Stephen Stanley, chief economist at Pierpont Securities LLC, has derided the Federal Reserve for downplaying improvement in the U.S. economy. Yet his 2.6 percent forecast for growth this year is below the midpoint in the central bank
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Treasuries pared losses as German and French finance ministers meet before a summit of regional leaders to discuss ways to contain the European debt crisis, stoking demand for government debt.
U.S. 10-year yields rose earlier on speculation record-low yields may limit demand as the government auctions $99 billion of coupon-bearing debt this week starting tomorrow. The U.S. will start this week
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Spain managed to auction nearly (EURO)2.5 billion ($3.18 billion) in medium-term debt amid strong demand but at sharply higher interest rates reflecting concerns that the country will be caught up in the fallout of the Greek crisis.
The Treasury sold three kinds of notes Thursday, two maturing in 2015 and one in 2016. Of them only one was strictly comparable to previous sales and the interest rate, or yield, on that three-year bond went up to 4.87 percent, from 4 fast payday loan no faxing.04 percent on May 3.
On the secondary market, the interest rate on Spanish 10-year bonds stood at 6.28 percent. The spread _ the difference between it and the yield on safe-haven German bunds _ was 481 basis points.
Spain’s Ibex 35 stock index was virtually unchanged in early trading.
Investors are getting increasingly worried about whether Greece will remain in the eurozone. And they should.
There are a series of upcoming events that could spell the end of a deal, put in place nearly three months ago, to restructure Greece’s debt under strict terms dictated by the European Union, International Monetary Fund and European Central Bank, known as the troika.
"The threat from Greece remains real, and Greece exiting the euro area would likely have contagion effects that cannot easily be addressed in the current set-up," said Bank of America Merrill Lynch analysts in a note Monday. "The next weeks are crucial."
Greece has been struggling under a mountain of debt, as it tries to push through unpopular austerity measures and get its economy on solid footing. Without a cohesive government, that battle just got tougher.
Here’s what next in the Greek political drama, and what it could mean for the rest of Europe and the global economy.
Where do things stand after last week’s national elections? There is still no party that has been able to form a new government. The two parties from the previous ruling coalition that supported austerity and the debt deal, New Democracy and Pasok, only have 149 seats between them and 151 are needed.
So far, none of the other parties are willing to join them, given Greek voters’ anger over the harsh austerity measures.
If Greek President Karolos Papoulias is not able to bring together a new ruling coalition by Thursday, he is expected to call for another round of voting, likely in mid-June.
What is likely to happen if new elections are held in June? Recent polls and various experts seem to agree that the Coalition of the Radical Left, also known as Syriza, would be the top vote getter in the next round. Syriza has gained solid support since finishing second in last week’s round of voting.
If it can form a majority coalition with other anti-austerity parties, that would leave Greece with a government opposed to the earlier deals made with the EU, IMF and ECB, which has to approve funds for Greece that would allow the government to pay its bills and make its bond payments.
Whether the June election result would lead to a disorderly default and a Greek exit from the euro is far less clear.
"Even Syriza is not really interested in getting out of the euro. Their primary focus is to renegotiate the bailout package," said Dimitri Papadimitriou, economics professor and expert on Greece from Bard College.
But without financial support from the so-called troika, it will be tough for Greece to meet its financial obligations.
Can Greece stop paying its bills and still stay in the eurozone? That is the biggest unknown, and probably the biggest worry for markets.
Elisabeth Afseth, fixed income analyst for Investec Bank in London, said if Greece stops paying its bills, that will mean the end of the funding it so desperately needs. If that happens, it won’t have much choice but to start issuing its own currency to pay its ongoing bills.
How Greece can stay in eurozone
But Papadimitriou said that other European leaders are also loath to have Greece exit the euro, due to the shock it might cause for the continent’s already-fragile financial system 100% free credit score. Therefore, he said, it is possible, albeit unlikely, that there could be yet another new deal even if Greece stops paying what it owes.
"I would expect the European finance ministers’ meeting to have intense discussions this week," he said. "The best case for keeping Greece within the euro would be for the rest of Europe to be proactive in trying to come up with a renegotiated deal suitable for all parties. But I’m not optimistic."
What’s the best case scenario for Greece leaving the euro? In the best case, the ECB steps in and contains the so-called contagion effect.
While the central bank’s drumbeat has been to not be the lender of last resort, it has also made it clear that it would do everything in its power to keep the crisis from spreading.
Greek euro exit won’t mean tragedy
A dozen European countries are already in recession but thanks to Germany’s surprise growht, the entire EU and eurozone managed to stave off recession in the first quarter.
Even in this best case scenario, one in which measures to prop up the non-Greek sovereign debt work, the austerity measures needed to pay for them would send the remaining countries of the eurozone and EU into an even deeper, more prolonged downturn.
Yields could soar on government debt for Portugal and Ireland, let alone much larger economies like Spain and Italy, vastly increasing the costs for the remaining European governments that are paying for various bailouts.
That would also weigh on the already slowing growth in both the United States and Asia.
How bad could things get? Things could be worse than that — far worse.
"I don’t think anyone at the present time can quantify the contagion effect of a disorderly exit of Greece from the eurozone," said Papadimitriou. "No one can predict the markets. They have a mind of their own.
In a worst-case scenario, the Greek exit prompts other countries to leave the euro, as voters there follow Greek voters’ lead and rebel against austerity measures.
"As it stands now, there’s no precedence for leaving," said Afseth. "If Greece leaves, all of sudden there is precedent."
If larger countries follow Greece out of eurozone, it could cause a meltdown in the European banking sector, which holds billions of euros of sovereign debt of the other troubled economies, as well as private sector loans to consumers.
In turn, businesses in those countries would be unable to pay given their suddenly devalued currency.
While U.S. authorities have said U.S. banks have relatively limited exposure to European sovereign debt, the major banks here do have exposure to the European banking system, so a meltdown in European markets would be felt in the United States and around the globe.
Asian shares edged higher Monday due to optimism about the regional economy after a move by China’s central bank over the weekend to encourage lending and curtail a slowdown.
Japan’s Nikkei 225 index gained 0.2 percent to 8,974.69 and Australia’s S&P/ASX 200 added 0.2 percent to 4,292.70. Benchmarks in Singapore and New Zealand also rose.
But South Korea’s Kospi fell 0.6 percent at 1,906.60 and Hong Kong’s Hang Seng Index slipped 0.1 percent at 19,942.64.
The People’s Bank of China announced the bank reserve ratio requirement is being reduced a half percentage point as of next Friday.
The move brings the rate down to 20 percent for most major banks and effectively frees up billions of dollars for lending.
But the regional market remains nervous about political uncertainty in crisis-struck Greece.
Wall Street ended last week with a decline after JPMorgan said it lost $2 billion on poorly-thought-out trades. The Dow Jones industrial average fell 0.3 percent Friday to 12,820.60.
In currencies, the euro dipped slightly at $1.2890 while the dollar was little changed at 80.08 Japanese yen.
The European Commission has called on EU nations to stick to their promised budget cuts despite voter discontent in France and Greece, but promised new efforts to boost growth to alleviate economic hardship.
EU President Herman Van Rompuy also called for an impromptu informal summit of the 27 EU government leaders on May 23 to discuss economic growth and to prepare for a summit in June focused on job-boosting measures.
In elections on Sunday, voters in France and Greece gave strong support to parties who want to roll back or slow down the spending cuts and tax increases that have defined Europe’s response to its debt crisis.
A court in Germany ruled Wednesday that Microsoft infringed two patents held by Motorola, in a case that could affect sales of its popular Xbox 360 console and the Windows 7 operating system.
The patent spat between the two companies centers on technology used for video compression that is owned by Motorola Mobility Holdings Inc., which Google is in the process of buying for $12.5 billion.
Following earlier complaints from Microsoft and Apple Corp., the European Union’s competition watchdog has opened two separate probes into whether Motorola unfairly limited rivals from using its patents by demanding exorbitant fees.
In Wednesday’s ruling, the state court in the southern city of Mannheim upheld Motorola’s complaint on the patent breaches and declared Microsoft Corp. liable for unspecified damages.
The court also ordered Microsoft to remove all products that infringe the patents from the German market, including its Xbox 360 console and the Windows 7 operating system.
But both parties have seven days to appeal before the verdict comes into force, and Microsoft spokesman Thomas Baumgaertner said the company plans to do so. Should Motorola want the verdict enforced before a final appeals ruling is issued, it would have to deposit several tens of millions of euros (dollars) as a legal security, the court said.
A U.S. court meanwhile has warned Motorola not to enforce the German verdict until it too has considered the patent issue.
“At the moment, there is no risk that we will be ordered to halt sales,” Baumgaertner said.
He said Microsoft hoped the German court’s ruling could open the way for a fairer licensing deal with Motorola.
Motorola issued a statement welcoming the verdict.
“We remain open to resolving this matter,” said the company. “Fair compensation is all that we have been seeking for our intellectual property.”
Delinquent taxes paid by Roberts brothers • Michael and Steven Roberts bought a little breathing room for their beleaguered Roberts Mayfair Hotel on Monday. Roberts Hospitality Services paid off delinquent state sales taxes on the Mayfair, and $15,000 toward a sales tax bond, according an order issued by Circuit Judge Joan Moriarty in a lawsuit filed by the Missouri Department of Revenue. The state last month sued to close two Roberts hotels — the Mayfair and their Comfort Inn in the Central West End — over $212,000 in unpaid taxes. The state is seeking a larger bond on the Mayfair. Taxes on the Comfort Inn are still outstanding. (Tim Logan)
Bakers Footwear sales drop • A company executive for St. Louis-based Bakers Footwear Group Inc. blamed a drop in sales and profit in the fiscal fourth quarter in part on a “difficult dress boot season.” Net income was $3.4 million, or 36 cents a share, in the quarter ended Jan. 28, compared with $5.2 million, or 54 cents a share, in the same period a year ago. Net sales dropped 8 percent, to $53.6 million. (Kavita Kumar)
Reliance posts a profit • Reliance Bancshares Inc no teletrack payday loan. swung to a profit in the first quarter, boosted by a $2.5 million gain from the sales of investment securities. The bank holding company posted a net income of $719,000, compared with a loss of $5.2 million a year earlier. Frontenac-based Reliance is the holding company for Reliance Bank, which has 20 local branches. (Gregory Cancelada)
Reinsurance Group adjusts accounting • Reinsurance Group of America reported first quarter income of $123.3 million, or $1.67 per share, compared with $148.9 million, or $2.02 per share, in the corresponding period last year. The company said amounts for last year were adjusted for the retrospective adoption of new accounting guidance for deferred acquisition costs. Consolidated net premiums rose 7 percent, to $1.86 billion, from $1.74 billion. Reinsurance Group, based in Chesterfield, is among the largest global providers of life reinsurance. (Tim Bryant)
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European policy makers were urged to be tougher and more agile in their efforts to end two years of debt turmoil as the International Monetary Fund won more than $430 billion to safeguard the world economy.
IMF Managing Director Christine Lagarde
The yen fell against most of its major counterparts as Bank of Japan (8301) officials signaled they
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