Euro, U.S. Futures Climb on Greek Deal

By Lynn Thomasson - Feb 13, 2012 7:36 AM GMT+0700

The euro, U.S. equity index futures and oil advanced after Greek Prime Minister Lucas Papademos won parliamentary approval for austerity measures to secure funds.

The euro rose 0.3 percent to $1.3236 as of 9:25 a.m. in Tokyo. Standard & Poor’s 500 Index futures added 0.4 percent, while the MSCI Asia Pacific Index climbed 0.2 percent. Oil climbed 0.7 percent to $99.31 a barrel. The Australian dollar strengthened 0.3 percent, while the U.S. currency slid versus 13 of its 16 most-traded counterparts.

At least 151 members of Greece’s parliament voted for the austerity plan, according to a tally that is being televised live on state-run Vouli TV. Police battled rioters in Athens protesting the measures. Euro-area finance ministers had refused to approve a 130 billion-euro ($173 billion) rescue package until Greece approved the measures, such as a 22 percent reduction in the minimum wage, smaller pensions and immediate job cuts for as many as 15,000 state workers.

The Nikkei 225 Stock Average increased 0.5 percent. Japan’s gross domestic product shrank an annualized 2.3 percent in the three months ended Dec. 31, following a revised 7 percent expansion in the previous quarter. The median forecast of 26 economists surveyed by Bloomberg News was for a 1.3 percent decline.

‘Fine Tuning’

Chinese shares may be active after Premier Wen Jiabao said the nation should start “fine-tuning” economic policies as early as the first quarter, according to Xinhua News Agency. Economic conditions in January and the first quarter deserve attention, Wen told business executives last week in Beijing, the official news agency reported yesterday.

More than 50 companies in the S&P 500 are scheduled to report results this week, data compiled by Bloomberg show, including Deere & Co. and Comcast Corp. Per-share profits have topped analyst estimates at 70 percent of the 331 companies that released results since Jan. 9, data compiled by Bloomberg show. Earnings-per-share have increased 3.9 percent for the group on 7 percent sales growth.

The S&P 500 ended last week down 0.2 percent at 1,342.64. The index is still up 6.8 percent this year, the best annual start since 1991.

To contact the reporter on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

Read more...

U.S. Would Block Iran From Mining Hormuz Strait, Commander Says

By Tony Capaccio - Feb 13, 2012 2:28 AM GMT+0700

The U.S. Navy would move to stop any Iranian attempt to lay mines in the Strait of Hormuz or Persian Gulf as an “act of war” the international community wouldn’t tolerate, the U.S. Navy’s top Gulf commander said.

Iran’s inventory of thousands of mines “represents an indiscriminate and very difficult maritime problem,” comparable to the improvised roadside bombs used in Iraq and Afghanistan to kill U.S. troops, Vice Admiral Mark Fox, commander of the U.S. 5th Fleet, told reporters at his Bahrain headquarters and on a conference call today.

Iran’s Vice President Mohammad Reza Rahimi said on Dec. 27 that his nation may close the Strait, the passageway for about one-fifth of globally traded oil, if the U.S. and its allies impose stricter economic sanctions in an effort to halt his country’s nuclear research. U.S. officials, including Pentagon spokesman George Little, have said since that threat that they haven’t seen any Iranian moves to close the waterway.

“The laying of mines in international waters is an act of war,” Fox said today. “We would, under the direction of the national leadership, prevent that from happening. We always have the right and obligation of self-defense and this falls in ‘self-defense.’

‘‘If we did nothing and allowed some’’ mining, ‘‘it would be a long and difficult process to clear them,’’ Fox said.

While Iran says its nuclear program is for civilian use, the U.S. and allies say the country may move to develop nuclear weapons.

Iranian’s Vow

Iran’s Foreign Minister Ali Akbar Salehi told reporters in Tehran yesterday that his country won’t ever cede to international pressure. President Mahmoud Ahmadinejad said he will disclose ‘‘major nuclear accomplishments” in coming days, according to the state-run Press TV news channel.

“The Iranians have every bit as much right to operate in international waters as we do,” Fox said, and “we are very keen on not trying to over-pressurize the situation.”

The Iranian Revolutionary Guard Corps that controls Persian Gulf operations is “capable of striking a blow, I don’t deny that,” Fox said. “The guidance I give the commanding officers of my ships is that ‘you have a right and obligation of self- defense.’ ”

Still, “the oil always flowed,” even in periods of instability such as the “Tanker War” in the 1980s, when ships were attacked and damaged, he said.

Mine-Sweeping Ships

The U.S. has four Avenger-class mine-sweeping ships in the Gulf -- the USS Ardent, USS Dextrous, USS Gladiator and USS Scout. The U.K.’s Royal Navy has another four vessels -- the HMS Pembroke, HMS Middleton, HMS Quorn and HMS Ramsey, according to the U.S. 5th Fleet in Bahrain.

Mines in the Strait could prompt insurance companies to raise rates on tankers utilizing the waterway, which in turn could lead at least temporarily to higher oil prices.

U.S. officials who follow Iran for the U.S. Central Command estimated in 2008 that Iran possessed as many as 5,000 mines. That compares with 1,000 mines in the 1980s during its conflict with Iraq and the Tanker War.

These include moored mines such as a variant that damaged a frigate, the USS Samuel Roberts, in April 1988 during the Operation Earnest Will escort of Kuwaiti and Saudi tankers.

The inventory also includes as many as 600 advanced mines bought from Russia, such as the MDM-3, which can be dropped from an aircraft. These “influence mines” can be programmed to detonate based on a ship’s acoustic signature.

Caught ‘Red-Handed’

The Navy would detect signs of Iranian mine-laying through surveillance aircraft and sensors, Fox said.

During the Tanker War “we caught some guys red-handed and we stopped them,” he said.

Iran was assessed by U.S. officials in 2008 as having a substantial inventory of mines that could be laid by three Russian-built Kilo-class diesel submarines it bought in the 1990s. In the past 18 months, Iran also increased its inventory of smaller, domestically made Yono-class submarines to more than 10 from 5 previously, Fox said.

The subs are similar to the vessel the U.S. assessed as having sunk the South Korean corvette Cheonan in March 2010, Fox said.

The Yono class is a “lethal but not very capable submarine, he said. ‘‘It doesn’t go very far. It can’t stay submerged very long, but the geography of the Strait of Hormuz is certainly in their favor,” Fox said of the narrow waterway.

The Office of Naval Intelligence also says the Yono-class subs may be used to deploy scuba divers.

Iran has increased the number of small, fast patrol aircraft, some of which have been outfitted with a large warhead for a suicide run at U.S. vessels, Fox said.

It also has boosted the number of coastal-defense cruise missiles along the Strait and invested to make them mobile.

“They have a capability, and we take that capability very seriously and are prepared for it,” Fox said.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

Read more...

Greek Parliament Backs Austerity as Riots Continue

By Maria Petrakis, Natalie Weeks and Marcus Bensasson - Feb 13, 2012 7:31 AM GMT+0700

Greek Prime Minister Lucas Papademos won parliamentary approval for austerity measures to secure an international bailout after rioters protesting the measures battled police and set fire to buildings in downtown Athens.

A total of 199 lawmakers voted in favor and 74 against, Parliament Speaker Filippos Petsalnikos said in remarks carried live on state-run Vouli TV. When, on Nov. 16, Papademos won a mandate from the Parliament to implement budget measures and secure the bailout of 130 billion euros ($172 billion) he received the support of 255 lawmakers in the 300-strong chamber.

“It is up to us, our vote, whether the country will remain in the euro or be led to a disorderly default,” Papademos told parliament. “Voting for the economic program and opening the road for a loan accord sets the basis for the modernization and recovery of the economy.”

Passage of the austerity bill puts the spotlight on a meeting of euro-region finance ministers on Feb. 15 that must decide whether to approve the second aid package. Resolution of the negotiations, which started in July, would help contain the threat that speculators will target debt-saddled nations, including Italy and Portugal.

Emergency euro-region talks on Greece broke up on Feb. 9, with Luxembourg Prime Minister Jean-Claude Juncker saying the Greek government must turn budget cuts into law, flesh out 325 million euros in reductions and have major party leaders sign up to the program so they don’t retreat after Greek elections, probably in April.

Euro, Stocks Rise

The euro rose 0.3 percent to $1.3239 as of 7:58 a.m. in Tokyo from last week in New York. Australia’s S&P/ASX 200 Index rose as much as 0.4 percent in early Sydney trading today, climbing for the first time in three sessions, while futures on the Standard & Poor’s 500 Index advanced 0.4 percent, rebounding from a 0.6 percent selloff on Feb. 10.

European finance ministers and private creditors this week will decide on a plan to shepherd Greece through a 14.5 billion- euro bond payment bond payment next month. Still, German Finance Minister Wolfgang Schaeuble told German lawmakers on Feb. 10 that Greece was set to miss deficit goals, suggesting that the measures may fall short.

Erik F. Nielsen, UniCredit’s chief global economist, said in a note yesterday that he keeps hearing investors say a Greek exit from the euro would be “better for all parties.”

“I am very confident that a Greek exit would be a disaster for Greek society,” Nielsen said. “For the rest of Europe I don’t think it’ll matter much (if at all) in the longer term, but I fear that a lot of people may be underestimating the short term risks to Europe of a Greek collapse.”

Arson Attacks

Ten buildings were set ablaze in central Athens by anti- austerity protesters including a Starbucks Corp. (SBUX) cafe and a bank, a fire department spokesman said, speaking on the condition of anonymity in line with official policy. The fires were near a bank that was set on fire in May 2010, killing three employees during a general strike against Greece’s first bailout package.

Demonstrators tore up marble in front of parliament that they hurled with fire-bombs at police guarding the chamber. Officers in riot gear responded with tear-gas and flash grenades. Fifty officers were injured in the violence, police spokesman Takis Papapetropoulos said by telephone. The Greek Health Ministry said in an e-mailed statement that 70 people had been taken to local hospitals. Police said 45 rioters had been arrested.

“Vandalism, violence and repression have no place in democracy and won’t be tolerated,” Papademos told lawmakers before the vote. “In such critical times we have no luxuries for such conflict.”

The measures equal about 7 percent of gross domestic product over three years and include a debt swap that would shave 100 billion euros off more than 200 billion euros of privately held debt.

Greece was granted its first aid package of 110 billion euros in May 2010.

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

Read more...

Euro Gains After Greek Parliament Approves Austerity Measures for Bailout

By Candice Zachariahs and Kristine Aquino - Feb 13, 2012 7:44 AM GMT+0700

The euro strengthened after Greek Prime Minister Lucas Papademos won approval from parliament for austerity measures to secure a second package of aid from the European Union and International Monetary Fund.

The 17-nation currency rose against most major peers after Parliament Speaker Filippos Petsalnikos said in remarks carried on state-run Vouli TV that a total of 199 lawmakers voted in favor of the measure. The dollar slid versus 12 of its 16 most- traded counterparts before data tomorrow forecast to show U.S. retail sales rose in January by the most in four months. The yen fell against the greenback after a report showed Japan’s economy contracted last quarter by more than economists had predicted.

The Greek vote “takes some of the downside out of euro for the short-term,” said Sacha Tihanyi, Hong Kong-based senior currency strategist at Scotiabank, a unit of Bank of Nova Scotia. “It certainly was helpful and positive for the currency. It probably induced some short-covering.” A short position is a bet that an asset will decline in value.

The euro rose 0.4 percent to $1.3247 as of 9:07 a.m. in Tokyo from last week in New York. The common currency gained 0.5 percent to 102.92 yen. The yen fell 0.1 percent to 77.70 per dollar.

Greece’s Finance Minister Evangelos Venizelos told lawmakers before the vote to secure a 130 billion-euro ($172 billion) second aid package that “we must show that Greeks, when they are called on to choose between the bad and the worst, choose the bad to avoid the worst.”

U.S. Retail Sales

With only weeks remaining before the country faces a 14.5 billion-euro bond payment, George Papandreou and Antonis Samaras, the leaders of the two largest parliamentary parties, urged support for the bill. Lawmakers, with an eye on elections as early as April, bristled at measures such as a 22 percent reduction in the minimum wage, smaller pensions and immediate job cuts. Seventy-four lawmakers voted against the measure.

Greece was granted its first aid package of 110 billion euros in May 2010.

The euro has gained 0.6 percent over the past week, the third best performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen dropped 2 percent, the worst return, while the dollar has lost 0.3 percent over the same period.

The U.S. currency extended declines against its major peers before Commerce Department figures projected to show a 0.8 percent gain in retail receipts, following a 0.1 percent advance in December, according to the median forecast of 65 economists surveyed by Bloomberg News.

“Economists have underestimated the upside to the U.S. retail report,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “It’s probably likely to weaken the U.S. dollar.”

Japan’s economy contracted at an annual 2.3 percent pace in the three months ended Dec. 31, the Cabinet Office said today. The median forecast of economists surveyed by Bloomberg was for a 1.3 percent decline.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

Read more...

German Leaders Maintain Pressure as Greek Parliament Debates Budget Cuts

By Patrick Donahue and Rainer Buergin - Feb 13, 2012 12:39 AM GMT+0700

German leaders kept up pressure on Greece as the struggling euro member moved closer to approving an austerity package designed to stave off economic collapse.

German Economy Minister Philipp Roesler said the lower house of parliament in Berlin could put off a vote for Greek financing this month if the government in Athens and opposition parties fail to approve measures today. Greece has to show that “it’s worth it” to call a meeting, Roesler told ARD public television. Finance Minister Wolfgang Schaeuble told newspaper Welt am Sonntag that Greece “will be saved in one way or another,” though the government has to do its “homework.”

As Greek lawmakers are today debating austerity measures to win approval for a loan, European finance ministers and private creditors this week will decide on a plan to shepherd Greece through a bond sale next month. Still, Schaeuble told German lawmakers on Feb. 10 that Greece was missing deficit goals, suggesting that the measures may fall short in rescuing Greece.

“I’m really wondering now whether so much damage has been done that this marriage no longer can be rescued,” Erik Nielsen, chief global economist at UniCredit SpA in London, wrote today in a note to clients. He predicted that the measures would be approved and that Greece will be able to make a 14.5 billion-euro ($19 billion) bond payment on March 20.

Budget Into Law

European finance ministers ended a meeting last week with Luxembourg’s Jean-Claude Juncker saying Greece must turn budget cuts into law, flesh out 325 million euros in reductions and have major party leaders sign up to the program so they don’t retreat after elections. Another extraordinary meeting is set for Feb. 15, where ministers must approve the Greek accord.

Chancellor Angela Merkel plans to ask lawmakers to vote on the next bailout on Feb. 27 if Greece approves the measures. Schaeuble told legislators that current plans would leave Greece’s debt as high as 136 percent of GDP by 2020, according to two people in the meeting. That compares with the 120 percent foreseen in the second bailout, down from about 160 percent of GDP last year.

Schaeuble was briefing on estimates from the European Commission, European Central Bank and International Monetary Fund -- known as the troika.

Send a Message

Greek Finance Minister Evangelos Venizelos today clashed with lawmakers, saying that “today at midnight, before the markets open, the Greek Parliament must send a message,” after Greek party leaders yesterday urged lawmakers to back the measure to secure the 130 billion-euro package and avoid a disorderly default. Venizelos has said the vote is tantamount to a decision on whether to remain in the euro area.

Before the final debate started, Prime Minister Lucas Papademos appealed to Greeks last night to support new measures, which include a 22 percent reduction in the minimum wage, smaller pensions and immediate job cuts for as many as 15,000 state workers.

“We are looking the Greek people straight in the eye with full knowledge of our historical responsibility,” he said in a televised address. “The social costs that come with these measures are contained in comparison to the economic and social catastrophe that will follow if we don’t adopt them.”

Bad Scenario

Greece has stumbled over the last two years in meeting reform targets in return for aid, citing a deepening recession now set to worsen. Unemployment climbed to 20.9 percent in November, as industrial production falls.

Joachim Fels, chief economist at Morgan Stanley, in a note to clients today repeated his assessment that policy makers shouldn’t rule out the “really, really bad scenario” of Greece leaving the monetary union.

Bondholders met separately in Paris on Feb. 9 to discuss accepting a debt swap for new 30-year bonds with an average coupon of as low as 3.6 percent. An agreement would slice 100 billion euros off more than 200 billion euros of privately held debt. Venizelos said the country needs to make a formal offer to private bondholders for a debt swap by Feb. 17.

To contact the reporter on this story: Patrick Donahue in Berlin at at pdonahue1@bloomberg.net, and Rainer Buergin in Berlin at at rbuergin1@bloomberg.net.

Read more...

German Leaders Maintain Pressure as Greek Parliament Debates Budget Cuts

By Patrick Donahue and Rainer Buergin - Feb 13, 2012 12:39 AM GMT+0700

German leaders kept up pressure on Greece as the struggling euro member moved closer to approving an austerity package designed to stave off economic collapse.

German Economy Minister Philipp Roesler said the lower house of parliament in Berlin could put off a vote for Greek financing this month if the government in Athens and opposition parties fail to approve measures today. Greece has to show that “it’s worth it” to call a meeting, Roesler told ARD public television. Finance Minister Wolfgang Schaeuble told newspaper Welt am Sonntag that Greece “will be saved in one way or another,” though the government has to do its “homework.”

As Greek lawmakers are today debating austerity measures to win approval for a loan, European finance ministers and private creditors this week will decide on a plan to shepherd Greece through a bond sale next month. Still, Schaeuble told German lawmakers on Feb. 10 that Greece was missing deficit goals, suggesting that the measures may fall short in rescuing Greece.

“I’m really wondering now whether so much damage has been done that this marriage no longer can be rescued,” Erik Nielsen, chief global economist at UniCredit SpA in London, wrote today in a note to clients. He predicted that the measures would be approved and that Greece will be able to make a 14.5 billion-euro ($19 billion) bond payment on March 20.

Budget Into Law

European finance ministers ended a meeting last week with Luxembourg’s Jean-Claude Juncker saying Greece must turn budget cuts into law, flesh out 325 million euros in reductions and have major party leaders sign up to the program so they don’t retreat after elections. Another extraordinary meeting is set for Feb. 15, where ministers must approve the Greek accord.

Chancellor Angela Merkel plans to ask lawmakers to vote on the next bailout on Feb. 27 if Greece approves the measures. Schaeuble told legislators that current plans would leave Greece’s debt as high as 136 percent of GDP by 2020, according to two people in the meeting. That compares with the 120 percent foreseen in the second bailout, down from about 160 percent of GDP last year.

Schaeuble was briefing on estimates from the European Commission, European Central Bank and International Monetary Fund -- known as the troika.

Send a Message

Greek Finance Minister Evangelos Venizelos today clashed with lawmakers, saying that “today at midnight, before the markets open, the Greek Parliament must send a message,” after Greek party leaders yesterday urged lawmakers to back the measure to secure the 130 billion-euro package and avoid a disorderly default. Venizelos has said the vote is tantamount to a decision on whether to remain in the euro area.

Before the final debate started, Prime Minister Lucas Papademos appealed to Greeks last night to support new measures, which include a 22 percent reduction in the minimum wage, smaller pensions and immediate job cuts for as many as 15,000 state workers.

“We are looking the Greek people straight in the eye with full knowledge of our historical responsibility,” he said in a televised address. “The social costs that come with these measures are contained in comparison to the economic and social catastrophe that will follow if we don’t adopt them.”

Bad Scenario

Greece has stumbled over the last two years in meeting reform targets in return for aid, citing a deepening recession now set to worsen. Unemployment climbed to 20.9 percent in November, as industrial production falls.

Joachim Fels, chief economist at Morgan Stanley, in a note to clients today repeated his assessment that policy makers shouldn’t rule out the “really, really bad scenario” of Greece leaving the monetary union.

Bondholders met separately in Paris on Feb. 9 to discuss accepting a debt swap for new 30-year bonds with an average coupon of as low as 3.6 percent. An agreement would slice 100 billion euros off more than 200 billion euros of privately held debt. Venizelos said the country needs to make a formal offer to private bondholders for a debt swap by Feb. 17.

To contact the reporter on this story: Patrick Donahue in Berlin at at pdonahue1@bloomberg.net, and Rainer Buergin in Berlin at at rbuergin1@bloomberg.net.

Read more...