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January 19th, 2012
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Standard & Poor’s said Friday that it has downgraded the credit ratings of nine euro area governments, including AAA-rated France and Austria.
S&P lowered its rating for Italy, Spain, Portugal and Cyprus by two notches. The move means Italian bonds are now rated BBB+, dangerously close to the junk bond level that could make it even harder for the government to raise money.
France and Austria both had their top-tier credit rating lowered by one notch to AA+, said S&P. But Germany, Finland, the Netherlands and Luxembourg all maintained their AAA ratings.
S&P cut the ratings of Malta, Slovakia and Slovenia by one notch.
It’s not clear how hard the downgrades will hit markets. Investors have been expecting S&P to act for weeks now — a fact that could blunt the impact. At the same time, downgrades could scare off investors in European debt and raise the cost of government borrowing.
S&P said the downgrades reflect a combination of economic and financial challenges, as well as "an open and prolonged dispute among European policymakers over the proper approach to address challenges."
Specifically, the agency pointed to weakening economies, tightening credit conditions across the eurozone, rising interest rates for a growing number of nations and the "deleveraging" of both governments and households.
"Today’s rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone," said S&P.
S&P warned that most eurozone governments are at risk of further downgrades given the risk of a "more adverse economic and financial environment."
The agency said a deeper-than-expected recession in the eurozone would put further stress on government finances. In addition, governments remain vulnerable to further turmoil in the bond market, which could drive up their borrowing costs.
Meanwhile, S&P said it welcomed recent moves by the European Central Bank to help prevent a credit crisis in the banking system.
On Friday, as the downgrade chatter circulated, stocks sold off. London’s FTSE 100 () and Germany’s DAX () were down about 1.5%, while the CAC40 () in Paris was off 1%.
In the United States, stocks also fell, with the Dow industrials (), S&P 500 () and Nasdaq Composite () posting modest declines.
Standard & Poor’s set the rumor mill in motion last month, when it put 15 members of the eurozone on review for a downgrade, including top-rated Germany and France.
The agency said at the time that it would conclude its review shortly after the latest summit of European Union leaders, which took place on Dec. 9.
European leaders have been banking on the new fiscal compact, announced at the December summit, to resolve the long running sovereign debt crisis.
But S&P said the plan does not go far enough.
"In our opinion, the political agreement does not supply sufficient additional resources or operational flexibility to bolster European rescue operations, or extend enough support for those eurozone sovereigns subjected to heightened market pressures," the agency said.
In response, Olli Rehn, vice president of the European Commission, defended European policymakers. He made a subtle dig, referencing an alert S&P accidentally sent to investors last year regarding France’s credit rating.
"After verifying that … this time is not accidental, I regret the inconsistent decision earlier today by Standard & Poor’s concerning the rating of several euro area member states, at a time when the euro area is taken decisive action in all fronts of its crisis response," Rehn said in a statement.
The plan includes €200 billion of loans to the International Monetary Fund to boost its contingency fund, possible sanctions if member states exceed a 3% deficit ceiling, and accelerated the creation of a permanent bailout fund that will run alongside the current European Financial Stability Facility for about a year.
Leaders from Germany, Italy and France have been sounding upbeat about the proposed solution. Earlier this week, German Chancellor Angela Merkel and French President Nicolas Sarkozy said the pact could be signed by Jan. 30, the date of the first EU summit of 2012.
Two days later, Italian Prime Minister Mario Monti met with Merkel and sounded equally positive, saying Europe "doesn’t have to fear any more that Italy is a possible source of contagion."
Europe groped throughout much of last year for a way out of its debt crisis. The hardest-hit countries have implemented tough austerity measures, but eurozone countries are now also facing weak economic growth and possibly even recession.
Downgrades could make it harder for governments to raise money by selling bonds to investors in the private sector.
World’s largest economies
And that could add to fears of one or more defaults in the eurozone, which has hung over financial markets for months. In addition, many analysts say the loss of AAA status would likely result in a downgrade of the eurozone bailout fund.
The bailout fund is financed by loan guarantees from the 17 euro area nations, with Germany and France as its largest backers.
The fund also raises money by selling bonds. It is set to offer up to €1.5 billion of 6-month bills on Tuesday.
Last August, the United States had its AAA rating cut one notch amid a political impasse over the nation’s debt ceiling.
The U.S. downgrade initially sparked a sell off in the stock market. But the reaction in the bond market was muted, with yields on U.S. government bonds holding steady at low levels.
That may not be the case in the eurozone bond market.
While yields on Italian and Spanish bills and notes have eased in recent days, investors remain wary of bonds issued by governments struggling with weak economic growth and heavy debt loads.
The real test of market sentiment could come next week. On Monday France wants to sell €8.7 billion of debt. Spain and Germany are also planning on selling debt next week.
– CNN’s Jim Bitterman contributed to this report.
A helicopter on Sunday airlifted a third survivor from the capsized hulk of a luxury cruise ship 36 hours after it ran aground off the Italian coast, as prosecutors said they were investigating the captain for manslaughter charges and accused him of abandoning his ship.
Authorities reduced to 17 from 40 the number of people still unaccounted for, with an Italian who worked in cabin service pulled from the wreckage of the Costa Concordia off the tiny Tuscan island of Grigio. A South Korean couple on their honeymoon were rescued late Saturday in the unsubmerged part of the liner when firefighters heard their screams.
Three people are confirmed dead after the huge cruise ship carrying more than 4,200 people ran aground on Friday night, forcing a chaotic and frightening evacuation. There are now six crew members and 11 passengers who haven’t been located, Tuscany’s regional president Enrico Rossi said.
Authorities were holding the captain, Francesco Schettino, for suspected manslaughter among other possible charges and a prosecutor on Sunday confirmed allegations that the captain abandoned the stricken liner before all the passengers had escaped.
Asked Sunday by Sky TG24 about the accusations, Grosseto prosecutor Francesco Verusio replied, “unfortunately, I must confirm that circumstance.”
A French couple who boarded the Concordia in Marseille, Ophelie Gondelle and David Du Pays of Marseille, told The Associated Press they saw the captain in a lifeboat, covered by a blanket, well before all the passengers were off the ship. They insisted on telling a reporter what they saw, so incensed that _ according to them _ the captain had abandoned the ship before everyone had been evacuated.
“The commander left before and was on the dock before everyone was off,” said Gondelle, 28, a French military officer.
“Normally the commander should leave at the end,” said Du Pays, a police officer who said he helped an injured passenger to a rescue boat. “I did what I could.”
According to the Italian navigation code, a captain who abandons a ship in danger can face up to 12 years in prison.
Schettino has said the ship hit rocks that weren’t marked on his nautical charts, and that he did all that he could to save lives.
“We were navigating approximately 300 meters (yards) from the rocks,” he told Mediaset television. “There shouldn’t have been such a rock.”
He insisted he didn’t leave the liner before all passengers were off, saying “we were the last ones to leave the ship.”
But that wasn’t the case. In addition to the three people recovered from on board by rescue crews Saturday night and Sunday, police divers and rescue crews on Sunday circled the wreckage searching for more of the 17 missing.
Crews in dinghies touched the hull with their hands, near the site of the 160-foot-long (50-meter-long) gash where water flooded in and caused the ship to fall on its side.
Coast guard officials have said divers would enter the belly of the ship in case anyone is still inside.
Coast guard spokesman Capt. Filippo Marini told Sky Italia TV that Coast Guard divers have recovered the so-called “black box” with the recording of the navigational details from a compartment now under water.
A Dutch firm has been called in to help extract the fuel from the Concordia’s tanks before any leaks into the area’s pristine waters, Rossi, the regional president, said. No leaks have so far been reported.
While ship owner Costa has insisted it was following the same route it takes every week between the Italian ports of Civitavecchia and Savona, residents on the island of Giglio said they had never seen the Costa come so close to the “Le Scole” reefs and rocks that jut out off Giglio’s eastern side.
“This was too close, too close,” said Italo Arienti, a 54-year-old sailor who has worked on the Maregigilo ferry service that runs between the island and the mainland for more than a decade. A now-retired Costa commander used to occasionally do “fly-bys” on the route, nearing a bit and sounding the siren in a special salute for his hometown, he said.
Such a fly-by was staged last August, but there was no incident, he said.
He said the cruise ship always stayed more than five to six nautical miles offshore, well beyond the reach of the “Le Scole” reefs, which are popular with scuba divers.
The terrifying escape from the luxury liner was straight out of a scene from “Titanic.” Many passengers complained the crew didn’t give them good directions on how to evacuate and once the emergency became clear, delayed lowering the lifeboats until the ship was listing too heavily for many to be released.
Several other passengers said crew members told passengers for 45 minutes that there was a simple “technical problem” that had caused the lights to go off.
Passengers said they had never participated in an evacuation drill, although one had been scheduled for Saturday. The cruise began on Jan. 7.
Costa Crociera SpA, which is owned by the U.S.-based cruise giant Carnival Corp., defended the actions of its crew and said it was cooperating with the investigation. Carnival Corp. issued a statement expressing sympathy that didn’t address the allegations of delayed evacuation.
France said two of the confirmed victims were Frenchmen; a Peruvian diplomat identified the third victim as Tomas Alberto Costilla Mendoza, 49, a crewman from Peru. Some 30 people were injured, at least two seriously.
Some 300 of the crew members were Filipinos and that three of them were injured, the Philippine Department of Foreign Affairs said.
The captain has insisted that the reef was not marked, but locals said that the stretch of sea is not difficult to maneuver. Anello Fiorentino, captain of a ferry that runs between Giglio and the mainland, said he makes the crossing every day without encountering problems.
“Yes, if you get near the coast there are reefs, but this is a stretch of sea where all the ships can safely pass,” he said.
Islanders on Giglio opened up their homes and businesses to accommodate the sudden rush of survivors. Rossana Bafigi, who runs a newsstand, said she was really moved by the reaction of the passengers.
She showed a note left by one Italian family that said, “We want to repay you for the disturbance. Please call us, we took milk and biscuits for the children. Claudia.”
At Mass on Sunday morning in Giglio’s main church, which opened its doors to the evacuees Friday night, altar boys and girls brought up to the altar a life vest, a rope, a rescue helmet, a plastic tarp and some bread.
Don Lorenzo, the parish priest, told the faithful that he wanted to make this admittedly “different” offering to God as a memory of what had transpired.
He said each one carried powerful symbolic meaning for what happened on Friday night: the bread that multiplied to feed the survivors, the rope that pulled people to safety, the life vest and helmet that protected them, and the plastic tarp that kept cold bodies warm. “Our community, our island will never be the same,” he told the few dozen islanders gathered for Mass.
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Ralcorp Holdings and Post Holdings, the branded cereal business that’s being spun off as a separate company, announced the lineup of each company’s board of directors.
The board appointments are effective when the spin-off of Post is finalized, which is expected to occur at the end of this month.
The new configuration of St. Louis-based Ralcorp’s board includes: J. Patrick Mulcahy, Benjamin Ola. Akande, Bill Armstrong, Jonathan Baum, Barry Beracha, Kevin Hunt, David Kemper, Patrick Moore and David Wenzel.
Joe Micheletto, vice chairman of Ralcorp’s board of directors, is ending a 46-year career with Ralcorp and its predecessor, Ralston Purina Co. His retirement from the board is effective Jan. 20.
At Post Holdings, the board lineup includes Bill Stiritz, David Banks, Terence Block, Jay Brown, Edwin Callison, Gregory Curl, Dr. William H. Danforth, Robert Grote and David Skarie. In recent SEC filings, Post listed an office building in Brentwood as its base of operations no teletrack payday loans.
Stiritz, who will also serve as CEO at Post, has been chairman of the board at Ralcorp since 1994. With the spin-off, Ralcorp is focusing on its private label, or store-brand, pastas, cereals, and frozen bakery foods.
Post is the third-largest seller of ready-to-eat cereals in the U.S. Its brands include Honey Bunches of Oats, Raisin Bran and Great Grains.
“As Ralcorp and Post move forward with the separation, the composition of these boards represents a significant milestone in becoming independent companies,” said Mulcahy, Ralcorp’s vice chairman, said in a statement. Once the separation of the companies is completed, Mulcahy will serve as chairman of the board at Ralcorp.
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After more than six months on the auction block, Florida-based Raymond James Financial emerged as the winning bidder to acquire Morgan Keegan & Co., a Memphis-based brokerage that’s a powerhouse in municipal bond underwriting.
Raymond James was competing with St. Louis-based Stifel Financial in the final days leading up to Wednesday’s sale announcement, but Stifel’s bid ultimately fell short.
Raymond James is paying $930 million to buy Morgan Keegan. The deal includes a $250 million dividend from Morgan Keegan to its parent company, Birmingham, Ala.-based Regions Financial, prior to the sale, resulting in proceeds totaling $1.18 billion for Regions.
The sale is expected to close within the first quarter, subject to regulatory approval, Regions said.
“We know them well and firmly believe they will be an outstanding long-term partner,” Regions’ president and CEO Grayson Hall said of Raymond James in an investor conference call late Wednesday afternoon. Raymond James’ fixed income and public finance businesses will be based in Memphis, where Morgan Keegan currently is headquartered.
At one time, Stifel was in exclusive negotiations with Regions Financial, which put Morgan Keegan’s brokerage and investment banking operations up for sale last June, according to Bloomberg News.
Regions, which bought Morgan Keegan in 2001 for $789 million, owes the U.S. Treasury $3.5 billion from participating in the Troubled Asset Relief Program, or TARP, in 2008. Regions is seeking to use the proceeds from selling Morgan Keegan to pay a portion of the TARP money it owes.
Once the exclusivity period ended with Stifel, talks between Regions and Raymond James began to intensify nearl the end of the year, Bloomberg reported.
Stifel executives have declined to comment on the firm’s bid for Morgan Keegan, but Bloomberg News reported Wednesday that Stifel’s most recent bid, made on Jan no fax payday loan. 8, was $875 million in cash and stock.
Several private equity firms that also expressed interest in buying Morgan Keegan also dropped out last fall after financial conditions worsened in the wake of the European debt crisis and the collapse of the derivatives broker MF Global.
Stifel has made several sizable acquisitions in recent years to grow its geographic footprint and its adviser ranks to more than 2,000 in 318 offices, including its $300 million acquisition of Thomas Weisel Partners Group of San Francisco in 2010. Adding Morgan Keegan would have been the largest acquisition in Stifel’s 122-year history.
Stifel recently acquired its headquarters building downtown St. Louis and company executives are in growth mode. In an interview in December, Ron Kruszewski, Stifel’s co-chairman, chief executive and president, said Stifel remains poised for growth opportunities.
For Raymond James, which has 5,400 financial advisers located in offices around the country, the acquisition of Morgan Keegan will add 1,200 financial advisers. It also will bolster Raymond James’ municipal bonds underwriting operations. This week, Thomson Reuters reported Morgan Keegan ranked ninth in the nation as leading underwriter for municipal bonds in 2011 after serving as book running manager on 488 issues with par amounts totaling $9.2 billion.
In the St. Louis area, Morgan Keegan has about 50 employees in offices located in Town and Country, East Alton and Swansea.
Republican Senators Orrin Hatch of Utah and Bob Corker of Tennessee criticized the Federal Reserve for overstepping its role by making policy recommendations on how the U.S. government should try new ways to spur the housing market.
Hatch, the top-ranking Republican on the Senate Finance Committee, said the housing study sent by Chairman Ben S. Bernanke to Congress last week, along with recent Fed speeches,
"Learn to program" isn’t a typical New Year’s resolution, but it’s one that’s gone viral thanks to a clever campaign by Codecademy, a startup that helps newbies learn the basics of software coding.
The New York-based venture kicked off 2012 by launching Code Year. Sign up for the free project and you’ll receive an interactive programming lesson each week in your inbox. Nearly 200,000 people have already joined, including New York Mayor Michael Bloomberg, who tweeted about his plan to participate.
"There are a lot of people who want to make New Year’s resolutions they’ll stick to," says Codecademy co-founder Zach Sims. "This is something they can use and learn."
The first lesson will go out to subscribers on Monday, Jan. 9. Participants will have plenty of support: The Twitter hashtag #codeyear is already buzzing.
"We’ll walk people along the path while they’re doing it," Sims says.
After coming up with the Code Year idea in early December, the Codecademy team partnered with tech communities including Y Combinator, TechStars and HackNY to spread the word instant credit report.
It’s the most ambitious project yet attempted by seven-month-old Codecademy. Launched in June, the site offers free, self-guided online courses on programming basics as well as on specific coding languages like Javascript.
Sims notes that programming skills are becoming increasingly important in the job market, and says that learning even the basics can give users a leg up.
Even Mayor Mike — whose term ends in 2013 — could score a new gig if he sticks with his pledge. "When you’re done being mayor, we’ll get you set up with an interview to join the @foursquare engineering team," Foursquare chief engineer Harry Heymann tweeted back.
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South Africa has become increasingly integrated into the global economy, leaving it exposed to
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Private-sector hiring surged in December as employers added 325,000 new workers while claims for jobless benefits fell, raising hope that recent labor market improvement would continue in 2012.
The ADP National Employment Report’s December job tally surprised economists who had expected a 178,000 gain. It was also well above the 204,000 private jobs added in November.
“The number is stunning,” said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. “This is another data point that shows our economy is healing. It fits in well with improvements we’ve seen in consumer sentiment, and obviously that’s because there are more people getting paychecks, which is making everyone happier.”
Joel Prakken of Macroeconomic Advisers, which helps produce the report, struck a note of caution, telling reporters that the December surge in hiring might have been caused in part by year-end seasonal factors and revisions were possible.
In the U.S. stock market, stock futures pared losses after the data while U.S. government debt prices fell slightly.
A more comprehensive government report due Friday is expected to show the economy added 150,000 public and private sector jobs last month, but the ADP report may cause some to revise that total upward.
Thursday’s data “point to what should be a fabulous number tomorrow,” said Todd Schoenberger, managing director at Landcolt Trading in Wilmington, Delaware Payday Loan for Bad Credit. “We should welcome this positive news because clearly Santa Claus is still around.”
A separate report from consultants Challenger, Gray & Christmas showed the number of planned layoffs at U.S. firms fell to a five-month low in November.
But John Challenger, chief executive officer, said the two sectors that suffered the most job cuts in 2011 — government and financial services — look destined to struggle again this year.
The jobless rate is expected to have edged up to 8.7 percent as some Americans who had given up their search for work were lured back into the market, according to a Reuters survey.
Even so, economists say recent labor market trends have been encouraging. The number of Americans filing first-time claims for unemployment benefits fell last week for the fourth time in the last five weeks.
However, in December 2010, a surge in private sector hiring far exceeded the total job gain for that month reported by the government.
“Some caution is required,” said Theodore Littleton, economist at IFR Economics, a unit of Thomson Reuters.
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