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ECB Says Has Tools Left to Act if Required

ECB policymakers said that European Central Bank still has room to plan should the euro zone economy persistent to worsen following it cut interest rates to a new record low previous week. The ECB cut its main rate to 0.5 percent previous Thursday.

Yves Mersch, a member of the ECB’s six-man Executive Board stated the bank still had tools at its disposal, however added that it could only spur lending to small euro zone companies in combination with other European institutions.

Joerg Asmussen stated the ECB had an open mind about what it could do to renew lending to small and medium-sized enterprises known as SMEs a growing concern for the central bank, principally in the crisis-stricken periphery countries.

Mersch said in a panel discussion in the northern German city of Aachen that we still have tools in our toolbox we are not a toothless tiger.

The ECB stated previous week it had set up a task force with the European Investment Bank known as EIB to assess ways to unblock lending to SMEs, for example by supporting a market for asset-backed securities known as ABS based on SME loans. ABS would permit banks to pass some credit risk on to other investors, enabling them up to lend more.

The move to promote ABS is controversial mainly in Germany, because during the financial crisis such securities became toxic due to the default of housing loans that underpinned them.

We have an open mind to seem at all things that we can do within our mandate and this relates to how can the market for asset backed securities, particularly backed by SME loans, be revitalized in Europe.

Asmussen was responding to a question regarding a Wednesday article in German newspaper Die Welt, which cited a central bank source as saying a majority of ECB Governing Council members seemed to be in support of the central bank buying ABSs itself.


Precious Metal Ends Lower, Copper jumps 7% on US Jobs Data

Yellow metal futures finished with a modest loss on Friday as greater than expected US employment numbers dulled the gold’s safe-haven appeal.

For the week, bullion found support from the European Central Bank’s decision to cut interest rates and from strength in physical demand to end the week 0.7% advanced.

Precious metal for June delivery chop down $3.40 or 0.2%, to settle at $1,464.20 per ounce on the Comex division of the New York Mercantile Exchange.

Labor Department said on Friday that the US economy created a net 165,000 jobs in April. The figure surpassed the 135,000 prediction of economists. The rushing in hiring nudged the unemployment rate down to 7.5%, the lowest level since December 2008.

Right before the data’s release yellow metal prices were trading about $13 per ounce higher than Thursday’s close, then following the figures they fell to trade around $10 lower.

Copper futures rallied almost 7% for their biggest one day percent advance in over two and a half years, as the jobs statistics brightened demand prospects for the industrial metal.

The July silver contract added 18 cents, or 0.8%, to end at $24.01 per ounce, climbed 1% from a week ago.

Chintan Karnani, an independent bullion analyst based in New Delhi said that if hiring continues to increase at the current pace for the coming two to three months that would be bearish for safe havens like silver and gold.

He further said only the interest rate cut by the European Central Bank and firm physical gold demand in Asia are supporting gold prices.

Gold dealers reported impressive jumps in April precious metal sales.

Will Rhind, managing director of ETF Securities, a provider of physically backed gold ETFs including the ETFS Gold Trust stated request is mainly being seen by coin/bar merchants and gold dealers (bullion banks) that act on behalf of central banks and other great institutional physical players.

Copper for delivery in July jumped 21 cents or 6.8% to a three-week high of $3.315 a pound. It rose approximately 4% for the week.



Bank of America Profit Misses Estimate as Revenue Collapse

Bank of America Corp reported a lower than expected first quarter profit and its revenue knock down, sending the No. 2 US bank’s shares down 3 percent earlier than the bell on Wednesday.

Net income quadrupled to $2.62 billion or 20 cents per share from $653 million or 3 cents per share a year earlier as expenses fall and the bank set aside less money to cover bad loans.

However total adjusted revenue knock down 8.4 percent to $23.85 billion, partly due to lower revenue from trading in fixed mortgages and income securities.

Revenue from the fixed income, commodities and currency markets knock down $829 million to $3.3 billion.

BofA shares slump 3 percent before the bell to $11.90.

Income in the year earlier period were affected by a host of one-time items including a $4.8 billion charge related to the value of its debt.

Net income in the Global Banking division chop down to $1.34 billion from $1.57 billion because net income in the Global Markets arm dropped to $1.4 billion excluding items from $1.7 billion.

Brian Moynihan, Chief Executive has made progress in building capital and settling mortgage related lawsuits since taking over in January 2010. The bank stated on Wednesday it had settled a mortgage backed securities class action lawsuit related to its nationwide unit for $500 million.

However Moynihan is under pressure to show that the bank can create higher earnings at a time of low interest rates, volatile economic conditions and stricter regulations.

BofA, the last of the big four US banks to report outcome has vowed to cut $8 billion in expenses by mid 2015 and has stated it could reduce expenses in its division that handles delinquent mortgages by $1 billion by the end of 2013.

The bank stated on Wednesday it expects to save almost $1.5 billion in costs per quarter, by the fourth quarter of 2013, representing 75 percent of the quarterly target. Total expenses knock down 5.2 percent to $18.15 billion in the first quarter.


Easy Federal Reserve Softens Fiscal Policy Strike On Economy

According to economists who have been scrambling to raise their growth forecasts, the Fed ‘s aggressive easing of monetary policy is demonstrating unexpectedly effective at blunting the blow to the US economy from tighter fiscal policy.

Economists had feared deep government spending cuts and higher taxes would exploit growth in the first quarter, however a series of strong economic data has so far proven them wrong. And they principally blame the Fed.

Tom Higgins, global macro strategist at Standish Mellon Asset Management in Boston said that the monetary policy is launch to gain some traction here.

According to Higgins, if it were not for the monetary incentive the economy would perhaps facing growth of a 1 percent annual rate or less, he anticipate growth to come in at a 2.5 percent pace in the first quarter.

The US central bank has held overnight interest rates near zero since December 2008 and has pushed around $2.5 trillion into the economy by acquiring mortgage-backed bonds and Treasury debt in a bid to promote faster growth and decreasing unemployment.

On Wednesday, it recommitted to plans to buy $85 billion worth of bonds each month and stated it would keep buying assets until it sees a considerable improvement in the labor market.

These activities have assist to put the economy in better shape to compact with the end of a 2 percent payroll tax cut, higher tax rates for rich Americans and $85 billion in across-the-board government spending cuts which is known as the sequester.

The easy money position has given a increase to interest rate sensitive sectors of the economy, such as housing and autos.

The vowed to easy policy also emerges to be lifting business confidence, which in turn is underpinning stock market and the job growth. Non-farm payrolls augmented 236,000 in February and the jobless rate knock down to a four-year low of 7.7 percent.


Mitt Romney Enjoys Lower Income Tax Rates Like Other Investors

Source of revenue off your investments is a much superior deal tax-wise in the US than source of revenue off a paycheck, as Mitt Romney’s 2011 tax revisit highlighted on Friday.

Days following a secret video demonstrated him scorning the about 47 percent of Americans who pay no federal income taxes, the Republican presidential challenger make known that his 2011 federal tax bill was 1.9 million dollar.

That is a lot of money by any principles however on an effective basis, Romney’s tax rate previous year was 14.1 percent. That was much lesser than President Barack Obama’s at 20.5 percent, and Paul Ryan, Romney’s administration mate at 20 percent.

The Romney’s 2011 tax return demonstrate adjusted gross income of 13.7 million dollar, 3 million dollar from taxable interest, 3.6 million dollar from dividends, 6.8 million dollar from capital gains, and the balance from other sources. Their wage income is Zero. That basically make clear their low effective tax rate compared with that of the Obamas.

One of the richest Americans ever to run for the White House, the previous Massachusetts governor built a chance selling and buying companies at Bain Capital as a private equity financier. Those rewarding years gave Romney a tax advantage.

His campaign stated in January he got 13 million dollar in income during the previous two years from carried interest, a form of earnings offered under the tax code to hedge fund managers and private equity partners.