Full Tilt Poker licence revoked by Alderney authority

Besieged online gambling site Full Tilt Poker has had its licence revoked.

The move comes after the Alderney Gambling Control Commission (AGCC) held a hearing about the US-run site, which is registered on the Channel Island of Alderney.

The AGCC said that the owners of Full Tilt Poker had misled authorities over the amount of cash to hand.

This month, the US accused the firm of being a "global Ponzi scheme" that defrauded players out of $440m (£289m).

Full Tilt Poker's licence was suspended by the AGCC in June.

Full Tilt Poker "had fundamentally misled AGCC about their operational integrity by continuously reporting as liquid funds balances that had been covertly seized or restrained by US authorities, or that were otherwise not actually available to the operator," the regulator said.

The AGCC said the revoking of the licence did not prevent new owners from rescuing the business.

Illegal

Although online gambling is illegal in the US, internet poker remains a multi-billion dollar industry because companies use a variety of ways to flout the law, including locating operations offshore.

The US Justice Department said earlier this month that Full Tilt had "defrauded players by misrepresenting that their funds on deposit in online gambling accounts were safe, secure and available for withdrawal at any time".

"In reality, Full Tilt Poker did not maintain funds sufficient to repay all players, and in addition, the company used player funds to pay board members and other owners more than $440m since April 2007," it said.

The US also charged two other online poker companies, PokerStars and Absolute Poker, with money laundering and illegal gambling in April.

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JPMorgan, BofA sued over mortgage debt losses

JPMorgan Chase & Co and Bank of America Corp were hit with new lawsuits by investors seeking to recover losses on $4.5 billion of soured mortgage debt, expanding the litigation targeting the two largest U.S. banks.

Sealink Funding Ltd said between 2005 and 2007 it bought nearly $2.4 billion of residential mortgage-backed securities (RMBS) from JPMorgan and $1.6 billion from Bank of America in reliance on offering materials that were misleading about the quality of the underwriting and underlying loans.

According to court papers, Sealink is an Irish entity that oversees RMBS purchased by special purchase vehicles once sponsored by SachsenLB.

Another plaintiff, Landesbank Baden-Wurttemberg, raised similar claims in a separate lawsuit against JPMorgan over $500 million of RMBS that it said it bought.

The plaintiffs seek compensatory and punitive damages.

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World’s Biggest Pension Eyes Emerging Markets

Japan’s public pension fund, the world’s largest, will start investing in emerging market stocks by the end of the year as it diversifies assets to maintain stable returns.

The Government Pension Investment Fund, which oversees 114 trillion yen ($1.5 trillion), is in the final stage of deciding the managers who will handle the investments, said Takahiro Mitani, president of the fund, known as GPIF. The investments will be focused on markets included in the MSCI Emerging Markets Index, he said.

“It looks like a good time to start investing in emerging markets,” said Mitani in an interview in Tokyo on Sept. 27. “Prospects for growth still remain strong for emerging markets relative to the developed countries, which means expected returns will be higher.”

The fund, whose majority of investments is in domestic bonds, is seeking better returns to cover payments in the world’s most rapidly aging society. The MSCI Emerging Markets Index has dropped 21 percent this year, more than the 12 percent decline by the MSCI World Index of developed stocks, amid inflationary concerns and as the European sovereign debt crisis prompted investors to sell assets deemed risky.

The shares of companies included in the emerging-market gauge, are trading at 9.9 times estimated 12-month earnings, compared with 12.2 times for stocks in advanced economies. Developing nations made up eight of the 10 best performers this year among 93 global benchmark stock gauges tracked by Bloomberg.

Emerging Economies

MSCI Emerging Markets Index, which tracks 21 countries including Brazil, China, India, Russia and Turkey, fell 1.2 percent as of 4:48 p.m. in Tokyo today, while the MSCI World (MXWO) Index lost 0.6 percent.
The International Monetary Fund forecast the world economy will expand 4 percent this year and next on Sept. 20, compared with June forecasts of 4.3 percent in 2011 and of 4.5 percent in 2012. IMF said it based its forecast of a “modest pickup of activity” in advanced economies and of “robust growth” in emerging counterparts on the premise that European policy makers implement the measures to reinforce their bailout mechanism agreed on in July.

GPIF will probably remain a net seller in the fiscal year starting April 2012 to cover pension payments, Mitani said. The fund will sell fewer Japanese bonds this fiscal year from its portfolio than it sold last year as bonds reach maturity, he said. It sold 4.7 trillion yen worth of bonds in the fiscal year ended March 31, according to GPIF.

Investment Plan

Under a five-year investment plan set up in March 2010, GPIF will allocate about two-thirds of its assets to domestic bonds, 11 percent to Japanese stocks, 8 percent to foreign bonds, 9 percent to overseas equities and 5 percent to short-term assets.

The March 11 earthquake and ensuing tsunami that led to a nuclear crisis in Japan hasn’t affected its allocations, Mitani said.

“There is no doubt that the disaster affected Japan’s economy,” said Mitani. “But from a long-term investment plan perspective, it didn’t have any significant impact for us.”

GPIF lost 0.25 percent, or 299 billion yen, in the year ended March 31, as investments in Japanese equities and foreign bonds fell in value, the fund said in July. For the three months ended June 30, the fund returned 0.2 percent, or 240 billion yen, as investments in bonds helped offset losses in equities, the fund said in August.

Alternative Assets

The pension is the biggest in the world by assets under management, according to the Towers Watson Global 300 survey published in September, followed by Norway’s government pension.

GPIF has commissioned a study on alternative assets, such as hedge funds, real estate and private equity, as it seeks investments that will not be correlated to the fund’s traditional holdings of bonds and equities, Mitani said.

“Some say that other pension funds are investing in alternatives, but given the size of our fund, we have to be careful in making any decisions as the impact will be rather significant,” Mitani said.

The likelihood of European economies collapsing because of Greece’s sovereign debt problems is unlikely, given Germany’s economic stability, Mitani said. In the U.S., the key will be whether President Barack Obama’s proposals to spark the economy and trim the nation’s long-term deficit will be effectively implemented, he said.

A fund like us cannot get too emotional over economic conditions and change allocations accordingly on a short-term basis,” Mitani said.

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Eurozone inflation rate jumps to 3%

The eurozone inflation rate is expected to show a sharp increase to 3% in September, up from 2.5% in August, according to official estimates.

No breakdown was given, but the EU's statistics agency said its initial forecasts were usually "reliable".
Separate figures also released by Eurostat showed the eurozone unemployment rate unchanged at 10% in August from the previous month.

The number of people unemployed fell by 38,000 compared with July.

The unemployment rate in Spain, the highest in Europe, rose slightly to 21.2%, with youth unemployment hitting 46.2%.

However, the jobless rate for those under 25 in the eurozone as a whole fell slightly, to 20.4%.

Falling shares

The European Central Bank target for inflation is 2%, and the bank raised interest rates in July from 1.25% to 1.5% in order to combat rising prices.

However, the continuing debt crisis makes further rate rises in the coming months unlikely, analysts say.
With confidence in the outlook for economic growth in the eurozone fragile, policymakers are unlikely to risk raising rates, they say.

Equally, however, sharply rising prices make a cut in interest rates less likely.

This put further downward pressure on markets that fell sharply in early trading.

Germany's Dax index was down 2.5%, with France's Cac 40 and the UK's FTSE 100 sliding about 1.5%.

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Slovak PM Hopes for Bailout Fund Vote Mid October

Slovakia's parliament may vote on the expansion of the euro zone's bailout fund, the European Financial Stability Facility (EFSF), as soon as mid October, but a Greek default is still possible, Slovak Prime Minister Iveta Radicova told CNBC in an interview in Bratislava.

Parliaments in the euro zone have rushed to approve the EFSF's  expansion over the past few days as markets demanded a resolution to the prolonged turmoil caused by Greece's debt crisis which spread across the euro zone.

Slovakia's parliament returns to work in October and Radicova said she hoped a vote would take place before the summit of European Union leaders taking place between October 17 and 18.

"The parliamentary session starts on the 11th of October, so the first possible day is the 11th of October," she added.

The Slovak Republic has asked for "principles for regulated default" to be set up in the euro zone as a condition for approving the EFSF, Radicova said.

"From my point of view the risk or the possibility that for Greece there is no other way [than a regulated default] is very probable," she said.

But she ruled out the possibility that the debt-laden country would leave the euro zone altogether.
"I don't think it's necessary that Greece will leave… they can have the way of a so-called default and keep the currency. It's not that Greece will automatically be out of (the) euro zone. I don't think so."
No Slovak Money in EFSF

The Freedom and Solidarity party (SaS), led by Richard Sulik - a Slovak businessman who lived  in Germany for a long time during the 1980s but returned after the fall of communism – is a junior member of the government and has refused to support boosting the EFSF.

Richard Sulik, who is Speaker of the Slovakian Parliament, told CNBC Friday that his party would vote against the EFSF in its current form.

"It’s a lot of money for Slovakia," he said. He believes that Slovakia should endorse the EFSF but not put money into it.

Radicova said she was in discussions with SaS towards reaching a compromise that would mean Slovakia itself would not have to invest any money in the EFSF. 

Even with its firepower boosted by the agreements in July – permitting the EFSF to offer precautionary credit lines to countries in distress and in extraordinary circumstance buy bonds from the secondary markets – analysts said the fund should be substantially increased, with some even suggesting the amount of 3 trillion euros ($4.08 billion).

"Such (an) amount of money would be new debt, so it's impossible," Radicova said, explaining that countries already running deficits would have to borrow more in order to meet their obligations to the EFSF, thereby increasing the problem.

"From my point of view it's impossible to cut debt in a country with new debt from another country," she said.

The euro zone was not prepared for the crisis and three major principles of the single currency – the no bailout principle, strict fiscal policy and preventing the European Central Bank from buying government bonds - have been breached by several countries, according to Radicova.

Now the euro zone needs to find new principles and put in place a control mechanism for countries that breach the rules under which "automatic sanctions" are applied "if countries do not behave according to European Union principles," she said.

"In other words, the financial mechanism in my point of view is only one step and we will need more and more new decisions," Radicova added.

New Rules for Markets

Banks, financial institutions and rating agencies are "equally responsible" for the crisis, which is "not only the fault of politicians," Radicova said, adding that she didn't believe that markets and financial institutions behaved according to "normal, standard rules."

"New rules for financial markets and financial institutions are absolutely needed," she added.

Talk has increased lately about creating a kind of euro zone treasury and passing authority to Brussels regarding fiscal matters but in Slovakia, which has had a flat tax for years that helped it attract foreign investors, the idea is anathema.

"If we have a common currency, the main regulator for policy in the country is the fiscal policy," Radicova explained, adding that the country would have no way to react to changes in economic conditions and no means to attract foreign investors.

She added that such a decision would require a popular vote, not just political will. "Without the votes of citizens it cannot be possible, this cannot be decided by a few politicians."

Radicova said she was "really worried" about the possibility of a slowdown because of the global economic troubles.

"We still have economic growth but it's slower, slower, slower," she said.

Slovakia has already made structural reforms, privatization and tax reform but it still needs to do more to become even more competitive on the international scene, Radicova said.

"We need first of all the reform of our justice system. We need reform of the education system, because of quality of education because of innovation and technology. And we need administrative reform. Too much bureaucracy."

She said the government created a better environment for entrepreneurship, reformed social contributions on employment to make the system easier and brought in a new Labor Code which makes the labor force more flexible.

"Slovakia was labeled the tiger of Europe, I am sure we are returning to this label," Radicova said.

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It’s 1987 Without Bubble in Japan as Job Losses Spur Hollowing-Out Concern

Japan’s labor force shrank last month to its smallest size since October 1987, when the nation’s stock-market benchmark was 185 percent higher and land prices were 85 percent greater than today.

Employers cut payrolls by 160,000 and a further 200,000 workers retired or abandoned efforts to find a job, leaving the seasonally adjusted number of employed at 59.4 million, the statistics bureau said today in Tokyo. Separate figures showed industrial production rose 0.8 percent from the previous month, less than all but three of 28 forecasts in a Bloomberg survey.

The data deepen concern that Japan’s recovery from the March earthquake will be stunted by manufacturers shifting operations abroad because of gains in the yen, a deterioration in consumer confidence and prospects for higher taxes at home. The challenges add to the burden of an economy already beset by a shrinking and aging population.

“We’ve seen an acceleration in the hollowing out of industry this year with the yen’s surge and the earthquake,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo. “The government doesn’t have a sense of crisis about the yen and emerging economies are luring Japanese companies away.”

The yen traded at 76.74 as of 9:12 a.m. in London, about 1 percent from the post-World War II record high of 75.95 on Aug. 19. The Nikkei 225 Stock Average finished little changed at 8,700.29, compared with the peak of 38,915.87 when it closed out 1989, capping a four-year run when it soared almost 200 percent.

Noda’s Response

Prime Minister Yoshihiko Noda’s government on Sept. 27 said it will start implementing measures to cope with the yen’s gains, including subsidies for companies struggling to retain workers. Finance Minister Jun Azumi said today that Japan plans to bolster funds needed to intervene and lengthen monitoring of foreign-exchange market positions until the end of the year, from an initial plan to end the review this month.

“The yen staying around the high-70s could throw cold water on the Japanese economy’s recovery trend,” Azumi said at a press conference in Tokyo. “We will take bold actions when needed and we don’t rule out taking any necessary measures while closely monitoring speculative trading.”

Manufacturers including Panasonic Corp. have announced plans to shift operations overseas. Panasonic, one of the world’s largest consumer electronics companies, is moving the headquarters of its $57 billion procurement operation to Singapore from Osaka in the year starting April 2012, Masaaki Fujita, an executive in charge of the business, said this month.

Exports Disappoint

Exports and retail sales data released this month also missed analysts forecasts, casting doubt on whether gross domestic product will rebound as much as forecast this quarter. GDP is expected to grow at a 4.6 percent annual pace in the three months through September, ending three quarters of decline, according to the average forecast of 42 economists surveyed by Japan’s government-affiliated Economic Planning Association.

The jobless rate fell to 4.3 percent in August from 4.7 percent as people left the workforce, today’s report showed. Household spending decreased 4.1 percent from a year earlier, compared with the median estimate in a Bloomberg News survey for a 2.8 percent drop.

A stagnating economy has also depressed consumer sentiment, with the nation’s Economy Watchers survey showing confidence among merchants and others who deal with consumers slipping to 47.3 in August, the first drop since March.

Not Enough

“I’m worried where things will go after this year, when we’ll start to see more of an impact from the strong yen and slowing growth in the U.S.,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. Reconstruction won’t be enough to fuel a “V-shaped rebound,” he said.

Japan plans to spend a total of 19 trillion yen ($247 billion) over five years for rebuilding after the magnitude-9 temblor and tsunami that devastated the northeast coast. The nation’s ruling Democratic Party of Japan this week proposed a 9.2 trillion yen temporary tax increase and selling of state assets to help pay for the effort.

In a sign that weaker global demand is affecting other Asian markets, South Korea’s industrial production also rose less than economist estimates in August, gaining 4.8 percent from a year earlier, Statistics Korea said today. Meanwhile, a gauge of Chinese manufacturing shrank for a third month in September, the longest contraction since 2009, according to the purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today.

Yen Gains

“Continuing yen strength will prompt companies to factor in a stronger yen in their business planning,” said Takahiro Sekido, a former analyst at the Bank of Japan and now a chief economist at Credit Agricole SA in Tokyo. “The biggest concern is the European debt crisis and the U.S. economy. With uncertain overseas demand,” Japan’s recovery may weaken, he said.

The International Monetary Fund predicted “severe” repercussions if Europe fails to contain its debt crisis or U.S. policy makers deadlock over a fiscal overhaul. Deepening debt woes in Europe have also put pressure on the yen’s exchange rate against its European counterpart, threatening to depress earnings at companies including Sony Corp.

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Europe Inflation Accelerates to Fastest Since 2008

European inflation unexpectedly accelerated to the fastest in almost three years in September, complicating the European Central Bank’s task as it fights the region’s worsening sovereign-debt crisis.

The euro-area inflation rate jumped to 3 percent this month from 2.5 percent in August, the European Union’s statistics office in Luxembourg said today in an initial estimate. That’s the biggest annual increase in consumer prices since October 2008. Economists had projected inflation to hold at 2.5 percent, according to the median of 38 estimates in a Bloomberg survey.

Faster inflation increases pressure on an economy already hurt by tougher austerity measures and waning investor confidence as governments combat the fiscal crisis. European economic confidence slumped more than economists forecast in September, partly as households grew more pessimistic. Commerzbank AG said today that the region “looks set to slip into a recession.”

“It’s more of a technical thing than a fundamental change,” said Laurent Bilke, global head of inflation strategy at Nomura International Plc in London, which was the only bank to forecast the right inflation rate in the Bloomberg survey. “The ECB is not going to cut in October and obviously strong inflation doesn’t give them much room for maneuver on that side. They will probably need a few more months of negative economic news to get there, maybe in November or December.”

Economic Growth

The euro moved lower against the dollar after the inflation data, trading at $1.3521 at 11:52 a.m. in Brussels, down 0.6 percent on the day.

The ECB, which aims to keep annual gains in consumer prices just below 2 percent, said earlier this month that inflation may average 2.6 percent this year and 1.7 percent in 2012. Economic growth may weaken to 1.3 percent next year from 1.6 percent in 2011, it said. By comparison, the International Monetary Fund sees the euro-area economy expanding 1.6 percent and 1.1 percent this year and next.

ECB officials have indicated the central bank is more likely to take non-standard measures first before resorting to rate cuts. Council members Ewald Nowotny and Luc Coene signaled the ECB may offer banks unlimited liquidity for as long as a year, while a euro-area central banking official speaking on condition of anonymity said policy makers will also debate restarting their covered-bond purchases.

Inflation ‘Bombshell’

“We suspect the ECB may be reluctant to cut interest rates in the near term,” said Martin van Vliet, an economist at ING Groep NV (INGA) in Amsterdam, calling today’s report a “bombshell.” The central bank “may instead opt to take steps to improve market functioning.”

The euro-area unemployment rate held at 10 percent in August, a separate report showed today. About 15.74 million people were unemployed in August in the euro region, down 38,000 from the previous month. At 21.2 percent, Spain had the highest jobless rate among the euro countries. Austria and the Netherlands had the lowest rates, with 3.7 percent and 4.4 percent, respectively.

With companies reluctant to boost hiring and increasing price pressures eroding their purchasing power, consumers may keep spending plans on hold. European economic confidence dropped to the lowest in almost two years this month and services output contracted.

‘Clearly Above’
ECB President Jean-Claude Trichet, who will retire at the end of October, said on Sept. 8 that inflation rates are “likely to stay clearly above” 2 percent in the coming months before falling below the central bank’s ceiling in 2012. This assessment is based on “moderate economic growth,” he said. Trichet will be succeeded by Italy’s Mario Draghi.

While the economy is showing increasing signs of slowdown, ECB council members have signaled little willingness to lower borrowing costs. Luxembourg’s Yves Mersch called speculation about a 50 basis-point rate cut “wild expectations,” according to Market News International. Jozef Makuch from Slovakia said on Sept. 27 that he “personally” doesn’t expect a recession.

“Next year, inflationary pressures are projected to abate,” ECB council member Erkki Liikanen said in a speech posted on the Bank of Finland’s website on Sept. 27. “Ultimately, it’s the responsibility of monetary policy to ensure that this moderation will take place.”

The statistics office will release a breakdown of September consumer prices next month. Euro-region core inflation, which excludes volatile costs such as energy, held at 1.2 percent in August from the previous month.

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Sterling soft versus dollar on rising QE expectations

Sterling fell against the dollar on Friday as traders took profit from a rally the previous day and it looked likely to remain under pressure on speculation the Bank of England could announce another round of quantitative easing next week.

The pound was last down 0.3 percent on the day at $1.5572 , slipping from a one-week high of $1.5716 hit on Thursday. Traders cited bids around $1.5535-45.

Sterling has struggled in recent weeks on rising expectations of further quantitative easing,(QE), to boost the faltering UK economy. Another round of QE would expand the BOE's balance sheet and flood the market with the UK currency.

Some market participants are speculating the BoE may signal further easing as early as next week, at its Monetary Policy Committee meeting. Economists in a Reuters poll forecast the bank will resume easing in November but saw a 40 percent chance it could start in October.

"QE will happen, the only question is when. It's more probable they will announce it in November which is an inflation report month and will allow the MPC to explain why they are easing policy despite inflation being so high," said Raghav Subbarao, currency analyst at Barclays.

Looser monetary policy can feed inflation, which in the UK is running at 4.5 percent, more than double the BoE's 2 percent target. But policymakers are now more focused on supporting growth, rather than price pressures.

Market players said those investors betting on an October start to QE may have to unwind their bearish bets on sterling if the BoE's Monetary Policy Committee delays more easing until November. That could help sterling rally, Subbarao said, but lasting gains were seen as unlikely.

"It will be very short-lived. If QE does not happen next week it is very likely it will happen in November," he said.

Technical traders highlighted a bearish "death cross" in cable after the 50-day moving average closed below the 200-day moving average earlier this week for the first time in roughly a year. The last time these two averages crossed in the opposite direction, cable rallied from around $1.5450 to $1.6300 in the space of two months.

EUR/GBP FIX

Month and quarter end rebalancing flows are also likely to weigh on sterling against the dollar, traders said.

The euro dipped against the pound, trading down 0.1 percent at 86.89 pence . Traders were expecting a lot of interest to buy and sell euro/sterling at the ECB fix at 1215 GMT, and also cited bids around 86.50 pence.

The ECB sets a reference rate for the euro at that time and the banks have match their customer orders to that rate.

There was market talk of UK bank selling up to an estimated 4 billion euros for the conversion of EU agricultural subsidies, possibly to be offset by more regular EU sovereign month-end demand.

"The problem is the world knows about the tickets so the market is shorter than the actual fix," a London-based spot trader said, referring to the sell order for agricultural subsidies. "It's a horrible ticket, nobody ever wants it. It will be very messy."

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Nobel chief sees "important" 2011 Peace Prize

This year's Nobel Peace Prize will be as "interesting" as the ones awarded to Barack Obama and Chinese dissident Liu Xiaobo, the head of the Norwegian Nobel Committee told Reuters on Thursday.

Under the two-year leadership of Thorbjoern Jagland, an ex-Norwegian prime minister, the Nobel Peace Prize has been given to the U.S. President, then less than a year in office, and to the jailed democracy activist, infuriating Beijing to this day.

"I believe it will be an interesting prize also this year," said Jagland when asked how this year's laureate could compare with the previous two.

"It will be an interesting and very important prize ... I think it will be well-received."

Jagland, who has been on a drive to give the Peace Prize a more global heft after an era in which laureates included environmentalists and a micro-loan pioneer, said the reaction to two prizes to Obama and Liu had been an encouragement to continue in the same direction.

"The way that these two prizes have been welcomed in the world has emboldened me, and I think as well the committee."

This year's award may recognize activists who helped unleash the revolutionary wave that swept through North Africa and the Middle East, closed watchers of the award have said, citing the committee's desire to address the day's big issues and to impact current events.

Wael Ghonim, an Egyptian Internet activist and Google executive, Egypt's April 6 Youth Movement, one of its founders Israa Abdel Fattah, and Tunisian blogger Lina Ben Mhenni may be among those in line for the award when announced on October 7, one analyst said.

Jagland declined to say what in his view were the major events in terms of peace this year, nor would he comment on whether the Arab Spring has been part of the committee's deliberations.

"There are ... quite many positive developments (in 2011)," he said. "If I name them, I have gone too far in saying where the prize is (going). But there are a number of positive developments that we have looked upon."

The five-strong committee is gathering on September 30 for what is expected to be the final meeting.
It has not yet made its decision, its secretary Geir Lundestad previously told Reuters, adding there were "a few" candidates linked to the Arab Spring among this year's nominees, declining to name them.

A record 241 candidates, of which 53 are organizations, have been nominated for this year's award, worth 10 million Swedish crowns ($1.5 million).

Among the known nominees this year are WikiLeaks and its leader Julian Assange, Israeli conductor Daniel Barenboim, Afghan human rights advocate Sima Samar, the European Union and former German Chancellor Helmut Kohl.

Jagland said the popular outrage against corruption was a driving factor behind the upheavals in North Africa.

"At the end of the day people will not tolerate this corruption," he said. "That is the main reason why the revolutions in the South Mediterranean are taking place ... They see how the leaders were stealing the whole country. And this is the big discussion in China now, how corruption is developing, in particular at the local level."

Jagland said it was too early to say whether the popular upheavals taking place across the Arab world would lead to the same wave of democratization seen in Eastern Europe in 1989 as the region does not have a democratic tradition like Eastern Europe had before the Communist years.

Europe, he added, is not standing ready to help the region economically like they did with Eastern Europe in the 1990s and is worried about the history of colonization in the region.

"(The Europeans) are very cautious and sensitive to interference from abroad because of the history," he said.

He believes there are two powerful trends that have influenced world affairs over the past decades: economic globalization and peoples' demand for human rights.

"The latter one is such a strong force: Berlin in 1989, now in the South Mediterranean and ... in China. This peoples' quest for freedom and human rights is an enormous transforming force."

Nearly a year after the award of the Peace Prize to Liu, China is continuing to crackdown on political dissenters, a reaction that Jagland said he and his colleagues had expected.

"It is probably related to some extent to the Peace Prize and Liu Xiaobo, but it is much more related to the Arab Spring."

"If you analyze the reaction of the Communist Party and the Chinese leaders, we know that they will not take the risk that Gorbachev took with the Soviet Union," he said.

Jagland is increasingly worried about the re-emergence of nationalism worldwide, citing the rise of xenophobia in Europe.

"There are quite many worrying signs in the world, one of them is the return of quite many nationalistic processes and nationalistic thinking in many places," he said.

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European shares extend losses on slowdown fears

European shares extended losses on Friday as investor fears for a global economic slowdown mounted.
At 0958 GMT, the FTSEurofirst 300 index of leading European shares was down 1.8 percent at 916.75 points after hitting a day-low of 915.91 points.

Traders said china's manufacturing sector, contracting for a third consecutive month in September as well as euro zone inflation numbers renewed fears for a global economic slowdown.

Euro zone annual consumer prices unexpectedly rose in September to 3.0 percent, which could exclude an interest rate cut by the European Central Bank next week.

The inflation figure for the 17 countries that share the euro compared to a 2.5 percent forecast by economists polled by Reuters.

"This is the biggest jump since October 2008," a trader said.

Banks Plan New Fees for Using Debit Cards

The US's beleaguered banking industry, which has been raising fees and doing away with free services, has a new target: debit-card users.

Bank of America Corp. is laying plans to charge millions of customers a $5 monthly fee to use their debit cards, and other big banks are expected to follow suit. The industry says it needs the fees to recoup revenue it will lose because of new government regulations taking effect Saturday that cap what they can charge merchants for debit-card transactions.

Bank of America, the largest U.S. bank by assets, disclosed the plan on Thursday in a memo to its senior staff. It intends to begin collecting the fees nationwide early next year.

Several other large banks, including J.P. Morgan Chase & Co. and Wells Fargo & Co., are testing or plan to test similar fees in some states. Regions Financial Corp., a Birmingham, Ala.-based lender, has said it will start charging a $4 monthly debit-card usage fee on certain accounts on Oct. 1.

New federal limits on debit-card "swipe fees" are expected to cost U.S. banks an estimated $6.6 billion a year in lost revenue.

To offset that lost revenue, many banks have eliminated or scaled back debit-rewards programs, added monthly fees for checking accounts and raised minimum balance requirements for customers to avoid certain fees.

The limits on debit-card swipe fees—one of the most contentious regulations to arise from the financial crisis—were finalized by the Federal Reserve Board in June. The new rules will cap at 24 cents the fee merchants pay banks each time a customer buys something with a debit card, down from the current average of 44 cents. The rules apply to banks with $10 billion and more in assets.

Bank of America has said it expects the caps, which the industry lobbied against for months, to erase $2 billion in revenue annually.

"The economics of offering a debit card have changed with recent regulations," a spokeswoman for Bank of America said Thursday.

In its internal memo, Bank of America said it will levy the $5 fee each billing cycle in which a customer uses a debit card to make a purchase. The fee will not be triggered by transactions at automated-teller machines.

The fee will apply to standard checking accounts, but not most premium accounts held by affluent customers. Banks typically exempt their premium accounts from many fees because they tend to be more profitable than standard accounts with lower balances.

Alison Miller, a Bank of America customer in West Windsor, N.J., who uses her debit card several times a week, said she would consider changing banks because of the new fee.

"It's just another way of gouging the customer," she said.

As banks were lobbying against some provisions of last year's Dodd-Frank financial-reform legislation, they warned that the new rules would force them to raise fees on some products, hitting consumers with higher costs.

Trish Wexler, a spokeswoman for the Electronic Payments Coalition, a trade group that represents Visa Inc., MasterCard Inc. and several large banks, said the new fees are an "unintended consequence" of the new rules.

Sen. Dick Durbin (D-Ill.), who championed the legislative provision that led to the caps, said in a prepared statement: "After years of raking in excess profits off an unfair and anticompetitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers. It's overt, unfair, and I hope their customers have the final say."

Bank of America declined to comment on reaction to its plan.

Brian Riley, a senior research director of bank cards at research group TowerGroup, said the new fees are not a surprise given the amount of revenue on the line for Bank of America and other banks with lots of debit-card customers.

"Bank of America has a real challenge," he said.

Bank of America, which has been rocked by large losses on its mortgage portfolio, said it has more than 58 million banking relationships with consumers and small businesses. Its customers are projected to make $260 billion in debit-card purchases this year, according to Mr. Riley's research.

Bank of America's planned $5 fee is higher than what most other banks are testing or planning to charge. San Francisco-based Wells Fargo said it will charge a $3 fee for some debit-card customers in Nevada, Washington, Oregon, New Mexico and Georgia, starting Oct. 14. Wells Fargo's fee also applies to debit-card use, not ATM transactions.

A Wells Fargo spokeswoman said that the fee is part of a pilot program, and that the bank has not determined whether it will roll it out to all customers. Wells Fargo has said it expects to lose $250 million each quarter from the new caps on swipe fees.

J.P. Morgan has been testing a $3 fee in a small market in Wisconsin since February. SunTrust Banks Inc. has begun charging a $5 monthly fee for "unlimited debit-card purchases." The fee has been in effect since June for new customers that open an "Everyday Checking" account, and will go into effect in November for existing customers who choose that account.

Citigroup Inc. said last week it was raising fees on certain checking accounts but would not charge fees for using debit cards.

Norma Garcia, a lawyer for advocacy group Consumers Union, said she urges consumers to read their bank statements and shop around for account options if they are unhappy with new fees.
"I'm not making business decisions for BofA, but I can only say from a consumer perspective, consumers are tired of being nickel and dimed," she said.

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Top Al Qaeda Figure Killed

Al Qaeda figure Anwar al-Awlaki, one of the most wanted terrorists on a U.S. target list, has been killed in Yemen, according to a statement issued by the country's defense ministry.

Mr. Awlaki has long been at the top of the U.S. target list in Yemen. He has been accused of involvement in several terrorism incidents in the U.S. in recent years. While he wasn't a top operational leader in al Qaeda, Mr. Awlaki's U.S. roots and fluent English made him a special concern of U.S.
counterterrorism officials, who have been attempting to kill or apprehend him for several years.

Yemeni security officials told the Associated Press that there was an air strike Friday morning in the country's east, between al-Jawf and Marib regions. The officials couldn't provide more details and spoke on condition of anonymity because they aren't authorized to talk to the media. Tribal elders in the area told the AP that the air strike targeted an al Qaeda convoy in the east.

Mr. Awlaki's death would be another significant blow to al Qaeda after the death of Osama bin Laden earlier this year.

Yemen has been a growing concern for counterterrorism officials as the country has descended into chaotic factional fighting as several key groups have turned on president Ali Abdullah Saleh this year. As the fighting has continued in the capital, outlying areas have increasingly come under the sway of militant Islamist groups, including al Qaeda in the Arabian Peninsula. At the same time, counterterrorism teams have stepped up their hunt for key figures and have killed several in the past few months.

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Greek Crisis Reveals EU's Tragic Flaw

In his influential 1910 tract "The Great Illusion," the writer Norman Angell argued that nations were so financially and economically interdependent that war would damage the winner as much as the loser. Under these circumstances, he argued, no nation would be foolish enough to start one.

His analysis about the economic catastrophe of war would prove correct; his conclusion about government decision-making was tragically wrong. Four years later, the countries of Europe would join in horrific conflict.

The warnings about the economic consequences of a Greek exit from the euro zone—which could follow from a default on its debts, but isn't an inevitable consequence of one—suggest it is an outcome that rational policy makers would seek to avoid.

It would be "a financial and economic disaster not only for Greece, but also for 16 continuing euro-area member states," argued Willem Buiter, Citigroup's chief economist, in a research note this month. It would trigger "bank runs in every country deemed, by markets and investors, to be even remotely at risk of exit from the euro area." Investors and lenders to these countries would, in effect, go on strike. The effects would reverberate around the world.

Others estimate that a withdrawal by Greece or any other weak economy could cost the country 25% or more of gross domestic product in the first year. Even if a strong economy left, the price it would pay would be huge.

But if exit from the euro, at least at a time of financial panic, appears deeply undesirable, is it avoidable?
Euro-zone governments have already maneuvered themselves unwittingly into multiple feedback loops, which have increased the risks to the currency. The prospect of a Greek default is viewed as increasing the chances of others, which in turn is seen to threaten banks holding billions of dollars of government bonds. The bill for rebuilding the banks lies with already indebted governments. If confidence continues to wane, a run on a country and its banks could drive a country from the euro zone.

Financial experts argue that technical solutions still are available to stem such a panic. They involve large sums of money. The most convincing of the solutions center on two pillars: the financial strength of Germany, far and away the strongest economy in the euro zone—more so than ever now that France and its big banks have been touched by the crisis—and the European Central Bank.

Herein lies the rub. There is, with the exception of the ECB, no euro-zone organization parallel to the institutions that would address such a crisis in a nation state, nor the centralization of power to make it possible.

The European Commission, the European Union's executive arm, has little independent power because most big member states like it that way. The European Council, the collection of the 27 governments, cannot act without the agreement of most of them. The European Parliament is, well, the European Parliament.

Even when there's action, it is slow. Commission President José Manuel Barroso pointed out in his state of the European Union address this week that European democracies collectively operate at a much slower pace than financial markets.

Germany, one of the keys to resolving the crisis, is a sovereign nation, whose leader presides over a country where people increasingly object to paying the bill for what they see as other people's profligacy. In phase after phase of the debt turmoil, the difficulties of German politics have led to crisis management in a reluctant, piecemeal and incomplete fashion.

Indeed, as European democracies operate, they expose the euro's weakest links. The parliaments of Slovakia and Finland, two countries with populations of around five million people, can hold up a critical expansion of the bailout funds. Italy, the euro zone's third-largest economy, now drawn into the crisis, is run by a weak prime minister, Silvio Berlusconi, viewed with ill-disguised scorn in many euro-zone capitals.

The crisis has revealed a lack of trust among the governments and the peoples of the euro zone. The Greek government abandoned its right to trust by lying repeatedly about its economic statistics, its people the victim of stereotypes. Italy and its leader aren't trusted to act responsibly. Their euro-zone partners believe that only if the ax is hovering over these governments' necks will they submit to discipline; but the hovering ax generates angst in the financial markets.

The salutary warning of "The Great Illusion" may yet be belied by events. The one institution that economists say can step in and end the immediate panic—though not deliver the essential long-term fixes—is the ECB, which can bring unlimited funds to bear without conditions attached. It is constrained from doing so by concerns that it not be viewed as subservient to governments, that it not be seen as directly financing governments, and by worries about inflation.

Even in the rarefied world of central banking, a central bank that presides over a break-up of its own currency area would be regarded as having failed, whether or not it kept inflation below its 2% target.
Yet its incoming president, Mario Draghi, is Italian. Because of that, many ECB watchers believe he will seek to prove his inflation-fighting credentials to suspicious Germans and avoid being seen as bending the rules to help out Italy. Mr. Draghi's freedom of action may be thus constrained. His predecessor, Jean-Claude Trichet has no such restrictions. Next month, his last in office, could be worth watching.

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Consumer Comfort Gauge Drops to Second-Weakest on Record

Consumer confidence slumped last week to the second-lowest level on record as Americans grew more concerned with their financial situation and the buying climate worsened.

The Bloomberg Consumer Comfort Index dropped to minus 53 in the period ended Sept. 25 from minus 52.1 the prior week. Another report showed the economy grew at a faster pace in the second quarter than previously estimated.

The comfort gauge showed the share of households saying it was a bad time to buy needed goods and services climbed to the highest level in three years, raising the risk that the biggest part of the economy will slow heading into the holiday shopping season. A lack of jobs and growing concern that policy makers will be unable to spur the recovery may keep sentiment depressed.

“Consumers are frustrated with just about everything,” said Lindsey Piegza, an economist at FTN Financial in New York. “Not only the pace of the economic recovery, but the heightened unemployment and also the clear lack of leadership in Washington.”

Stocks rose as Germany approved changes to a European bailout fund. The Standard & Poor’s 500 Index rose 0.9 percent to 1,161.01 at 11:14 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 2.01 percent from 1.98 percent late yesterday.

More Growth

The economy grew at a 1.3 percent annual rate in the second quarter, helped by exports and spending on services, a report from the Commerce Department also showed. The revised rise in gross domestic product compares with a 1 percent gain previously calculated and followed a 0.4 percent increase in the first three months of the year.

The comfort gauge reached similar readings of minus 53 three times in the first half of 2009, when the economy was in the recession. It is surpassed only by all-time lows of minus 54 plumbed in November 2008 and again in January 2009. Sentiment among homeowners and part-time workers fell to the lowest in records dating back to 1990, while married Americans were the gloomiest in 19 years.

Company executives have also turned less optimistic. The Business Roundtable’s survey of chief executive officers showed its economic outlook index fell to 77.6 in the third quarter, the lowest reading since the last three months of 2009, from 109.9 in the previous three months, the Washington-based group said today. Readings higher than 50 are consistent with economic expansion. Survey participants reduced forecasts for growth, employment and business investment.

‘Slower’ Expansion

“We’re still in the expansion category, albeit at a slower rate,” Jim McNerney, chairman of the Business Roundtable and chief executive officer of Boeing Co. (BA), said on a conference call with reporters today. Survey results showing a deterioration in investment plans should be read as “not that it’s fallen off a cliff, rather it has moderated,” he said.

Other reports today showed fewer workers filed claims for jobless benefits last week and the number of signed contracts to buy existing homes fell in August.

Applications for jobless benefits dropped by 37,000 to 391,000, the fewest since April, a report from the Labor Department showed. An agency official said the data probably reflected a “mistiming” in the seasonal factors used to modify the figures.

Pending home sales fell 1.2 percent in August after dropping 1.3 percent the previous month, the National Association of Realtors said.

Buying Plans

Two of the comfort index’s three components declined. The measure of personal finances fell to minus 11.6 from minus 7.5. The buying climate index was minus 61, the lowest level since the aftermath of the Lehman Brothers Holdings Inc. bankruptcy in October 2008, compared with minus 59.9 the prior week. The gauge of American’s views on the economy rose to minus 86.4 from minus 88.9.

Confidence among part-time workers plunged 9.9 points to minus 72.2. The so-called underemployment rate, which includes workers who’d prefer a full-time position and people who want to work but have given up looking, rose to 16.2 in August, matching June as the highest reading this year, Labor Department figures show.

Homeowner sentiment also dropped to the lowest ever, falling to minus 49.5 from minus 47.1. Earlier this week, the S&P/Case-Shiller index of property values in 20 cities fell 4.1 percent in July from the same month in 2010. The home-price barometer has dropped for 10 consecutive months.

Shares Slump

Europe’s sovereign debt crisis and recent data showing a weakening U.S. recovery have also fueled deteriorating sentiment and sent equity markets lower. The Dow Jones Industrial Average dropped 6.4 percent last week, the worst loss since October 2008.

“Plenty of factors inform the public’s sour economic views, from gyrations in the stock market, the still-flattened housing market and declining real incomes to Washington’s games of chicken over economic remedies,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “But the chief irritant is the jobs market.”

On the political front, the outlook among registered independent voters fell to the lowest level since October 2009. Republicans’ confidence also slumped, while Democrats became less pessimistic.

President Barack Obama has been traveling the country this week to promote his $447 billion job creation plan. Speaking in Denver on Sept. 27, Obama said the nation needs to reset its priorities to assure future growth.

The president’s package includes tax cuts and spending aimed at spurring hiring to trim the nation’s 9.1 percent unemployment rate, which has restrained consumers’ spending and darkened their outlooks.

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Recovery next year for world stocks: poll

World stock markets will recover next year from a nightmarish 2011 that has wiped trillions of dollars off share prices, according to a Reuters poll that showed almost all major stock indexes ending 2011 in the red.
Darkening economic prospects and fears the euro zone debt crisis will unravel into financial catastrophe sent global stocks plummeting around 14 percent since the last quarterly poll of equity strategists in June.

Only the Dow Jones Industrial Average and South Korea's KOSPI are expected to finish the year with gains compared with 2010's closing levels, among the 19 major stock indexes covered by Reuters polls over the last week.

Still, despite the dire performance of stock markets so far this year, most respondents were stuck in their usual habit of predicting big gains, no matter what real risks face the world economy.

According to the consensus, only one index -- Taiwan's TAIEX -- is expected to finish 2011 at a significantly lower level than its close on Thursday.

The last three months have seen an enormous spike in stock market volatility, to the point that several of the survey's usual sample of around 350 analysts refused to give forecasts this time.

While analysts are waiting for clear signs either way of progress or failure in fixing the euro zone debt crisis, stalling economic growth in major Western economies will restrain share prices in coming months.

"The global slowdown will still drive economic growth and earnings lower," said Philippe Gijsels, head of research at BNP Paribas Fortis in Brussels.

"Obstacles to a new bull market are still formidable... there is a lot of political uncertainty. This will take time to clear."

World equities have already lost around $3.7 trillion dollars in market capitalization since the start of this year -- more than the nominal gross domestic product of Germany.

Even by midway through next year, analysts expect only a handful of stock indexes -- seven out of 18 -- to top their closing 2010 levels. By comparison, world stocks rose around 30 percent in 2009 and around 10 percent last year.

TOP PERFORMERS

There is at least some support for the notion that equity markets should start rising again, other than the perennial bullishness of equity market analysts.

For one thing, global shares look undervalued compared with historical averages. The MSCI World Index is currently trading a little over 10 times 12-month forward earnings, the lowest since December 2008, and considerably below the average of 14.3 over the past decade.

Investors too are entering the fourth quarter with a slightly raised exposure to shares and holding high reserves of cash that could quickly be used to fuel a stock rally, a Reuters poll showed on Thursday.

Russia's RTS index, long the darling of the poll's equity bulls, again topped the chart among indexes expected to yield the biggest returns with a 32 percent gain expected between now and mid-2012.

The Shanghai Stock Exchange should rise smartly next year after a torrid two years of heavy losses, the poll showed, while Brazil's Bovespa is expected to rally about as strongly as Russia.

"Even with the sovereign debt crisis in Europe worsening and discouraging U.S. data, we see the Brazilian economy as plenty resilient," said Paulo Esteves of Gradual Investimentos.

The survey also suggested strong gains lie ahead on some rich-world bourses, with bourses in the United States, Australia, France, Germany and Japan expected to yield double-digit returns from now until mid-2012.

"The recent sell-off in stock markets around the world, especially in Europe, has been the result of a lack of confidence, not growth," Markus Huber, head of German sales trading at ETX Capital, said.
Even so, the near-term outlook is very uncertain. The Dow Jones Industrial Average is the only dev
eloped-world index that analysts expect to finish the year in the black, with a modest gain of around 2 percent over the course of 2011.

LAGGARDS

Taiwan's TAIEX is expected to be by far the worst performing market out of the 19 indexes in the Reuters poll.

Having already lost around 20 percent of its value so far this year, analysts see the TAIEX falling a further 5 percent from now until the end of the year and almost 9 percent by mid-2012, as the tech-heavy index suffers badly from slowing exports to struggling Western economies.

The other most notable laggard was Britain's FTSE 100, one of the world's largest by capitalization, which respondents expect will register a full-year loss of around 11 percent.

The poll showed the FTSE gaining marginally between now and the end of the year, and only about 6 percent between now and mid-2012 -- considerably less than forecast for its U.S. and European peers.
"I would say that there is potential for upside on the FTSE, but I think the likelihood of any economic growth has been stunted severely by what's happening in the euro zone," said Martin Dobson, head of trading at Westhouse Securities.

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German Parliament Approves Bailout Fund's Expansion (Video)

German Chancellor Angela Merkel's fractious coalition won a brief reprieve on Thursday as lawmakers from her center-right ruling parties closed ranks after weeks of bickering to pass legislation to expand and reform the euro-zone's bailout fund without having to borrow votes from the opposition.

In the run-up to the vote Ms. Merkel faced a palace revolt of critics with her coalition determined to stop expansion of the European Financial Stability Facility, threatening to weaken her and make it more difficult for the chancellor to help resolve the euro-zone debt crisis. In the end, she received the psychologically important chancellor's majority, but Parliament gave itself veto rights over any future bailouts, tying Ms. Merkel's hands in future euro-zone negotiations.

A total of 523 lawmakers voted in favor of the EFSF reform bill, with 85 lawmakers against and three abstentions. The overall result includes the votes of the opposition Social Democrats and the environmentalist Greens, who unanimously backed the bill in stark contrast to Ms. Merkel's unruly coalition. Ms. Merkel's coalition of Christian Democrats, Bavarian Christian Social Union, and pro-business Free Democrats backed the EFSF bill with a razor-thin absolute majority of 315 votes, barely more than the 311 Ms. Merkel needed to for a government majority. Thirteen coalition lawmakers voted against the bill and two abstained.

"This is a temporary boost for Merkel's coalition, but the problems will not go away," said Moritz Schularick, an economics professor at Berlin's Free University.

The 17 euro-zone governments agreed in July to expand and reform the EFSF, boosting the lending capacity of the fund to €440 billion from €250 billion. The fund will also receive additional powers, such as the ability to extend credit lines to banks and buy bonds on the secondary market. The EFSF reform increases Germany's commitment to the fund to €211 billion from €123 billion. The temporary EFSF is set to expire in 2013 and to be replaced by a permanent European Stability Mechanism.

Ms. Merkel's problems are only just beginning. Tougher issues lie ahead, as demonstrated during a rougly two-and-a-half hour parliamentary debate. It is widely believed that the EFSF is a big step, but hardly bold enough to deal immunize Europe against the spread of financial contagion. Opposition lawmakers and coalition euro rebels pressed Finance Minister Wolfgang Schäuble to confirm speculation that the fund already needed more money, even before the ink was dry on the current legislation, and to say if it is planned to allow the fund to leverage its assets to increase its firepower. The devil is in the details of the EFSF framework guidelines, which must still be worked out.

"Nothing is being concealed or hidden," Mr. Schäuble told parliament. "Those guidelines will need the approval of the German Parliament."

"The step that we are taking now will certainly not be sufficient," said Kurt Lauk, a CDU lawmaker and head of the party's economy council. "There will be another sequel to the euro thriller."

A major question that will grip German politics soon is how to increase the firepower of the EFSF. European officials are talking about creating technical instruments that would allow the fund to leverage its cash to borrow more cash from the European Central Bank or to turn the fund into an kind of insurance company.

Germans are concerned that leveraging the fund will put their triple-A credit rating at risk. Responding to such concerns, Mr. Schäuble told FDP lawmakers in a closed-door session on Tuesday that he ruled out allowing the EFSF to borrow from the ECB, according to Otto Fricke, budget expert for the FDP.

"There are a hundred possible ways to leverage," said Mr. Fricke. "But the legislation makes it clear that there can be no additional risk. And that means that some of these leveraging ideas can be excluded because there are €211 billion plus interest, plus costs, and that's it."



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Mortgage approvals hit 20-month high

The number of new mortgages approved, but not yet lent, for home buyers in August rose to its highest level since December 2009.

The Bank of England said 52,410 mortgages were approved last month.

That was nearly three thousand more than in July, and the highest number since December 2009.
The figures suggest that a recent slight relaxation in lending criteria by banks and other lenders will lead to higher sales in the coming months.

Adrian Coles, director-general of the Building Societies Association, said: "Approval figures continue to look promising as consumers take advantage of the competitive mortgage rates."

"However, the outlook for the economy has deteriorated over the past month as has consumer confidence, which could well spill into the housing market, causing further weakness," he warned.

Lending squeeze

Average house prices have been stagnant across the UK this year, with both the Nationwide and the Halifax reporting little change in the past few months.

In its latest survey, the Nationwide said house prices had continued to "tread water" in September. House prices rose by 0.1% in the month, Nationwide said, but were 0.3% lower than a year ago.

The number of house sales fell in August, according to the Bank of England's own figures published last week.

They dropped by 6,000 from July to 78,000 in August which was, in turn, 3,000 lower than in August last year.

Approvals are traditionally a good indicator of near term trends in sales, so the latest approvals data suggests that sales funded by mortgage borrowing may pick up this autumn.

But on Wednesday the Bank of England said banks had told it they may face a renewed squeeze on their ability to lend.

In its quarterly Credit Conditions Survey, the Bank said it had been told by some big lenders that they might find increasingly hard to raise the necessary funds on the wholesale financial markets to lend to home buyers.

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IPOs Postponed at Record Pace Globally

Companies canceled or postponed $8.9 billion in initial public offerings in the third quarter as stocks plunged, putting the market on pace to set a record for pulled deals.

The value of withdrawn and delayed IPOs so far this year rose to $34 billion, approaching the $40 billion pulled in 2010, the most since Bloomberg began compiling data. Siemens AG (SIE) suspended an IPO of its Osram lighting unit, while U.S. defense equipment maker ADS Tactical Inc. and Shanghai-based Xiao Nan Guo Restaurants Holdings Ltd. abandoned offerings.

The pace of IPOs slowed as equity markets fell to the lowest level in more than a year and stock volatility surged in August to the highest since 2009. In the U.S., delays helped create the biggest backlog of IPOs since at least 2006, with 154 deals as of Sept. 20, according to Ipreo Holdings LLC.

“Issuers have learned to be more patient while looking for the right windows,” said Tim Harvey-Samuel, Citigroup Inc.’s London-based head of equity capital markets for Europe, the Middle East and Africa. “A number of transactions may slip into 2012.”

Companies completed IPOs valued at $30 billion from the start of July through yesterday, less than half the amount in the previous quarter, according to Bloomberg data. That means funds generated from IPOs this quarter will be the least in more than two years.

Dunkin’ Gains

While Dunkin’ Brands Group Inc. and Zillow Inc. completed IPOs during the quarter and have since climbed at least 40 percent, more than half of global IPOs this year are trading below their offer prices, Bloomberg data show.

“There’s no question that what has happened to the class of 2011 has impacted sentiment toward investing in IPOs,” said Mark Hantho, New York-based global co-head of equity capital markets at Deutsche Bank AG. “While there is some reluctance, I think it will recede fairly quickly, and with the right valuations on the table, people will start to play again.”

There were 366 companies planning IPOs around the world as of Sept. 20, almost double the number on file after the MSCI World Index reached a 13-year low in 2009, according to New York-based Ipreo, a capital markets data and analysis firm.

The Chicago Board Options Exchange Volatility Index, known as the VIX, surged as high as 48 on Aug. 8, more than double its average level of 18 during the first two quarters of this year.

Stock Declines
The intensifying European debt crisis and a U.S. debt- rating downgrade from Standard & Poor’s pushed the MSCI World Index this month to the lowest since last August.

“Because stocks have been marked down by a fair number of selloffs lately, the valuations at which investors are willing to accept new issues have come down,” said Dan Cummings, head of global equity capital markets at Bank of America Corp. “Sellers who want to go ahead with their offerings will be faced with the potential trade-off of a more modest valuation or a smaller-sized deal.”

Offerings in Asia provided some relief, accounting for half of funds raised globally, Bloomberg data show. Sun Art Retail Group Ltd., China’s largest hypermarket operator, raised HK$9.5 billion ($1.2 billion) in its July IPO in Hong Kong, and the shares gained 17 percent through yesterday.

Appetite for new shares in Asia got a boost from China’s economy, projected to grow twice as fast as the world as a whole in 2012, said Josef Schuster, founder of Chicago-based IPOX Schuster LLC, which oversees about $2.5 billion.

Hong Kong Leadership

“There needs to be a market which takes leadership globally, and I think it’s going to be Hong Kong,” Schuster said. “If deals there go well, that will lend more confidence to the upcoming U.S. IPOs.”

As of yesterday, Goldman Sachs Group Inc. and Morgan Stanley led underwriting of global IPOs so far this year with 6.3 percent market share each, according to Bloomberg data. Deutsche Bank was third with 6.1 percent. Globally, the largest IPO this quarter was Bankia SA, which raised 3.1 billion euros ($4.2 billion) in a July offering in Madrid.

In western Europe, at least 24 new stock sales were postponed or canceled this year, almost twice as many as a year earlier, according to data compiled by Bloomberg. Yesterday, the Spanish government pulled the IPO for state-owned lottery operator Sociedad Estatal Loterias & Apuestas del Estado SA, citing market conditions.

Europe Stalls

While the volume of IPOs completed in Europe, the Middle East and Africa this year has risen to $37 billion from $25 billion a year ago, deals stalled in August as the global economic recovery deteriorated and concern grew that Europe’s banks may need more capital.

Still, a need for funds has pushed some to brave global uncertainty. Bankia and fellow Spanish lender Banca Civica fetched about $5 billion together through IPOs in July after their country’s government pushed them to shore up capital.

The rest are staying put. While the growing pipeline means plenty of companies are ready to move forward with their IPOs once investor demand recovers, global IPOs may raise $150 billion in 2011, 36 percent less than last year, said Renaissance Capital LLC. U.S. offerings may fail to exceed the $39 billion fetched last year, according to the Greenwich, Connecticut-based IPO research and investment firm.

“There’s a huge backlog of companies that want to go public,” said Timothy Cunningham, who helps oversee about $71 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico. “The problem is that the companies want a different valuation than where the demand is. I don’t think anyone’s willing to bring it at these levels.”

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Nokia to Cut 3,500 More Jobs, Close Romanian Factory

Nokia Oyj (NOK1V) will eliminate 3,500 jobs, shut a mobile-phone factory in Romania and inject 1 billion euros ($1.4 billion) with Siemens AG (SIE) into their unprofitable network-equipment venture.

The closure of the plant in Cluj, which only began production in 2008, along with adjustments with suppliers will take out 2,200 positions, Nokia said today. The company will also reorganize its map business, cutting 1,300 jobs, and review the future of its handset plants in Finland, Hungary and Mexico.

The reductions come on top of 4,000 job cuts announced in April, mainly in research and development. Chief Executive Officer Stephen Elop is slimming Espoo, Finland-based Nokia to arrest a decline in market share to Apple Inc. and pursue faster-moving Asian competitors such as HTC Corp. that are driving the price of smartphones below $100.

“It seems there’s a shortfall in volumes compared to what the company expected last spring and now they need to adjust production to meet lower levels of demand,” said Michael Schroeder, a Helsinki-based analyst at FIM Bank.

Nokia fell as much as 2.3 percent in Helsinki and was up 0.5 percent to 4.20 euros as of 12:48 p.m. local time. Siemens added 0.1 percent to 68.93 euros in Frankfurt trading.
Preferred Shares

Nokia and Siemens will each contribute 500 million euros in cash to Nokia Siemens Networks, their 50-50 venture. The parents will get preferred stock in return, Nokia spokesman James Etheridge said by telephone.
The owners named Jesper Ovesen as the venture’s executive chairman, replacing former Nokia CEO Olli-Pekka Kallasvuo, who was non-executive chairman and is retiring from Nokia. Ovesen, 54, was chief financial officer of TDC A/S, whose private equity owners sold shares in the Danish carrier to the public last year.

It will be easier for Nokia Siemens to tap the financial markets independently once its profitability improves, Siemens spokesman Wolfram Trost said. It’s too early to speculate on a possible initial public offering and the focus now is on operational and financial improvements, he said.

Nokia Siemens, which has been unprofitable for all but one quarter since it started in April 2007, said in July that it wanted to improve its competitiveness as a standalone entity and had ended talks about a possible stake sale to private-equity investors. The venture, the second-largest maker of wireless networks after Ericsson AB, is struggling to hold onto that position as competition with China’s Huawei Technologies Co. intensifies.

Industry Outlook

“Ovesen may be able to do another successful restructuring just as he seems to have done at TDC,” said Michael Hagmann, an analyst at Nomura International Plc in London. “At the end it may take a little bit longer until demand in this industry finally improves enough for Siemens to be able to offload its stake.”

Nokia shipments of low-end phones dropped 16 percent in the second quarter. Smartphone volume fell 34 percent. The company is expected to start shipping a new line based on Microsoft Corp.’s Windows Phone by year-end.

Nokia has 10 handset factories. Three make smartphones, in Finland, China and South Korea, and one in the U.K. makes the Vertu luxury models. Low-end mobile phones are made in Brazil, Mexico, China, Romania, Hungary and India. Nokia announced plans in March to add a plant in Vietnam.

Navteq Reorganization

The company is folding its maps business Navteq, acquired for $8.1 billion in 2008, into a new location and commerce software division that will help its handsets stand out from competitors. Nokia will shutter units in Bonn and Malvern, Pennsylvania as a result.

Nokia’s smartphone market share plummeted to 20.9 percent in the second quarter from 37.4 percent a year earlier, according to researcher Gartner Inc. Its overall handset market share declined to 22.8 percent from 30.3 percent in the second quarter of 2010.

Elop has also shifted 3,000 employees to Accenture Plc (ACN) along with the Symbian operating software to make way for the adoption of Microsoft’s Windows Phone 7 and other platforms.

While factories in Asia “provide greater scale and proximity benefits,” the company is committed to keeping research and development facilities in Europe, Elop said in the statement.

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The Kremlin has castled and Putin is still king

Long live the king? You can’t hold it against the Russian people for wondering just how long Vladimir Putin intends to remain in power with the recent announcement that he plans to return himself to the presidency and swap his partner Dmitri Medvedev into the prime minister slot. The electoral game Putin is playing is being compared to “castling” in chess– a rook and a king swapping places, in order to shore up the defense.

There might be defense at the heart of the strategy, but Putin’s ruling party, United Russia, despite some recent murmurings, is still the only game in Moscow. Which is to say that Vladimir Putin is by all reckoning the most powerful man in the world. What other leader, leaving aside third-world strongmen, has so completely consolidated his rule over a country, as Putin has? His success is all the more venerable when one considers that Putin is leader of a country of nearly 150 million people — and at the helm of the one of the world’s most important economies. Attention must be paid to him. Sure, other leaders around the world may have more people or even larger economies, but they don’t have as full a grip on the reins of power as Putin.

(And few have ever been reverently photographed riding horseback shirtless, petting a tiger, or playing piano in tux and tails.)

Even with this switcheroo, little will change about Russia’s, which is to say Putin’s, stance on foreign domestic affairs. Despite years of inspired reformist speechifying from President Medvedev, little has changed in the ossified Russian bureaucracy. That speaks to his true, limited, authority. The civil service system he declaims remain inefficient and antiquated, and presents ample opportunity for the kind of low-level corruption that greases the wheels of local politics across the world. Medvedev has been a friendly face for the Western world, someone who says the right things on its grand stages; but he has had little influence, as president, over the country’s true direction. As the prime minister in waiting, look for that trend to continue.

It’s hard to believe the public pronouncements that the decision to castle was made years ago, as Putin has told the press. Medvedev’s recent statements simply don’t bear that out. Nor does the sudden ouster of Economics minister Alexei Kudrin. Kudrin was upset because he wasn’t given advance warning of the decision. That speaks volumes about who is important at the Kremlin — power there is controlled by Putin’s tiny circle and those on the periphery, titles aside, are kept completely in the dark.

Having said all this, one reason Putin’s not afraid to pull such a brazen stunt is that the swap will have little to no impact on foreign investment or the Russian domestic economy. A recent move towards an improved investment climate in Russia’s strategic sectors (facilitating, among other things, ExxonMobil’s recent mammoth joint venture with Rosneft) is the natural outcome of lower oil prices and limited inbound investment. Again, some of the signals coming out of Russia may change — Putin as president may once again show something like disinterested contempt towards the West and its demands of his regime in terms of human rights or international conventions, but as in his previous terms, such talk will be just that. The Kremlin has strategically opened itself up to smart money in foreign direct investment and will continue to let Western money in on its own terms. That won’t change.

There’s not much more else to see here from a policy perspective, or a political one. The parliamentary “elections” after all, will be between Putin’s United Russia, the ever-weakening Communist Party, and an “opposition” party that is actually financed by the Kremlin. When Putin eventually leaves the scene, which might not be for decades, the extraordinary centralization of power in his Kremlin and weakness of the bureaucracy will be a profound mess for whoever tries to succeed him. But, until that time, for any pretenders to the Russian throne, it’s checkmate.

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Sterling rises vs dlr, tracking euro gains; UK data due

Sterling rose against the dollar on Thursday, tracking gains in the euro and other riskier currencies as expectations that the German parliament would ratify the euro zone rescue fund's new powers helped lift sentiment.

Markets were cautious, however, as German Chancellor Angela Merkel may have to rely on opposition support, highlighting the political hurdles that could hinder euro zone leaders' efforts to find a solution to the region's debt crisis.

In the UK, markets will look out for second-tier UK lending data at 0830 GMT, which are expected to show a very modest rise in mortgage approvals in August.

"Firmer data will be sterling positive but these figures are not seen as important," said RBC currency strategist Adam Cole.

He added that stronger-than-expected data would have more of an impact than weaker numbers, given that the market was to some extent already pricing in the prospect of more monetary easing by the Bank of England.

"The market is focused at the moment on the degree to which Merkel has to rely on opposition support".
Sterling was up 0.55 percent against the dollar at $1.5661, with near-term resistance seen at Tuesday's high of $1.5705. Traders cited an options expiry at $1.5600 that may influence price action.

The pound stayed comfortably above its recent one-year low of $1.5326, but analysts said its scope for further gains was limited.

"Sterling/dollar is likely to break above Tuesday's high of $1.5705 and rise to the $1.5780/1.5820 resistance area before reversing downwards," technical analysts at Societe Generale said.

The trend for sterling is still seen as negative given concerns about a fragile UK economy and its vulnerability to any escalation of the euro zone debt crisis, as well as the risks of more quantitative easing from the BoE.
BoE chief economist Spencer Dale said in a newspaper interview on Thursday that the weakening of the global economy looked more persistent than first thought and more monetary stimulus may be needed if the situation worsened further.

The pound dipped against a firmer euro, with the single currency up 0.2 percent at 87.14 pence, just ahead of its 200-day moving average around 87.12 pence.

Traders said month-end and quarter-end flows may influence trading. They said market speculation of an imminent large euro sell order relating to the EU's annual farm subsidy to the UK could support the pound.
Earlier, data from mortgage lender Nationwide added to the negative picture on the UK economy, showing British house prices failed to recover from August's slide this month, due to sluggish demand for new properties and a weak jobs market. (Editing by Anna Willard)

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