 index gained 0.16 percent.

Steel companies have been hit by the uncertain economic outlook. On Monday, AK Steel Holding Corp fell 2.8 percent to $5.17. The company forecast a second-quarter profit that fell short of analysts' expectations and said it could not predict full-year earnings because of volatile market conditions and a drop in steel prices.

Body Central Corp, the woman's retailer, slid almost 50 percent to $8.22 after it cut its second-quarter outlook as the company resorted to heavy discounting to clear out piled-up inventory.

On the upside, Ramtron International Corp rose 9.5 percent to $2.66. The chipmaker turned down rival Cypress Semiconductor Corp's offer to buy the company for about $87.6 million, and said it would explore other options including a sale.

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