September 22nd, 2010 19:17:51 GMT

US House to vote on China currency bill next week

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Just 41 days until the mid-term elections, so the House is scheduling a vote on bill to refer China to the WTO for currency manipulation.

China is unhappy with US pressure over the currency and is at loggerheads with Japan over a disputed gas field. The problem with being a world power is people stop letting you slide, China is finding out.

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September 22nd, 2010 18:28:29 GMT

Greek PM: No plans to raise VAT

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The Greek PM, still visiting New York,  says he has no plans to raise the VAT and will look at other ways of increasing revenues.

He sees two or three strong private sector banks after the Greek banking sector is done consolidating.

I hope someone asks him about the German comments suggesting investors need to take a haircut… I’d like to see his head explode…

15 Comments

September 22nd, 2010 18:25:37 GMT

France Faces Mass Protests In Last-Ditch Battle Over Pensions

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By Stephen Sandelius

PARIS (MNI) – France faces another wave of strikes and mass
protests Thursday as opponents to the government’s pension reform make a
last-ditch effort to derail a project that would raise the retirement
age by two years over the coming decade.

The goal of union organizers is to match or exceed the protest on
September 7, which they claim mobilized 2.7 million marchers (1.1
million according to police estimates.)

While union leaders display confidence, they are well aware of the
challenge of demanding that employees forego another day’s pay for a
goal that seems increasingly illusory. The reform bill has already been
adopted by the National Assembly and is likely to be modified only at
the margins in the Senate debate next month.

Despite some minor concessions by the government, public opposition
is growing. Some 57% of the French reject the rise in the minimum
retirement age to 62 years, according to a BVA poll earlier this month.

In view of the trend across Europe to push back retirement as life
expectancy increases, it would be easy to dismiss this opposition as
merely a disinclination to work longer or an attempt to seek a “French
exception” to an apparently inevitable trend.

The growing unpopularity of President Nicolas Sarkozy and
record-high rejection of his economic policies have certainly fanned the
discontent.

At the heart of the wide-ranging debate over alternate ways to
finance the pay-as-you-go pension system in the coming years is a
deep-seated desire to overhaul what many French perceive as an
unequitable distribution of wealth in society.

To demand that fatigued workers sacrifice their later years to pay
for a pension of pittance, while those with seven-digit incomes coast
down in golden parachutes or the super-rich pocket millions in tax
rebates seems unjust to many.

To soften the sting of the hike in the legal retirement age, the
reform bill does foresee exceptions to the 62-year threshold for those
who started work at a very early age or who have raised several children
or have suffered physically at their jobs. A few more concessions of
this sort are being held in reserve by the government as a “response” to
Thursday’s protest.

But another spoonful of sugar will hardly make the bitter medicine
go down. The BVA poll suggests that rejection of the highly symbolic
hike in the minimum retirement age is overshadowed by opposition to a
parallel increase of two years, to 67, in the age at which people can
retire with a full pension regardless of how long they have worked.

If nearly two thirds of the public are opposed to this component of
the reform, it is no doubt because longer years of education and high
unemployment rates among the youth mean that an ever smaller share of
the workforce can hope to rack up the 41 years of contributions that
will be required for a full pension at 62.

Labor Minister Eric Woerth made clear again this week that the
government was not about to budge on the new age limits. The government
fears that doing so would not only undermine hopes of balancing the
pension accounts by 2018 but also jeopardize the government’s
shorter-term strategy for fiscal consolidation and perhaps its
prime-borrower status as well.

“Nicolas Sarkozy is stubbornly attached to the same accounting
logic, obsessed by France’s credit rating on financial markets,” FO
union head Jean-Claude Mailly charged in an interview published
Wednesday.

For the unions, the stakes riding on today’s protest are high. Even
if they doctor their estimates to the upside, a disappointing turnout
would probably signal the slow death of the movement.

But even strong turnout would be no guarantee of victory, since the
unions are divided on the way forward. “If the 23rd [of September] is a
success, we’ll have to organize the follow-up rapidly and especially
discuss the plans of action,” Mailly conceded in the interview.

FO favors further days of strikes — perhaps extendable, depending
on the determination of the rank-and-file, Mailly said. Reformist unions
like the CFDT prefer weekend rallies in order to limit the financial
costs to the protesters, who lose pay by walking off their jobs. The
leading CGT union, torn between its radical and reformist wings, remains
flexible.

The government, with its back to the wall, is counting on the
traditional disunity among the country’s unions to fray the protest
movement and allow its bill to be adopted with few changes, as has been
the case with previous pension reforms.

However, rather than marking the culmination of Sarkozy’s campaign
strategy to modernize French society, the pension reform is likely to
remain a thorn in side of millions of voters, who will be attracted by
the pledge of parties on the Left to rescind the hike of the minimum
retirement age if they are elected to office in 2012.

–Paris newsroom +331 4271 5540; Email: stephen@marketnews.com

[TOPICS: MFFBU$,M$F$$$,M$X$$$,MGX$$$]

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September 22nd, 2010 18:15:41 GMT

US Data Preview: August Durables Expected to Edge Down 0.1%

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By Utta Von Nuremburg

WASHINGTON (MNI) – Friday’s advance durable goods orders report
from the Commerce Department is expected to show its third monthly
decline in the last four months, reflecting a general slowdown in the
manufacturing sector.

According to a survey of economists by Market News International,
the headline figure for durable goods orders is expected to show a 0.1%
drop.

The forecasts mostly centered on an expected decline in nondefense
aircraft orders, mainly those of Boeing. According to Kim Rupert,
managing director at Action Economics, “Boeing orders are expected to
drop off sharply after benefiting from a large volume of orders in
July.”

Boeing’s July orders contributed to a 75.9% jump in non-defense
aircraft, and led the 0.4% gain in headline orders. Other notable data
from July include a 5.3% jump in motor vehicle and parts orders and a
3.9% rise in communications equipment orders. New orders for non-defense
capital goods — a key gauge for future business investment — were down
2.8% in July.

John Basile, economists at Credit Suisse, noted that the
consistently low readings for durable goods orders suggest a softer
trend in the manufacturing sector heading into the third quarter. ISM
manufacturing data has supported this trend, as the July and August
readings were lower on average than those of the second quarter.

–Utta Von Nuremburg is a Washington reporter with Need to Know News

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: MAUDS$,M$U$$$]

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September 22nd, 2010 17:50:53 GMT

Conspiracy theorists smell a German rat

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9-22 eur

EUR rallying like a freight train? Quick call the dpa and tell them something euro-negative.

The Germans did it all spring, helping push EUR/USD breifly under the 1.2000 level.

Here we are several months and 15 big numbers later…tie to undermine confidence in the single currency again…

Looks like the market is not buying it as EUR/USD bounces back from the 1.3350/55 area.

Technically though, EUR/USD does look like it is trying to put in a short-term top. 1.3250/70 is support on further pullbacks if 1.3350 is lost.

9 Comments

September 22nd, 2010 17:37:00 GMT

BOE’s Dale: Inflation risks in both directions

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There are big inflation risks on both sides, says the BOE’s chief economist Spencer Dale. His central view is that inflation risks should subside as temporary effects wane and te economy recovers. If inflation expectations rise, the BOE would need to tighten though, to bolster faith in the BOE’s inflation fighting credentials.

Cable is edging higher, along with EUR/USD as the single currency bounces from near 1.3350. Cable is now at 1.5645.

1 Comment

September 22nd, 2010 17:35:32 GMT

Dale: Inflation Risks Large; BOE To React If They Materialize

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–BOE Dale: Policy Will Need to React if Inflation Risks Materialize
–BOE Dale: Significant Risks on Both Sides Inflation Outlook
–BOE Dale: Current Inflation Risks Unusually Large
–BOE Dale: Small Tightening Would Leave Policy Very Stimulative
–BOE Dale: Risk Credibility, Confidence in, MPC May waver
–Dale: May Need Aggressive Tightening if BOE Loses Credibility

LONDON (MNI) – Both upside and downside inflation risks are
unusually large at present, and the Bank of England’s Monetary Policy
Committee is ready to move policy in either direction if they
materialize, BOE Chief Economist Spencer Dale said Wednesday.

Dale warned there was a risk, with inflation running persistently
above target, that the MPC could lose credibility, adding policy would
have to respond aggressively if this happened. He stressed that the MPC
had not gone soft of inflation, but said it must factor in the downside
risks, as well as the upside ones, in setting policy.

One MPC member, Andrew Sentance, has repeatedly made the case for
monetary tightening faced with persistent, high inflation. Dale,
however, said things were not that simple.

The BOE’s chief economist said there has been “dangerous talk” that
the MPC is turning a blind eye to inflation.

“What better way to counter the dangerous talk than by putting
our money where our mouth is and beginning to withdraw the policy
stimulus? But it is not as straightforward as that – there are
significant risks to both sides of the inflation outlook,” Dale said.

In his speech at Cardiff Business School, Dale acknowledged the
MPC’s credibility is at risk with inflation averaging close to 3% over
the past four years when the committee has a 2% target.

“The period of above target inflation; the fact that inflation has
been higher than expected; and that it is likely to remain above target
until the end of next year all contribute to the risk that credibility
and confidence in the MPC may start to waver,” Dale said.

If the MPC was losing credibility “monetary policy would need to
tighten, possibly aggressively so,” he said.

Dale added, however, that at present loss of credibility was simply
one of a number of risks, rather than a reality.

The “evidence to date is that inflation expectations remain
relatively well anchored,” he said.

While households short-term inflation expectations have risen, so
have the BOE’s own near term projections and measures of “medium-term
inflation expectations have remained broadly stable, as have
expectations of professional forecasters.”

Dale looked in some depth at the reasons why inflation has moved
above target and stayed there. He said there was nothing mysterious
about the rise in inflation.

“The economy has been hit by a series of large price level shocks –
to oil and other commodity prices, to VAT and to the sterling exchange
rate – which have raised companies’ costs and put upward pressure on
prices. Together these factors can more than account for the strength of
inflation,” Dale said.

The near 25% fall in sterling, trade weighted, since mid-2007 may
at peak have added as much as 3 percentage points to inflation but Dale
said its peak impact had now probably passed.

Alongside the price shocks, he found evidence of firms widening
margins to strengthen cashflow in response to the economic downturn.
While there is evidence of firms reducing capacity, Dale expressed
confidence there was still substantial spare capacity out there which
will bear down on inflation.

“There remains some slack in the economy and this is likely to be
pushing down on costs and prices,” he said.

The downward impact of this slack on inflation “should become more
apparent as the temporary effects associated with the shocks to input
prices and VAT wane,” Dale said.

He noted core inflation in the US and the euro area, which have not
seen such large currency depreciations or VAT moves, has fallen
substantially.

Dale also noted that there are downside risks to growth, in
particular from the planned fiscal tightening, and these add to
downside inflation risks.

“The job of monetary policy is to try to balance these upside and
downside risks to inflation. In essence this is no different to normal,
monetary policy is always faced with a balancing act. But what is
different is that the current risks to inflation are unusually large,”
Dale said.

“My central view is that these risks should gradually lessen as the
temporary effects pushing up on inflation wane and the economic recovery
continues. But it is possible that some of the risks will crystallize
and policy will need to react,” he added.

He said it was likely that in hindsight people will say current MPC
policy was too loose or too tight “but we cannot set policy with
hindsight. All we can do is set policy in such a way that balances the
opposing risks to inflation and be ready to change policy decisively in
either direction as this balance of risks alters,” Dale said.

Dale said he did not know when, or in what direction, policy would
change next, but concluded the decision would be based purely on
inflation considerations.

–London newsroom: 4420 7862 7491; email: drobinson@marketnews.com

[TOPICS: M$B$$$,M$$BE$,MABPR$,MT$$$$]

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September 22nd, 2010 17:35:31 GMT

US’s Schumer:Dem Leaders’Discussing’ How,When To Push Tax Cuts

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–Democrats Have Not Yet Decided Tax Plan
–Senate Finance Chief Expected To Release His Plan This Week

By John Shaw

WASHINGTON (MNI) – Sen. Charles Schumer, the third ranking Senate
Democrat, said Wednesday that Democrats have not yet settled in on their
strategy for pushing middle class tax cuts this fall.

Speaking to reporters at a press conference on campaign finance
issues, Schumer was careful and evasive when pressed to describe
Democratic plans related to extending portions of the 2001 and 2003 tax
cuts.

“That’s being discussed,” Schumer said when asked if a tax cut vote
is likely to occur next week in the Senate.

When another question was posed to Schumer, he said “ask Leader
Reid,” referring to the Senate Majority Leader Harry Reid.

Reid has said he expects a tax cut vote before Congress leaves to
campaign for the Nov. 2 mid-term elections.

There are growing signs that both the House and Senate may end
their fall sessions at the end of next week, returning to Washington
after the elections for a Lame Duck session of uncertain length.

Senate Finance Committee Chairman Max Baucus is expected to unveil
his tax cut plan as early as Thursday.

Baucus’s plan is expected to extend tax cuts for individuals making
up to $200,000 and couples earning up to $250,000. It may also extend
the expired estate tax.

Baucus has said he would like the Senate to vote on the plan soon.
“We have to vote before the election to show people where we are. It’s
the right thing to do,” Baucus said earlier this week.

House Democratic leaders have said they will wait for the Senate to
act before deciding on how they to deal with the tax cut issue.

But all signs point to a symbolic battle over taxes on the Senate
floor next week.

Senate Minority Leader Mitch McConnell has indicated he would like
a far reaching debate on tax issues with votes on a number of
amendments. This could not occur over a week. Many relatively minor tax
bills often take weeks in the Senate, so it is highly unlikely the issue
could be resolved in a week.

It seems quite likely that Senate Democratic leaders next week will
make a motion to pass the middle class portion of the Bush tax cuts and
that McConnell will object.

Then McConnell is likely to make a counter motion, calling for
passage of the entire array of Bush era tax cuts which Reid would object
to.

Under this scenario, the tax debate would end in a stalemate this
fall and be resolved after the elections.

The Obama administration and congressional Democrats have
repeatedly said that tax cuts for individuals making up to $200,000 and
couples earning up to $250,000 should be extended.

Congressional Republican leaders have supported extending all of
the 2001 and 2003 tax cuts.

** Market News International Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

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September 22nd, 2010 17:25:18 GMT

Germany’s Schaeuble: Won’t Agree To Prolong EFSF Beyond 2013

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BERLIN (MNI) – Germany’s Finance Minister Wolfgang Schaeuble
Wednesday reaffirmed that Germany will oppose any attempt to prolong the
European Financial Stability Facility (EFSF) beyond 2013.

“Anyone who believes that the EFSF will be prolonged beyond three
years is putting our trustworthiness at risk,” Schaeuble said in a
speech here. “We cannot do that.”

Rather, the time between now and 2013 needs to be used “to create
better solutions for the euro,” the Minister said. “Otherwise, it will
be difficult to defend the stability of the euro,” he warned.

The E440 billion EFSF was created earlier this year by EU leaders
to mollify markets at the height of the Eurozone’s sovereign debt
crisis. It would provide emergency loans to EMU states that get into
financial trouble and have no other recourse. Along with a pre-existing
fund of E60 billion and another E250 billion pledged by the
International Monetary Fund, the total available for that purpose would
be E750 billion.

But Klaus Regling, who heads the EFSF, has said recently — no
doubt to reassure edgy markets — that he does not expect the fund ever
to be tapped.

Schaeuble again called for a stiffening of the EU Stability and
Growth Pact, which will also require altering the EU Treaties, he
argued. Reforms are needed to counter moral hazard risks, he said. “In
future crisis, the creditors need take part in the solutions,” he
demanded.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

[TOPICS: MT$$$$,M$G$$$,M$X$$$,MGX$$$,MFX$$$]

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