Archive for the ‘ USA ’ Category

Dollar increases on Fed rate rise bets

Warren Buffett: U.S. Federal Reserve is the ‘biggest hedge fund in history’

Equities are calm, taking in their stride the US central bank’s confirmation it is finishing the third multibillion-dollar asset purchase programme, or QE3, that many investors considered a crucial support for stock markets.

Gold is falling and short-term US bond borrowing costs are holding at three-week highs as traders bet the Federal Reserve may start raising interest rates sooner than the market had expected. The FTSE Eurofirst 300 is opening up 0.5 per cent and US index futures indicate the S&P 500 will add 2 points to 1,984, in line to leave Wall Street’s benchmark less than 1.5 per cent shy of its record close hit in September.

As the two-day meeting came to a conclusion last Wednesday, the Federal Open Market Committee not only announced the end of QE3 but also highlighted an improvement in the US labour market and gave itself room to raise rates if the country’s economy grows faster than it expects.

“The gradual Fed normalisation is a result of a strengthening economy,” said Gary Yau of Crédit Agricole.

But the Fed’s comments also have been deemed slightly more aggressive than investors had forecast, causing analysts to reconsider the timing for when US interest rates will start rising from record lows.

“With the rates market fully priced for October 2015 as the first Fed Funds hike, we expect this in part to be brought forward should US data remain on trend,” said Richard Cochinos, CitiFX G10 strategist.

“What has tripped the markets is the fact that there was no mention by the FOMC of recent financial volatility and no concern about the weakness of market inflation expectations,” said Lena Komileva, chief economist at G+ Economics.

“The Fed is clearly more confident about economic risks than investors are, which will add a risk premium to the market price of liquidity and volatility, via a stronger dollar and higher US rates,” she added.

Indeed, US bond prices took a dive in the wake of the Fed statement and those levels are mostly being held on Thursday. The US 10-year yield, which moves inversely to the price, is 1 basis point softer at 2.31 per cent and the more policy-sensitive 2-year yield is barely changed at 0.49 per cent, the highest in three weeks.

The dollar is stronger in response, its trade-weighted index up another 0.4 per cent to 86.24, placing it about 0.5 per cent below its highest level since June 2010.

Oil, gold hit multi-month peak

Oil, gold hit multi-month peak.

The prices of oil and gold have been pushed to multi-month highs over concerns that the US will lead a military strike against the Syrian government.

Brent crude prices advanced 2.4% to a six-month high of $117.14 a barrel, extending Tuesday’s 3.3% surge – the biggest one-day percentage gain in nearly 10 months.

Gold climbed 0.8% to a more than three-month high after also gaining 0.8% on Tuesday.

But while the prices of oil and gold rose to their highest in several months, Asian equities fell to a seven-week low. An acute ‘risk-off’ mode also boosted the appeal of the Japanese yen, which held near a one-week high against the dollar and euro after having posted its biggest rally in more than two months.

Tokyo’s Nikkei share average sagged as much as 2.6% to a two-month low, while the yen was largely steady at 97.120 to the dollar and 129.90 to the euro after climbing more than 1% overnight.

US and European stocks were also impacted overnight, suffering their worst day since June. Investor nervousness was reflected in a nearly 12 percent jump on the CBOE volatility index, Wall Street’s so-called fear gauge, to a two-month high.

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US will reach debt limit in October

US will reach debt limit in October.

US Treasury Secretary Jack Lew is reminding policy makers that the clock is ticking – the US will reach its debt limit by mid-October and Congress needs to act quickly.

Jack Lew claims that failure to act soon could result in significant disruptions to US economy, the largest economy on the world. If the debt ceiling is reached, the US Government can no longer borrow money and as such, it will be unable to meet obligations such as pensions, military salaries and Medicare payments.

In a letter to House Speaker, Lew said that “Extraordinary measures are projected to be exhausted in the middle of October”. At that point, the US will have reached the limit of its borrowing authority, and Treasury would be left to fund the government with only the cash it has on hand on any given day, he added.

This would place the United States in ‘an unacceptable position’, according to Lew. Such a scenario could undermine financial markets and result in significant disruptions to the economy.

In recent years, there have been tense debates between the White House and congressional Republicans over the government’s debt ceiling, spending cuts, and other fiscal matters. In January, the debt ceiling was last raised to $16.7 trillion.

In August 2011, the Republicans and the Democrats took a hard line while debating raising the borrowing limits. However, then they reached a compromise on the day the Government’s debt ceiling was due to be breached. The compromise included a series of automatic budget cuts known as the ‘sequester’ which came into affect earlier this year.

At that time, the delay in reaching a deal led ratings agency Standard & Poor’s to downgrade the US for the first time ever, which sparked volatility in the financial markets.

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Google buys Glass patent for iconic tech eyewear

Google buys Glass patent for iconic tech eyewear.

Tech geeks may not need to wait much longer for futuristic eyewear, as Google has just confirmed that it has bought technology patents from Foxconn, the maker of glass eyewear.

Google Glass, which has yet to go on sale to the public, allows users to see information on a transparent screen slightly above their normal field of vision.The patents were related to the displays, through which virtual images can be superimposed on a real-world view.

In an obvious attempt to kick-start start its venture into wearable gadgets, the deal marks a rare example of a US technology company buying intellectual property from an Asian manufacturer.

Google Glass is currently only available to developers and costs $1500. It provides users with an image that floats in front of the right eye and has a 5-megapixel camera capable of recording 720p video built-in, a microphone for voice commands and 12GB of usable storage. Google Glass supports Bluetooth and Wi-Fi, but works best in partnership with an Android or iOS smartphone.

Meanwhile, Apple has not yet announced plans for wearable technology products.

However, Analysts in the field suggest that growth of wearable technology may lead to a spate of patent litigation, similar to that which has dominated the smartphone industry in recent years.

Foxconn said that such patents are ‘commonly used in aviation and tactical/ground displays, engineering and scientific design applications, gaming and video devices as well as training and simulation tools’.

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New York threatens to suspend driving license if tax is not paid

New York threatens to suspend driving license if tax is not paid.

New York threatens to suspend driving license if tax is not paid

The New York Governor Andrew Cuomo made headlines this week as he introduced a new measure to encourage individuals who owe tax to pay their bills – by suspending their driving licences when their past-due tax liability exceeds $10,000.

The legislation forms part of the state department’s executive budget that was signed into law earlier this year.

Governor Cuomo said in a statement that the message is simple: ‘tax scofflaws who don’t abide by the same rules as everyone else are not entitled to the same privileges as everyone else’.

He further explained that, “These worst offenders are putting an unfair burden on the overwhelming majority of New Yorkers who are hardworking, law-abiding taxpayers. By enacting these additional consequences, we’re providing additional incentives for the state to receive the money it is owed and we’re keeping scofflaws off the very roads they refuse to pay their fair share to maintain”.

The new tax crackdown is estimated to increase state collections by $26 million this fiscal year and as much as $6 million annually after that.

Interestingly, in New York, 96% of taxes are paid by businesses and individuals who voluntarily meet their tax responsibilities – the remaining 4% is collected through the tax department’s audit, collections and criminal investigations programs.

The New York tax department will send the first round of 16,000 suspension notices, who have 60 days from the mailing date to arrange payment with the department.

If the taxpayer fails to do so, the Department of Motor Vehicles will send a second letter providing an additional 15 days to respond. If the delinquent taxpayer again fails to arrange payment, the license will be suspended until the debt is paid or a payment plan is established.

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Sony turns down Loeb offer to sell off entertainment arm

Sony turns down Loeb offer to sell off entertainment arm.

Sony turned down a proposal by one of its biggest shareholders, hedge fund Third Point, to sell off part of its entertainment division.

The founder of the fund Daniel Loeb had called for cash from the move to be used to boost Sony’s electronics arm.
However, Sony said that the company and its shareholders would benefit from “owning all, rather than a part” of the division as demand for entertainment content increased in value across different platforms.

After Loeb’s proposal was rejected, Sony’s shares fell as much as 5%.
Mr Loeb’s fund, which owns nearly 7% of Sony’s shares, said that it would continue to carry out dialogue with Sony’s management and explore further options with the company.

Earlier this month, Sony reported a jump in earnings for the April-to-June quarter. It made a net profit of 3.5bn yen ($35m; £23m) in the quarter, reversing a loss of 24.6bn yen last year. Its Pictures division made a profit of 3.7bn yen during the period, reversing a loss of 4.9bn yen last year, while its music unit saw its operating profit rise to 10.8bn yen, from 7.3bn yen a year earlier.

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