Economic Calendar

Thursday, May 31, 2012

EU Weighs Direct Aid to Banks as Antidote to Crisis

By James G. Neuger - May 31, 2012 5:00 AM GMT+0700

The European Commission challenged Germany’s remedies for the financial crisis, calling for direct euro-area aid for troubled banks and demanding a path to common bond issuance.

The commission, the European Union’s central regulator, sided with Spain in proposing that the planned permanent rescue fund, the European Stability Mechanism, inject cash to banks instead of channeling the money via national governments.

Spain, the 17-nation euro area’s fourth-largest economy, is trying to simultaneously plug holes in regional budgets and detoxify its banks, all while struggling to lift the economy out of a recession. Photographer: Angel Navarrete/Bloomberg

May 30 (Bloomberg) -- European Commission President Jose Barroso speaks about the need for closer financial integration among member states. Economic and Monetary Affairs Commissioner Olli Rehn discusses Spain's deficit-cutting timetable. They speak at a news conference in Brussels. (Excerpts. Source: Europe by Satellite)

May 30 (Bloomberg) -- Bloomberg's Erik Schatzker reports that the European Commission called for direct euro-area aid for troubled banks and touted common bond issuance as an antidote to the debt crisis now threatening to overwhelm Spain. He speaks on Bloomberg Television's "Inside Track." (Source: Bloomberg)

May 30 (Bloomberg) -- Bryan Marsal, co-founder of Alvarez & Marsal Inc., talks about the outlook for the U.S. banking industry and implementation of the Dodd-Frank Act. Marsal, speaking with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "InsideTrack," also discusses his tenure as Chief Executive Officer of Lehman Brothers Holdings Inc. and the European debt crisis. (Source: Bloomberg)

May 30 (Bloomberg) -- Luke Spajic, head of European credit portfolio management at Pacific Investment Management Co., talks about the role of the European Central Bank in stemming the sovereign debt crisis, Greece's euro prospects and his investment strategy. He speaks with Caroline Hyde on Bloomberg Television's "The Pulse." (Source: Bloomberg)

May 30 (Bloomberg) -- Simon Derrick, chief currency strategist at Bank of New York Mellon Corp., discusses the euro, yen and dollar. He speaks with Owen Thomas on Bloomberg Television's "First Look." (Source: Bloomberg)

“Flexibility and speed of action will be of the essence,” Jose Barroso, the commission’s president, said in Brussels yesterday. He sought “not only flexibility in terms of instruments, but also in terms of speed of reaction of the so- called firewalls, in this case of the ESM.”

Proposals for more liberal use of European bailout money face resistance in creditor countries such as Germany, Finland and the Netherlands, the scenes of growing taxpayer opposition to adding to the 386 billion euros ($479 billion) already pledged to fight the crisis.

Germany showed no signs of easing its stance, as Steffen Seibert, Chancellor Angela Merkel’s chief spokesman, told reporters in Berlin that “the German position on the direct recapitalization of banks out of the European rescue funds is known.”

Signs of stress multiplied in financial markets. Investors relinquished returns for security, sending the yield on German two-year notes to zero. Italy’s 10-year yield rose above 6 percent for the first time since January and Spain’s 10-year yields approached 7 percent.

The euro tumbled to as low as $1.2386, the lowest in almost two years.

Bank Aid

The commission packaged the bank-aid ideas along with a call for a European deposit-insurance program, designed to break the spiral of faltering governments and failing banks. It said it will make concrete proposals for common bond issuance -- also opposed by northern European donor countries -- and singled Spain out as the only country entitled to more time to cut its budget deficit.

Spain, the 17-nation euro area’s fourth-largest economy, is trying to simultaneously plug holes in regional budgets and detoxify its banks, all while struggling to lift the economy out of a recession.

‘Sever the Link’

Current EU plans call for the 500 billion-euro ESM to funnel bank-aid money through national governments and, ultimately, require those governments to pay it back. Direct recapitalizations by the fund “might be envisaged” and would “sever the link between banks and the sovereigns,” the commission said in a staff working paper.

Any discussion of creating that power would come once the permanent fund gets going in July, the commission said. A makeover of the fund’s aid tools requires a unanimous vote of the euro area’s 17 finance ministers, though ratification by national parliaments wouldn’t be needed.

Germany is spearheading resistance to direct European financing for banks because that would let governments bypass the conditions set for full aid programs, such as deeper budget cuts and more European intrusion into economic management. Finland is in Germany’s camp, Martti Salmi, a Finance Ministry official, said in a telephone interview.

Banking Union

The commission appealed for a “banking union” that would more tightly integrate supervision and create a pool of European funds to clean up banks with cross-border exposure and segregate their underperforming assets.

“It’s hard enough to bail out local banks let alone non- domestic banks,” said Harvinder Sian, a London-based fixed- income strategist at Royal Bank of Scotland Group Plc. (RBS) “A crisis lesson so far is that big ideas coming from Brussels or the guys taking the money are noise up until the point that the Germans get on the same page.”

Part of the solution lies in “correct and transparent risk recognition” instead of putting off the reckoning, the commission said. In the wake of the European Central Bank’s unprecedented 1 trillion euros in long-term loans, some banks are still using the funds to buy sovereign bonds, binding them more closely to financially shaky governments, the commission said.

Watchful ECB

The central bank’s “accommodative” monetary policy with interest rates at 1 percent limits its scope for spurring the economy, the commission said. It estimated on May 11 that the euro economy will contract 0.3 percent in 2012.

In an assessment by staff economists, the commission said there is little room for deficit-plagued countries to push back planned savings to a later date. Such an easing-up would be punished by markets, it said.

“Member states which face high and potentially rising risk premia do not have much room for maneuver to deviate from their nominal fiscal targets, even if macroeconomic conditions turn out worse than expected,” according to the document.

Still, Economic and Monetary Commissioner Olli Rehn said Spain might be granted an extra year, until 2014, to bring its deficit down to the limit of 3 percent of gross domestic product.

Spain deserves that mercy -- denied to France and the Netherlands -- because it is the only euro-area country likely to still be in recession in 2013, Rehn said. The concession will only come if Spanish Prime Minister Mariano Rajoy’s government delivers a “solid, two-year budget plan for 2013 and 2014,” he said.

The commission, which gained new powers to police national budgets in response to the crisis, is trying to crack down on deficits without imposing policies that crimp the economy.

“Credibility of consolidation is one of the key factors,” the staff paper said.

Euro Bonds

The commission kept alive the debate over common borrowing by euro-area governments, already rejected by Merkel as at best a goal for the long term and not a way out of the current turmoil.

Debate over euro bonds flared at last week’s summit of European leaders, the first for French President Francois Hollande after he took office vowing to challenge the German- dominated budget-cutting creed that has marked the crisis response.

Ideas include a debt-redemption fund proposed by Germany’s council of economic advisers and different types of “stability bonds” sketched out by the commission last year. The commission is now working on more concrete proposals.

Passage of a deficit-limitation treaty and the adoption of two laws that further enhance central oversight of national budgets will help pave the way toward common bond sales, the commission said.

The commission is only asking for “a roadmap and a timetable, but an early confirmation of the steps to be taken will underscore the irreversibility and the solidity of the euro,” Barroso said.

To contact the reporter on this story: James G. Neuger in Brussels at

To contact the editor responsible for this story: James Hertling at


Pending Sales of U.S. Homes Decrease by Most in a Year

By Shobhana Chandra - May 31, 2012 4:14 AM GMT+0700

The number of Americans signing contracts to buy previously owned homes fell in April by the most in a year, indicating the U.S. housing recovery remains uneven.

The index of pending home resales dropped 5.5 percent following a revised 3.8 percent gain the prior month, figures from the National Association of Realtors showed today in Washington. The median forecast of 42 economists surveyed by Bloomberg News called for no change in the measure.

Real estate agents with a prospective buyer in Miami. Photographer: Joe Raedle/Getty Images

May 29 (Bloomberg) -- Robert Shiller, an economics professor at Yale University and co-creator of the S&P/Case-Shiller index of property values in 20 U.S. cities, talks about the housing market. The index fell 2.6 percent from a year earlier after a 3.5 percent drop in February, the group reported today in New York. Shiller, speaking with Tom Keene on Bloomberg Television's "Surveillance Midday," also talks about Facebook Inc. (Source: Bloomberg)

May 24 (Bloomberg) -- Douglas Yearley, chief executive officer of Toll Brothers Inc., talks about the luxury-home builder's second-quarter profit and outlook for the U.S. housing market. Net income was $16.9 million, or 10 cents a share, for the three months through April, compared with a loss of $20.8 million, or 12 cents, a year earlier, the company said. Yearley speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

A PulteGroup Inc. sign advertises homes for sale in the Lyon's Gate neighborhood of Gilbert, Arizona. Photographer: Joshua Lott/Bloomberg

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Mortgage rates at record lows failed to sustain the pace of demand as some buyers may have waited for home prices to decline further. Limited access to credit and persistent foreclosures still weigh on housing, adding to concern it will remain a source of weakness for the world’s largest economy.

“The pattern of demand is sluggish and volatile,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, who projected a decline. “Until the supply issue is resolved, we could see further declines in prices and the housing market will continue to hover around the bottom. It’ll be a gradual improvement, we don’t expect anything stronger than that.”

Estimates in the Bloomberg survey ranged from a drop of 4.3 percent to a rise of 3.1 percent. The Realtors group revised March data from a previously reported gain of 4.1 percent.

Stocks fell after the figures and on concern Greece will leave the euro. The Standard & Poor’s 500 Index (SPX) declined 1.4 percent to 1,313.32 at 4 p.m. in New York. The yield on the benchmark 10-year Treasury note tumbled 12 basis points to 1.62 percent at 5 p.m. after touching 1.6085 percent, the lowest in Federal Reserve figures going back to 1953.

Three Regions Decline

Three of four regions saw a decrease, today’s report showed. That included a 12 percent slump in the West and a 6.8 percent decline in the South. Pending purchases rose in the Northeast.

Compared with a year earlier, the index climbed 14.7 percent after a 10.5 percent gain in the prior 12-month period.

Pending home sales provide insight into actual contract closings a month or two later. Purchases of existing homes, which made up about 93 percent of the housing market last year, are tabulated when the contract closes.

Other figures signal demand is improving. New-home purchases, also logged when contracts are signed, climbed 3.3 percent to a 343,000 annual rate in April, a Commerce Department report showed May 23.

April Sales

Data the previous day showed sales of existing homes increased 3.4 percent to a 4.62 million annual rate, with gains in all four regions.

The Realtors group revised this year’s forecast to 4.66 million previously owned home sales, up from 4.26 million in 2011. It projects 4.92 million purchases in 2013.

Toll Brothers Inc. (TOL) is among the builders reporting growth in orders. Second-quarter profit at the Horsham, Pennsylvania- based company exceeded analysts’ estimates as orders surged 47 percent from a year earlier.

“We are feeling better than we have at any time in the past five years,” Chairman Robert Toll said on a May 23 earnings call. “We would like to say we’re back, but we need a little more confirmation. Nonetheless, it sure feels good compared to the desert we’ve just crossed.”

Borrowing costs remain attractive. The average rate on a 30-year fixed mortgage fell to an all-time low of 3.78 percent in the week ended May 24, according to Freddie Mac data going back to 1971. The average 15-year rate held at 3.04 percent, also a record low, the McLean, Virginia-based mortgage-finance company said.

A real estate agents group’s affordability index, which is based on a combination of resale prices, household income and mortgage rates, reached a record high in the first quarter, a report showed this month.

To contact the reporter on this story: Shobhana Chandra in Washington at

To contact the editor responsible for this story: Christopher Wellisz at


Zuckerberg Drops Off Billionaires Index as Facebook Falls

By David de Jong - May 31, 2012 3:33 AM GMT+0700

Mark Zuckerberg, Facebook (FB) Inc.’s co- founder and chief executive officer, is no longer one of the world’s 40 richest people.

The 28-year-old’s fortune fell to $14.7 billion yesterday from $16.2 billion on May 25, as shares of the world’s largest social-networking company dropped 9.6 percent. They slipped another 2.3 percent today to $28.19. That extended the stock’s losses to 26 percent from the worst-performing large initial public offering in the past decade and cut Zuckerberg’s net worth to $14.4 billion.

Mark Zuckerberg, chief executive officer and founder of Facebook Inc. Photographer: David Paul Morris/Bloomberg

May 30 (Bloomberg) -- Mark Zuckerberg, Facebook Inc.'s co-founder and chief executive officer, is no longer one of the world's 40 richest people, according to the Bloomberg Billionaires Index. Linzie Janis and Mark Barton report on Bloomberg Television's "Countdown." (Source: Bloomberg)

May 29 (Bloomberg) -- Brian Wieser, a senior analyst at Pivotal Research Group LLC, talks about the outlook for Facebook Inc. He speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

May 29 (Bloomberg) -- Bobby Heller, an options trader at On Point Executions LLC, talks about options trading in Facebook Inc. shares. Facebook fell to a new low, extending losses from the worst-performing large initial public offering during the past decade to more than 23 percent. Heller speaks with Matt Miller on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

May 29 (Bloomberg) -- Tom Forte, director and senior research analyst at Telsey Advisory Group, talks about the outlook for Facebook Inc. and ways the social networking company can increase its mobile advertising revenue. Forte speaks with Adam Johnson on Bloomberg Television's "InBusiness." (Source: Bloomberg)

May 29 (Bloomberg) -- Walter Isaacson, biographer of late Apple Inc. co-founder Steve Jobs and chief executive officer of the Aspen Institute, talks about Mark Zuckerberg, chief executive officer of Facebook Inc., and the social networking company's stock performance. Isaacson speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

May 30 (Bloomberg) -- Bloomberg's Betty Liu reports that Mark Zuckerberg, Facebook Inc.’s co-founder and chief executive officer, is no longer one of the world’s 40 richest people on the Bloomberg Billionaires Index. The 28-year-old’s fortune fell to $14.7 billion yesterday from $16.2 billion on May 25, as shares of the world’s largest social-networking company dropped 9.6 percent to $28.84. She speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

“It seems to be a clear reflection that there was just too much stock issued, that the valuation was aggressive and that a lot of people who lined up to buy it really had no intention of holding it,” Jack Ablin, chief investment officer of BMO Harris Private Bank in Chicago, said yesterday in a telephone interview. The bank oversees about $60 billion of assets.

Facebook shares closed at $38.23 on May 18, the first day they began trading, giving Zuckerberg a net worth of $19.4 billion. The Menlo Park, California-based company ended the day with a price-earnings ratio of 83.1, making it more expensive than 99 percent of Standard & Poor’s 500 Index (SPX) stocks. The company went public as the equity index was heading for its biggest monthly decline since September.

Facebook options trading began yesterday, with volume for puts exceeding calls by 1.2 to 1, data compiled by Bloomberg show. More than 200,000 puts were traded yesterday, giving the holder the right to sell the shares at a specified price. June $30 calls were the most active contracts today, with volume at 22,896. They were followed by June $28 puts and June $29 puts.

To contact the reporter on this story: David De Jong in New York at

To contact the editor responsible for this story: Matthew G. Miller at


Apple CEO Says TV Is ‘Intense Focus,’ Sees Closer Facebook Ties

By Douglas MacMillan - May 30, 2012 12:32 PM GMT+0700

Apple Inc. (AAPL) Chief Executive Officer Tim Cook said that television is an area of “intense focus” for the company as it seeks to add products that can build on the success of Macs, iPhones and iPads.

“This is an area of intense focus for us,” Cook said of TV in an on-stage interview yesterday at the D10 conference in Rancho Palos Verdes, California. “We’re going to keep pulling this string and see where it takes us.”

Apple CEO Tim Cook. Photographer: Kevork Djansezian/Getty Images

May 29 (Bloomberg) -- Bloomberg’s Emily Chang reports on Tim Cook’s performance at Apple. She speaks on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

May 30 (Bloomberg) -- Shaw Wu, an analyst at Sterne Agee & Leach Inc., talks about Apple Inc. Chief Executive Officer Tim Cook's remarks about television yesterday at the D10 conference in Rancho Palos Verdes, California, and the outlook for the company. Wu speaks with Adam Johnson on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

May 30 (Bloomberg) -- Sandy Shen, an analyst at Gartner Inc. in Shanghai, talks about Samsung Electronics Co.'s new Galaxy S III smartphone and how it compares to Apple Inc.'s iPhone 4S. Shen speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

May 30 (Bloomberg) -- In today's "Movers & Shakers", Bloomberg's Erik Schatzker reports that during an appearance Tuesday night at the D10 Conference, Apple CEO Tim Cook hinted at `incredible' new products amid speculation that Apple TV will be available later this year. He speaks on Bloomberg Television's "Inside Track." (Source: Bloomberg)

May 30 (Bloomberg) -- Bloomberg's Doug MacMillan reports that Apple CEO Tim Cook hinted at great things in the company’s future at last night's D10 Conference. Cook comments referred to television, Facebook and possible U.S. production of the iPhone. He speaks on Bloomberg Television's "Inside Track." (Source: Bloomberg)

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Apple co-founder Steve Jobs, before he died last year, told his biographer that he had “finally cracked” how to build a TV with a simple user interface that would wirelessly synchronize content with Apple’s other devices. The company is working on a television that may be unveiled this year and released in 2013, according to Gene Munster, an analyst at Piper Jaffray Cos.

Apple turned to Jeff Robin, the software engineer who built the iTunes media store and helped create the iPod, to lead its development of a TV set, people with knowledge of the product said last year.

The company sells a set-top box called Apple TV that lets customers stream video from Apple products or the Internet to their TVs. Still, that device has yet to gain wide acceptance, and Apple executives have called it a “hobby.”

During the conference, put on by the AllThingsD technology blog, Cook said that Apple has “great appreciation” for Facebook Inc. (FB), the largest social-networking service.

“The relationship is very solid,” he said. “We have great respect for them. I think we can do more with them. Stay tuned on this one.”

Takeovers, Transparency

In the wide-ranging interview, Cook also said that Apple remains on the lookout for acquisitions, though it’s not currently seeking a large-sized deal. He also said that it’s possible that more manufacturing of his company’s products will happen in the U.S. The iPhone, Apple’s best-selling device, might one day be assembled in the U.S., he said.

Much of the manufacturing and assembly of Apple products takes place in factories in Asia, which have come under criticism for treatment of workers. Cook said yesterday that the company is moving toward greater transparency in areas such as supplier responsibility and environmental sustainability.

Even as the company discloses more in those areas, it will redouble efforts to keep products under wraps while they are still under development, Cook said.

Responding to criticism that Apple’s Siri voice- recognition service has functioned improperly for some users, Cook said Apple is working to improve the technology.

Siri, IAd

“There’s more that it can do, and we have a lot of people working on this, and I think you’ll be really pleased with some of the things that you’ll see over the coming months,” Cook said.

Cook also said that the company’s iAd online advertising effort wasn’t essential to Apple’s future, which would remain centered on hardware.

“When I was talking about the things at Apple that make up the four legs of the stool, I didn’t mention that one,” Cook said, referring to Macs, iPods, iPhones and iPads.

Before becoming CEO last year, Cook was Apple’s chief operating officer, leading the company’s vast supply chain. He joined the company in 1998 from Compaq Computer Corp. and was instrumental in managing the operational side of Apple’s business while long-time CEO Jobs concentrated on product development and marketing.

The company’s gross margins of 47 percent last quarter are more than double those of rivals Hewlett-Packard Co. (HPQ) and Dell Inc. (DELL)

Jobs Woos Cook

The interview comes ahead of Apple’s annual Worldwide Developers Conference. The company is slated to unveil a new line-up of Mac laptops, as well as show off new features for the latest mobile operating system that powers the iPad and iPhone, people with knowledge of the matter have said.

A new iPhone, which accounts for more than half the company’s sales, is expected to be unveiled by October, according to analysts, includingMunster.

Cook also spent part of the interview reflecting on Jobs, who recruited him from Compaq when he had no intention of leaving the rival computer maker. After ignoring numerous calls from executive recruiters working on behalf of Apple, Cook agreed to meet with Jobs on a Saturday morning, he said.

Jobs discussed his vision for iMac computers and sold him on the company’s ambitious plans to sell to consumers, he said.

“Five minutes into the conversation, I wanted to join Apple,” Cook said. “He painted a story, a strategy, that he was taking Apple deep into consumer at a time when I knew that other people were doing the exact opposite. And I’ve never thought following the herd was a good strategy.”

“I went back and resigned immediately,” he said.

To contact the reporters on this story: Douglas MacMillan in San Francisco at

To contact the editor responsible for this story: Tom Giles at