June 20, 2012 1:31 pm
Stocks dip, recover after Fed announcement - USA Today
The U.S. central bank said it would extend Operation Twist, under which the Fed has been gradually selling short-term Treasury securities and using the proceeds to buy longer-term bonds to keep their rates down. The current program was set to expire at the end of the month; it will now extend through the end of the year.
Procter & Gamble, the world's largest consumer products maker, predicted continued slow growth in developed markets and a slowdown in China. The company cut its estimates for fourth-quarter revenue and income. The stock dropped $2.46, almost 4%, to $59.75. That made P&G the biggest decliner in the Dow Jones industrial average.
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Some of the same weakness that is being addressed by the Fed has forced Procter & Gamble to reign in recent price increases as people cut back on spending.
Consumer spending accounts for about 70% of economic activity in the U.S. With few companies hiring, the weak forecast from P&G was a worrisome sign that one of the country's most important economic engines may be weakening. P&G makes Tide detergent, Pampers diapers and Duracell batteries.
Investors are hoping the Fed will either keep buying long-term bonds to keep rates low, or at least signal that it's ready to act if the economy slows any more.
"The market's risk-averse sentiment is easing, and investors have quite high hopes for central bankers to help," said Kwong Man Bun, chief operating officer at KGI Securities in Hong Kong. "Investors are now taking a breather before looking at the problem of Spain."
Concern over Spain, Greece and the euro limited optimism over potential stimulus from the Fed.
Greek politicians continued to try to finalize a potential power-sharing deal to end weeks of political uncertainty there, while borrowing rates in Spain remained dangerously high despite a small drop on Wednesday. If they do not drop in coming weeks or months, Madrid is likely to have to ask for an international bailout to be able to finance itself.
Meanwhile, Spain's Finance Minister Cristobal Montoro denied that the country needs a full-fledged bailout of its public finances "because it does not need to be rescued."
Earlier, Japan's Nikkei 225 index closed up 1.1% to 8,752.30. Hong Kong's Hang Seng added 0.5% to 19,518.85 and South Korea's Kospi gained 0.7% to 1,904.12.
Australia's S&P/ASX 200 added 0.2% to 4,132.40. Benchmarks in Singapore, Taiwan and Indonesia also ended higher. Mainland China's Shanghai Composite Index fell. Benchmarks in Thailand and New Zealand were also lower.
Benchmark oil for July delivery was down 10 cents to $83.93 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose by 76 cents to end the day at $84.03 per barrel in New York on Tuesday.
In currencies, the euro rose slightly to $1.2692.
MONEY MARKETS-Interbank rates fall on bets of c.bank stimulus - Reuters
* Three-month sterling Libor falls further after minutes
* Euribor rates within whisker of record lows
* Cut in ECB deposit rate seen more likely than refi rate
LONDON, June 20 (Reuters) - Interbank lending rates in sterling and in euros continued to fall on Wednesday on growing expectations of further support from major central banks around the world to counter the fallout from the euro zone's debt troubles.
The Bank of England looked to be close to launching a new round of monetary stimulus because of the worsening euro zone crisis, according to minutes of its last policy meeting, which showed officials split 5-4 on the move, with Governor Mervyn King in favour.
The minutes helped take three-month sterling Libor to its lowest since September 2011, after the rate tumbled last week when the BoE announced a raft of measures to boost liquidity in the banking system and hinted that more quantitative easing gilt purchases could be on the cards.
Three-month Euribor rates were only a whisker away from record lows after recent comments from European Central Bank officials prompted markets to price in the possibility of more rate cuts.
"Barring a massive rebound in retail sales tomorrow and better PMIs, above all, I think the market is going to be heavily discounting more QE (quantitative easing in the UK) in July," Ma r c Ostwald, strategist at Monument Securities, said.
"For the euro zone, I think really the jury is still out ... The talk that ... reducing the deposit rate to zero is no longer a subject which is a taboo at the ECB, would seem to suggest that a few people will be looking for the ECB to cut rates in July. But what difference that's going to make (I don't know)."
ECB policymaker Ewald Nowotny said earlier this month the bank has the ability to cut interest rates if the euro zone economy continues to deteriorate and could even slash the rate that controls money market rates to zero.
That along with recent comments from ECB President Mario Draghi that the euro zone economy faces serious risks and no inflation threat has heightened expectations the ECB could cut interest rates or take policy action soon.
Reflecting this sentiment, three-month Euribor rates traded at 0.657 percent, unchanged from the previous day's level which was the lowest since April 2010. Euribor rates hit a record low of 0.634 percent in March of that same year.
Three-month sterling Libor edged lower to 0.91775 percent from 0.92150 percent the previous session, after a sharp fall last Friday.
DEPOSIT RATE CUT
Eonia forwards showed that markets were expecting the Eonia overnight rate to trough at between 0.224 percent and 0.174 from August, suggesting the market was discounting some possibility of a deposit rate cut.
The rate offered by the ECB's deposit facility is 0.25 percent and is seen as a floor for overnight Eonia rates which last traded at 0.33 percent.
"A deposit facility rate cut is (what the market is) expecting now. If you look at where money markets are trading, it's now expecting Eonia fixings below the 20 basis points level, 15 bps below current Eonia fixings. That would only be possible with the cut of the deposit facility rate," Benjamin Schroeder, rate strategist at Commerzbank, said.
It was hard to gauge market expectations for a deposit rate cut because the ECB could opt for a smaller reduction to say 0.125 percent or a bigger cut to zero percent, he said.
But the market was pricing in a 40 percent chance of a deposit rate cut to zero percent in July and a 50-60 percent of this happening in August, he added.
The reading varied widely between analysts.
Simon Peck, rate strategist at RBS, said the market was pricing in a 25 percent chance the ECB would cut its deposit rate to zero in September and only an 8 percent chance of such a move in July.
The Federal Reserve on Wednesday may also opt to launch a new round of monetary stimulus.
Stocks Back Near Flat Line After Post-Fed Volatility - U.S. Commentary - RTT News
6/20/2012 1:32 PM ET
(RTTNews) - Stocks saw considerable volatility following the Federal Reserve's announcement of its decision to extend "Operation Twist." After initially falling sharply on the heels of the news, the major averages showed a strong move back to the upside.
The volatility on Wall Street came after the Fed announced its decision to continue its program to extend the average maturity of its holdings of securities through the end of the year.
The program, known as "Operation Twist," involves replacing short-term securities in the Fed's bond portfolio with longer-term securities in an effort to push already low long-term interest rates even lower.
Rob Carnell, chief international economist at ING, said, "Most Fed watchers were expecting an extension of the Twist operation at this latest FOMC meeting. After all, the hurdle for QE3, we were previously told, was very high."
"Moreover, allowing the twist to expire, even if you believed it was essentially a useless policy (we did), was akin to a monetary tightening, albeit a tiny one," he added.
Later this afternoon, the Fed's revised economic forecasts may attract some attention along with Chairman Ben Bernanke's press conference.
While most of the major sectors are showing only modest moves in mid-afternoon trading, considerable strength has emerged among airline stocks. The NYSE Arca Airline Index has surged up by 1.2 percent, reaching its best intraday level in four months.
Semiconductor, steel, and financial stocks have also shown strong moves to the upside, while weakness remains visible among trucking, railroad, and utilities stocks.
The major averages have pulled back near the unchanged line in recent trading and are currently mixed. While the S&P 500 is down 0.39 points or less than a tenth of a percent at 1,357.59, the Dow is up 6.06 points or 0.1 percent at 12,843.39 and the Nasdaq is up 4.08 points or 0.1 percent at 2,933.84.
by RTT Staff Writer
For comments and feedback: editorial@rttnews.com
Pearl Jam's former financial manager charged with stealing from the band - The Guardian
A former member of Pearl Jam's management team has been charged with stealing $380,000 (£242,000) from the band.
Rickey Charles Goodrich was chief financial officer with Curtis Inc, the band's management company, when he is alleged to have taken money from the band's accounts. Prosecutors say he committed the theft beween 2006 and September 2010, when he was fired. He had begun working for Pearl Jam in 2005 and joined Curtis Inc the following year.
Goodrich has been charged with 33 counts of theft, and is expected to enter a plea on 28 June at his hearing at Seattle's King County Superior Court. Prosecutors say he transferred money from company accounts to pay debts he and his wife had accrued. He is also alleged to have used company credit cards to pay for personal items, including family holidays and wine.
The charging documents claim that hired investigators found Goodrich had claimed to have paid thousands of dollars to band-members and crew that remained unaccounted for. The band's manager had reviewed areas of their cash flow after becoming concerned by Goodrich's management of their money in late 2009.
According to the Seattle Post-Intelligencer, police claim the thefts cost the management company $556,000 (£354,000), including investigative expenses. Kelly Curtis of Curtis Management said, "We are deeply saddened by this situation," but added that he is "looking forward to a resolution".
Pearl Jam are due to headline the Isle of Wight festival this Saturday.
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