MF Global sows winter of discontent for CME: new section
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== October consumer prices fall, giving Fed more room ==
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WASHINGTON (Reuters) - Consumer prices fell in October for the first time in four months,burberry outlet, taking pressure off strapped households and giving the Federal Reserve more room to ease monetary policy if the economy falters.
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For now, economic growth is gaining traction and a separate report on Wednesday showed industrial output rebounded strongly last month as factories ramped up production.
"The consistent theme in the recent flow of economic data has been one of accelerating momentum in economic activity," said Millan Mulraine, a senior macro strategist at TD Securities in New York.
"Nevertheless,burberry outlet, the concern for the recovery continues to be about what happens in Europe, as any escalation in the unfolding debt crisis could present a significant obstacle for the economic recovery."
The Labor Department said consumer prices dropped 0.1 percent last month as Americans paid less for new cars and gasoline.
The data reinforces the view that inflation is poised to trend lower following a spike in oil prices earlier in the year. That is seen giving the Fed more room to act if the economy slows.
"The Fed remains intently focused on employment and growth -- and not on inflation," said Jacob Oubina, an economist at RBC Capital Markets in New York.
The drop in prices during October gave a boost to workers whose wages failed to keep up with inflation over the summer, which had led households to save less.
A separate report by the Labor Department showed weekly earnings rose 0.3 percent in October when accounting for inflation.
Stronger incomes could help consumer spending as the year closes, giving the economy a little more momentum as the country braces for a possible recession in Europe that would drag on growth.
Major U.S. stock indexes were lower on worries about Europe's debt problems, while Treasuries prices rose. The dollar was higher against the euro.
HEADWINDS
A storm is gathering over the global economy as Europe struggles to contain a snowballing sovereign debt crisis. The U.S. economy has been gaining steam since the summer,burberry outlet online, but a blowup of Europe's problems could drag the U.S. back into recession.
A separate report from the Fed showed industrial production rose 0.7 percent last month, beating economists' expectations.
Home builders in the United States grew more optimistic this month but still thought sales conditions were poor, according to the National Association of Home Builders/Wells Fargo Housing Market index released on Wednesday.
"The data is relatively upbeat in the U.S., which contrasts with the situation in Europe," said Omer Esiner, a strategist at Commonwealth Foreign Exchange in Washington.
President Barack Obama urged European leaders to act boldly to stem the crisis as bond market contagion spread throughout the region, while France and Germany clashed over the role of the euro zone's central bank.
The Fed report also showed factory output accelerated in October, rising 0.5 percent on an increase in production of motor vehicles and parts. Even with U.S. factories operating closer to full capacity than at any time since July 2008, there was little sign of inflationary pressures in the factory data.
Also looming over the economic outlook, U.S. lawmakers are debating whether to let tax cuts and some unemployment benefits expire at the end of year, which would drag on growth.
Inflation is expected to fall sharply over the next year.
In the 12 months through October, consumer prices rose 3.5 percent after rising 3.9 percent in the full year through September.
Investors and economists expect that reading will fall to 1.3 percent by November of 2012, the Cleveland Federal Reserve Bank said in a report.
For now though,burberry outlet online, a measure of prices closely watched by the Federal Reserve remains uncomfortably high.
Prices outside food and energy climbed 0.1 percent in October,burberry outlet online, pushing the so called core reading for 12-month inflation up to 2.1 percent. The Fed would like that reading to trend at 2 percent or just below.
Still,louis vuitton, the headwinds to U.S. growth appear strong enough that the Fed could be forced to act before long.
"At this point it would probably take only a few missteps out of elected Washington or the capitals of Europe before Fed leadership sees the need for more aggressive action," said Michael Feroli, an economist at J.P. Morgan.
(Additional reporting by Lucia Mutikani in Washington and Emily Flitter in New York; Editing by Andrea Ricci and Neil Stempleman)
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== Israel's Olmert acquitted on major corruption charges ==
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JERUSALEM (Reuters) - Israel's Ehud Olmert was acquitted of major corruption charges on Tuesday but convicted of breach of trust,burberry outlet online, a lesser offence, in what was widely seen as a stunning victory for the former prime minister.
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Olmert resigned as the country's leader in 2008 after the allegations surfaced, cutting short his pursuit of a peace deal with the Palestinians.
The three-judge court's rejection of key accusations that drove the veteran politician from office raised questions in Israel about whether prosecutors had been overzealous in effectively bringing down a sitting prime minister.
"There is justice in Jerusalem," a gaunt-looking Olmert, 66, said after the ruling. Smiling broadly, he left the courthouse to a smattering of applause, hugging and kissing well-wishers.
The verdict, which defied widespread expectations of a full conviction, capped the first criminal trial of a former Israeli premier - proceedings that grabbed headlines with accounts of Olmert pocketing cash-stuffed envelopes and enjoying a lavish lifestyle of expensive cigars and luxury hotels.
The court found Olmert not guilty of charges that he received, as a cabinet minister and Jerusalem's mayor before becoming prime minister, $150,burberry outlet online,000 in bribes from a U.S. businessman and defrauded Israeli charities by double-billing them for overseas fundraising trips.
But it said he was in breach of trust when, as trade and industry minister,burberry outlet online, he green-lighted projects that involved one of his long-time friends.
The conviction carries a maximum penalty of three years' imprisonment, and the court said it would begin hearing arguments on sentencing in September.
Olmert, addressing reporters outside the court, described the offence as a "procedural irregularity,burberry outlet, not corruption".
COMEBACK
Any thoughts of a return to politics would likely depend on the severity of his sentence and the outcome of a separate bribery case over his role, as Jerusalem's mayor from 1993 to 2003, in the building of the huge Holyland housing complex widely considered to be the city's biggest eyesore.
Olmert has denied any wrongdoing.
"If Olmert comes out clean ... he will most definitely consider a political comeback, if not in the upcoming elections, then in the next," political commentator Yossi Verter wrote on the website of the Haaretz newspaper.
When he announced his resignation in September 2008, Olmert, who took over the leadership of the centrist Kadima party and the premiership in 2006 after then-prime minister Ariel Sharon suffered a stroke, said he would battle to clear his name.
He stayed on as caretaker until March 2009 when Prime Minister Benjamin Netanyahu's government was sworn in.
Olmert,burberry outlet, who waged war against militants in Lebanon in 2006 and the Gaza Strip in 2008, said he had achieved significant progress in talks with the Palestinians aimed at securing a final peace deal, offering an Israeli withdrawal from much of the occupied West Bank.
But no agreement was reached and subsequent negotiations held under Netanyahu collapsed in 2010 in a dispute over Israeli settlement building on land Palestinians want for a state.
"I think one can't ignore the far-reaching ramifications in Israel and outside it as a result of the decision to bring me to trial," Olmert said after the verdict, hinting at diplomatic moves he was never able to make.
Ruling on some of the most serious charges in the case, the court said prosecutors had failed to prove that payments Olmert received, before he became prime minister, from New York-based businessman Morris Talansky were illegal.
It also found he had broken no laws in helping to arrange meetings between Talansky, who ran a mini-bar business,burberry outlet online, and hotel owners Olmert knew.
The Israeli newspaper Haaretz described the verdict as a "crushing defeat" for the prosecution. The popular Ynet news site called the outcome a "legal earthquake".
Israel has already witnessed a former head of state put behind bars.
Former president Moshe Katsav was convicted last year of raping an aide when he was a cabinet minister in the late 1990s and molesting or sexually harassing two other women who worked for him during his 2000-2007 term as president. He began serving a seven-year prison sentence in December.
(Editing by Crispian Balmer and Alessandra Rizzo)
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== MF Global sows winter of discontent for CME ==
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CHICAGO (Reuters) - Agricultural bankers and other players in the world's grain markets say fallout from the collapse of giant broker MF Global is changing cash grain trading and fueling calls for alternatives and reforms.
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Trading changes include more "back to back" transactions and more direct contracting by farmers to end users, eliminating middlemen like MF Global, merchandisers say.
Bankers and traders also say anger with lack of oversight by the Chicago Mercantile Exchange's clearing house regarding MF Global's supposedly secure customer accounts is rampant,burberry outlet online, spurring calls for more regulation of a traditionally close-knit,burberry outlet, clubby and "self-regulating" industry.
Proposals have included the idea of setting up a separate "insurance fund" to hold the so-called "segregated" accounts that futures commission merchants (FCM's) now hold and account for with the exchange clearinghouse, which is supposed to "mark to market" every trade every day to assure adequate capital.
Up to $1.2 billion in such segregated customer funds are still missing eight weeks after MF Global collapsed into bankruptcy after a revelation it had made a $6 billion bet on European sovereign debt that went sour.
"I don't think people are satisfied with CME's response. What the banks thought was rock solid isn't as rock solid any more," said Lance Holden, senior vice president with Wells Fargo Bank, the largest private lender to agribusiness that had customers who lost funds with MF Global.
CME Group chief operating officer Bryan Durkin told a packed meeting of the National Grain and Feed Association this month, echoing earlier testimony by CME executives to Congress, that MF Global was the culprit, not CME's clearing house.
"This was the failure of a firm. A firm that broke the rules, not the failure of any clearing house. At CME, we met our obligations," Durkin told the gathering of 700 farm bankers, grain traders, brokers and farmers in Chicago.
"We believe all customers affected should have their full balances and property returned by MF Global. Until then, we will not consider the process complete," Durkin said.
CME, looking to line up with its futures-trading customers and the banks like Wells Fargo who finance them, has pledged at least $550 million to the court trustee now sorting out the MF Global mess to help make good customers who were victimized.
But CME will need to do more, grain traders said.
"We want to get the confidence back and restore confidence with the lenders too," said Diana Klemme, vice president of Grain Services Corp in Atlanta,burberry outlet, which advises grain buyers and sellers on marketing and risk strategies.
"In the end the loss of even a dime by users of the system will have a chilling impact," said Jeff Hainline, president of Advance Trading, an Illinois brokerage with many farmer and farm cooperative clients.
VOTING WITH THEIR FEET
As the CME's regulator, the Commodity Futures Trading Commission, as well as Congress and the bankruptcy court try to sort out accountability for the missing funds, many farmers and grain traders have backed off using CME's grain futures, the world pricing and risk-management benchmark for decades.
"We are watching closely how these events play out to figure out what do we need to ask more of from a counter-party risk standpoint," said Sam Miller,burberry outlet online, senior vice president of agricultural banking at M&I Bank in Appleton, Wisconsin, who had customers who lost money with MF Global.
Miller said he's seeing more interest among bank customers to sell commodities directly to end-users but they are looking at all their choices -- over-the-counter privately negotiated deals, options markets, and back-to-back deals where purchases and sales are done simultaneously.
"We do see more contracts between a seller and somebody who is actually going to use the product," Miller said.
"There are some real concerns about figuring out just what happened and how we make sure the situation never repeats," said NGFA Treasurer and director of marketing Todd Kemp. "Of course,burberry outlet online, the number one issue among customers right now is return of supposedly segregated funds to customers."
Kemp said NGFA members, which include more than 1,000 firms who buy and sell grain, will find it hard to market grain without the CME. But confidence has been deeply shaken in the CME and the FCM's who hold customer funds, he said.
"Our task in that respect is to re-establish confidence and examine changes that might help ensure safety of customer funds in the future," he said. "Some have suggested that we might look at changes in which entity holds customer funds.
"Instead of the FCM, should the clearinghouse or exchange, or maybe some independent third party, hold the funds? Should we look at extending some form of insurance to commodity accounts?" Kemp said. "Our Risk Management Committee will begin those discussions soon."
Oversight and accountability must be addressed, he added.
"NGFA historically has not been an organization that believes in more government regulation. However, it's clear that in some way customer protections need to be improved," Kemp said.
Even bankers may seek more regulation -- of brokers.
"Futures trading is supposed to be riskless from the transaction side. If you've got outside risk, people may use different types of products," said Holden of Wells Fargo.
Grain elevators, farmers and others using futures markets to hedge price risk often borrow 90 percent or more of the value of their crops or livestock to finance futures trades.
The government-linked Farm Credit System (FCS), for example, lent some $6 billion to make sure grain elevators could make margin calls when grain prices plummeted in 2008.
So grain traders are closely watching the stance of CoBank, the Denver-based FCS bank with $62 billion in assets and one of the biggest lenders to U.S. grain elevators.
"CoBank has not changed its credit policies in light of the events at MF Global." Lori O'Flaherty, chief credit officer for CoBank, told Reuters in an interview. "But the failure of this institution highlights the need for close monitoring of counterparty risk, both by banks and their customers, during these volatile economic times."
Bankers said CME will also remain squarely in the grain industry's sights,burberry outlet, as an institution that must re-earn trust.
"CME -- all of the exchanges have been focused on contracts, more growth, all these hedge funds, private equity funds that are getting into these markets. They are focused on that instead of their base business," Holden said. "That something like missing segregated funds could happen -- that's a big miss."
(Editing by Peter Bohan, Leslie Gevirtz)
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