Euro banking deal fails to impress markets

LONDON (AP) -- A sketchy agreement on how to create a single European banking supervisor failed to impress markets on Friday, with stocks drifting lower ahead of another round of U.S. corporate earnings statements and after a shock trading update from Google.

On Thursday, Google surprised investors by publishing by mistake its worse-than-expected earnings ahead of schedule. After billions were wiped off the internet giant's market value, the company suspended trading in its shares.

Microsoft also disappointed with its latest update, contributing to a broad retreat in technology stocks. "After what had started to look like a relatively upbeat season, investors are now looking a little more wary," said Fawad Razaqzada, market strategist at GFT Markets.

Highlights later include earnings reports from McDonald's, General Electric and Honeywell.
By mid-morning in Europe, Germany's DAX was down 0.3 percent at 7,412 while the CAC-40 in France fell 0.2 percent to 3,527. The FTSE 100 index of leading British shares as flat at 5,918.

Wall Street was poised for a subdued opening with both Dow futures and the broader S&P 500 futures down 0.1 percent.

An agreement early Friday by the leaders of the 17 euro countries to push ahead with a single banking supervisory body failed to support markets. The leaders remained vague on key details, such as when the supervisor will be up and running.

Some investors and analysts worry that Europe's politicians may have lost the incentive to fix things quickly now that market turmoil has subsided. The borrowing costs of countries like Spain have eased since the European Central Bank unveiled in September a new bond-buying program.

"Europe's politicians seem to have kicked things into the long grass for a few more months as they fail to agree on steps towards banking supervision or closer integration," said Rebecca O'Keeffe, head of investment at Interactive Investor. "As interest rates continue to fall, so the need to act decisively diminishes."

Read the rest here!

Government of Canada introduces payments code of conduct addendum that anticipates smart phone apps, but potentially at the cost of less product innovation

The Government of Canada is being quite proactive in consideration of payment regulation.  The code of conduct released in 2010 has been overtaken by introduction of apps that incorporate payments into smart phones, and the government have issued this addendum in that light.  However the approach risks being to product centric versus focussing on their mandate which is consumer protection.

CONSULTATION PAPER: ADDENDUM TO THE CODE OF CONDUCT FOR THE CREDIT AND DEBIT CARD INDUSTRY IN CANADA TO ADDRESS MOBILE PAYMENTS | 

Department of Finance Canada

The Code of Conduct for the Credit and Debit Card Industry in Canada (the Code) came into effect in August 2010 and covers several methods for making payments, including point-of-sale, internet and telephone. The Code does not explicitly address mobile payments transactions.

One situation in particular is dealt with in Element 8 but also seems to apply broadly throughout, requires that debit and credit cannot reside on the same card.  The addendum recognises this makes no sense for smart phones with a debit app and a credit app on the same device, albeit separate apps.  Protection is provided in the addendum to ensure consumers are still able to make choices about what they accept and what they pay for, notwithstanding the apps are on the same device.

However the original intent to keep debit and credit separate is unclear.  The original code of conduct, Element 8 states (emphasis mine); 8.  Payment card network rules will ensure that debit and credit card functions shall not co-reside on the same payment card.

Debit and credit cards have very distinct characteristics, such as providing access to a deposit account or a credit card account.  These accounts have specific provisions and fees attached to them.  Given the specific features associated with debit and credit cards, and their corresponding accounts, such cards shall be issued as separate payment cards.  

Consumer confusion would be minimized by not allowing debit and credit card functions to co-reside on the same payment card.

Read the rest here! 

Steve Jobs, A Year Later

Steve Jobs, A Year LaterCredit to  JOHN BIGGS 

One year later we can’t forget him. It wasn’t supposed to be this way. He made computers and phones and MP3 players. He wasn’t a political figure, a missionary, a healer. He was a guy who knew how to put software into hardware and make the whole as desirable to many as air. 

The stories of great men are often intertwined. The great clockmakers of the 1700s all lived together and worked together on the same block, their shops open on the Place Dauphine, a triangular park at the prow of the Île de la Cité. The geniuses of Bletchley Park came together to crack the codes that won the war. The Beats roared through the country looking for love, booze, and enlightenment. 

Their fates, the fates of Breguet, Turing, Kerouac, Ginsberg, depended on their networks the way a spider depends on her web. Jobs was the same. He grew up in a time that was best for what he did. He was born and came of age in an era that led him to see the promise in a bag of microprocessors and cold silicon, but wasn’t born so late as to misunderstand the change that swept through America in the 1960s and left its waterline high on the entrenched establishment. He grew up near Woz, near H-P, near the Homebrew Computer Club, near the cauldron of education, commerce, and risk that, in turn, grew up to become Silicon Valley.

Read the rest here!

Google celebrates 14th birthday with animated chocolate cake (by Dara Kerr of Cnet)

Let Google eat cake. Today, the Web giant turns 14 years old, and to celebrate, it's serving up an animated chocolate cake filled with Google-colored candles on its homepage.

It seems like just yesterday that the tech company was born, and now it's old enough to go to high school.

Last year when Google officially became a teenager, it celebrated with a doodle that showed a cake, some balloons, candles, and a few party hats -- but it wasn't animated. Apparently, this year it has upped its sophistication.

Google Doodles are an integral part of the company's Web design. It has made drawings for Pac-Man's anniversary, Einstein's birthday, the World Cup, the Fourth of July, Persian New Year, the Olympics, U.S. elections, and just about everything in between. The doodlers are Google's band of artists who have the job of translating special events into colorful, whimsical versions of Google's corporate logo.

Now that Google is 14, let's hope that going forward it doesn't turn into one of those rebellious teens.

Battered Dollar Slides to Four Month Lows Vs. Euro

Battered Dollar Slides to Four Month Lows Vs. Euro By: Reuters

The dollar fell against most currencies on Friday, hitting a four-month low versus the euro, a day after the Federal Reserve announced a fresh round of monetary stimulus to boost a still lackluster U.S. economy. 

Despite the move away from the safe-haven dollar, the yen fell broadly on speculation Japanese authorities could intervene to cap its recent gains against the dollar. Expectations that the Bank of Japan could ease policy next week in response to the Fed's action will also likely undermine the yen, some traders said.

The dollar [JPY=  78.21    0.73  (+0.94%)   ] rose 0.9 percent against the yen to 78.15 yen. Commodity currencies including the Australian and Canadian dollars also rallied against the greenback, pushing the dollar index to 78.729, its lowest level in more than four months.

Some market players said the Fed's announcement on Thursday that it will pump $40 billion a month into the U.S. economy until the jobs market shows a sustained upturn, along with the European Central Bank's plan agreed last week to lower peripheral euro zone borrowing costs, could see an the euro extend its rally toward $1.35 in the near term.

"Recent moves by both the Fed and the ECB to bolster growth have helped usher in a wave of risk-taking which has seen demand for lower-yielding, safer investments such as the dollar evaporate," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

The euro [EUR=  1.3138    0.015  (+1.15%)   ] hit a peak of $1.3120 and was last at $1.3099, up 0.8 percent on the day, as a drop in peripheral bond yields prompted investors to buy the currency. The euro rose to an eight-month high against theSwiss franc [EURCHF=  1.2157    0.0007  (+0.06%)   ] of 1.2178 francs on trading platform EBS and hit a four-month high against the yen of 102.37 yen [EURJPY= 102.77    2.13  (+2.12%)   ].

The dollar [CHF=  0.9252    -0.0097  (-1.04%)   ] fell to 0.9265 Swiss francs, its lowest level since mid-May. The Australian dollar [AUD=  1.0557    0.0016  (+0.15%)  ] hit a one-month high of US$1.0605 as riskier assets rallied. Risk-taking was also helped by better-than-expected U.S. retail sales last month, which rose 0.9 percent, the largest gain since February.

Chart of the Day: The drain on Spain...

Credit: Mike Foster / Financial Times

Whisper it softly, but accelerating capital flows out of southern Europe probably gave Mario Draghi all the excuse he needed to authorise the European Central Bank’s use of unlimited monetary firepower to purchase stressed sovereign bonds in the eurozone.

Darren Williams, senior European economist at asset manager AllianceBernstein, has pointed out in his latest strategy note that this year Spain alone has suffered a €220bn capital outflow.

Of this total, €84bn comprised the sale of Spanish securities by foreigners; €91bn was withdrawn from loans or deposits by overseas banks, and banks in Spain shifted a further €61bn.

The sums involved are equal to 41% of Spain’s gross domestic product, seriously eroding the cumulative inflows Spain has enjoyed since 1999, as the attached graph illustrates. Spain was heavily depended on inflows prior to the credit crisis to pay its way in the world. To make good the loss, the Bank of Spain has been forced to borrow €237bn. Private sector risk has shifted decisively onto the public sector balance sheet.

The terrible thing about capital flight is that it almost invariably accelerates unless action is taken to restore confidence. Which was why the UK government had to step in to rescue Northern Rock as soon as customers started queueing to withdraw funds. And so on, and so forth.

As Williams says: “It is hard to see how policymakers can prevent past capital flows into Spain from reversing and spilling onto their own balance sheets, except by soothing investor concerns. Perhaps this is one reason the ECB is now ready to intervene more aggressively."

Q&A: Spain's banking bailout

Is this a bailout of Spain?

Mariano Rajoy is determined to portray the €100bn as a cash injection for Spain's banks and not a bailout of his country. However, the funds are being made available because Spain cannot afford to prop up its banks with its existing resources and its cost of borrowing on the markets is too high to raise the funds. Jonathan Loynes, chief European economist at Capital Economics, reckons Spain will need more help. "The poor economic outlook will also maintain concerns that Spain will at some point require a government bailout too," Loynes said.

Who is providing the €100bn?

The cash-strapped eurozone nations themselves, although details are hazy as there are two bailout funds: the existing European Financial Stability Fund, and the European Stability Mechanism, which launches next month. If Spain borrows money from the ESM it has to repay these loans ahead of its bond holders, making the markets less willing to lend to Spain. The EFSF allows Spain to honour its own debts first. On Monday an EU official told Reuters the EFSF would provide the cash but these could be transferred to ESM at a later stage – crucially without the requirement that Spain repay its eurozone debts first.

How does the Spanish government get the money?

It will be handed to the government's Fund for Orderly Bank Restructuring which passes it on to the banks. But this does not insulate the public purse from the bailout as Spain's public debt to GDP ratio will rise from 68.5% to a potential 90%.

How does the bailout differ from the rescue of Greece, Portugal and Ireland?

The money is only coming from the euro area and not from the IMF (which includes contributions from the UK) and is just for the banks. There is also much debate about the lack of fresh austerity measures being imposed on the Spanish government, which argues that it has already embarked on tough budgetary measures. Unlike in Greece, losses have not been imposed on holders of Greek government debt although it is not yet clear what the impact will be on holders of bonds issued by Spanish banks.

Does this mean Spain will not be subjected to supervision from the so-called troika – the IMF, EC and ECB?

Spain reckons not. But the IMF and EU officials think otherwise. EU competition commissioner Joaquin Almunia said the IMF would be involved, while Germany's finance minister Wolfgang Schauble said there would be a supervision programme. Amid the confusion, it appears that the supervision focus on restructuring the banks – rather than the economy as has been the case with the other three countries. In other bank rescues the EU has imposed conditions to prevent dividend payments and force big reductions in the size of banks.

Where does this leave the eurozone?

The bank bailout for Spain is a sticking plaster and does nothing to solve the long-term issues about stronger fiscal union. Italian bond yields have started to rise and Cyprus may soon need international help. On the positive side, the absence of extra austerity may indicate that politicians are coming round to the view that it has been ineffective. A new government in Athens on Sunday night may feel empowered to renegotiate more relaxed terms for its bailout – a move that might help keep Greece inside the eurozone.

Read more about this here The Guardian!