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Gold turns lower as wider markets slide
Gold Bars
(Updates prices)
* Gold surrenders gains, succumbs to pressure from falling stocks
* Dollar firms against currency basket, other commodities fall
* Platinum widens discount to gold to nearly $200/oz
By Jan Harvey
LONDON, Oct 4 (Reuters) - Gold prices turned lower on Tuesday, surrendering early gains as it was caught up in hefty losses across the financial markets due to heightened concerns over the prospect of a Greek default.
U.S. stocks dropped around 2 percent and European shares by 3.2 percent, while oil slid by more than $2 a barrel and industrial metals such as copper and nickel fell on growing fears the euro zone sovereign debt crisis could spread to banks.
Spot gold was down 0.7 percent at $1,645.90 an ounce at 1413 GMT, having earlier risen as high as $1,678 an ounce.
Investors remained wary towards gold after it was caught up in a financial market rout in late September, which led to heavy selling of the metal to cover losses elsewhere. Prices fell 20 percent from a record $1,920.30 hit early in the month.
" Against a sea of red, (gold) probably will continue to struggle as its safe-haven (appeal) has been somewhat put into question over the last month," said Saxo Bank senior manager Ole Hansen.
" Further losses on the S& P, which are now likely considering how we are testing recent lows, could trigger additional long liquidation of profitable positions," he added.
" Gold has done pretty well considering the continued dollar strength," he added. " But it is probably also clear that following a $300 dollar correction, many are a bit hesitant jumping back in."
European shares took a hit on Tuesday on fears Franco-Belgian bank Dexia may need to be rescued due to its exposure to Greek debt. Investors fear this is evidence that banks will be hit hard by the euro zone debt crisis.
European finance ministers are considering making banks take bigger losses on Greek debt and have postponed a vital aid payment to Athens until mid-November. The STOXX Europe 600 Banking Index is down nearly 5 percent.
Despite putting in its weakest performance in nearly three years in September, gold still managed to deliver its biggest quarterly gain of 2011 in the third quarter and is up more than 15 percent so far this year.
This is even after some gains in the dollar, which has inched up 1.1 percent this year versus the euro. Gold is usually pressured by a stronger dollar, which makes it more expensive for other currency holders.
U.S. gold futures < GCv1> for December delivery were down $11.50 an ounce at $1,646.40.
DRIVEN BY RATES
Goldman Sachs reiterated its 12-month gold price target of $1,860 an ounce, while cutting its 2012 forecasts for oil and copper prices.
" As we expect gold prices will continue to be driven in large measure by the evolution of U.S. real interest rates, and with our U.S. economic outlook pointing for continued low levels of U.S. real rates in 2012, we continue to recommend long trading positions," it said.
Credit Suisse also raised its 2012 gold price forecast to $1,850 an ounce, saying the metal, as a clear beneficiary of the uncertainty and dislocations in financial markets, has further upside with the crises set to continue.
Silver was down 0.7 percent at $30.14 an ounce. Platinum was down 1.6 percent at $1,473.99 an ounce, while palladium was down 0.2 percent at $578.97.
Platinum widened its discount to gold to nearly $200 an ounce in earlier trade, an unprecedented level, while the gold:platinum ratio -- the number of platinum ounces needed to buy an ounce of gold -- rose to 1.13, its highest since Reuters data began.
Platinum prices were hurt by a 29 percent hike in CME Group trading margins on platinum futures, as the biggest operator of U.S. futures exchanges moved to tame market volatility.
" Major automakers posted double-digit percentage U.S. sales gains for September ... (but) September car sales in Italy and France were weak, offsetting gains in Germany," said HSBC.
" More than half of annual platinum and palladium demand is from the auto sector, where it is a necessary component in the production of catalytic converters and particulate filters." (Reporting by Jan Harvey Editing by Jane Baird)
U.S. recovery " close to faltering" , Fed could act
* Bernanke tells Congress U.S. recovery close to faltering
* Weak U.S. jobs market biggest factor hurting confidence
* Lawmakers should avoid fiscal cuts that hurt growth
* Europe's financial strains pose ongoing risk
* Distressed housing, tight credit still restrain recovery (Adds background, details, byline)
By Pedro da Costa and Mark Felsenthal
WASHINGTON, Oct 4 (Reuters) - The Federal Reserve is prepared to take further steps to help an economic recovery that is " close to faltering" , Fed Chairman Ben Bernanke said on Tuesday.
Citing anemic employment, depressed confidence and financial risks from Europe, Bernanke urged lawmakers not to cut spending too quickly in the short term even as they grapple with trimming the long-run budget deficit.
He also made clear the Fed -- the U.S. central bank -- stands ready to ease monetary conditions further following its launch of a new stimulus measure in September.
" The (Fed's policy-setting Open Market) Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability," Bernanke told the Joint Economic Committee of Congress.
His language was the firmest indication yet that the Fed may take further steps to prevent a weakening U.S. economy from stumbling back into recession. Financial analysts over the past week increasingly have warned that economic contraction is a considerable and mounting risk.
The prospect of further Fed support for the economy provided support to U.S. stocks < .SPX> , which pared earlier losses sustained on the darkening outlook in Europe amid fears of a Greek default.
FISCAL WARNING
Bernanke said government belt-tightening was likely to prove a significant drag on the world's largest economy, which averaged less than 1 percent annualized growth in the first half of the year.
" An important objective is to avoid fiscal actions that could impede the ongoing economic recovery," he said,
Bernanke said Europe's debt crisis poses 'ongoing risks' to U.S. economic growth, saying they had already dampened the mood of households and businesses.
Stressing that higher inflation earlier in the year had not become ingrained in the economy, Bernanke argued price pressures will remain subdued for the foreseeable future.
That backdrop made it easier for the Fed to launch a fresh monetary easing effort in September, when it announced it would be selling $400 billion in short-term Treasuries and use the proceeds to buy longer-dated ones.
Bernanke estimated the new policy would lower long-term interest rates by about 0.20 percentage point, which he said was roughly equivalent to a half percentage point reduction in the benchmark federal funds rate.
He said the action is significant but not a game changer.
" We think this is a meaningful but not an enormous support to the economy. I think it provides some additional monetary accommodation, it should help somewhat on job creation and growth. It's particularly important now the economy is close -- the recovery is close -- to faltering. We need to make sure that the recovery continues and doesn't drop back and the unemployment rate continues to fall downward.
A depressed housing sector and tight credit are other factors preventing a more robust expansion, Bernanke said, while offering little hope for improvement in employment.
" Recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead," he told the Joint Economic Committee of Congress.
The policy is expected to have a dampening effect on long-term rates, stimulating lending and investment. However, many economists doubts its effectiveness, arguing that the key underlying problem is low demand rather than a lack of credit.
In response to the financial crisis and recession of 2008-2009, the Fed slashed interest rates to effectively zero and more than tripled the size of its balance sheet to a record $2.9 trillion. (Editing by James Dalgleish)
Bernanke Calms Markets with Hint of QE3
For the past year, in my mind it’s only been a matter of when, not if. It appears the groundwork for QE3 slowly begins today. Ben says there are no inflation issues, hence it’s good to go on more easing.
“The Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability,” Bernanke said.
Stressing that higher inflation earlier in the year had not become ingrained in the economy, Bernanke argued price pressures will remain subdued for the foreseeable future.
“Bernanke is not saying anything that we haven’t heard recently,” notes David Ader at CRT Capital, but the idea of being “prepared to take further action can only mean QE3,” which means bulking up the Fed’s balance sheet…
Pavlov dogs are responding accordingly with the NASDAQ now in the green. They never change their stripes.
It is amazing how drug dependent we now are. If you look at the time frames the past 2+ years there has been no QE, the market has been in almost constant freefall. When QE is on, we celebrate like its 1999.
In an unrelated note – he did not apologize for being completely wrong with his ‘transitory’ comments this spring, as it related to the slowdown. He also did not say oops on how badly off the Fed economic forecasts have been (yet again). Because he is accountable to no one.
Operation Twist May Be a Primer for QE3
Tuesday, 04 Oct 2011 09:12 AM
By Axel Merk
Read more on Newsmax.com:
Operation Twist May Be a Primer for QE3 Important: Do You Support Pres. Obama's Re-Election?
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Is Operation Twist a failure?
The stock market plunged in disappointment when it was announced. Keynesians are tearing their hair out in frustration, as it appears the Fed failed to ramp up the printing press.
Free marketers are disgusted by the blatant manipulation of the yield curve. A number of Federal Reserve (Fed) President Bernanke’s colleagues dissented and/or are voicing public opposition.
However, as the dust settles, it appears there is a method to the twist: Bernanke may have a plan…
To understand where we may be heading, let’s look at where we have come from. Below is a graphical depiction of the Federal Reserve’s holdings of Treasury securities on its balance sheet the different colors represent the evolving composition of the maturity of assets held by the Fed:
Story Continues Below Chart.
Click on Chart to Enlarge.One does not need to be an economist to see that the Fed has already been “twisting” its holdings of Treasury securities. It used to be that over 50 percent of Treasurys held by the Fed had a maturity of less than a year. That portion has already shrunk dramatically. Operation Twist is going to focus on the purple shading, replacing many of these securities with longer-dated ones. Differently said, Operation Twist really is nothing new, but an extension and expansion of policies in place since 2008.
Indeed, Bernanke has a playbook, hiding in plain sight: in his 2002 speech that earned Bernanke his nickname as “Helicopter Ben,” he laid out his plan when faced with the threat of deflation. Whereas his predecessor Paul Volcker took years to convince the markets that the Fed was serious about fighting inflation, Bernanke appears to be relentless in trying to convince the markets that deflation is not going to happen in his back yard. But why not simply print more money as the economy has slowed (engage in “QE3”)?
It looks like Bernanke at least wants to maintain the appearance of keeping long-term inflation expectations low. Earlier this year, Bernanke complained a few times that the risk-reward ratio of another round of easing is not all that clear. Well, how about making it clearer, by:
• First crushing the short end of the yield curve by committing to keep interest rates low until the middle of 2013.
• Then lower long-term interest rates by initiating “Operation Twist,” the selling of short-term securities by the Fed in the billions, then reinvesting the proceeds in long-term securities.
Add to that overall gloomy economic data, and conditions may be ripe for inflation expectations, as priced into bond price differential with and without inflation protection, to drop. Sure enough, that is exactly what has been playing out the chart below depicts inflation expectations over a nine year period, beginning one year from today (referred to as “forward” inflation expectations, as it filters out inflation expectations over the short-term this approach helps adjust for inflation shocks that may be presumed to be transitory in nature).
Story Continues Below Chart.
Click on Chart to Enlarge.
What this chart shows is that recent communication and action by the Fed may have contributed to an environment closer to where Bernanke would like to see: with inflation expectations low, Bernanke is back in familiar territory, able to print more money. A reason why the Fed first needed to set the stage is because the Federal Open Market Committee (FOMC) has a couple of outspoken hawks that, as we have alluded to, are not afraid to voice their dissent:
Story Continues Below Chart.
Click on Chart to Enlarge.
Incidentally, the 2012 FOMC composition reflects that hawks are snowbirds only one hawk will remain. A stranded hawk may be noisy (dissent and speak out), but might stand little chance against a flight of doves:
Let us review the Bernanke playbook all quotes below are taken from his 2002 speech:
Bernanke is determined
• “First, the Fed should try to preserve a buffer zone”, i.e. an implicit or explicit inflation target between 1 and 3 percent.
• “Second, the Fed should take most seriously … its responsibility to ensure financial stability.”
• “Third, …the central bank should act more preemptively and more aggressively…”
Bernanke on Operation Twist:
• “One relatively straightforward extension of current procedures would be to try to stimulate spending by lowering rates further out along the Treasury term structure – that is, rates on government bonds of longer maturities.”
• “I personally prefer…for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years)."
• “The Fed might next consider attempting to influence directly the yields on privately issued securities…the Fed to offer fixed-term loans to banks at low or zero interest, with a wide range of private assets (including, among others, corporate bonds, commercial paper, bank loans, and mortgages) deemed eligible as collateral. "
Bernanke may want a weaker dollar:
• “U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press…that allows it to produce as many U.S. dollar as it wishes at essentially no cost.”
• “By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar…”
• “The Fed has the authority to buy foreign government debt… Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S.”
While Bernanke cautions that the Fed might step on the toes of the Treasury by targeting a weaker U.S. dollar, he actively embraces a weaker currency as a tool to spur nominal growth. Bernanke’s primary concern appears to be not one of determination, but one of calibration: “One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies.”
Enough said. While the markets have been “disappointed,” when push comes to shove, Bernanke has stuck to his playbook. He has paved the way for QE3. We have argued that there may not be such a thing as a safe asset anymore, and that investors may want to take a diversified approach to something as mundane as cash.
Investors may want to actively manage their U.S. dollar risk, be that for their domestic or international investments. After all, investors may want to position their portfolios to take the risk that Bernanke will do what he has said into account.
Read more on Newsmax.com:
Operation Twist May Be a Primer for QE3 Important: Do You Support Pres. Obama's Re-Election?
Vote Here Now!
The
Gold Price fell to $1643 per ounce by Tuesday lunchtime in London – still 1.1% up for the week so far – while stocks and commodities suffered another battering as Greek debt fears once again rattled the markets.
Copper fell 1.9%%, while WTI crude oil lost over 2%, dropping to $76 a barrel.
The
Silver Price dropped to $30.21 – 0.8% up on last Friday's close.
" Gold continues to benefit from the current pessimism regarding the global economy [and] the realisation that the Eurozone debt issue is far from being resolved," says today's note from Standard Bank's commodity analysts.
" We expect physical [gold] demand to be quite decent in the coming days," adds Edel Tully, precious metals strategist at UBS.
" After the recent washout, gold positioning is far from extended, and this is quite a bullish signal for price strength ahead."
Stock markets meantime fell Tuesday for the fifth session running, with the FTSE100 here in London dropping through 5000 – a level it first crossed on the way up in August 1997.
The finance ministers of France and Belgium today pledged to " step in" if necessary and bail out the part-nationalized Dexia banking group.
Dexia received a bailout worth around €6 billion in 2008. Its share price fell to a low of €0.81 Tuesday morning – 44% below where it closed last week – after ratings agency Moody's placed Dexia on review for downgrade, citing " concerns about the group's sizeable reliance on short-term funding and the consequent liquidity gaps" .
Last week Fitch, another ratings agency, referred to Dexia's " structural weakness" and warned that the bank faces growing difficulties in getting access to funding.
Several European banks have now " marked to market" the Greek government bonds they own, making writedowns of 50% or more. But others – including French banks BNP Paribas and Societe Generale and the Franco-Belgian Dexia Group – have so far only recorded the 21% loss agreed at a Eurozone summit in July.
" It's no coincidence that the banks with some of the biggest holdings of Greek debt took the smallest writedowns," says Peter Hahn, professor of finance at Cass Business School in London and a former managing director at Citigroup.
" You've got banks, which are supposedly comparable, putting different values on their assets. That destroys the credibility of the banking system, and is one of the reasons why the shares are being hit so badly."
" The market is increasingly worried about the potential of the Greek crisis and the calamity that could be created if there was a messy default," says Jane Foley, senior currency strategist at Rabobank in London.
" We could be in for a shakeout even larger than the Lehman shock," adds Hideki Amikura, Tokyo-based foreign exchange manager at Nomura Trust Bank.
" While last week saw precious metals largely following equities on a downward slope, gold and silver's moderate gains this week are a positive sign that they are returning to favor on haven demand," reckons one bullion dealer here in London.
" Investors will be reassured that last week's rout [of gold] was driven more by a flight to cash to meet margin calls and mitigate losses on equities than by a fundamental shift in perceptions of gold's value."
Luxembourg prime minister Jean-Claude Juncker, who chairs the Eurogroup of single currency finance ministers, confirmed Tuesday morning that he has cancelled a meeting of Eurozone ministers scheduled for October 13 to discuss whether or not Greece should receive the next installment of its bailout funding, worth over €8 billion.
The cancellation follows Greece's announcement on Sunday that it expects to miss its deficit-cutting targets for 2011.
Greek finance minister Evangelos Venizelos said today that the government has enough money to last until mid-November if the next installment is delayed. He has previously said it would run out of money by the middle of October.
Dollar and Sterling
Gold Prices remain broadly where they closed on Friday 23 September, while the Euro
Gold Price is up 1.7% over the same period. In the so-called commodity currencies, the
Gold Price has risen 2% against the Canadian Dollar in that time and 3.4% against the Australian Dollar – recovering most of the losses in that currency incurred towards the end of last month.
Looking to Buy Gold?...
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service
BullionVault,
Ben Traynor was formerly editor of the
Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
Recessionary Conditions To Weigh On Spanish Job Market: IHS Global Insight
(RTTNews) - The continuing slump in the Spanish job market is in line with recent data suggesting that the country is sliding into a recession, Raj Badiani, an economist at IHS Global Insight, said in a note Tuesday.
According to the economist, the intensified job cuts in the third quarter suggests that overall employment is set to fall for the fourth consecutive year in a row in 2011. Also, the possibility of the recent curb in employment intentions extending into 2012 makes the outlook more downbeat.
The prospects of Spain's job market continues to remain bleak, with the government's austerity measures reducing the number of public sector jobs, and the private sector being unable to pick-up the slack.
Construction and housing-sector-related employment is likely to be hit by the ongoing property market slump during the remainder of 2011 and early 2012, while rising non-labor costs and intense competition will force industrial and service-sector firms to keep a tight rein on their workforces.
The disappointing prospects of the job market in the next few quarters is likely to result in the Spanish unemployment rate holding above 20 percent for most of 2012, Badiani said.
Latest data showed that Spain's unemployment increased for the second successive month in September. New benefit claimants increased 2.3 percent month-on-month to 4.226.7 million in September, while the number of registered unemployed increased 5.2 percent annually.
ECB seen increasing credit for shaky banks
By DAVID McHUGH
AP Business Writer
(AP:FRANKFURT, Germany) The European Central Bank could boost emergency credit offerings on Thursday to help shore up a banking system that has come under increasing pressure from the eurozone debt crisis.
Economists say the meeting in Berlin is much less likely to result in a cut in the bank's benchmark refinancing rate from the current 1.5 percent, though it is not completely ruled out.
The eurozone's troubled banks will be a major topic at the meeting and at the subsequent news conference, the last such appearance for bank President Jean-Claude Trichet before his eight-year term expires Oct. 31 and he hands over to successor Mario Draghi.
Many economists expect the ECB will open its credit window wide for banks to borrow, as it did during the financial crisis that followed the 2008 collapse of U.S. investment bank Lehman Brothers. Analysts say the central bank could decide to offer unlimited credit for six months or a full year, and could also buy asset-backed securities known as covered bonds from banks.
That would provide support to European banks that are having difficulty borrowing normally from other banks. Banks are reluctant to lend because they fear Greece could default on its government bonds and cause losses that mean other banks would not pay them back.
The European Central Bank already regularly offers short term credit for as long as 3 months, but extending the loan period means banks are less vulnerable to market turmoil. It made a special six-month credit offer in August, and 114 banks borrowed euro49.75 billion.
Protecting banks would be a key challenge if financially troubled Greece defaults on its debts, either in a coordinated way with eurozone governments' approval or a disorderly default in which the country simply runs out of money.
Belgium's finance minister, Didier Reynders, said Tuesday that the eurozone will likely boost the financial firepower of its euro440 billion ($580 billion) rescue fund. One of the fund's purposes is to help recapitalize troubled banks, but as the eurozone's debt crisis has intensified the fund has started to look too small to reassure markets.
Eurozone officials however have moved slowly to beef up the rescue fund and to get Greece an additional installment of money from a 2010 bailout that could keep it from a disorderly default in coming weeks.
That puts additional pressure on the ECB as eurozone crisis manager.
" The ECB will once again face a role as fire brigade in the debt crisis," economist Carsten Brzeski at ING in Brussels wrote in a research note. " While the ECB looks likely to get the remaining tools out of the 2008 first aid kit on Thursday, a rate cut could be a bridge too far, for the time being."
Royal Bank of Scotland analysts, however, predict a quarter point cut on Thursday, and if not then, by the Nov. 3 meeting. More economists think the bank will lower rates to 1.0 percent by early next year.
Signs that Europe's economy is headed for a slowdown or recession are increasing pressure on the bank to cut rates. But September's sharply higher inflation rate of 3.0 percent means the bank's 23-member rate-setting council may wait.
A rate cut could help keep the economy from slowing because it lowers borrowing costs for businesses. But lower rates can also fuel inflation.
Trichet offered few hints about rate policy during his final testimony Tuesday in front of the European Parliament's economic and monetary affairs committee in Brussels. He reitereated that risks to growth had increased while inflation risks were " broadly balanced," meaning they could come in either above or below forecast.
He touted the bank's record on inflation, saying that over almost 13 years of the euro it had averaged 2.01 percent, better, he said, than national central banks had done in the previous 50 years. The bank's goal is just under 2 percent.
Signs of trouble among banks have multiplied in recent days. The Franco-Belgian bank Dexia saw its shares fall 24 percent Tuesday in the wake of a statement by Moody's that the agency might downgrade its credit rating. Dexia is heavily exposed to Greek debt.
Deutsche Bank said it couldn't achieve its profit estimate for the year and would write down an additional euro250 million ($333 million) in Greek debt after taking a euro155 million ($207 million) Greek debt charge in the second quarter.
Foreclosure help among legal needs of NY poor
By MICHAEL VIRTANEN
Associated Press
(AP:ALBANY, N.Y.) The mortgage crisis has forced tens of thousands of New Yorkers to battle for their homes, nearly half of them facing foreclosure without a lawyer to defend them, according to the state attorney general's office.
Executive Deputy Attorney General Martin Mack said Monday that abuses by lenders and debt collectors, including foreclosures without proper documentation or chain of title, only happened because they can assume those borrowers don't have attorneys. He testified before the state's top administrative judges on the need for civil legal services for the poor.
" New Yorkers threatened with foreclosure have only the promise of a fair legal system to protect them from being homeless and having their American dream die an unjust, and untimely death," Mack said. " Even with special state legislative funding for foreclosure prevention services and the surge of pro bono assistance, across the state, 44 percent of New Yorkers facing foreclosure lack legal representation."
However, Mack said that foreclosure filings in the state have been " dramatically reduced" by Chief Judge Jonathan Lippman's requirement last Oct. 20 that lender attorneys affirm they took reasonable steps to make sure residential foreclosure documents are accurate.
According to the Office of Court Administration, New York had 22,601 residential and commercial foreclosure filings in 2005. Last year, there were 35,937 residential foreclosure filings, with the residential total projected to decline to 9,236 this year.
The attorney general's office has been investigating mortgage practices, including the bundling of troubled loans into troubled securities whose sharp decline contributed to tumbling financial markets and the national recession.
" These are difficult times. And particularly in these difficult times the least advantaged in our society are the ones most at risk in our legal system," Lippman said, opening the hearing. Recent statistics show 20 percent of New York City's people living at or below the poverty level, as well as 15 percent of New Yorkers outside the city, and he said the judiciary has a moral, ethical and constitutional obligation to support civil legal services for the poor and equal justice under law.
That also helps the economy and reduces homelessness, social services and prison time, Lippman said. A judicial task force is examining the gap in services as it relates to housing, safety, income and other basic needs. Last year, $27.5 million was put into the judiciary budget to help fund those services, he said.
Court officials have estimated that 2.3 million New Yorkers are trying to navigate the civil court system without lawyers, including at least 98 percent of tenants in eviction cases and 95 percent of parents in child support matters.
Bernanke: Fed Ready To Support Sluggish Recovery
(RTTNews) - The Federal Reserve stands ready to support the fragile U.S. recovery amid signs that the jobs market has not improved, the nation's top central banker told lawmakers on Tuesday.
" Recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead," Bernanke said in testimony prepared for the Joint Economic Committee of Congress.
A lack of resolution on Europe's sovereign debt crisis has hurt household and business confidence in the U.S, and pose ongoing risks to growth, Bernanke warned.
" Concerns about sovereign debt in Greece and other euro-zone countries, as well as about the sovereign debt exposures of the European banking system, have been a significant source of stress in global financial markets," Bernanke said.
He acknowledged that the recovery from the financial crisis of 2008 has been much less robust earlier projections.
The Fed now expects a somewhat slower pace of economic growth over coming quarters than it did when making projections in June.
Still, growth in the second half of the year seems likely to be more rapid than in the first half, Bernanke said.
The Fed " will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability," he assured.
Bernanke cautioned U.S. lawmakers against choking off the fragile domestic recovery, noting that government spending cuts have been a drag on the economy.
As the FOMC anticipated earlier this year, inflation has begun to moderate as the " transitory" influences of high oil and commodity prices have waned.
" Importantly, the higher rate of inflation experienced so far this year does not appear to have become ingrained in the economy," he said, signaling the Fed can further ease monetary policy without worrying too much about rising prices.
Bernanke will be grilled by Congress on a variety of topics after delivering his prepared remarks. Republicans accuse the Fed of needlessly risking runaway inflation by keeping ultra-accommodative monetary policy in place.
On the other side of the aisle, Democrats have expressed concerns that the Fed is not doing enough to help heal the jobs market.
Bernanke will face questions about the Fed's Operation Twist, a bond-shuffling plan that was announced earlier this month.
Protests against Wall Street spread across US
By CHRIS HAWLEY
Associated Press
(AP:NEW YORK) Protests against Wall Street entered their 18th day Tuesday as demonstrators across the country show their anger over the wobbly economy and what they see as corporate greed by marching on Federal Reserve banks and camping out in parks from Los Angeles to Portland, Maine.
Demonstrations are expected to continue throughout the week as more groups hold organizational meetings and air their concerns on websites and through streaming video.
In Manhattan on Monday, hundreds of protesters dressed as corporate zombies in white face paint lurched past the New York Stock Exchange clutching fistfuls of fake money. In Chicago, demonstrators pounded drums in the city's financial district. Others pitched tents or waved protest signs at passing cars in Boston, St. Louis, Kansas City, Mo., and Los Angeles.
A slice of America's discontented, from college students worried about their job prospects to middle-age workers who have been recently laid off, were galvanized after the arrests of 700 protesters on the Brooklyn Bridge over the weekend.
Some protesters likened themselves to the tea party movement _ but with a liberal bent _ or to the Arab Spring demonstrators who brought down their rulers in the Middle East.
" We feel the power in Washington has actually been compromised by Wall Street," said Jason Counts, a computer systems analyst and one of about three dozen protesters in St. Louis. " We want a voice, and our voice has slowly been degraded over time."
The Occupy Wall Street protests started on Sept. 17 with a few dozen demonstrators who tried to pitch tents in front of the New York Stock Exchange. Since then, hundreds have set up camp in a park nearby and have become increasingly organized, lining up medical aid and legal help and printing their own newspaper, the Occupied Wall Street Journal.
About 100 demonstrators were arrested on Sept. 24 and some were pepper-sprayed. On Saturday police arrested 700 on charges of disorderly conduct and blocking a public street as they tried to march over the Brooklyn Bridge. Police said they took five more protesters into custody on Monday, though it was unclear whether they had been charged with any crime.
" At this point, we don't anticipate wider unrest," said Tim Flannelly, an FBI spokesman in New York, " but should it occur the city, including the NYPD and the FBI, will deploy any and all resources necessary to control any developments."
Flannelly said he does not expect the New York protests to develop into the often-violent demonstrations that have rocked cities in the United Kingdom since the summer. But he said the FBI is " monitoring the situation and will respond accordingly."
Wiljago Cook, of Oakland, Calif., who joined the New York protest on the first day, said she was shocked by the arrests.
" Exposing police brutality wasn't even really on my agenda, but my eyes have been opened," she said. She vowed to stay in New York " as long as it seems useful."
City bus drivers sued the New York Police Department on Monday for commandeering their buses and making them drive to the Brooklyn Bridge on Saturday to pick up detained protesters.
" We're down with these protesters. We support the notion that rich folk are not paying their fair share," said Transport Workers Union President John Samuelsen. " Our bus operators are not going to be pressed into service to arrest protesters anywhere."
The city's Law Department said the NYPD's actions were proper.
On Monday, the zombies stayed on the sidewalks as they wound through Manhattan's financial district chanting, " How to fix the deficit: End the war, tax the rich!" They lurched along with their arms in front of them. Some yelled, " I smell money!"
Reaction was mixed from passers-by.
Roland Klingman, who works in the financial industry and was wearing a suit as he walked through a raucous crowd of protesters, said he could sympathize with the anti-Wall Street message.
" I don't think it's directed personally at everyone who works down here," Klingman said. " If they believe everyone down here contributes to policy decisions, it's a serious misunderstanding."
Another man in a suit yelled at the protesters, " Go back to work!" He declined to be interviewed.
Mayor Michael Bloomberg, a billionaire who made his fortune as a corporate executive, has said the demonstrators are making a mistake by targeting Wall Street.
" The protesters are protesting against people who make $40- or $50,000 a year and are struggling to make ends meet. That's the bottom line. Those are the people who work on Wall Street or in the finance sector," Bloomberg said in a radio interview Friday.
Some protesters planned to travel to other cities to organize similar events.
John Hildebrand, a protester in New York from Norman, Okla., hoped to mount a protest there after returning home Tuesday. Julie Levine, a protester in Los Angeles, planned to go to Washington on Thursday.
Websites and Facebook pages with names like Occupy Boston and Occupy Philadelphia have also sprung up to plan the demonstrations.
Hundreds of demonstrators marched from a tent city on a grassy plot in downtown Boston to the Statehouse to call for an end of corporate influence of government.
" Our beautiful system of American checks and balances has been thoroughly trashed by the influence of banks and big finance that have made it impossible for the people to speak," said protester Marisa Engerstrom, of Somerville, Mass., a Harvard doctoral student.
The Boston demonstrators decorated their tents with hand-written signs reading, " Fight the rich, not their wars" and " Human need, not corporate greed."
Some stood on the sidewalk holding up signs, engaging in debate with passers-by and waving at honking cars. One man yelled " Go home!" from his truck. Another man made an obscene gesture.
Patrick Putnam, a 27-year-old chef from Framingham, Mass., said he's standing up for the 99 percent of Americans who have no say in what happens in government.
" We don't have voices, we don't have lobbyists, so we've been pretty much neglected by Washington," he said.
In Chicago, protesters beat drums on the corner near the Federal Reserve Bank of Chicago. In Los Angeles, demonstrators hoping to get TV coverage gathered in front of the courthouse where Michael Jackson's doctor is on trial on manslaughter charges.
Protesters in St. Louis stood on a street corner a few blocks from the shimmering Gateway Arch, carrying signs that read, " How Did The Cat Get So Fat?," " You're a Pawn in Their Game" and " We Want The Sacks Of Gold Goldman Sachs Stole From Us."
" Money talks, and it seems like money has all the power," said Apollonia Childs. " I don't want to see any homeless people on the streets, and I don't want to see a veteran or elderly people struggle. We all should have our fair share. We all vote, pay taxes. Tax the rich."
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Verena Dobnik, Karen Matthews, Cristian Salazar and Jennifer Peltz in New York Jim Suhr in St. Louis David Sharp in Portland, Maine Mark Pratt in Boston Patrick Walters in Philadelphia Pete Yost in Washington Bill Draper in Kansas City, Mo. Carla K. Johnson in Chicago, and Christina Hoag and Robert Jablon in Los Angeles contributed to this report.
ENERGY MARKETS
November crude oil was lower overnight and trading below key support marked by August's low crossing at 76.61. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near-term. If November extends last week's decline, the 75% retracement level of the 2009-2011-rally crossing at 72.20 is the next downside target. Closes above the 20-day moving average crossing at 84.56 are needed to confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 80.70. Second resistance is the 20-day moving average crossing at 84.56. First support is the overnight low crossing at 75.84. Second support is the 75% retracement level of the 2009-2011-rally crossing at 72.20.
November heating oil was lower overnight as it extends this month's decline. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near-term. If November extends the decline off the late-August high, the 38% retracement level of the 2009-2011-rally crossing at 270.49 is the next downside target. Closes above the 20-day moving average crossing at 290.84 are needed to confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 282.08. Second resistance is the 20-day moving average crossing at 290.84. First support is the overnight low crossing at 272.10. Second support is the 38% retracement level of the 2009-2011-rally crossing at 270.49.
November unleaded gas was lower overnight and is poised to extend this month's decline. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near-term. If November renews the decline off this month's high, August's low crossing at 244.23 is the next downside target. Closes above the 20-day moving average crossing at 265.00 are needed to confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 255.61. Second resistance is the 20-day moving average crossing at 265.00. First support is last Monday's low crossing at 247.16. Second support is August's low crossing at 244.23.
November Henry natural gas was slightly lower overnight as it extends the decline off June's high. Stochastics and the RSI are oversold but remain bearish signaling that sideways to lower prices are possible near-term. If November extends the aforementioned decline, monthly support crossing at 3.225 is the next downside target. Closes above the 20-day moving average crossing at 3.874 are needed to confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 3.752. Second resistance is the 20-day moving average crossing at 3.874. First support is Monday's low crossing at 3.591. Second support is monthly support crossing at 3.225.
CURRENCIES
The December Dollar was higher overnight as it extends the rally off August's low. Stochastics and the RSI are overbought, diverging but are turning bullish signaling that sideways to higher prices are possible near-term. If December extends the rally off August's low, the 87% retracement level of this year's decline crossing at 81.35 is the next upside target. Closes below the 20-day moving average crossing at 78.10 are needed to confirm that a short-term top has been posted. First resistance is the overnight high crossing at 80.43. Second resistance is the 87% retracement level of this year's decline crossing at 81.35. First support is the 10-day moving average crossing at 78.96. Second support is the 20-day moving average crossing at 78.10.
The December Euro was lower overnight as it extends the decline off August's high. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near-term. If December extends the decline off August's high, the 75% retracement level of the 2010-2011-rally crossing at 128.78 is the next downside target. Closes above the 20-day moving average crossing at 136.13 are needed to confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 134.63. Second resistance is the 20-day moving average crossing at 136.13. First support is the overnight low crossing at 131.42. Second support is the 75% retracement level of the 2010-2011-rally crossing at 128.78.
The December British Pound was lower overnight and poised to renew the decline off August's high. Stochastics and the RSI are turning bearish signaling that sideways to lower prices are possible near-term. If December renews the decline off August's high, the 75% retracement level of the 2010-2011-rally crossing at 1.5243 is the next downside target. Closes above the 20-day moving average crossing at 1.5657 are needed to confirm that a short-term low has been posted. First resistance is the 20-day moving average crossing at 1.5657. Second resistance is the reaction high crossing at 1.5852. First support is this month's low crossing at 1.5316. Second support is the 75% retracement level of the 2010-2011-rally crossing at 1.5243.
The December Swiss Franc was lower overnight as it extends Monday's decline below the 62% retracement level of the 2010-2011-rally crossing at .10916. Stochastics and the RSI are bearish signaling that additional weakness is possible near-term. If December renews the decline off August's high, the 75% retracement level of the 2010-2011-rally crossing at .10222 is the next downside target. Closes above the 20-day moving average crossing at .11248 are needed to confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at .11068. Second resistance is the 20-day moving average crossing at .11248. First support is the reaction low crossing at .10821. Second support is the 75% retracement level of the 2010-2011-rally crossing at .10222.
The December Canadian Dollar was lower overnight as it extends the decline off July's high. Stochastics and the RSI are oversold but are neutral to bearish signaling that sideways to lower prices are possible near-term. If December extends the decline off July's high, the August 2010 low crossing at 93.00 is the next downside target. Closes above the 20-day moving average crossing at 98.76 are needed to confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 96.62. Second resistance is the 20-day moving average crossing at 98.76. First support is the 87% retracement level of the 2010-2011-rally crossing at 94.61. Second support is the August 2010 low crossing at 93.00.
The December Japanese Yen was slightly lower overnight as it extends the trading range of the past two months. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near-term. If December extends this year's rally, August's high crossing at .13180 is the next upside target. If December renews the decline off August's high, the 25% retracement level of the 2010-2011-rally crossing at .12657 is the next downside target. First resistance is the reaction high crossing at .13158. Second resistance is August's high crossing at .13180. First support is the reaction low crossing at .12860. Second support is 25% retracement level of the 2010-2011-rally crossing at .12657.
Bernanke warns Congress against deep spending cuts
By MARTIN CRUTSINGER
AP Economics Writer
(AP:WASHINGTON) Federal Reserve Chairman Ben Bernanke is reiterating that Congress should not cut spending sharply while the economy is weak.
Bernanke tells the Joint Economic Committee that lawmakers face a delicate challenge: They must avoid making deep spending cuts that could impede the recovery. But he says they must also eventually cut spending more deeply than the $1.5 trillion in deficit cuts being sought by a special panel.
Bernanke says that the economy is growing more slowly than the Federal Reserve had expected and that the biggest factor depressing consumer confidence is poor job growth.
His warning to Congress not to pursue deep spending cuts in the short run comes at a time of sharp disagreement within the Fed and Congress about how to invigorate the economy.
In an unusual move, Republican leaders in Congress wrote to Bernanke on the eve of the Fed's September policy meeting, urging Fed policymakers against acting further to lower rates.
Even so, the policymakers voted to shift $400 billion of the Fed's investment portfolio from short- to longer-term Treasurys to try to drive down long-term rates. That decision followed the Fed's statement after its Aug. 9 meeting that it planned to keep short-term rates at record lows until at least mid-2013, assuming the economy remained weak.
Both decisions drew three dissenting votes on the Fed's policy committee. The three dissents, all from regional Fed bank presidents, were the most dissents in nearly 20 years.
In a speech in Cleveland last week, Bernanke called long-term unemployment a " national crisis" and said Congress should take further steps to address it. Bernanke noted that about 45 percent of the unemployed have been out of work for at least six months _ a level previously unseen in the six decades since World War II.
In that speech, Bernanke said there was only so much the Fed's interest rate policies could achieve. He said that long-term unemployment, budget deficits and the depressed housing market were three priority areas that Congress should address.
Tuesday is the first time Bernanke is discussing his economic outlook with lawmakers since he delivered the Fed's twice-a-year economic report to Congress in July. In that testimony, Bernanke laid out steps the central bank could take to support economic growth.
One of the remaining options is a third round of bond buying that would expand the Fed's holdings of securities, already at record levels. Another is reducing the interest the Fed pays banks for their excess reserves. That step would be intended to reduce the incentive for banks to keep their money at the Fed. So they might lend more.
The central bank's next policy meeting is scheduled for Nov. 1-2. Because the economy is still struggling to grow, many private economists think the Fed will take some further step to try to reduce the risk of another recession.
The economy slowed to an annual growth rate of just 0.9 percent in the first six months of this year. Forecasters think growth will rebound only slightly in the final half of this year _ to an annual rate of 2 percent to 2.5 percent.
Growth at that pace would be far too weak to significantly lower the unemployment rate. The rate remained stuck at 9.1 percent in August, a month when employers didn't add any jobs at all.
On Friday, the government will issue the jobs report for September.
FOr now i expect DOW to have a 500 pts rebound Once it reaches 10100… LOL..
iPunter ( Date: 04-Oct-2011 21:59) Posted:
Don't waste time thinking about rebounds...
In any case rebounds will be only tiny... 
JUNWEI9756 ( Date: 04-Oct-2011 21:56) Posted:
| IF botak ben talk cannot push up the market by at least 100 pts.. then BYE BYE.. Dream on for rebound.. |
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The Dow is now down -230 pts...
Don't waste time thinking about rebounds...
In any case rebounds will be only tiny...
JUNWEI9756 ( Date: 04-Oct-2011 21:56) Posted:
IF botak ben talk cannot push up the market by at least 100 pts.. then BYE BYE.. Dream on for rebound...
iPunter ( Date: 04-Oct-2011 21:53) Posted:
The Dow is now down -200 pts...
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Banks, euro tumble on Greece exposure fears
Graph with stacks of Australian dollars
* MSCI world equity index hits lowest since July 2010
* Europe bank stocks hit heavily Greece-exposed Dexia plunges
* Euro hits 10-year low vs yen German 5-year CDS hit record
By Natsuko Waki
LONDON, Oct 4 (Reuters) - World stocks hit a fresh 15-month low on Tuesday and the euro fell across the board as the growing prospect of a near-term default by Greece stoked fears of a major banking crisis in Europe, which would accelerate a global economic slowdown.
The cost of insuring German sovereign debt against default hit a record high for a second day in a row, reflecting concerns that the euro zone's paymaster-in-chief will have to dig ever deeper into its pockets to bail out the region's weaker states.
A fresh sell-off in risky assets began after euro zone finance ministers said they were reviewing the size of private sector involvement in a second bailout package for Greece, a move that could undermine the aid plan and hasten a default.
The prospect of private creditors taking a bigger writedown on their holdings of Greek debt than agreed in July added to unease about an already fragile European banking sector.
European banking shares fell 4.2 percent, with Dexia shedding as much as 37 percent on top of its 10 percent fall on Monday due to worries about the Franco-Belgian bank's heavy exposure to Greece.
" The tone for the euro is sour after the failure of the euro zone finmins to bring anything concrete to the table with respect to Greece," said Jane Foley, senior currency strategist at Rabobank.
" The market is increasingly worried about the potential of the Greek crisis and the calamity that could be created if there was a messy default."
There had been no discussion about Greece defaulting, the country's finance minister told a news conference in Athens.
The MSCI world equity index fell 1.5 percent, hitting its lowest since July 2010. The index has fallen more than 18 percent since January and more than 24 percent since hitting a three-year high in March.
U.S. stock futures were down 0.3 percent < SPc1> , pointing to a weaker open on Wall Street later.
BANKS UNDER PRESSURE
European stocks lost 2.6 percent while emerging stocks fell 2 percent to hit their lowest since September 2009.
Dexia, whose shares hit a record low, vowed to fix its balance sheet after Moody's placed the group on a review for a possible downgrade, warning about its liquidity. According to a Belgian newspaper report on Tuesday, Dexia could be split up and its 'good' assets sold by the end of 2011.
France and Belgium, working with central banks, said they would take all measures necessary to protect Dexia's account holders and creditors.
Euro zone ministers also agreed Greece could wait until mid-November for the next instalment from the existing aid programme, putting further pressure on Athens to get to grips with its debt problems .
" What you're now beginning to see is they (investors) are now picking out the banks. Dexia is the weakest," said Justin Urquhart Stewart, director at Seven Investment Management.
" Politicians have to stand behind these banks -- whether you call it state support, nationalisation, you have to keep the financial system working otherwise we will end up with another credit crisis."
German five-year credit default swaps rose to 121 basis points while Belgium's five-year CDS gained 14 bps to 286 bps, close to a Sept 22 record high.
U.S. crude oil < CLc1> fell 1.5 percent to $76.45 a barrel.
Bund futures < FGBLc1> rose 88 ticks.
The dollar rose 0.4 percent against a basket of major currencies to a fresh nine-month high. The euro fell as low as $1.3144, a nine-month trough. It also fell to a 10-year low of 100.78 yen . (Editing by John Stonestreet)
IF botak ben talk cannot push up the market by at least 100 pts.. then BYE BYE.. Dream on for rebound...
iPunter ( Date: 04-Oct-2011 21:53) Posted:
The Dow is now down -200 pts...
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NYSE: wouldn't be surprised by EU objections to D.Boerse deal
BRUSSELS, Oct 4 (Reuters) - NYSE Euronext said on Tuesday that it would not be surprised if EU regulators were formally to object to its proposed merger with Deutsche Boerse < DB1Gn.DE> .
" We would not be surprised to receive a statement of objections. I can't confirm the timing. Nothing has been received yet. A statement of objections doesn't prejudge the Commission's final decision," NYSE Euronext spokesman Mark MacGann told Reuters.
" We are confident the merger will be cleared," he said.
Two sources with direct knowledge of the matter earlier told Reuters that the European Commission, which acts as regulator in the 27-state European Union, was set to formally object to the deal this week. (Reporting by Foo Yun Chee editing by Rex Merrifield)
The Dow is now down -200 pts...
