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Banks tighten loan standards, see more coming: ECB - (www.reuters.com) Banks began early repayment
of crisis funds to the European Central Bank on Wednesday, shrinking the ECB's
balance sheet while the world's other big central banks are still spending to
support their economies. Combined with lackluster demand for weekly funding, it
helped boost the euro to its highest level against the dollar since November
2011. An ECB survey separately showed that banks' access to market funding
improved in recent months following the ECB's pledge to do what it takes to
preserve the euro and the launch of a new bond purchase program. However, new
capital requirements and financial regulation led them to toughen loan
standards.
Writedowns Near $50 Billion as M&A Haunts Mine CEOs:
Commodities - (www.bloomberg.com) The
world’s biggest mining and steel companies have wiped about $50 billion off
project valuations in the past year and the purge is poised to continue this
earnings season as managers reassess expensive takeovers. Anglo American
Plc (AAL), Vale SA (VALE3) and Rio Tinto Group
(RIO) led the writedowns as declining metal prices, rising project
costs and slowing demand forced reviews. Glencore
International Plc (GLEN) may write down some nickel and copper assets
acquired through its takeover of Xstrata Plc
(XTA), Liberum Capital Ltd. has said. BHP Billiton
Ltd. (BHP) may trim aluminum operation valuations, according to
Goldman Sachs Group Inc. and Sanford C. Bernstein Ltd.
Analysis: Pall of bank "legacy assets" hangs over
euro zone - (www.reuters.com) In September last year, at a
below-the-radar meeting in Helsinki, three euro zone finance ministers came up with a two-word
phrase that sounded harmless at the time but has since troubled European
leaders a great deal. Banks' "legacy assets" sound
innocent enough but in the context of Europe's debt crisis, and particularly
for Ireland and
Spain, the question of how to deal with existing bad debts is a time bomb that
has not been defused. In the months since the term entered the EU's lexicon,
efforts have been made to parse it or play it down. But those that came up with
it -- the finance ministers of Finland, Germanyand the Netherlands -- appear
determined to keep it alive, and until June 2013, the deadline leaders have set
themselves to resolve it, the issue will fuel uncertainty.
Spain Recession Deepens More Than Forecast Amid Austerity -
(www.bloomberg.com) Spain’s recession deepened more than
economists forecast in the fourth quarter as the government’s struggle to rein
in the euro region’s second-largest budget
deficit weighed on domestic demand. Gross domestic product fell 0.7
percent in the three months through December from the previous quarter, when it
declined 0.3 percent, the Madrid-based National Statistics Institute said today. That’s more than the 0.6
percent contraction the Bank of Spain predicted on Jan. 23. GDP dropped 1.8
percent in the fourth quarter from a year earlier and 1.37 percent in the full
year from 2011, INE said. The European Commission this week signaled it may
recommend easing Spain’s budget goals for the fourth time in a year as
unemployment in the euro region’s fourth-largest economy rose to a record 26
percent at the end of Prime Minister Mariano
Rajoy’s first year in power.
Fed Risks Losses From Bonds - (online.wsj.com) The Federal Reserve could be
charting a course that leaves the highly profitable central bank with no extra
income to hand over to the U.S. Treasury for several years. That is the conclusion of five Fed staff
economists who examined how the central bank's bond-buying
programs will affect its profitability over the long run. Right now the Fed is earning large returns on its
bond portfolio and sending most of its profits to the Treasury. Several years
from now, when the economy is stronger, the Fed is expected to sell bonds and
raise short-term interest rates to tighten credit and restrain inflation. The
group found the Fed might have to sell bonds at a loss and incur higher
expenses on interest it pays to banks on the reserves they hold at the Fed.
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