Breaking Wall Street Market News & Reports

House Speaker John Boehner is rewriting his bill to lift the debt ceiling and cut spending after the Congressional Budget Office ruled his plan would have only cut spending by $850 billion over 10 years rather than the $1.2 trillion the Republican sought. The House may end up voting on the bill on Thursday rather than the initially scheduled Wednesday vote. On Tuesday, the head of Keidanren, Japan’s biggest business lobby, called for joint Group of Seven intervention to stem the yen’s gains as it heads back towards the record high of 76.25 hit days after the March 11 earthquake. The Australian dollar traded at $1.1041 after the data, just off a fresh high of $1.1062 — its highest level since it was floated in 1983.

“We promised that we will cut spending more than we increase the debt limit — with no tax hikes — and we will keep that promise,” Boehner spokesman Michael Steel said. Boehner’s plan — and a competing Democratic bill in the Senate  are are the only live bills this week that would increase the debt ceiling by Aug. 2. The CBO said the bulk of deficit savings under Boehner’s original bill — $710 billion — would result from caps on discretionary spending. The other big chunk of savings — $136 billion — would come from reduced interest costs on the debt. Almost as soon as he proposed it on Monday, the bill came under fire from the most conservative members of his caucus and some conservative groups for not going far enough to reflect the principles of the Cut, Cap and Balance Act, which the House passed last week. Cut, Cap and Balance would, among other things, cut total spending by $111 billion for fiscal year 2012. It would also require a balanced budget amendment to the Constitution that would cap total annual spending at 18%. The spending caps in Boehner’s bill would result in small savings in the early years, but the savings would grow over time. In addition, the Boehner bill would require that both chambers of Congress vote on a Balanced Budget Amendment but doesn’t require that one be enacted.

Boehner is in a tough spot. He recognizes that the debt limit must be raised to prevent the country from defaulting on its obligations. But he is also representing the will of his most conservative members, who have not yielded in their demands for large, immediate spending cuts as a condition for raising the debt ceiling. That has put him at odds with Obama, who has pushed for a debt reduction package that also includes a revenue component.

Japan

Japan’s policymakers, alarmed that the yen’s persistent climb could derail the nation’s economic recovery, see solo market intervention as an increasingly viable option. The yen scaled four-month highs against the dollar on the back of market fears of a U.S. government debt downgrade, prompting warnings from Japanese officials and executives that an unchecked yen rise was hurting the export-reliant economy. Markets are virtually ruling out a repeat of the coordinated intervention that the G7 carried out in the quake’s aftermath, but investors are gearing up for a possible solo Tokyo act, primed by official warnings.

Growing market worries about the possibility of a U.S. debt default, coupled with Europe’s debt problems, have been fuelling the yen’s gains as investors seek the relative safety of Japan’s currency. That clouds the outlook for Japan’s economy, which is just emerging from the post-disaster slump and is relying on its exports to reignite growth. But with the currency mainly driven by overseas developments beyond Japan’s control, some market players are skeptical whether Tokyo would risk acting alone, especially given uncertainty about the outcome of U.S. debt talks ahead of an Aug. 2 deadline. Some policymakers share such concerns, but others say the prominence of external factors in the yen’s rise is no excuse to hold off on intervention, and worry that Japan’s economy is still too weak to withstand the pain from yen gains. The yen’s climb also puts pressure on the central bank to ease monetary policy further in the hope of pushing down bond yields and reining in the currency. Japan last intervened on its own in September 2010, its first market foray in six years. The BOJ eased monetary policy in combination with both the latest solo and coordinated interventions.

Australia

Australia’s most recent quarterly consumer price index inflation reading exceeded economist forecasts, data out Wednesday showed, propelling the Australian dollar to a fresh record high. Second-quarter consumer price index inflation hit 0.9%, compared to a rise of 1.6% in the March quarter, the Australian Bureau of Statistics reported. The CPI reading exceeded the 0.8% reading that economists had expected. Fruit prices jumped 26.9% while gasoline prices climbed 4% in the quarter, the ABS said. CPI rose 3.6% on an annual basis, up from a rise of 3.3% recorded for the March quarter. The Australian dollar traded at $1.1041 after the data, just off a fresh high of $1.1062 — its highest level since it was floated in 1983.

Australian stocks extended early losses immediately after the data, with the S&P/ASX 200 index trading down 0.4%, as investors tried to assess the likelihood of another interest rate hike from the Reserve Bank of Australia. The central bank has a mandate to contain inflation. The RBA has been on hold since last November, with its current cash rate at 4.75%. It meets next week to decide on interest rates.