Reuters News - Report on ECB bond plan helps shares

 A man is silhouetted in an electronic board showing the FTSE MIB Index for the Italian equity market in this photo illustration taken in Rome August 9, 2011.

Credit: Reuters/Tony Gentile

By Marc Jones

LONDON | Mon Aug 20, 2012 6:30am EDT

(Reuters) - European shares edged higher on Monday, helped by a report that the European Central Bank could buy bonds of euro zone countries if borrowing costs rose over certain limits to try and solve the debt crisis.

However, the euro fell slightly against the dollar and the yen after the German central bank reiterated its opposition to bond purchases and a spokesman for the finance ministry said it was not aware of any plans to target bond spreads.

European and global markets have had a recent strong run on hopes that a new plan being drawn up by the ECB, the central bank overseeing the 17 countries that use the euro, could help the currency bloc tackle its problems.

Top European stocks .FTEU3 were up 0.07 percent by mid morning, having closed at 13-month highs on Friday following their best week in seven years.

The main indexes in the region were little changed with London .FTSEdown 0.1 percent but Paris .FCHI and Frankfurt .GDAXI safely in positive territory.

The MSCI global share index .MIWD00000PUS was up 0.1 percent at 0915 GMT .EU .L .N and U.S. stock index futures pointed to a slightly higher open on Wall Street.

"We are fishing in the fog at the moment so we need to see some more of the meat regarding the ECB's plans," said Heinz-Gerd Sonnenschein, equities strategist at Germany's Postbank.

"Shares have risen a lot since June even though the earnings outlook has been downgraded, so progress from here very much depends on the sovereign debt crisis," he said.

Investor appetite for Spanish, Italian and other peripheral debt also picked up, at the expense of German bonds.

Germany's der Spiegel magazine said over the weekend that the ECB's new bond buying plan, due to be detailed at the start of September, could see the bank setting upper limits on bond spreads, above which it would start buying.

Spanish two-year yields have already fallen sharply since ECB President Mario Draghi said on July 26 that the bank would do whatever it takes to preserve the euro, fuelling expectations the central bank would restart its bond buying program.

However, policymakers remain in the early stages of thrashing out the details of any plan.

Some experienced ECB watchers doubt whether the central bank would set a bond price threshold as European laws ban it from financing governments.

"Critical details about such a new instrument remain unclear - at least until the ECB's September meeting," said Commerzbank strategists in a note.

GREECE MEETING

With many European policymakers on summer holidays, investors have had a respite from negative headlines.

This week's focus is on a meeting between leaders of Greece and Germany on Friday as well as details of Spain's 'bad bank' plans, due to be announced on the same day.

The first August reading of closely watched, forward looking purchase manager index (PMI) data will come out from the euro zone on Thursday until then data will be thin on the ground.

Away from Europe's equities and bond markets, oil prices hovered at $114 per barrel, supported by tight North Sea supplies ahead of the closure of a key UK oilfield for maintenance and on expectations of more demand before the northern hemisphere winter.

Platinum rose to its highest in more than six weeks as supply worries lingered after violence at a major mine in South Africa, while gold firmed a touch.

Corn prices rose to their highest in more than a week, resuming a recent rally on supply concerns arising from the U.S. grain belt's worst drought in 56 years.

Wheat edged in the other direction as the market took a breather after gaining for three straight sessions on fears of tightening global supplies and expectations of curbs on exports from the Black Sea region.

(editing by Anna Willard)

BBC News - Asia's fastest data cable links Tokyo to Singapore

By Katia MoskvitchTechnology reporter, BBC News

A new high-speed undersea data cable has opened to traffic in Asia.

The route for the new cable avoids Taiwan, where earthquakes are common

The 7,800km Asia Submarine-cable Express (ASE) connects Japan, Malaysia, Singapore and the Philippines.

It transfers data via an optical fibre system at 40 gigabits per second, and is three milliseconds faster than any other cable between Singapore and Tokyo.

The gain in speed may sound small, but could prove critical to financial trades made out of the region.

So-called "high frequency trades", controlled by computers, involve making what may be hundreds of thousands of transactions in less than a second - all determined by a program that tracks market conditions.

With banks and hedge funds competing against each other, the size of the profit or loss can come down to a matter of beating the competition by a fraction of a second, explained Ralph Silva, a strategist at Silva Research Network.

"High frequency trading is basically computer trading - you program a set of rules and as events happen - the computer decides buy or sell commands," he said.

"As all incoming data is received by all banks at the same time, and because the computers are all the same with the same speed of processors, the length of time the command takes to get to the exchange makes a big difference.

"So if all banks come to the same trading decision at the same time, the one to get the transaction to the master computer first wins.

"Three milliseconds in computer time is an hour in human time."

The route for the new cable was chosen to be as straight as possible, reducing the time to get information from one end to the other to 65 milliseconds.

The data transfer capacity of 40Gbps is the equivalent of downloading a high-resolution DVD in about two seconds.

Avoiding trouble areasMany undersea cables were damaged by a powerful earthquake that hit Japan in March 2011

The new facility adds to a web of undersea cables in the waters around Japan.

These include ones run by Australian operator Telstra International; Taiwan's largest phone operator Chunghwa Telecom; and the global telecommunications service provider Pacnet, based in Singapore and Hong Kong.

Many were damaged by a powerful earthquake near Japan's northeast coast in March 2011.

An earlier earthquake in December 2006, off the south-west coast of Taiwan, also broke several cables, disrupting telecommunications in Asian countries.

The problems helped influence where the new cable was laid, said Japan's biggest telecommunications provider.

"We avoided the area around Taiwan, where earthquakes are common, and laid the route near the Philippines instead, making the cable very safe and reliable," said Hiroyuki Matsumoto, senior director of network services at NTT, one of the four partners involved in the project.

After 2011's earthquake and tsunami his firm reported that half a million telephone circuits and about 150,000 internet circuits went down in Japan because of subsea cable damage.

To repair the cable network, telecoms operators had to send out ships equipped with remotely controlled robots, able to dive to a depth of 2,500m (8,200ft).

The other companies involved in the project are PLDT, the Philippines' main telecom company; StarHub, the second-largest mobile phone operator in Singapore; and Telekom Malaysia.

PLDT said that the venture was the first direct cable connection between the Philippines and Japan, and "the largest-capacity international submarine cable system ever to land in the Philippines".

Reuters News - German backing for ECB action lifts stocks, euro

Traders work at their desks in front of the DAX board at the Frankfurt stock exchange August 17, 2012.

Credit: Reuters/Remote/Amanda Andersen

By Marc Jones

LONDON | Fri Aug 17, 2012 5:42am EDT

(Reuters) - Global shares hit three-month highs on Friday, with top European stocks and the euro lifted by apparent support from German Chancellor Angela Merkel for European Central Bank intervention to calm the euro zone's debt troubles.

Merkel said declarations by ECB President Mario Draghi, who outlined conditional plans at the start of the month to buy bonds of troubled euro zone governments, were "completely in line" with the approach taken by European leaders and urged the bloc to now act swiftly to tackle its woes.

Hopes the bloc may finally be getting a grip on its problems lifted top European shares .FTEU3 0.19 percent by mid morning, putting them on track for their best weekly run in seven years.

"Generally, the newsflow has been positive for risk sentiment and the appraisal of the policy response in the euro zone. In the U.S., we have seen some positive data surprises as well," said Ian Richards, head of equity strategy at Exane BNP Paribas.

The main indexes in London .FTSE, Paris .FCHI and Frankfurt .GDAXIwere all in positive territory, helping the MSCI index of global shares .MIWD00000PUS, at their highest since May 4, to extend an 11.5 percent gain that started back in June.

European and global share markets have been riding high in recent weeks on hopes that new crisis plans being drawn up by the ECB, and due to be detailed at the start of September, will put a floor under Spain and Italy's troubles and prevent the euro from unraveling.

The euro was buoyant at $1.2376 and also hit a six-month high against the yen.

U.S. futures pointed to a flat open on Wall Street, with futures for the S&P 500 down 0.08 percent, Dow Jones futures up 0.05 percent and Nasdaq 100 futures up 0.13 percent by 0815 GMT.

OIL SLIP

Oil prices slipped below $114 a barrel after sources told Reuters the U.S. was dusting off plans for a possible release of oil reserves.

Gold inched up to $1,617.66 an ounce.

Demand for German government bonds continued to wane on Friday, as the appetite for riskier assets which offer a better returns, continued to strengthen.

Bund futures fell 20 ticks on the day to 141.58. They have come off more than 3 full points since the ECB's Draghi promised last month to do whatever it took to "preserve the euro".

Ten-year German government bond yields, which move in the opposite direction to the price, were up 1.2 basis points at 1.54 percent, while those for Spain and Italy were both lower.

"With this 1.5 percent taken out, I wouldn't be surprised to see 10-year Bund yields edging a bit higher towards 1.60-65," said Rainer Guntermann, strategist at Commerzbank. "At that level, they should start to look a little more attractive ... going into September."

September is a crunch period for the euro zone and its hopes to overcome its debt troubles.

The ECB is due to flesh out its new bond buying crisis strategy by September 6, and Germany's constitutional court will deliver a ruling on September 12 on the euro zone's permanent ESM rescue fund, before which Berlin cannot ratify it.

Dutch elections are held on the same day. And on September 14/15, European Union financeministers meet in Cyprus. By then, the troika of EU, IMF and ECB inspectors may have also delivered a verdict on Greece's debt-cutting progress.

(Reporting by Marc Jones; Editing by Will Waterman)

Reuters News - Exclusive: White House studying potential oil reserve release

Gasoline drips off a nozzle during refueling at a gas station in Altadena, California March 24, 2012. Picture taken March 24, 2012.

Credit: Reuters/Mario Anzuoni

By Jeff Mason

WASHINGTON | Fri Aug 17, 2012 6:15am EDT

(Reuters) - The White House is "dusting off old plans" for a potential release of oil reserves to dampen prices and prevent high energy costs from undermining sanctions against Iran, a source with knowledge of the situation said on Thursday.

U.S. officials will monitor market conditions over the next few weeks, watching whether gasoline prices fall after the September 3 Labor Day holiday, as they historically do, the source said.

It was too early to detail the size of any release from the U.S. Strategic Petroleum Reserve and other international stockpiles if a decision to proceed was taken, the source said.

Oil prices have surged in recent weeks, with Brent crude prices closing in on $120 a barrel, up sharply from below $90 a barrel in June. The United States and other Group of Eight countries studied a potential oil release in the spring but shelved the plans when prices dropped.

As prices rise again, U.S. officials were now collecting information from the market about potential needs and studying futures, production numbers and data on Iranian oil exports.

"The driving force in this is both impact on the economy and impact on the Iran sanctions policy," the source said, noting that Washington did not want rising oil prices to create a windfall for Iran while international sanctions were having an effective impact on its crude exports and revenues.

The United States has not yet held talks with international partners about a coordinated move. The source noted that Britain, France, Germany and other partner nations in the Paris-based International Energy Agency (IEA) were receptive to a potential release a few months ago when conditions were similar.

Those countries were concerned about the impact of high oil prices on the global economy and Iran then, and those concerns remain equally relevant now.

"The logic behind a potential release in the spring is at least if not ... more true today," the source said.

Within the United States, tapping reserves could spark criticism from Republicans, who would cast it as a political move to boost Democratic President Barack Obama's chances in the November 6 election.

The source said the White House had not discussed political ramifications because a decision on a release had not been made.

A White House spokesman declined to comment.

GATHERING SUPPORT

Gathering support from partner nations is likely to be the next step as Washington studies its options.

In May, the G8 put the IEA, the West's energy adviser responsible for coordinating reserves, on standby for action, a sign at the time that Obama was winning support for tapping government-held oil stocks for the second time in two years.

Some IEA nations could object to a release now because market conditions are less tight than they were in the spring, the source said. Saudi Arabia and Iraq were producing more and the supply disruption related to Libya was resolved.

Germany and some other European nations have generally resisted using government-held oil inventories in the absence of a sharp and deep disruption in supplies.

Britain's energy ministry said on Friday it was prepared to ask the IEA to act to deal with high oil prices, but added that no decision had yet been made on any release of stocks.

"The market remains very tight," a UK ministry spokesman said. "This has a knock-on impact on the oil price and therefore the global economic recovery." [ID:nL6E8JH4Q4]

France and the United States are in contact on recent oil price rises.

"We are consulting our American partners on all issues, including containment of oil prices. All options are being studied," an official at the offices of President Francois Hollande told Reuters, speaking on condition of anonymity.

Asian IEA members Japan and South Korea saw no need yet for a release from reserves, government sources said on Friday.

"It is not as if Japan is short of oil," said a Japanese government source who declined to be named due to the sensitivity of the matter. "Stock releases are not done when the price is high but when supply is insufficient. Supplies are sufficient now."

Japan and South Korea are among Iran's top oil buyers and have cut imports to gain waivers from U.S. sanctions. Despite having to rely on costly alternatives to Iranian oil, South Korea did not believe prices were high enough yet to warrant a release, a government source said.

"I don't think any member will agree to the oil release at current price levels, considering the release was not made a few months ago when oil prices hovered at much higher levels," said the source who also declined to be named.

Although the loss of over half Iran's oil exports is about equivalent to the drop in Libyan shipments that prompted IEA action last year, the decline has been relatively gradual and global commercial oil inventories remain relatively well-supplied for this time of year.

Last year, the United States and the IEA announced a coordinated drawdown of 60 million barrels in response to outages in Libya and other places, Brent oil prices fell 6 percent, or nearly $7 a barrel, to about $107 a barrel.

A week later the prices were back to about where they had been, though analysts say the drawdown could have stopped prices from going even higher.

(Additional reporting by Timothy Gardner in Washington; Matthew Robinson in New York; Meeyoung Cho in Seoul; Osamu Tsukimori in Tokyo; Karolin Schaps and Christopher Johnson in London; Editing by Russ Blinch, Sandra Maler and Alison Birrane)

BBC News - Wen Jiabao warns China's growth is under pressure

China's Premier Wen Jiabao has warned that the country's economy is under pressure and that it is facing problems that may last for some time.

The uncertain global economic environment has hurt demand for Chinese goods

However, he said that Beijing will be able to meet its growth target, despite those issues.

He said that easing inflation had given more room to policymakers to introduce measures to spur growth.

China has been hurt by slowing global demand for its exports and lacklustre growth in domestic consumption.

"We have the conditions and capabilities, and will be sure to fulfil this year's economic and social development targets," Premier Wen was quoted as saying by the Xinhua news agency.

Further easing?

Premier Wen's comments comes amid worries of a sharp slowdown in China's economy, the world's second-largest.

Its gross domestic product grew at an annual rate of 7.6% during the April-to-June period.

While that may be healthy compared to many developed Western economies, it was the slowest pace of expansion for China in three years.

Data released earlier this month showed a sharp decline in export and import growth during July, indicating that both external and internal demand were slowing.

The economic conditions in the eurozone and the US, two of China's biggest markets, continue to remain weak, adding to fears that China's growth may slow further in the near term.

That has triggered calls for easing of monetary policy.

China's central bank, the People's Bank of China, has already cut its key interest rates twice since the start of June.

It has also cut the reserve ratio requirement, the amount of money the country's banks must keep in reserve, three times in past few months, in a bid to boost lending.

Analysts said Mr Wen's comments indicated that Beijing was likely to ease policies further to sustain growth.

"We continue to believe that a reserve ratio requirement cut is more likely than a rate cut and expect a move soon," said Dariusz Kowalczyk, a senior economist & strategist, at Credit Agricole CIB in Hong Kong.

BBC News - Brazil changes tack with new stimulus plan

By Joao FelletBBC Brasil, Brasilia

Brazil's government is set to launch the first in a series of measures that could inject up to $50bn (£32bn) into the economy over the next five years.

President Rousseff will launch the initiative personally

The first part of the plan, to be announced on Wednesday, includes privatising about 14,000 kilometres of railways and roads.

The privatisation of ports, lower energy costs and incentives for industry will soon follow.

The package is designed to boost what have been disappointing growth levels.

President Dilma Rousseff has invited 50 leading Brazilian businessmen to the capital Brasilia where she will personally launch the new strategy.

In May, she brought the businessmen to the presidential palace - the Planalto - to ask them what was needed to stimulate the economy.

Growth in Brazil is predicted to be under 2% this year, the weakest annual performance since 2009 and a sharp slowdown from an impressive 7.5% rise in 2010.

Rising debt rates

Prior to these measures, the government had been counting mainly on rising levels of domestic consumption - fuelled by credit growth and rising income among poor Brazilians - alongside investments by state companies.

Although the previous strategy had helped Brazil become the sixth largest economy in the world in 2011, overtaking Britain, the government has not been able to maintain high growth rates.

The recent weak growth has been attributed mainly to rising debt rates among the population and the global downturn, which reduced demand for Brazilian products.

Expensive energy, poor infrastructure and increasing labour costs - known here as 'Custo Brasil' or the 'Brazil Cost' - have also weighed on growth, analysts say.

Now the government will increase the role played by private investors, who were seen to have lost ground during the government of Luiz Inacio Lula da Silva, Brazil's president from 2003-2010.

President Rousseff was his chosen successor, but she is seen as a tough and pragmatic decision maker when it comes to economic policy.

In February, the government granted three of the largest airports in the country to private companies, hoping to improve overstretched facilities before the 2014 Football World Cup.

Boosting investment

Now roads, railways, ports and perhaps other airports will also be privatised. President Rousseff hopes these concessions will also help to improve the country's much-criticised infrastructure.

"The government realized that privatisations are a way to boost investment", says Felipe Salto, an economist at Tendencias, a leading consulting firm in Brazil.

The concessions are expected to attract up to $50bn in investments in five years.

Rousseff is also preparing to lower the price of energy for industry with the abolition of some federal taxes, which could cut the price by 10%.

Further extensive reductions would depend on tough negotiations with governors and politicians across the country.

Economists are worried, however, about a new round of tax reductions for industry that should be announced in the coming weeks.

"Without structural changes, they could even generate demand and short-term growth, but also cause higher inflation", says Mr Salto.

The measures, he says, would also affect the fiscal balance.

"Comprehensive stimulus measures could harm the efforts to bring down public debt, leading to imbalance in government accounts."

Late diagnosis

For economist Silvia Matos, professor at Getulio Vargas Foundation, "the new package shows that the government is convinced that the economy faces a structural problem.

"The diagnosis is correct, but took too long to be made."

According to Ms Matos, previous economic steps taken by the government this year, such as reducing taxes on cars, were not enough to lift GDP.

Not even the recent devaluation of the currency, the real, and the progressive reduction in interest rates, have produced significant effects so far.

According to the National Confederation of Industry, 11 of the 19 industrial sectors they were tracking suffered a drop in capacity in 2011, indicating a cooling in industrial activity.

Ms Matos believes the new package will tackle some key economic problems, but says Brazil faces other serious issues such as increased public spending and an inefficient tax system.

Without reforms in these areas, she says, the country's economy will remain vulnerable.

Reuters News - Euro zone economy shrinks despite German growth

A worker walks along rolls of Mercedes cars at a shipping terminal in the harbor of the German northern town of Bremerhaven, March 8, 2012.

Credit: Reuters/Fabian Bimmer

By Ben Deighton and Sarah Marsh

BRUSSELS/BERLIN | Tue Aug 14, 2012 7:03am EDT

(Reuters) - The euro zone's debt-ravaged economy shrank in the second quarter, having flatlined in the first, despite continued German growth which economists said could soon be snuffed out.

The 17-nation currency bloc contracted by 0.2 percent on the quarter, data showed on Tuesday. Germany eked out growth of 0.3 percent, marginally beating forecasts, but its forward-looking ZEW sentiment index slid for a fourth month running, undercutting even the lowest estimate in a Reuters poll.

Economists said worse is likely to come and even Europe's largest economy is unlikely to defy gravity for long unless decisive action is taken to tackle the bloc's debt crisis.

"Growth turned out to be pretty solid. But this could be the last positive piece of news out of Germany for some time," said Joerg Kraemer at Commerzbank. "The German economy could contract in the summer. It is fundamentally in good structural shape, but can't decouple from the recession in the euro zone, plus the global economy has also shifted down a gear."

Aside from a downward blip in the last three months of 2011, the euro zone has posted pretty consistent, albeit anemic, growth over the past three years although some of its debt-laden members have been in recession for some time.

"It was a touch better than we expected, but I think overall it confirms the idea that the euro zone is in a recession phase," Aline Schuiling, economist at ABN AMRO, said of Tuesday's data.

"What we see is a vicious circle of budget cuts, high interest rates in the periphery and sovereign debt rising," she said. "Policymakers are moving very slowly. There are limited prospects for growth in the euro zone. We expect another contraction in Q3."

For France, it was the third consecutive quarter of zero growth. The central bank has already said it expects a mild contraction in the third quarter.

"These figures are not excellent, but at the same time France is not in recession while the majority of its European partners are," Finance Minister Pierre Moscovici told Europe 1 radio.

Safe-haven German Bund futures fell and European stocks rose after the slightly stronger than expected German and French GDP reports but the euro dipped against the dollar after the ZEW survey came in worse than expected.

The think tank's monthly poll of economic sentiment slid to -25.5 from -19.6 in July. ZEW economist Christian Dick said the German economy would slow due to weak growth in its main export markets, but would not deteriorate sharply.

Austria and the Netherlands almost matched Germany's performance, each posting growth of 0.2 percent. Economists surveyed by Reuters had expected the Dutch economy to shrink 0.3 percent.

Finland, one of Germany's northern European allies in pushing for austerity, suffered a 0.7 percent year-on-year fall in GDP.

SOUTHERN PAIN

For the currency bloc's members at the sharp end of its debt crisis, the picture is bleaker still and as economies shrink, so do tax revenues, making deficit-cutting even harder to achieve.

That has fostered a growing debate inside and outside Europe about the sense of austerity drives.

Bailed-out Portugal's recession deepened with GDP diving by 1.2 percent on the quarter and Cyprus contracted by 0.8 percent.

Figures released on Monday showed deficit-cutting measures helped to shrink Greece's economy 6.2 percent year-on-year in the second quarter. Economists say the slump will persist as the government scrambles to secure billions in additional cuts to keep bailout funds flowing.

Italy's second quarter data last week showed the economy contracted 0.7 percent quarter-on-quarter, compounding the difficulties for Mario Monti's technocrat government as it tries to avoid a bailout.

Spain's economy shrank 0.4 percent over the same period, pushing it deeper into recession, according to figures out two weeks ago.

The big unanswered question is whether a weakening economy will make Germans, the EU's paymasters, less likely to support government rescue efforts for the broader euro zone.

German Chancellor Angela Merkel has said repeatedly over the past year that she will do everything to save the euro, most recently after the European Central Bank signaled it would intervene in the bond market to lower Spanish and Italian borrowing costs.

Not all Germans support that course and the chancellor's room for maneuver appears to be shrinking at a time when both Greece and Spain may soon require new rescues. However, if ordinary Germans start to feel real economic pain, their response could be to demand their leaders sort out the crisis that is now finally knocking at their door.

Spanish and Italian bond yields have steadied since ECB President Mario Draghi promised to do whatever it takes to save the euro zone. It is quite possible that Madrid and Rome will seek help from the euro zone's rescue funds and the ECB before the year is out.

"It remains decisive whether the euro crisis can be controlled. We expect that the ECB has initiated a turning point with its signal of bond purchases," said Christian Schulz, economist at Berenberg Bank. "After a weaker summer the German economy will be able to grow faster again from the fourth quarter."

(Additional reporting by Daniel Flynn in Paris. Writing by Mike Peacock, editing by Jeremy Gaunt and David Stamp)