After showing a lackluster performance earlier in the session, the stock markets are firmly in positive territory in early-afternoon trading on Monday. A better than expected report on business activity in the Chicago area has added to the positive sentiment in the final trading day of the first quarter.
The National Association of Purchasing Management - Chicago released its report on business activity in the Chicago-area manufacturing sector in the month of March, showing that its index of activity in the sector came in above economist estimates.
The report showed that the purchasing managers index rose to 48.2 in March from 44.5 in February, although a reading below 50 indicates a continued contraction in the sector. Economists had been expecting the index to edge up to 46.7.
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Monday, March 31, 2008
Dollar Heads for Biggest Quarterly Loss Against Euro Since 2004
The dollar headed for its biggest quarterly loss against the euro in almost four years as the Federal Reserve cut its target lending rate by the most since 1984 to revive the economy while the European Central Bank held borrowing costs at a six-year high to contain inflation.
The dollar traded within a cent of a record low against the euro after a European Union report showed consumer prices accelerated at the fastest pace in almost 16 years this month. The pound fell to an all-time low against the euro, posting its largest-ever quarterly decline, after U.K. housing prices dropped in March for a sixth month.
``Heading into this quarter, a lot of people thought the worst for the dollar was behind us,'' said Daniel Katzive, a currency strategist at Credit Suisse Group in New York. ``It's pretty clear that this view has been damaged.''
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The dollar traded within a cent of a record low against the euro after a European Union report showed consumer prices accelerated at the fastest pace in almost 16 years this month. The pound fell to an all-time low against the euro, posting its largest-ever quarterly decline, after U.K. housing prices dropped in March for a sixth month.
``Heading into this quarter, a lot of people thought the worst for the dollar was behind us,'' said Daniel Katzive, a currency strategist at Credit Suisse Group in New York. ``It's pretty clear that this view has been damaged.''
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Payrolls May Have Slumped for Third Month: U.S. Economy Preview
The U.S. lost jobs for a third month in March and manufacturing contracted at the fastest pace in five years, signs the economy continues to turn down, economists said before reports this week.
Payrolls probably shrank by 50,000, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department's April 4 report. The last time the economy lost jobs for at least three consecutive months coincided with the start of the Iraq War in 2003.
``The economy has slipped into a recession,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. ``We expect the labor market to weaken, with payrolls falling steadily through the middle of next year.''
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Payrolls probably shrank by 50,000, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department's April 4 report. The last time the economy lost jobs for at least three consecutive months coincided with the start of the Iraq War in 2003.
``The economy has slipped into a recession,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. ``We expect the labor market to weaken, with payrolls falling steadily through the middle of next year.''
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US recession seen by 70 pct of money mgrs-poll
The near-term outlook of money managers around the world has turned decidedly grim, with seven in 10 expecting a U.S. recession this year, a survey showed on Monday.
However, more than a third of the institutional fund managers in Asia, Europe and North America who took part in the poll conducted in February are actively seeking opportunities in illiquid securities, suggesting some investors see a bottom in the market.
Most investors are still reeling from the credit crisis, which has touched just about every financial market in the world. About a third of the 234 fixed-income and equity investors in the survey conducted by research consultancy Greenwich Associates said they they have suffered losses due to mortgage-backed securities.
"Growing fears of systemic risk and doubts about the soundness of some counterparties show that investors are increasingly worried about the ability of some markets to function properly on a much broader level," Greenwich Associates consultant Frank Feenstra said in a note.
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However, more than a third of the institutional fund managers in Asia, Europe and North America who took part in the poll conducted in February are actively seeking opportunities in illiquid securities, suggesting some investors see a bottom in the market.
Most investors are still reeling from the credit crisis, which has touched just about every financial market in the world. About a third of the 234 fixed-income and equity investors in the survey conducted by research consultancy Greenwich Associates said they they have suffered losses due to mortgage-backed securities.
"Growing fears of systemic risk and doubts about the soundness of some counterparties show that investors are increasingly worried about the ability of some markets to function properly on a much broader level," Greenwich Associates consultant Frank Feenstra said in a note.
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Weak Dollar Could Mean More Auto Jobs
In an odd twist of economic ups and downs, the plummeting value of the dollar could lead to more auto manufacturing jobs in the U.S. Companies like GM are having trouble making a profit on imported cars like the new Saturn Astra – built in Belgium – and the new Pontiac G8 — built in Australia — and will have to limit how many they import.
The wilting dollar is also extremely alluring to foreign automakers. Volkswagen and Volvo are considering building assembly plants stateside, while BMW is expanding its South Carolina facility so it can export more cars. That could mean thousands of new jobs in the manufacturing sector. Unfortunately, there aren’t signs that jobs sent to Canada and Mexico will return.
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The wilting dollar is also extremely alluring to foreign automakers. Volkswagen and Volvo are considering building assembly plants stateside, while BMW is expanding its South Carolina facility so it can export more cars. That could mean thousands of new jobs in the manufacturing sector. Unfortunately, there aren’t signs that jobs sent to Canada and Mexico will return.
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The Bankrupting of America
No matter where you get your news, it seems that the pitiful state of the American economy is the front and center story. One day it’s the foreclosure rate. On another day it’s about a major financial institution getting bailed out by the Fed. The most telling, however, was the article I found about tent cities going up in the Los Angeles area. This is particularly disturbing, especially when you look back at where this country was before George Bush took office.
When President Clinton took office, we were operating in deficit mode in part because of the disastrous economic policies of the Reagan-Bush (George H.W.) years. In August of 1993, President Clinton signed the Omnibus Budget Reconciliation Act, which raised taxes on the wealthiest 1.2% of taxpayers and lowered the taxes on 15 million low-income families. It also made tax cuts available to 90% of small businesses and reigned in spending. By 1998, the United States had its first surplus in 42 years. Now, everyone knows that all administrations take credit for these kinds of statistics, and the Clinton administration was no exception.
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When President Clinton took office, we were operating in deficit mode in part because of the disastrous economic policies of the Reagan-Bush (George H.W.) years. In August of 1993, President Clinton signed the Omnibus Budget Reconciliation Act, which raised taxes on the wealthiest 1.2% of taxpayers and lowered the taxes on 15 million low-income families. It also made tax cuts available to 90% of small businesses and reigned in spending. By 1998, the United States had its first surplus in 42 years. Now, everyone knows that all administrations take credit for these kinds of statistics, and the Clinton administration was no exception.
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Friday, March 28, 2008
US recession and what needs to be done
Wall Street got its hopes up on Mar 11. Elated by a Federal Reserve move to stop the credit crunch, the US stock market posted its biggest one-day gain in five years, with the Dow Jones industrial average rising more than 400 points.
Look out, though. Fed officials are the first to acknowledge that their initiative attacks only one problem, the liquidity squeeze at big banks. It does nothing about the central risk to the US economy: an unprecedented crash in home values that is sapping households' wealth and confidence while putting an enormous strain on the banking system.
How bad will this downturn get? No one can know because we've never experienced such a headlong slide in the housing market - and this comes at a time when its current value of $20 trillion accounts for the vast majority of most families' wealth.
Right now most economists expect the US to experience a mild, short recession in 2008. But there is at least a possibility of a steeper decline that the traditional recession remedies - interest-rate cuts here, deficit spending there - won't be able to handle.
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Look out, though. Fed officials are the first to acknowledge that their initiative attacks only one problem, the liquidity squeeze at big banks. It does nothing about the central risk to the US economy: an unprecedented crash in home values that is sapping households' wealth and confidence while putting an enormous strain on the banking system.
How bad will this downturn get? No one can know because we've never experienced such a headlong slide in the housing market - and this comes at a time when its current value of $20 trillion accounts for the vast majority of most families' wealth.
Right now most economists expect the US to experience a mild, short recession in 2008. But there is at least a possibility of a steeper decline that the traditional recession remedies - interest-rate cuts here, deficit spending there - won't be able to handle.
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US recession more severe than last three
Martin Feldstein is a Professor of Economics at Harvard University and was one of the contenders for the FOMC or the Fed Chairmanship with Ben Bernanke. He is a widely respected economist and is important now because he believes that US is probably already under recession.
Feldstein said this is a very different recession from the last three recessions, which is the number of recessions we have had over the past quarter century plus, since 1980. “This recession was not created by the Federal Reserve as a way of damping inflation but grew out of the problems in the housing sector and credit markets. Those are not going to be easy to resolve.”
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Feldstein said this is a very different recession from the last three recessions, which is the number of recessions we have had over the past quarter century plus, since 1980. “This recession was not created by the Federal Reserve as a way of damping inflation but grew out of the problems in the housing sector and credit markets. Those are not going to be easy to resolve.”
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Thursday, March 27, 2008
Canadian dollar edges lower on U.S. economic concern
The Canadian dollar was down slightly versus the U.S. dollar on Thursday as nagging concerns about what impact a U.S. economic slowdown could have on the domestic economy overshadowed the benefit of lofty commodity prices.
Domestic bonds prices had no Canadian data to consider but were pinned lower across the curve after a U.S. jobless claims report gave dealers an excuse to book profits.
At 9:10 a.m. (1310 GMT), the Canadian unit was at C$1.0195 to the U.S. dollar, or 98.09 U.S. cents, down from C$1.0188 to the U.S. dollar, or 98.15 U.S. cents, at Wednesday's close.
The slide in the Canadian dollar pulled it further from the one-week high of C$1.0095 to the U.S. dollar, or 99.05 U.S. cents, that it reached on Wednesday.
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Domestic bonds prices had no Canadian data to consider but were pinned lower across the curve after a U.S. jobless claims report gave dealers an excuse to book profits.
At 9:10 a.m. (1310 GMT), the Canadian unit was at C$1.0195 to the U.S. dollar, or 98.09 U.S. cents, down from C$1.0188 to the U.S. dollar, or 98.15 U.S. cents, at Wednesday's close.
The slide in the Canadian dollar pulled it further from the one-week high of C$1.0095 to the U.S. dollar, or 99.05 U.S. cents, that it reached on Wednesday.
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Tata Chemicals completes acquisition of General Chemical Industrial Products news
Just a day after Tata Motors announced its acquisition of Jaguar and Land Rover from Ford Motors', another Tata Group company, Tata Chemicals, India's largest soda ash maker, has completed its acquisition of the US-based General Chemical Industrial Products Inc (GCIP), less than two months after having signed a definitive agreement to acquire it for $1.005 billion.
To fund the acquisition, Tata Chemicals has raised $850 million comprising a $500 million seven-year loan at 1.35 percentage points over LIBOR and a $350 million in six-month bridge loan, through a consortium comprising ABN AMRO, Bank of Nova Scotia, Calyon, HSBC, Mizuho Financial Group, Rabobank and Standard Chartered.
GCIP, is among the top five global soda ash producers with interests in mining, and its acquisition catapults Tata Chemicals to the world's second largest soda ash maker with a combined global capacity of 5.5 million tonnes per annum.
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To fund the acquisition, Tata Chemicals has raised $850 million comprising a $500 million seven-year loan at 1.35 percentage points over LIBOR and a $350 million in six-month bridge loan, through a consortium comprising ABN AMRO, Bank of Nova Scotia, Calyon, HSBC, Mizuho Financial Group, Rabobank and Standard Chartered.
GCIP, is among the top five global soda ash producers with interests in mining, and its acquisition catapults Tata Chemicals to the world's second largest soda ash maker with a combined global capacity of 5.5 million tonnes per annum.
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Euro falls on speculation credit losses will spread to Europe
The euro fell for the first time in three days against the dollar on speculation losses at the region's biggest banks will spread amid the credit crisis.
The euro fell versus 13 of the 16 most-traded currencies after Oppenheimer & Co. said UBS AG, Europe's largest bank by assets, will probably report a loss this quarter. European Central Bank policy maker Guy Quaden said in an interview there are ``shockwaves'' from the U.S. credit squeeze, the Wall Street Journal reported today.
``A topping-out process for euro-dollar is taking place,'' said Ian Stannard, a currency strategist in London at BNP Paribas SA, France's biggest bank. ``The move higher for the euro is quite fragile. As equity markets start to pull back, that could undermine support for the euro.''
The euro fell to $1.5817 at 7:21 a.m. in New York, from $1.5845 late yesterday, when it rose 1.3 percent. It was little changed against the yen, at 157.06 yen, after trading as low as 155.89 earlier, its largest loss since March 20. The dollar was at 99.30 yen, from 99.20, and rose to 0.9920 Swiss franc, from 0.9888 yesterday.
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The euro fell versus 13 of the 16 most-traded currencies after Oppenheimer & Co. said UBS AG, Europe's largest bank by assets, will probably report a loss this quarter. European Central Bank policy maker Guy Quaden said in an interview there are ``shockwaves'' from the U.S. credit squeeze, the Wall Street Journal reported today.
``A topping-out process for euro-dollar is taking place,'' said Ian Stannard, a currency strategist in London at BNP Paribas SA, France's biggest bank. ``The move higher for the euro is quite fragile. As equity markets start to pull back, that could undermine support for the euro.''
The euro fell to $1.5817 at 7:21 a.m. in New York, from $1.5845 late yesterday, when it rose 1.3 percent. It was little changed against the yen, at 157.06 yen, after trading as low as 155.89 earlier, its largest loss since March 20. The dollar was at 99.30 yen, from 99.20, and rose to 0.9920 Swiss franc, from 0.9888 yesterday.
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Final Q4 2007 GDP may indicate the U.S. is in a recession
The U.S. economy slowed substantially in Q4 2007 to a 0.6% annualized rate, the U.S. Commerce Department announced Thursday, in its final estimate for the quarter. It was the slowest annualized growth rate since 2002.
Economists surveyed by Bloomberg News had expected the final Q4 2007 GDP statistic to be 0.6%.
For 2007, the U.S. economy grew 2.2%, after adjusting for inflation -- its slowest growth rate in five years. The U.S. economy grew 2.9% in 2006.
In dollar terms, U.S. GDP in 2007 totaled $13.84 trillion, not adjusted for inflation.
In Q4 2007, business inventories increased 6%, exports increased 6.5%, government spending rose 2%, imports fell 1.4% and residential investment plummeted 25.2%.
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Economists surveyed by Bloomberg News had expected the final Q4 2007 GDP statistic to be 0.6%.
For 2007, the U.S. economy grew 2.2%, after adjusting for inflation -- its slowest growth rate in five years. The U.S. economy grew 2.9% in 2006.
In dollar terms, U.S. GDP in 2007 totaled $13.84 trillion, not adjusted for inflation.
In Q4 2007, business inventories increased 6%, exports increased 6.5%, government spending rose 2%, imports fell 1.4% and residential investment plummeted 25.2%.
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Chinese banks cast wary eye at ailing U.S. financial sector
Chinese banks, widely considered as possible buyers of more U.S. financial assets amid the credit crisis, are becoming picky and cautious because of increasing concerns about investment risks.
After the Chinese state-controlled Citic Securities narrowly avoided taking a bath on a proposed investment in Bear Stearns, the Chinese government is insisting that any major foreign investment by state entities gets approval from the State Council, or cabinet, before a final deal can be reached, according to sources with direct knowledge of the situation.
Even before that, there had been increased caution about doing bank deals.
China Construction Bank, one of the four largest banks in mainland China, has turned down nearly 30 proposals of possible acquisitions over the past year, including opportunities to buy stakes in the troubled U.S. home mortgage lender Countrywide Financial and British bank Northern Rock, the sources said.
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After the Chinese state-controlled Citic Securities narrowly avoided taking a bath on a proposed investment in Bear Stearns, the Chinese government is insisting that any major foreign investment by state entities gets approval from the State Council, or cabinet, before a final deal can be reached, according to sources with direct knowledge of the situation.
Even before that, there had been increased caution about doing bank deals.
China Construction Bank, one of the four largest banks in mainland China, has turned down nearly 30 proposals of possible acquisitions over the past year, including opportunities to buy stakes in the troubled U.S. home mortgage lender Countrywide Financial and British bank Northern Rock, the sources said.
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Obama: 'Economy is in a recession'
Sen. Barack Obama, delivering a speech on the economy in New York today, took aim at not only the Bush administration but also Sen. John McCain of Arizona for their approaches to an economy which, as the senator put it, "is in a recession.''
The Tribune's John McCormick is reporting from the scene of the Cooper Union speech.
I want to thank Mayor Bloomberg for his extraordinary leadership. At a time when Washington is divided in old ideological battles, he shows us what can be achieved when we bring people together to seek pragmatic solutions. Not only has he been a remarkable leader for New York –he has established himself as a major voice in our national debate on issues like renewing our economy, educating our children, and seeking energy independence. Mr. Mayor, I share your determination to bring this country together to finally make progress for the American people.
In a city of landmarks, we meet at Cooper Union, just uptown from Federal Hall, where George Washington took the oath of office as the first President of the United States. With all the history that has passed through the narrow canyons of lower Manhattan, it is worth taking a moment to reflect on the role that the market has played in the development of the American story.
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The Tribune's John McCormick is reporting from the scene of the Cooper Union speech.
I want to thank Mayor Bloomberg for his extraordinary leadership. At a time when Washington is divided in old ideological battles, he shows us what can be achieved when we bring people together to seek pragmatic solutions. Not only has he been a remarkable leader for New York –he has established himself as a major voice in our national debate on issues like renewing our economy, educating our children, and seeking energy independence. Mr. Mayor, I share your determination to bring this country together to finally make progress for the American people.
In a city of landmarks, we meet at Cooper Union, just uptown from Federal Hall, where George Washington took the oath of office as the first President of the United States. With all the history that has passed through the narrow canyons of lower Manhattan, it is worth taking a moment to reflect on the role that the market has played in the development of the American story.
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Wednesday, March 26, 2008
Weak Dollar Likely to Benefit US Hotel Markets in 2008
A weak US dollar may be the primary factor in the ongoing solid performance of the US hospitality sector in 2008, according to a report released today by Ernst & Young's Global Real Estate Center.
"The continued weakness of the dollar is producing multiple beneficial effects on the US hotel market which is likely to continue for the foreseeable future and which may pull the sector through current recessionary pressures," said Michael Fishbin, Ernst & Young's US Director, Hospitality & Leisure.
Today, international tourists are looking to the US as a prime vacation spot and are spending more money, often upgrading to higher-end and even luxury accommodations because their local currency now buys, in some cases, more than twice what it did just a few years ago. Total arrivals in the US have witnessed 18 months of successive growth since April 2006, according to the US Department of Commerce, and in the first 11 months of 2007 international visitors spent US$111.6 billion, up 13 percent from the first 11 months of 2006.
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"The continued weakness of the dollar is producing multiple beneficial effects on the US hotel market which is likely to continue for the foreseeable future and which may pull the sector through current recessionary pressures," said Michael Fishbin, Ernst & Young's US Director, Hospitality & Leisure.
Today, international tourists are looking to the US as a prime vacation spot and are spending more money, often upgrading to higher-end and even luxury accommodations because their local currency now buys, in some cases, more than twice what it did just a few years ago. Total arrivals in the US have witnessed 18 months of successive growth since April 2006, according to the US Department of Commerce, and in the first 11 months of 2007 international visitors spent US$111.6 billion, up 13 percent from the first 11 months of 2006.
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Ford and Tata finalise $2.3bn deal
Tata Motors will pay Ford Motor about $2.3bn for Jaguar and Land Rover and Ford will contribute up to about $600m (£300m) to the two brands’ pension plans under terms of a sale agreement announced on Wednesday.
Ford will also continue to supply the two brands with engines and transmissions, stampings and other components for differing periods, and its credit arm will provide financing for their dealers during a transitional period of up to two months.
Ford made the announcement, as expected, at midday UK time after briefing Jaguar and Land Rover employees on details of the transaction. The sale is subject to regulatory approvals and is expected to close by midyear.
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Ford will also continue to supply the two brands with engines and transmissions, stampings and other components for differing periods, and its credit arm will provide financing for their dealers during a transitional period of up to two months.
Ford made the announcement, as expected, at midday UK time after briefing Jaguar and Land Rover employees on details of the transaction. The sale is subject to regulatory approvals and is expected to close by midyear.
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U.S. Stocks Open Lower After Surprise Slide In Factory Orders
U.S. stocks fell at Wednesday's start after an unexpected slide in February factory orders further underlined a distressed economy, and word a buyout of Clear Channel Communications Inc. might be in jeopardy also weighed on sentiment.
"By signaling a decline in business spending, which has declined in each of the past eight recessions, today's report is consistent with economic recession, " said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.
The Dow Jones Industrial Average (DJI) fell 77.17 points to 12,455.43, with 27 of its 30 components posting early declines, with financials leading the way lower.
Early broker action had Oppenheimer & Co. cutting first-quarter profit forecasts for U.S. banks on average by 84%, led by Citigroup Inc. (C), down 4.6% .
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"By signaling a decline in business spending, which has declined in each of the past eight recessions, today's report is consistent with economic recession, " said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.
The Dow Jones Industrial Average (DJI) fell 77.17 points to 12,455.43, with 27 of its 30 components posting early declines, with financials leading the way lower.
Early broker action had Oppenheimer & Co. cutting first-quarter profit forecasts for U.S. banks on average by 84%, led by Citigroup Inc. (C), down 4.6% .
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Oil Above $102 As US Dollar Weakens
Oil prices rose Wednesday as the depreciation of the U.S. dollar drove investors to oil futures despite new economic worries and expectations that U.S. crude supplies were continuing to build.
News that consumer confidence and home prices in the United States were slumping prompted the greenback's decline against major currencies Tuesday, in turn fueling oil prices.
"U.S. economic woes give mixed signals for oil ... all these poor economic data should affect demand in the U.S. negatively and the weaker supply demand fundamentals should pull down prices," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
But "the weak U.S. dollar continues to prop up oil prices due to financial investors engaging in this inflation play," Shum said.
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News that consumer confidence and home prices in the United States were slumping prompted the greenback's decline against major currencies Tuesday, in turn fueling oil prices.
"U.S. economic woes give mixed signals for oil ... all these poor economic data should affect demand in the U.S. negatively and the weaker supply demand fundamentals should pull down prices," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
But "the weak U.S. dollar continues to prop up oil prices due to financial investors engaging in this inflation play," Shum said.
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U.S. Stocks Fall on Banking Outlook, Durable Goods Orders Slump
U.S. stocks fell for the first time in four days on a worsening outlook for bank profits, an unexpected drop in durable goods orders and concern that financing for buyouts will collapse.
Citigroup Inc. tumbled the most in the Dow Jones Industrial Average and led financials to their biggest retreat in almost two weeks after Oppenheimer & Co.'s Meredith Whitney said the largest U.S. bank's quarterly loss will be four times bigger than previously forecast. General Electric Co. and United Technologies Corp. declined on the worst-ever slump in machinery demand. Clear Channel Communications Inc. posted its steepest drop in 19 years on concern banks will pull loans for the broadcaster's $19.5 billion takeover.
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Citigroup Inc. tumbled the most in the Dow Jones Industrial Average and led financials to their biggest retreat in almost two weeks after Oppenheimer & Co.'s Meredith Whitney said the largest U.S. bank's quarterly loss will be four times bigger than previously forecast. General Electric Co. and United Technologies Corp. declined on the worst-ever slump in machinery demand. Clear Channel Communications Inc. posted its steepest drop in 19 years on concern banks will pull loans for the broadcaster's $19.5 billion takeover.
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How Will the Housing Crisis End?
We are continuously being barraged with mixed news concerning the housing crisis. One day we hear signs are pointing towards a bottom; the next, housing numbers came in much lower than expectations. So we raise this question: What indicators should we be looking at to truly signal a recovery in housing?
With this question in mind our analysis focused on creating the stages we believe would be necessary to facilitate a recovery. We were able to define 7 chronological stages which need to occur in order for the crisis to end. Additionally, the progress for each of the stages can be measured by several key indicators. The stages we outline below are meant to help to average investor better understand how a recovery will most likely unfold, and includes indicator that anyone with a basic internet connection will be able to easily access.
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With this question in mind our analysis focused on creating the stages we believe would be necessary to facilitate a recovery. We were able to define 7 chronological stages which need to occur in order for the crisis to end. Additionally, the progress for each of the stages can be measured by several key indicators. The stages we outline below are meant to help to average investor better understand how a recovery will most likely unfold, and includes indicator that anyone with a basic internet connection will be able to easily access.
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Monday, March 24, 2008
Oil Falls a Third Day as Economic Slowdown May Cut U.S. Demand
Crude oil fell for a third day in New York on signs that the slowing U.S. economy will cut fuel demand in the world's biggest energy consuming country.
Oil is likely to slide further this spring as slowing economic growth encourages traders to exit commodity markets, Goldman Sachs Group Inc. said in a report on March 20. A government report on March 19 showed that U.S. fuel demand in the four previous weeks was down 3.2 percent from a year earlier.
``We can look forward to a continuation of the commodity downtrend we saw last week,'' said Eric Wittenauer, an energy analyst at Wachovia Securities in St. Louis. ``The economic slowdown and concern about demand are pushing prices lower.''
Crude oil for May delivery fell 31 cents, or 0.3 percent, to $101.53 a barrel at 11:06 a.m. on the New York Mercantile Exchange. Futures prices rose to $111.80 a barrel on March 17, the highest since trading began in 1983. Oil is up 63 percent from a year ago.
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Oil is likely to slide further this spring as slowing economic growth encourages traders to exit commodity markets, Goldman Sachs Group Inc. said in a report on March 20. A government report on March 19 showed that U.S. fuel demand in the four previous weeks was down 3.2 percent from a year earlier.
``We can look forward to a continuation of the commodity downtrend we saw last week,'' said Eric Wittenauer, an energy analyst at Wachovia Securities in St. Louis. ``The economic slowdown and concern about demand are pushing prices lower.''
Crude oil for May delivery fell 31 cents, or 0.3 percent, to $101.53 a barrel at 11:06 a.m. on the New York Mercantile Exchange. Futures prices rose to $111.80 a barrel on March 17, the highest since trading began in 1983. Oil is up 63 percent from a year ago.
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Euro lower against the dollar at US$1.5381
The euro was lower against the U.S. dollar Monday after the sales of existing U.S. homes posted an unexpected increase in February, giving the dollar some strength on a day that most financial markets in Europe were closed for the Easter holidays.
The 15-nation currency bought US$1.5381 compared to US$$1.5443 in trading Friday when markets were closed for the start of the holiday, pushed lower by the U.S. housing report.
The National Association of Realtors said that sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of just more than 5 million units. In the previous six months, sales had fallen, something analysts had been expecting again last month.
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The 15-nation currency bought US$1.5381 compared to US$$1.5443 in trading Friday when markets were closed for the start of the holiday, pushed lower by the U.S. housing report.
The National Association of Realtors said that sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of just more than 5 million units. In the previous six months, sales had fallen, something analysts had been expecting again last month.
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Pru with a view to US £1bn acquisition
Insurance giant Prudential has set aside $2bn (£1bn) to make a major acquisition in the US within a few months.
The war chest will be used to grow in a market that is seeing a wave of baby boomers begin to retire. The US already accounts for a quarter of the group's new business sales and with the UK market increasingly sluggish, insurers are being forced to turn towards overseas expansion.
Prudential is looking to announce details of an acquisition - possibly of a life assurance company - within the next few months. Funds would come out of its US arm, Jackson National Life Insurance Company.
Clark Manning, chief executive of Jackson, said it could grow organically, but this would lead to "single digit returns" while taking over a business would result in "double digit growth". He added that the credit crisis had put it into an ideal position to make major acquisitions.
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The war chest will be used to grow in a market that is seeing a wave of baby boomers begin to retire. The US already accounts for a quarter of the group's new business sales and with the UK market increasingly sluggish, insurers are being forced to turn towards overseas expansion.
Prudential is looking to announce details of an acquisition - possibly of a life assurance company - within the next few months. Funds would come out of its US arm, Jackson National Life Insurance Company.
Clark Manning, chief executive of Jackson, said it could grow organically, but this would lead to "single digit returns" while taking over a business would result in "double digit growth". He added that the credit crisis had put it into an ideal position to make major acquisitions.
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Canadian Dollar Rebounds From Two-Month Low as Stocks Advance
Canada's dollar rebounded from a two-month low against the U.S. currency, as rising stock prices bolstered investor confidence in the U.S. economy, the biggest consumer of Canadian exports.
The Canadian dollar strengthened against 10 of the 16 most- traded currencies, gaining about 1.8 percent against the Swiss franc and 1.4 percent against the yen. Traders resumed buying high-yielding assets as U.S. stocks rose for a second day after JPMorgan Chase & Co. increased its bid for Bear Stearns Cos., reducing risks in financial markets. Canada's benchmark index advanced 2 percent.
``Stocks have shown us the way today,'' said Steve Butler, director of foreign exchange trading at Scotia Capital Inc. in Toronto. ``It's a feel-good factor that is helping the currency.''
Canada's dollar rose 0.2 percent to C$1.0208 per U.S. dollar in Toronto at 11:26 a.m. from C$1.0233 on March 21. Earlier it fell to C$1.0309, the lowest since Jan. 23. One Canadian dollar buys 97.97 U.S. cents.
Connecting all the dots: Economy a victim of war
All the polls show that economic problems have surpassed the Iraq war as the top concern among Democrats and Republicans alike. But no candidate has yet connected the dots to show the direct causal links between that war and our myriad economic woes.
Such a lesson just might help reshape our priorities.
First, take the high price of oil. It was $25 per barrel right before the war, with gasoline at about $1.50 a gallon. Now oil hits $110 per barrel and gasoline approaches $4.
When oil goes up it boosts the price of every other product that requires transportation—notably food and otheressentials. That's called an "inflationary pressure."
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Such a lesson just might help reshape our priorities.
First, take the high price of oil. It was $25 per barrel right before the war, with gasoline at about $1.50 a gallon. Now oil hits $110 per barrel and gasoline approaches $4.
When oil goes up it boosts the price of every other product that requires transportation—notably food and otheressentials. That's called an "inflationary pressure."
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Into the Economic Abyss
For months, Americans have been subjected to a sort of economic water torture — a maddening drip of bad news about jobs, gas prices, sagging home values, creeping inflation, the slouching dollar and a stock market in bumpy descent.
Then came Bear Stearns. One of the five largest U.S. investment banks nearly collapsed in a single day before the government propped it up by backing emergency loans and a rival stepped in to buy it for a paltry $2 per share.
To the drumbeat of signs that seemed to foretell a traditional recession, this added a nightmarish specter — an old-style run on the bank, customers clamoring to pull their cash, a stately Wall Street firm brought to its knees.
The combination has forced the economy to the forefront of the national conversation in a way it has not been since the go-go 1990s, and for entirely opposite reasons.
Friday, March 21, 2008
Dollar Set for Weekly Gain on Fed Steps to Restore Confidence
The dollar headed for the first weekly advance against the euro and the yen in a month after the Federal Reserve's decision to accept more collateral for loans eased concern about banks' access to capital.
The U.S. currency rose against the pound and the Swiss franc this week after the Fed made an emergency cut to the rate it charges banks to borrow and said it would swap Treasuries for mortgage-backed securities. The Fed also lent $28.8 billion to U.S. securities firms, its first extension of credit to non-banks since the Great Depression.
``The dollar is enjoying a bounce,'' said Hideki Amikura, deputy general manager of currencies at Nomura Trust and Banking Co. in Tokyo, a unit of Japan's largest brokerage. ``The Fed is working to restore confidence. U.S. investment bank earnings weren't as dire as some predicted.''
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The U.S. currency rose against the pound and the Swiss franc this week after the Fed made an emergency cut to the rate it charges banks to borrow and said it would swap Treasuries for mortgage-backed securities. The Fed also lent $28.8 billion to U.S. securities firms, its first extension of credit to non-banks since the Great Depression.
``The dollar is enjoying a bounce,'' said Hideki Amikura, deputy general manager of currencies at Nomura Trust and Banking Co. in Tokyo, a unit of Japan's largest brokerage. ``The Fed is working to restore confidence. U.S. investment bank earnings weren't as dire as some predicted.''
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Investors in Asia Worry About Fallout from Possible US Recession
Japan's Nikkei Index rose for the third straight day following gains overnight on Wall Street and a week of fluctuation amid global worries about a possible U.S. recession. As Naomi Martig reports from Hong Kong, financial analysts say concern is steadily growing among investors and officials in Asia about just how damaging the predicted recession will be.
It has been a very volatile week for global stocks. At its low points, China's main stock index in Shanghai dropped to its lowest level in nine months, share prices in Hong Kong and Japan both witnessed plummets of more than three-percent, and the dollar continued to hit below that psychological 100-yen mark.
There were also short-lived surges. Stocks in Asia rallied on Wednesday after the Federal Reserve announced an interest rate cut of 75 basis points and two heavyweight U.S. investment banks, Lehman Brothers and Goldman Sachs reported better-than-expected results.
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It has been a very volatile week for global stocks. At its low points, China's main stock index in Shanghai dropped to its lowest level in nine months, share prices in Hong Kong and Japan both witnessed plummets of more than three-percent, and the dollar continued to hit below that psychological 100-yen mark.
There were also short-lived surges. Stocks in Asia rallied on Wednesday after the Federal Reserve announced an interest rate cut of 75 basis points and two heavyweight U.S. investment banks, Lehman Brothers and Goldman Sachs reported better-than-expected results.
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OECD Downgrades US Economic Outlook
The Paris-based Organization for Economic Development and Cooperation (OECD) published a grim assessment Thursday of the United States economy, saying it was close to recession. However, the OECD suggested European economies will likely fare better this year. Lisa Bryant has more for VOA from the French capital.
The OECD downgraded its estimates for U.S. growth to just 0.1 percent for the first quarter of this year. Overall, the organization predicted the American economy would grow just 1.4 percent in 2008, far below its previous estimate in December of a two percent growth.
The OECD is an international economic research organization based in Paris.
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The OECD downgraded its estimates for U.S. growth to just 0.1 percent for the first quarter of this year. Overall, the organization predicted the American economy would grow just 1.4 percent in 2008, far below its previous estimate in December of a two percent growth.
The OECD is an international economic research organization based in Paris.
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Thursday, March 20, 2008
US teeters on recession, eurozone could weather crisis
The US economy is teetering on the brink of recession but eurozone countries could pull through the global financial crisis without special measures, the OECD said on Thursday
The OECD slashed US growth estimates for the first half of this year, saying the latest data "suggest that the US economy is now essentially moving sideways, if not contracting outright."
The US economy was now expected to grow 0.1 percent in the first quarter, a sharp reduction from the 0.3 percent estimated in December, and to show zero growth in the second, a sudden halt compared with 0.4 percent given previously.
Despite the sharp downward revision, acting chief OECD economist Jorgen Elmeskov said in a statement "it may be premature to declare a recession" in the United States.
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The OECD slashed US growth estimates for the first half of this year, saying the latest data "suggest that the US economy is now essentially moving sideways, if not contracting outright."
The US economy was now expected to grow 0.1 percent in the first quarter, a sharp reduction from the 0.3 percent estimated in December, and to show zero growth in the second, a sudden halt compared with 0.4 percent given previously.
Despite the sharp downward revision, acting chief OECD economist Jorgen Elmeskov said in a statement "it may be premature to declare a recession" in the United States.
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Dollar Rises Against Euro, Yen as Oil, Commodity Prices Decline
The dollar rose to its strongest in a week against the euro as speculation a global economic slowdown will reduce demand for raw materials pushed gold and oil lower.
Europe's common currency declined after Credit Suisse Group said it may have a loss this quarter because of writedowns on debt securities. The dollar climbed to the highest level in more than a week versus the currencies of its major trade partners as crude, which is priced in the U.S. currency, dropped after a government report showed weaker demand for fuel.
``The main driver is the liquidation of long commodity positions, specifically crude oil,'' said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. ``That's potentially been a positive for the dollar on the back of the drop in commodity prices.''
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Europe's common currency declined after Credit Suisse Group said it may have a loss this quarter because of writedowns on debt securities. The dollar climbed to the highest level in more than a week versus the currencies of its major trade partners as crude, which is priced in the U.S. currency, dropped after a government report showed weaker demand for fuel.
``The main driver is the liquidation of long commodity positions, specifically crude oil,'' said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. ``That's potentially been a positive for the dollar on the back of the drop in commodity prices.''
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Recession math smacks head-on into Reagan myth
Georgia Republicans have a choice to make, a choice between math and myth.
The math is pretty simple: We're heading into a major recession that a lot of economists predict could be deeper and longer than anything we've experienced in a generation or longer. Already, state revenues have begun to fall significantly, raising fear of budget shortfalls.
In California, the situation has already gotten so bad that 20,000 school employees may soon be laid off to balance the budget.
Under such circumstances, basic math says that passing significant tax cuts would compound the problem. It would turn potentially serious budget cutbacks into something truly traumatic.
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The math is pretty simple: We're heading into a major recession that a lot of economists predict could be deeper and longer than anything we've experienced in a generation or longer. Already, state revenues have begun to fall significantly, raising fear of budget shortfalls.
In California, the situation has already gotten so bad that 20,000 school employees may soon be laid off to balance the budget.
Under such circumstances, basic math says that passing significant tax cuts would compound the problem. It would turn potentially serious budget cutbacks into something truly traumatic.
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Economic Crisis in America
The world's largest economy has began to show weakness and drift as a result of a collapse of the housing market, the subprime mortgage turmoil, a severe credit crunch, high oil prices, and the deep devaluation of the dollar.
The broad international stock sell-offs on Monday and the prospect of a steep decline in the U.S. market raised fresh concerns that a looming recession in America could have global repercussions.
Already share prices in Japan, Europe, China, Hong Kong, Britain, France, and Canada already fell on average 5 percent, reminding us of the 1990 Asian financial crisis. The tumble in Wall Street resulted from the massive losses on loans made to U.S. homebuyers will cascade through the world financial system.
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The broad international stock sell-offs on Monday and the prospect of a steep decline in the U.S. market raised fresh concerns that a looming recession in America could have global repercussions.
Already share prices in Japan, Europe, China, Hong Kong, Britain, France, and Canada already fell on average 5 percent, reminding us of the 1990 Asian financial crisis. The tumble in Wall Street resulted from the massive losses on loans made to U.S. homebuyers will cascade through the world financial system.
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US waging economic war against China
The New York stock market rallied some 400 points Tuesday night, prompting an increase in prices across Asia. Even the Philippines participated a little. US stock prices reacted favorably to the news that the Federal Reserve lowered interest rates. Bloomberg: “The Fed has cut the benchmark lending rate by 2 percentage points this year, the most aggressive easing since the federal funds rate became an explicit target of policy in the late 1980s.”
But don’t get too excited because you must look not just at the “big” picture, but the “whole” picture.
Conventional and common wisdom talks about the recession facing the United States and the potential that an economic slowdown is confronting the globe. There is little indication that a “normal” economic slowdown is happening; normal meaning that production is dropping. It is not so much that production is going down but that the end-result of production, buying, is dropping. If you look around the world at virtually every country in every economic and wealth group, people are wealthier today on the average than at any other time in history. But if people are wealthier, why aren’t they purchasing? One word: inflation.
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But don’t get too excited because you must look not just at the “big” picture, but the “whole” picture.
Conventional and common wisdom talks about the recession facing the United States and the potential that an economic slowdown is confronting the globe. There is little indication that a “normal” economic slowdown is happening; normal meaning that production is dropping. It is not so much that production is going down but that the end-result of production, buying, is dropping. If you look around the world at virtually every country in every economic and wealth group, people are wealthier today on the average than at any other time in history. But if people are wealthier, why aren’t they purchasing? One word: inflation.
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Looming US recession will have worse impact than 1997 Asian crisis
Expect the coming months to be tough, warned an economics professor. And the tough times may start next month.
"It's going to be a hard year for us. Everyone will be affected. And the hurt will be deepest among the low-income families," Ernesto Pernia, a professor of economics at the University of the Philippines and former economic chief at the Asian Development Bank told abs-cbnnews.com/Newsbreak in an interview.
The United States, a major destination of our export products and the host of overseas Filipinos whose dollars account for half of total remittances to the country, is facing a looming economic recession or growth slowdown.
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"It's going to be a hard year for us. Everyone will be affected. And the hurt will be deepest among the low-income families," Ernesto Pernia, a professor of economics at the University of the Philippines and former economic chief at the Asian Development Bank told abs-cbnnews.com/Newsbreak in an interview.
The United States, a major destination of our export products and the host of overseas Filipinos whose dollars account for half of total remittances to the country, is facing a looming economic recession or growth slowdown.
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Wednesday, March 19, 2008
Loonie down as U.S. economic concerns linger
The Canadian dollar reversed its overnight gain and fell versus the U.S. dollar on Wednesday as the calm restored in financial markets after Tuesday's U.S. Federal Reserve rate cut was short-lived.
Domestic bond prices, with no key Canadian data to trigger a move, followed the bigger U.S.
Treasury market higher across the curve as equity markets looked poised for a pullback.
At 8:40 a.m. EDT, the Canadian dollar was at US$1.0032, valuing a U.S. dollar at 99.68 Canadian cents, down from US$1.0048, valuing a U.S. dollar at 99.52 Canadian cents, at Tuesday's close.
The Canadian dollar had rallied overnight, reaching a high of US$1.0126, or 98.76 Canadian cents per U.S. dollar, as the Fed rate cut on Tuesday helped boost market sentiment.
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Domestic bond prices, with no key Canadian data to trigger a move, followed the bigger U.S.
Treasury market higher across the curve as equity markets looked poised for a pullback.
At 8:40 a.m. EDT, the Canadian dollar was at US$1.0032, valuing a U.S. dollar at 99.68 Canadian cents, down from US$1.0048, valuing a U.S. dollar at 99.52 Canadian cents, at Tuesday's close.
The Canadian dollar had rallied overnight, reaching a high of US$1.0126, or 98.76 Canadian cents per U.S. dollar, as the Fed rate cut on Tuesday helped boost market sentiment.
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Japanese Drug Firms Bulk Up for the U.S. Market
Japan’s Takeda Pharmaceutical Co. has taken a step closer to buying out its partner in a U.S. joint venture, the latest sign that the country’s relatively small pharmaceutical companies are becoming more proactive about building their international presence.
Shares of Osaka-based Takeda jumped nearly 4% after the Nihon Keizai Shimbun, Japan’s big economic daily, reported the company was close (subscriber access only) to a long-sought deal that would give it complete control of TAP Pharmaceutical Products Inc., a joint venture it established with Abbot Laboratories Inc. in 1977. TAP, headquartered in Illinois, has successful prostate cancer and heartburn drugs.
A spokeswoman for Takeda said the two companies had been discussing a potential sale of TAP for several years and that those discussions had recently moved forward. She declined to comment further.
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Shares of Osaka-based Takeda jumped nearly 4% after the Nihon Keizai Shimbun, Japan’s big economic daily, reported the company was close (subscriber access only) to a long-sought deal that would give it complete control of TAP Pharmaceutical Products Inc., a joint venture it established with Abbot Laboratories Inc. in 1977. TAP, headquartered in Illinois, has successful prostate cancer and heartburn drugs.
A spokeswoman for Takeda said the two companies had been discussing a potential sale of TAP for several years and that those discussions had recently moved forward. She declined to comment further.
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Stagflation fears push up fund managers' cash levels
Growing fears of stagflation pushed fund managers' cash levels to a new high and risk appetite close to record lows, though investors continue to see value in equities, Merrill Lynch's (NYSE:MER) (OOTC:MERIZ) survey of fund managers for March found.
The survey found asset allocators' cash positions rose to a record high for the survey in March with a net 42 pct reporting they are overweight cash, up from February's then high of 41 pct.
Meanwhile, the survey's FMS composite indicator for risk and liquidity stayed at 31, well down on the long-term average of 42.
These findings reflect increased fears of stagflation, with more than three quarters of the survey's panel believing the global economy is entering a year when growth is below trend while inflation is above trend. In February, two thirds had taken that view.
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The survey found asset allocators' cash positions rose to a record high for the survey in March with a net 42 pct reporting they are overweight cash, up from February's then high of 41 pct.
Meanwhile, the survey's FMS composite indicator for risk and liquidity stayed at 31, well down on the long-term average of 42.
These findings reflect increased fears of stagflation, with more than three quarters of the survey's panel believing the global economy is entering a year when growth is below trend while inflation is above trend. In February, two thirds had taken that view.
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Zogby: McCain Best to Manage Economy
With U.S. recession fears hitting new highs, the overall mood of Americans has taken a sharp turn for the worse, a new Reuters/Zogby poll shows. The Reuters/Zogby Index, which measures American confidence, has fallen to a new low of 87.7 from 99.3 last month, when the index boasted its highest rating since the baseline rating of 100 for the index was established in August.
The report of public confidence in the economy and their nation comes after several days of dramatic economic headlines, but fieldwork for the survey was actually completed just as news was breaking Friday about the collapse of investment house Bear Stearns and the full percent cut of a key interest rate by the Federal Reserve – a quarter-point on Sunday and another three-quarters of a percent on Tuesday.
The Reuters/Zogby index is comprised of 10 poll questions that gauge perceptions of the state of the country and the economy. Every one of the 10 data points declined in March compared to a month ago.
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The report of public confidence in the economy and their nation comes after several days of dramatic economic headlines, but fieldwork for the survey was actually completed just as news was breaking Friday about the collapse of investment house Bear Stearns and the full percent cut of a key interest rate by the Federal Reserve – a quarter-point on Sunday and another three-quarters of a percent on Tuesday.
The Reuters/Zogby index is comprised of 10 poll questions that gauge perceptions of the state of the country and the economy. Every one of the 10 data points declined in March compared to a month ago.
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Fed's bold moves could have psychological risks
There's a risk in Federal Reserve Chairman Ben Bernanke's bold moves of late.
If recent history is any guide, the euphoria that met the Fed's three-quarter-point reduction to a key interest rate Tuesday could be short-lived. With a string of urgent and aggressive actions, the Fed itself could end up feeding the panicky mind-set that it so desperately wants to calm.
Even inside the Fed there was disagreement about just how much the key interest rate — its most potent tool in dealing with economic trouble — should be lowered.
Two Fed members dissented, preferring a smaller cut, while Bernanke and seven others prevailed with a more powerful three-quarter-point one. Cuts of this size are pretty infrequent. Bernanke, in an emergency session in January, ordered one — making for the single-biggest reduction in more than two decades.
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If recent history is any guide, the euphoria that met the Fed's three-quarter-point reduction to a key interest rate Tuesday could be short-lived. With a string of urgent and aggressive actions, the Fed itself could end up feeding the panicky mind-set that it so desperately wants to calm.
Even inside the Fed there was disagreement about just how much the key interest rate — its most potent tool in dealing with economic trouble — should be lowered.
Two Fed members dissented, preferring a smaller cut, while Bernanke and seven others prevailed with a more powerful three-quarter-point one. Cuts of this size are pretty infrequent. Bernanke, in an emergency session in January, ordered one — making for the single-biggest reduction in more than two decades.
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Drop in dollar could add to U.S. economic woes
The dollar's relentless decline may increase the dangers facing the U.S. economy, with the potential for risk-averse investors to stop funding the U.S. current account deficit.
The initial trigger for the dollar's slide in recent years had been the large deficits in spending and trade, analysts said, but as long as they were funded by investment flows into U.S. dollar-denominated assets, few were worried about the long term.
But with a slowing economy and increasing concerns about the stability of the U.S. financial system because of widening losses on credit defaults, dollar-denominated securities are becoming less attractive to investors, reducing the demand for dollars to fund such investments.
"That's one of the main concerns: that the sell-off in the dollar reaches the point where foreign investors would start selling most of their positions, and then we would really have funding problems," said Omer Esiner, a market analyst at Ruesch International in Washington.
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The initial trigger for the dollar's slide in recent years had been the large deficits in spending and trade, analysts said, but as long as they were funded by investment flows into U.S. dollar-denominated assets, few were worried about the long term.
But with a slowing economy and increasing concerns about the stability of the U.S. financial system because of widening losses on credit defaults, dollar-denominated securities are becoming less attractive to investors, reducing the demand for dollars to fund such investments.
"That's one of the main concerns: that the sell-off in the dollar reaches the point where foreign investors would start selling most of their positions, and then we would really have funding problems," said Omer Esiner, a market analyst at Ruesch International in Washington.
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Tuesday, March 18, 2008
Core inflation higher at wholesale level
Prices excluding food and energy surpass forecasts, with natural gas and unleaded gasoline leading the way.
Inflation at the wholesale level met most estimates in February, the Labor Department said Tuesday, but core inflation, which excludes food and energy, rose more than expected.
Wholesale prices rose 0.3% last month, in line with the 0.3% expected by a consensus of analysts polled by Briefing.com.
Minus food and energy, wholesale inflation rose 0.5%, an increase from the 0.4% reported for January. Analysts had predicted an increase of just 0.2%.
The Labor Department's Producer Price Index is a key measure of price inflation.
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Inflation at the wholesale level met most estimates in February, the Labor Department said Tuesday, but core inflation, which excludes food and energy, rose more than expected.
Wholesale prices rose 0.3% last month, in line with the 0.3% expected by a consensus of analysts polled by Briefing.com.
Minus food and energy, wholesale inflation rose 0.5%, an increase from the 0.4% reported for January. Analysts had predicted an increase of just 0.2%.
The Labor Department's Producer Price Index is a key measure of price inflation.
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Tata Motors gets $3 bln loan from Citi, JPMorgan
India's Tata Motors Ltd (TAMO.BO: Quote, Profile, Research) has signed a deal to receive a $3 billion one-year bridge loan from Citigroup (C.N: Quote, Profile, Research) and JPMorgan (JPM.N: Quote, Profile, Research) to help finance a potential purchase of luxury brands Jaguar and Land Rover, sources familiar with the deal said on Tuesday.
"It is signed, but it's still at an early process," said one of the sources, who was not authorized to speak to the media.
A separate source briefed on the deal later said the loan would be for one year.
Citigroup, JPMorgan and Tata Motors all declined to comment.
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"It is signed, but it's still at an early process," said one of the sources, who was not authorized to speak to the media.
A separate source briefed on the deal later said the loan would be for one year.
Citigroup, JPMorgan and Tata Motors all declined to comment.
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Why mortgage rates are still heading higher
The Fed will probably cut interest rates again, but long-term fixed-rate mortgages may go up.
The Federal Reserve is likely to cut interest rates again Tuesday, but don't expect mortgage rates to go down too. In fact, home loans could be heading higher.
Consider recent history: The Fed issued an emergency cut of short-term rates in early January, and then trimmed more just a few days later - but the 30-year fixed mortgage rate has
responded by bouncing up from 5.6% to 6.4%.
The Fed's main tool is control over the short-term "Fed Funds" rate, which determines what banks charge each other for overnight loans. Long-term mortgage rates are mostly tied to the 10-year Treasury yield, which is determined by bond traders worldwide.
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The Federal Reserve is likely to cut interest rates again Tuesday, but don't expect mortgage rates to go down too. In fact, home loans could be heading higher.
Consider recent history: The Fed issued an emergency cut of short-term rates in early January, and then trimmed more just a few days later - but the 30-year fixed mortgage rate has
responded by bouncing up from 5.6% to 6.4%.
The Fed's main tool is control over the short-term "Fed Funds" rate, which determines what banks charge each other for overnight loans. Long-term mortgage rates are mostly tied to the 10-year Treasury yield, which is determined by bond traders worldwide.
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How subprime killed Bear Stearns
A problem with risky mortgages has led to a global financial crisis. The bigger issue: Experts don't know when it will end.
It started last summer when borrowers with weak credit started defaulting on their mortgages. Last night, it brought down an 85-year-old pillar of Wall Street.
How did we get to this point? How did rising foreclosures among subprime borrowers lead to Bear Stearns being scooped up in a fire-sale for two bucks a share?
The answer starts with investment banks: They sold complex securities backed by debt that was a lot riskier than most realized. The realization that the banks had failed to manage this risk sparked widespread concern among investors and other financial firms.Suddenly, investors found they couldn't put a value on much of what the banks were selling. As a result, the lending markets that keep Wall Street humming seized up because people feared they wouldn't get paid back.
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It started last summer when borrowers with weak credit started defaulting on their mortgages. Last night, it brought down an 85-year-old pillar of Wall Street.
How did we get to this point? How did rising foreclosures among subprime borrowers lead to Bear Stearns being scooped up in a fire-sale for two bucks a share?
The answer starts with investment banks: They sold complex securities backed by debt that was a lot riskier than most realized. The realization that the banks had failed to manage this risk sparked widespread concern among investors and other financial firms.Suddenly, investors found they couldn't put a value on much of what the banks were selling. As a result, the lending markets that keep Wall Street humming seized up because people feared they wouldn't get paid back.
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Dollars tough to sell on streets of Amsterdam
The U.S. dollar's value is dropping so fast against the euro that small currency outlets in Amsterdam are turning away tourists seeking to sell their dollars for local money while on vacation in the Netherlands.
"Our dollar is worth maybe zero over here," said Mary Kelly, an American tourist from Indianapolis, Indiana, in front of the Anne Frank house. "It's hard to find a place to exchange. We have to go downtown, to the central station or post office."
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"Our dollar is worth maybe zero over here," said Mary Kelly, an American tourist from Indianapolis, Indiana, in front of the Anne Frank house. "It's hard to find a place to exchange. We have to go downtown, to the central station or post office."
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Wall Street's pink slip parade
Job losses at Bear Stearns after the JPMorgan buyout could launch another big round of layoffs in the banking sector. And those jobs may never come back.
There's already been a wave of layoffs on Wall Street this year, and the Bear Stearns buyout could trigger another round of pink slips.
Through February of this year, 18,000 jobs have already been lost in the hard-hit mortgage markets, according to research firm Challenger, Gray & Christmas, accounting for an
overwhelming majority of the 22,000 jobs lost in the financial sector overall.
But analysts said Monday they expect 15,000 to 30,000 more job losses by the end of the year in the financial sector, including half of Bear Stearns' 14,000 workers following JPMorgan Chase's (JPM, Fortune 500) impending takeover of the company.
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There's already been a wave of layoffs on Wall Street this year, and the Bear Stearns buyout could trigger another round of pink slips.
Through February of this year, 18,000 jobs have already been lost in the hard-hit mortgage markets, according to research firm Challenger, Gray & Christmas, accounting for an
overwhelming majority of the 22,000 jobs lost in the financial sector overall.
But analysts said Monday they expect 15,000 to 30,000 more job losses by the end of the year in the financial sector, including half of Bear Stearns' 14,000 workers following JPMorgan Chase's (JPM, Fortune 500) impending takeover of the company.
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End of Wall Street as we know it
Financial firms have relied on a highly flawed business model for years. The time has come to fix it.
Until the recent tempest, Wall Street firms looked like just about the world's best businesses. Year after year, they posted sumptuous returns on equity, ever-rising share prices, and if you believed their claims, a new breed of CEOs who'd mastered the art and science of risk management. True, it was hard to decipher exactly how they made all that money. But make it they did.
The standards that rule most businesses - avoiding excessive leverage, reining in rampant pay and the massive dilution that goes with it - didn't apply to Wall Street. So what if investors didn't understand all those arcane instruments and sophisticated hedging strategies? Wall Street was the black box on the Hudson that worked its own brand of magic.
Today, the magic is fading fast. It's time to step back and analyze how financial firms actually operate.
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Until the recent tempest, Wall Street firms looked like just about the world's best businesses. Year after year, they posted sumptuous returns on equity, ever-rising share prices, and if you believed their claims, a new breed of CEOs who'd mastered the art and science of risk management. True, it was hard to decipher exactly how they made all that money. But make it they did.
The standards that rule most businesses - avoiding excessive leverage, reining in rampant pay and the massive dilution that goes with it - didn't apply to Wall Street. So what if investors didn't understand all those arcane instruments and sophisticated hedging strategies? Wall Street was the black box on the Hudson that worked its own brand of magic.
Today, the magic is fading fast. It's time to step back and analyze how financial firms actually operate.
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Monday, March 17, 2008
Dollar dives to near 13-year low vs. yen
Greenback plunges after Federal Reserve slashes discount rate at emergency meeting.
The dollar nose-dived to its lowest levels in 12 1/2 years Monday in Asia, falling below 96 yen as the Federal Reserve's rate cut failed to calm market fears about more U.S. bank writedowns.
The Fed on Sunday cut its discount rate, or its lending rate to financial institutions, by a quarter point to 3.25%.
The move only managed to give a temporary lift to the U.S. currency before it began its steep decline.
"The Fed's action is needed but it leaves the current main market problems unresolved, and there seems to be nothing that can stop this [dollar-selling] flow for now," said Masafumi Yamamoto, head of foreign exchange strategy at Royal Bank of Scotland.
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The dollar nose-dived to its lowest levels in 12 1/2 years Monday in Asia, falling below 96 yen as the Federal Reserve's rate cut failed to calm market fears about more U.S. bank writedowns.
The Fed on Sunday cut its discount rate, or its lending rate to financial institutions, by a quarter point to 3.25%.
The move only managed to give a temporary lift to the U.S. currency before it began its steep decline.
"The Fed's action is needed but it leaves the current main market problems unresolved, and there seems to be nothing that can stop this [dollar-selling] flow for now," said Masafumi Yamamoto, head of foreign exchange strategy at Royal Bank of Scotland.
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Wall Street banks shiver in Bear's shadow
JPMorgan spikes on the deal it struck for Bear Stearns, but other banking giants dip in the wake of Bear's dramatic fall.
The financial services sector was shaken early Monday, the first trading day following news of JPMorgan Chase's buyout of Bear Stearns - for just $2 a share - in the face of a cash crisis that brought the firm to the brink of bankruptcy.
JP Morgan was the one bright spot in the banking sector with its shares jumping nearly 12% in early trade, helping lift the Dow into the black, as investors signaled their approval of the deal.
JPMorgan (JPM, Fortune 500) managed to buy Bear for "next to nothing," said Dave Rovelli, managing director of U.S. equities at Canaccord Adams. With the Federal Reserve backing the deal with $30 billion, JPMorgan "basically stole Bear Stearns," he said.
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The financial services sector was shaken early Monday, the first trading day following news of JPMorgan Chase's buyout of Bear Stearns - for just $2 a share - in the face of a cash crisis that brought the firm to the brink of bankruptcy.
JP Morgan was the one bright spot in the banking sector with its shares jumping nearly 12% in early trade, helping lift the Dow into the black, as investors signaled their approval of the deal.
JPMorgan (JPM, Fortune 500) managed to buy Bear for "next to nothing," said Dave Rovelli, managing director of U.S. equities at Canaccord Adams. With the Federal Reserve backing the deal with $30 billion, JPMorgan "basically stole Bear Stearns," he said.
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Global crisis deepening: IMF Chief
IMF head Dominique Strauss-Kahn says global financial crisis worse that originally believed, and worsening.
The collapse of a Wall Street institution over the weekend shows the global financial crisis is broader than policy makers realized and it is growing worse, the head of the International Monetary Fund said Monday.
"The financial crisis which started in the United States is more serious and more global than it was a few weeks ago," IMF Chief Dominique Strauss-Kahn said in Paris.
"The risks and dangers are very high. The economic environment is still worsening."
The current crises will require a "global answer," Strauss-Kahn said.
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The collapse of a Wall Street institution over the weekend shows the global financial crisis is broader than policy makers realized and it is growing worse, the head of the International Monetary Fund said Monday.
"The financial crisis which started in the United States is more serious and more global than it was a few weeks ago," IMF Chief Dominique Strauss-Kahn said in Paris.
"The risks and dangers are very high. The economic environment is still worsening."
The current crises will require a "global answer," Strauss-Kahn said.
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Greenspan: Economy worst since WWII
Today's economic condition could likely be seen as "the most wrenching since the end of the second world war," wrote former Federal Reserve chairman Alan Greenspan in the Financial Times on Monday.
The U.S. financial crisis won't end until housing prices stabilize, but that won't happen for months, wrote Greenspan.
The models used by the finance industry to determine risk and measure economic strength are too simple to fully account for human responses, he said. "We cannot hope to anticipate the specifics of future crises with any degree of confidence," he wrote.
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The U.S. financial crisis won't end until housing prices stabilize, but that won't happen for months, wrote Greenspan.
The models used by the finance industry to determine risk and measure economic strength are too simple to fully account for human responses, he said. "We cannot hope to anticipate the specifics of future crises with any degree of confidence," he wrote.
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How bad is the mortgage crisis going to get?
What started in subprime is likely to continue cascading into the markets and keep the economy down until 2010, economist Paul Krugman forecasts. Bottom line for homeowners: An average drop of 25%.
If there is any word that captures the mood in the economy right now, it's uncertainty, along with shadings of bafflement and distrust. We have never seen a credit crisis quite like this. What's next?
Princeton economist Paul Krugman spoke with Fortune's Jia Lynn Yang about the impact on the economy, the outlook for home prices, and the reasons for both fear and hope. Krugman, a former Fortune columnist who now writes a column for the New York Times, will also appear in a one-hour CNN & Fortune special report on the economy that premieres March 28 at 8 p.m. ET.
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If there is any word that captures the mood in the economy right now, it's uncertainty, along with shadings of bafflement and distrust. We have never seen a credit crisis quite like this. What's next?
Princeton economist Paul Krugman spoke with Fortune's Jia Lynn Yang about the impact on the economy, the outlook for home prices, and the reasons for both fear and hope. Krugman, a former Fortune columnist who now writes a column for the New York Times, will also appear in a one-hour CNN & Fortune special report on the economy that premieres March 28 at 8 p.m. ET.
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Time to put a brake on the dollar's decline
The global credit crisis and the US economic upheavals that are driving it appear to have entered a new, more dangerous phase.
Last week's relentless spate of tribulations for the world's financial markets, culminating in an emergency bailout of Bear Stearns, the stricken investment bank, marked a scary escalation of events.
Little wonder, then, that the markets are pinning their hopes on tomorrow's meeting of the Federal Reserve for some respite from the deluge of grim news, and a further restorative dose of interest rate cuts.
Wall Street is hoping that the Fed's latest tonic will come in the form of another aggressive three-quarter-point reduction in official rates, and perhaps even a cut of a full percentage point. The Fed will very probably fulfil these expectations.
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Last week's relentless spate of tribulations for the world's financial markets, culminating in an emergency bailout of Bear Stearns, the stricken investment bank, marked a scary escalation of events.
Little wonder, then, that the markets are pinning their hopes on tomorrow's meeting of the Federal Reserve for some respite from the deluge of grim news, and a further restorative dose of interest rate cuts.
Wall Street is hoping that the Fed's latest tonic will come in the form of another aggressive three-quarter-point reduction in official rates, and perhaps even a cut of a full percentage point. The Fed will very probably fulfil these expectations.
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Friday, March 14, 2008
Who gets rich off $3 gas - who doesn't
The guy running the service station makes just a few cents, while crude oil producers take the biggest chunk.
Motorists may fume when forking over $3 a gallon at the local service station, but as it turns out, your local filling spot makes chump change from a gallon of gas.
So exactly who is getting rich?
Oil traders: While often blamed for pushing up prices, traders don't necessarily benefit from the high price of crude or gasoline; they profit from how much the price changes. Traders can get rich - as long as they bet correctly on whether prices will rise or fall.
For example, an investment bank that makes a bet that the price of oil will rise makes money when oil prices go from $95 to $100 a barrel - or $100 to $95 if it bet the price will fall - not on the difference between production cost and trading price.
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Motorists may fume when forking over $3 a gallon at the local service station, but as it turns out, your local filling spot makes chump change from a gallon of gas.
So exactly who is getting rich?
Oil traders: While often blamed for pushing up prices, traders don't necessarily benefit from the high price of crude or gasoline; they profit from how much the price changes. Traders can get rich - as long as they bet correctly on whether prices will rise or fall.
For example, an investment bank that makes a bet that the price of oil will rise makes money when oil prices go from $95 to $100 a barrel - or $100 to $95 if it bet the price will fall - not on the difference between production cost and trading price.
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Senior military strategist disagrees with Air Force tanker deal
National defense expert Bob Maginnis believes the Air Force made a serious mistake in awarding a $40 billion contract to a European company to build 179 tankers that will replace America's aging airborne refueling fleet.
Air Force Secretary Michael Wynne recently told members of the Senate Armed Services Committee that the European-made refueling tanker "was clearly a better performer" than its U.S. rival, and that was why the European Aeronautic Defense and Space Company (EADS) and its U.S. partner Northrop Grumman Corporation were awarded the contract. Wynne argues the EADS-designed plane was determined to be less expensive and risky than the one offered by Boeing Aircraft Corporation.
But Lt. Col. Bob Maginnis (USA-Ret.) disagrees, and claims the decision effectively outsources American jobs to a firm subsidized by foreign governments. "One of the reasons they're far more competitive is because they ... are not forced to make a profit, whereas Boeing has to be competitive in a market that is pretty vicious," argues the senior Pentagon strategist.
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Air Force Secretary Michael Wynne recently told members of the Senate Armed Services Committee that the European-made refueling tanker "was clearly a better performer" than its U.S. rival, and that was why the European Aeronautic Defense and Space Company (EADS) and its U.S. partner Northrop Grumman Corporation were awarded the contract. Wynne argues the EADS-designed plane was determined to be less expensive and risky than the one offered by Boeing Aircraft Corporation.
But Lt. Col. Bob Maginnis (USA-Ret.) disagrees, and claims the decision effectively outsources American jobs to a firm subsidized by foreign governments. "One of the reasons they're far more competitive is because they ... are not forced to make a profit, whereas Boeing has to be competitive in a market that is pretty vicious," argues the senior Pentagon strategist.
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White House urges US consumers to spend
The White House, buffeted by a stronger than expected drop in monthly US retail sales, urged US consumers Thursday to shop and said they should be confident in long-term US economic health.
"We do want to see the consumer spend, and that's one of the reasons for the rebate checks," spokesman Tony Fratto said, referring to a key component of a stimulus package valued at 152 billion for 2008 and 16 billion next year.
"The big message is that you can have confidence in the long-term future of our economy," Fratto told reporters amid growing fears that the world's wealthiest country may be facing a recession.
He spoke after the US Commerce Department reported that US retail sales fell an unexpected 0.6 percent in February from the prior month as consumers coped with rising oil and food prices.
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"We do want to see the consumer spend, and that's one of the reasons for the rebate checks," spokesman Tony Fratto said, referring to a key component of a stimulus package valued at 152 billion for 2008 and 16 billion next year.
"The big message is that you can have confidence in the long-term future of our economy," Fratto told reporters amid growing fears that the world's wealthiest country may be facing a recession.
He spoke after the US Commerce Department reported that US retail sales fell an unexpected 0.6 percent in February from the prior month as consumers coped with rising oil and food prices.
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Zuckerman Says U.S. Economy May Face `Perfect Storm'
Mortimer Zuckerman, co-founder of Boston Properties Inc., the largest U.S. office real estate investment trust, said the U.S. economy is in a recession and there's no sign of a recovery.
``We are looking at the worst set of macroeconomic conditions since the Great Depression,'' Zuckerman said in an interview with Bloomberg Television. ``I don't know where the bottom is. The federal government's going to have to do a lot more to contain what I think is the potential of a perfect storm.''
Employers are cutting jobs and demand for housing is tumbling. On March 7, the Labor Department said payrolls fell by 63,000 in February, the most in five years, after a revised decline of 22,000 in January.
U.S. economic growth slowed to a 0.6 percent pace in the fourth quarter of 2007 from a 4.4 percent rate in the prior six months, according to the U.S. Commerce Department's Bureau of Economic Analysis. The share of economists in a monthly Bloomberg News survey predicting a recession rose to 50 percent in February from 40 percent in January.
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``We are looking at the worst set of macroeconomic conditions since the Great Depression,'' Zuckerman said in an interview with Bloomberg Television. ``I don't know where the bottom is. The federal government's going to have to do a lot more to contain what I think is the potential of a perfect storm.''
Employers are cutting jobs and demand for housing is tumbling. On March 7, the Labor Department said payrolls fell by 63,000 in February, the most in five years, after a revised decline of 22,000 in January.
U.S. economic growth slowed to a 0.6 percent pace in the fourth quarter of 2007 from a 4.4 percent rate in the prior six months, according to the U.S. Commerce Department's Bureau of Economic Analysis. The share of economists in a monthly Bloomberg News survey predicting a recession rose to 50 percent in February from 40 percent in January.
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Fed takes boldest action since the Depression to rescue US mortgage industry
The US Federal Reserve has taken the boldest action since the 1930s, accepting $200bn of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis.
The Bank of England, the key European central banks, and the Bank of Canada all joined in a co-ordinated move with a mix of policies to halt the dowward spiral in the credit markets, expanding on the "shock and awe" tactics used late last year.
The Fed's dramatic step came after an emergency conference call by governors on Monday night. It followed the melt-down of the US chartered agencies -- Fannie Mae, Freddie Mac, and other lenders -- which together guarantee 60pc of the entire US home loan market. Fannie Mae's share price fell 19pc in panic trading on Monday after Barron's magazine said it may need a rescue package.
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The Bank of England, the key European central banks, and the Bank of Canada all joined in a co-ordinated move with a mix of policies to halt the dowward spiral in the credit markets, expanding on the "shock and awe" tactics used late last year.
The Fed's dramatic step came after an emergency conference call by governors on Monday night. It followed the melt-down of the US chartered agencies -- Fannie Mae, Freddie Mac, and other lenders -- which together guarantee 60pc of the entire US home loan market. Fannie Mae's share price fell 19pc in panic trading on Monday after Barron's magazine said it may need a rescue package.
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Dollar under pressure as US outlook darkens
The dollar remains under pressure against all major currencies on fears that the Federal Reserve may need to slash interest rates further to stop the downward spiral in the credit markets.
The greenback was at 100.57 against the yen after breaking below 100 yesterday in a day of wild trading, that set off alarm bells at Japan's Keidanren industry lobby.
It touched a record low of $1.5651 against the euro and came within a whisker of parity with the Swiss franc for the first time in history.
It rebounded somewhat in London today and was trading at $1.5582 by mid morning.
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The greenback was at 100.57 against the yen after breaking below 100 yesterday in a day of wild trading, that set off alarm bells at Japan's Keidanren industry lobby.
It touched a record low of $1.5651 against the euro and came within a whisker of parity with the Swiss franc for the first time in history.
It rebounded somewhat in London today and was trading at $1.5582 by mid morning.
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Thursday, March 13, 2008
U.S. economists see long-term ills from Iraq war
What's over $100 billion a year in Iraq war costs to a $14 trillion U.S. economy? Not much now, but the tab is growing on a "buy-now-pay-later" plan that threatens long-term problems.
Money was not much of an issue five years ago when President George W. Bush led the country into war in Iraq. Instead, all eyes were on allegations, later proven unfounded, that then-Iraqi President Saddam Hussein had weapons of mass destruction and could use them against the United States.
But $500 billion later, experts worry about the impact on the world's biggest economy, already facing a crippling housing crisis.
"The short-term economic consequences of the war have been manageable and modest. But the long-term consequences will be substantial," said Mark Zandi, chief economist of Moody's Economy.com.
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Money was not much of an issue five years ago when President George W. Bush led the country into war in Iraq. Instead, all eyes were on allegations, later proven unfounded, that then-Iraqi President Saddam Hussein had weapons of mass destruction and could use them against the United States.
But $500 billion later, experts worry about the impact on the world's biggest economy, already facing a crippling housing crisis.
"The short-term economic consequences of the war have been manageable and modest. But the long-term consequences will be substantial," said Mark Zandi, chief economist of Moody's Economy.com.
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To Die for NAFTA
"The commonest error in politics," said Lord Salisbury, "is sticking to the carcass of dead policies."
Lord Salisbury's rule comes to mind on reading of John McCain's delight at the $40 billion contract awarded the French-led parent of Airbus—to build the next generation of U.S. Air Force tankers.
The contract could run to $100 billion and is a body blow to Boeing in its duel to the death with Airbus. Two-thirds of all air-to-air refueling tankers are used by the United States. The contract gives a 30-year lease on life to the expiring Airbus A330 and means early death for Boeing's 767, the U.S. model for the tanker.
Congratulating himself for having exposed corruption in the Boeing bid, McCain purred, "I have always insisted that the Air Force buy major weapons through fair and open competition."
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Lord Salisbury's rule comes to mind on reading of John McCain's delight at the $40 billion contract awarded the French-led parent of Airbus—to build the next generation of U.S. Air Force tankers.
The contract could run to $100 billion and is a body blow to Boeing in its duel to the death with Airbus. Two-thirds of all air-to-air refueling tankers are used by the United States. The contract gives a 30-year lease on life to the expiring Airbus A330 and means early death for Boeing's 767, the U.S. model for the tanker.
Congratulating himself for having exposed corruption in the Boeing bid, McCain purred, "I have always insisted that the Air Force buy major weapons through fair and open competition."
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Crude Oil Rises to Record as Dollar Declines to 12-Year Low
Crude oil futures rose to a record $110.70 a barrel as the sinking value of the dollar attracted investors to commodity markets.
The dollar fell below 100 yen for the first time in more than 12 years today after a Carlyle Group debt fund moved close to collapse, raising concern of more financial turmoil. The tumbling dollar has drawn investors to the crude market as commodities become cheaper for buyers with other currencies.
``It's all down to financial market activity,'' said Simon Wardell, energy research manager with Global Insight Inc. in London. ``The weak dollar makes dollar-oil much cheaper for people.''
Crude oil for April delivery rose as much as 78 cents, or 0.7 percent, to $110.70 a barrel on the New York Mercantile Exchange today. The contract traded at $110.62 a barrel at 11:55 a.m. London time.
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The dollar fell below 100 yen for the first time in more than 12 years today after a Carlyle Group debt fund moved close to collapse, raising concern of more financial turmoil. The tumbling dollar has drawn investors to the crude market as commodities become cheaper for buyers with other currencies.
``It's all down to financial market activity,'' said Simon Wardell, energy research manager with Global Insight Inc. in London. ``The weak dollar makes dollar-oil much cheaper for people.''
Crude oil for April delivery rose as much as 78 cents, or 0.7 percent, to $110.70 a barrel on the New York Mercantile Exchange today. The contract traded at $110.62 a barrel at 11:55 a.m. London time.
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Recession fears revived as store sales tumble
Retail sales were much worse than expected in February, a sign that consumers are cutting back.
Monthly retail sales suffered a surprising drop last month as American households continued to curtail their spending amid higher energy and food prices and a weakening jobs market.
The Commerce Department reported Thursday that total retail sales fell 0.6%, compared to a revised 0.4% increase in January. January sales were originally reported to have increased 0.3%.
Economists surveyed by Briefing.com expected a 0.2% gain in retail sales for the month.
"The basic story from these numbers is that consumer spending growth has slowed, which is consistent with our assessment that the economy is in a mild recession," said Scott Hoyt, director of consumer economics at Moody's Economy.com.
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Monthly retail sales suffered a surprising drop last month as American households continued to curtail their spending amid higher energy and food prices and a weakening jobs market.
The Commerce Department reported Thursday that total retail sales fell 0.6%, compared to a revised 0.4% increase in January. January sales were originally reported to have increased 0.3%.
Economists surveyed by Briefing.com expected a 0.2% gain in retail sales for the month.
"The basic story from these numbers is that consumer spending growth has slowed, which is consistent with our assessment that the economy is in a mild recession," said Scott Hoyt, director of consumer economics at Moody's Economy.com.
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The next shoe to drop in housing
Rising foreclosures and big losses at Fannie Mae and Freddie Mac are making it harder for people with good credit backgrounds to get a traditional mortgage.
The credit crunch has finally hit the traditional mortgage market.
Investors are now shunning mortgage-backed securities issued by government sponsored enterprises Fannie Mae and Freddie Mac, which have been critical in keeping the real estate market from completely falling apart.
Some fear this development will make it harder for people, even those with strong credit histories, to get a home loan.
"Even if you have good credit, you don't know if they are going to give you a loan or not," said Joseph Mason, a senior fellow at the Wharton School of the University of Pennsylvania.
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The credit crunch has finally hit the traditional mortgage market.
Investors are now shunning mortgage-backed securities issued by government sponsored enterprises Fannie Mae and Freddie Mac, which have been critical in keeping the real estate market from completely falling apart.
Some fear this development will make it harder for people, even those with strong credit histories, to get a home loan.
"Even if you have good credit, you don't know if they are going to give you a loan or not," said Joseph Mason, a senior fellow at the Wharton School of the University of Pennsylvania.
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The Fed's worst nightmare
Ugly retail sales and a somber forecast from CFOs point to recession, but rising oil and gold prices and a weak dollar show inflation. What's Ben Bernanke to do?
It's days like today that will make many investors wish they stayed in bed.
And they're not the only ones. Something tells me that Ben Bernanke and the rest of the Federal Reserve's policy-making committee would like to run and hide as well.
Where to begin? Retail sales for February were shockingly weak, with sales falling 0.6% during the month compared to economists' forecasts of a 0.2% gain. Those numbers put dents in the argument that consumers would keep spending in the face of the housing downturn.
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It's days like today that will make many investors wish they stayed in bed.
And they're not the only ones. Something tells me that Ben Bernanke and the rest of the Federal Reserve's policy-making committee would like to run and hide as well.
Where to begin? Retail sales for February were shockingly weak, with sales falling 0.6% during the month compared to economists' forecasts of a 0.2% gain. Those numbers put dents in the argument that consumers would keep spending in the face of the housing downturn.
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Wednesday, March 12, 2008
McCain lashes Democrats for criticizing NAFTA
Republican presidential candidate John McCain criticized his Democratic rivals on Tuesday for pledging to renegotiate a hemispheric trade treaty that Democrats blame for U.S. manufacturing job losses.
At a town-hall meeting in St. Louis, the Arizona senator also called for the Democratic-controlled U.S. Congress to approve a free-trade treaty with Colombia that is being stymied on Capitol Hill.
"On trade, I'm a free trader," McCain told employees at Savvis Internet company, a session dominated by questions about the ailing U.S. economy.
McCain, the likely Republican nominee to run in the November election, is spending the week hop-scotching across several states raising money for his cash-strapped campaign ahead of a trip to the Middle East and Europe next week
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At a town-hall meeting in St. Louis, the Arizona senator also called for the Democratic-controlled U.S. Congress to approve a free-trade treaty with Colombia that is being stymied on Capitol Hill.
"On trade, I'm a free trader," McCain told employees at Savvis Internet company, a session dominated by questions about the ailing U.S. economy.
McCain, the likely Republican nominee to run in the November election, is spending the week hop-scotching across several states raising money for his cash-strapped campaign ahead of a trip to the Middle East and Europe next week
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Free Trade Fails Us
Our congressional leaders are outraged! Boeing and Wichita have lost a juicy defense contract. My sources tell me that Boeing gave it away, and Northrop worked the proposal. Perhaps the real issue is why a European consortium is bidding on U.S. defense contracts!
What is the buzzword? Free trade? As I recall, this was a bipartisan solution to our aspiration to work with the international environment. Thousands of good high-paying blue-collar jobs have been sent overseas and the jobholders essentially forgotten. Now it is our turn. Now we complain! Are we serious?
If we are, it is time to rethink the notion of free trade. As a large, diverse and powerful country, are there not some things that for our own survival should be designed and built here? Should our skilled workers be forced into continual competition with workers in the Third World?
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What is the buzzword? Free trade? As I recall, this was a bipartisan solution to our aspiration to work with the international environment. Thousands of good high-paying blue-collar jobs have been sent overseas and the jobholders essentially forgotten. Now it is our turn. Now we complain! Are we serious?
If we are, it is time to rethink the notion of free trade. As a large, diverse and powerful country, are there not some things that for our own survival should be designed and built here? Should our skilled workers be forced into continual competition with workers in the Third World?
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Airbus deal: 'One of the most un-American things I've ever heard.'
Here's what U.S. Sens. Pat Roberts and Sam Brownback and U.S. Rep. Todd Tiahrt had to say about the recent announcement that Boeing won't be building those tanker planes:
"This afternoon, we conveyed to the Air Force our shock and disappointment of the recent Tanker bid being awarded to Airbus as opposed to a reliable and experienced U.S. company. We have just met with the Air Force and we remain unconvinced that the Airbus team willprovide a better aircraft than the men and women of Boeing.
"In the coming weeks, we want answers from the Air Force to our questions including: Why are we sending these jobs overseas when Boeing has a proven record of building Tankers? Why did the Air Force choose a less-efficient aircraft that is harder to maneuver?
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"This afternoon, we conveyed to the Air Force our shock and disappointment of the recent Tanker bid being awarded to Airbus as opposed to a reliable and experienced U.S. company. We have just met with the Air Force and we remain unconvinced that the Airbus team willprovide a better aircraft than the men and women of Boeing.
"In the coming weeks, we want answers from the Air Force to our questions including: Why are we sending these jobs overseas when Boeing has a proven record of building Tankers? Why did the Air Force choose a less-efficient aircraft that is harder to maneuver?
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Air Force insults American workers
The United States/French Air Force should be ashamed of awarding the contract to Airbus to build the next generation tanker. Consider from a taxpayer's point of view: Boeing's proposal cost $35 million less per aircraft, they are able to operate out of existing bases without expensive modifications and Boeing's tanker is built with the knowledge gained from a long history of building and maintaining tankers.
Presently, all major assemblies of the tanker platform (the Boeing 767) are built by Boeing workers. With the loss of this program, Boeing will phase out the 767 and these jobs will be lost. As we have seen with the 787, the manufacturing of the major assemblies will more than likely be performed by global partners resulting in a net loss of American jobs.
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Presently, all major assemblies of the tanker platform (the Boeing 767) are built by Boeing workers. With the loss of this program, Boeing will phase out the 767 and these jobs will be lost. As we have seen with the 787, the manufacturing of the major assemblies will more than likely be performed by global partners resulting in a net loss of American jobs.
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Dollar Falls to Record Low on Concern Fed Package Won't Succeed
The dollar fell to a record below $1.55 per euro as firms from Citigroup Inc. to Goldman Sachs Group Inc. said the Federal Reserve's plan to inject $200 billion into the banking system may fail to break the freeze in money-market lending.
The U.S. currency erased almost half of yesterday's 1.6 percent rally versus the yen, the biggest in six months, which came after the Fed said it would lend Treasuries to financial institutions in return for mortgage debt. Traders bet the Fed will cut rates by as much as three quarters of a percentage point next week to avert a recession, while the European Central Bank keeps borrowing costs unchanged.
``It's difficult for the dollar to gain traction,'' said Paresh Upadhyaya, who helps manage $50 billion in currency assets at Putnam Investments in Boston. ``The Fed is probably running out of options; the market is fixated on interest-rate differentials, which are clearly negative for the dollar.''
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The U.S. currency erased almost half of yesterday's 1.6 percent rally versus the yen, the biggest in six months, which came after the Fed said it would lend Treasuries to financial institutions in return for mortgage debt. Traders bet the Fed will cut rates by as much as three quarters of a percentage point next week to avert a recession, while the European Central Bank keeps borrowing costs unchanged.
``It's difficult for the dollar to gain traction,'' said Paresh Upadhyaya, who helps manage $50 billion in currency assets at Putnam Investments in Boston. ``The Fed is probably running out of options; the market is fixated on interest-rate differentials, which are clearly negative for the dollar.''
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Derivatives the new 'ticking bomb'
Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen
"Charlie and I believe Berkshire should be a fortress of financial strength" wrote Warren Buffett. That was five years before the subprime-credit meltdown.
"We try to be alert to any sort of mega-catastrophe risk, and that posture may make us unduly appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."
That warning was in Buffett's 2002 letter to Berkshire shareholders. He saw a future that many others chose to ignore. The Iraq war build-up was at a fever-pitch. The imagery of WMDs and a mushroom cloud fresh in his mind.
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"Charlie and I believe Berkshire should be a fortress of financial strength" wrote Warren Buffett. That was five years before the subprime-credit meltdown.
"We try to be alert to any sort of mega-catastrophe risk, and that posture may make us unduly appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."
That warning was in Buffett's 2002 letter to Berkshire shareholders. He saw a future that many others chose to ignore. The Iraq war build-up was at a fever-pitch. The imagery of WMDs and a mushroom cloud fresh in his mind.
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Tuesday, March 11, 2008
Fed pumps more money into financial markets
Central bank loans $200 billion to big investment firms to promote liquidity. But measures aren't prompting banks to increasing lending.
The Federal Reserve on Tuesday announced yet another measure to pump more liquidity into the jittery financial markets.
The program will lend up to $200 billion of Treasurys to primary dealers, a group of 20 big investment firms, for a 28-day term. The firms can put up as collateral mortgage-backed securities issued by Fannie Mae and Freddie Mac, which generally are seen as safe because of an implicit government guarantee.
But in an unusual move, AAA-rated mortgage securities issued by banks will also be accepted. Many investors have shied away from these mortgage-backed securities because they fear defaults in the underlying assets will erode the value.
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The Federal Reserve on Tuesday announced yet another measure to pump more liquidity into the jittery financial markets.
The program will lend up to $200 billion of Treasurys to primary dealers, a group of 20 big investment firms, for a 28-day term. The firms can put up as collateral mortgage-backed securities issued by Fannie Mae and Freddie Mac, which generally are seen as safe because of an implicit government guarantee.
But in an unusual move, AAA-rated mortgage securities issued by banks will also be accepted. Many investors have shied away from these mortgage-backed securities because they fear defaults in the underlying assets will erode the value.
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Global subprime losses hit $215 billion
Subprime-related losses at global financial institutions have so far totaled as much as $215 billion, with about 55 percent of that coming from the United States, the head of Japan's financial regulator said on Monday.
The estimates from Japan's Financial Services Agency (FSA) come after JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) said in a report late on Friday Wall Street banks are facing a "systemic margin call" that could deplete them of up to $325 billion in capital.
European losses totaled about 8 trillion yen ($78.5 billion), while Asia and Canada together accounted for about 1.4 trillion, FSA Chairman Takafumi Sato told reporters at a regular briefing.
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The estimates from Japan's Financial Services Agency (FSA) come after JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) said in a report late on Friday Wall Street banks are facing a "systemic margin call" that could deplete them of up to $325 billion in capital.
European losses totaled about 8 trillion yen ($78.5 billion), while Asia and Canada together accounted for about 1.4 trillion, FSA Chairman Takafumi Sato told reporters at a regular briefing.
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Time to be honest: We've got money problems
We're knee-deep into the credit crunch and only one thing is certain: We're not as rich as we thought we were. And we must come clean and admit it.
Every day, sometimes twice a day, we get hit by tales of financial turmoil. Banks are edgy about handing over money to everybody from hedge funds to homeowners. The stock market stinks. Our homes aren't the nest egg that we thought, either.
Jobs, the price of gas and groceries, you name it -- everything makes you worry about just how bad things could get. No matter what the numbers say, things seem far more ominous than just a run-of-the-mill slowdown. Are they? No one knows.
On Friday, U.S. stocks fell to the lowest point since October 2006. The Dow Jones Industrial Average closed at 11,893.69 points -- down 146.7 points.
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Every day, sometimes twice a day, we get hit by tales of financial turmoil. Banks are edgy about handing over money to everybody from hedge funds to homeowners. The stock market stinks. Our homes aren't the nest egg that we thought, either.
Jobs, the price of gas and groceries, you name it -- everything makes you worry about just how bad things could get. No matter what the numbers say, things seem far more ominous than just a run-of-the-mill slowdown. Are they? No one knows.
On Friday, U.S. stocks fell to the lowest point since October 2006. The Dow Jones Industrial Average closed at 11,893.69 points -- down 146.7 points.
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Monday, March 10, 2008
EADS targeting acquisitions in US this year - report
European aerospace group EADS is targeting acquisitions in the US this year, according to the Daily Telegraph.
Chief executive Louis Gallois told staff that one of the Airbus owner's top 10 objectives for 2008 was to 'propose two acquisition projects in the field of defence, security or services to the board, at least one of which is in the US,' the Daily Telegraph cited an internal memo leaked to the media as saying.
The move is expected to help EADS protect itself against the weak dollar, the newspaper said.
Just over a week ago, EADS and partner Northrop Grumman Corp (nyse: NOC - news - people ) surprised the market and dismayed arch-rival Boeing (nyse: BA - news - people ) Co by winning a 35 bln usd contract to build airborne refuelling aircraft. Boeing, which had been expected to win the US air force contract, has said it is considering an appeal.
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Chief executive Louis Gallois told staff that one of the Airbus owner's top 10 objectives for 2008 was to 'propose two acquisition projects in the field of defence, security or services to the board, at least one of which is in the US,' the Daily Telegraph cited an internal memo leaked to the media as saying.
The move is expected to help EADS protect itself against the weak dollar, the newspaper said.
Just over a week ago, EADS and partner Northrop Grumman Corp (nyse: NOC - news - people ) surprised the market and dismayed arch-rival Boeing (nyse: BA - news - people ) Co by winning a 35 bln usd contract to build airborne refuelling aircraft. Boeing, which had been expected to win the US air force contract, has said it is considering an appeal.
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China, U.S. to see closer economic ties
A number of Chinese experts and enterprisers on Monday said China and the United States will see closer economic ties.
The remark is in reply to the belief that economic ties between China and the United States has been disconnected, proposed by some foreign economists recently amid worries of the possible decline of the U.S. economy.
The saying is only an academic judgment, a Chinese enterpriser told Xinhua.
"The fact is totally different," said Huang Baoan, vice president of Jinwang Group, China's largest candle producer base in Qingdao City, Shandong Province.
The U.S. economy is playing a more important role in the development of Jinwang Group as well as other export-oriented enterprises in China, Huang said.
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The remark is in reply to the belief that economic ties between China and the United States has been disconnected, proposed by some foreign economists recently amid worries of the possible decline of the U.S. economy.
The saying is only an academic judgment, a Chinese enterpriser told Xinhua.
"The fact is totally different," said Huang Baoan, vice president of Jinwang Group, China's largest candle producer base in Qingdao City, Shandong Province.
The U.S. economy is playing a more important role in the development of Jinwang Group as well as other export-oriented enterprises in China, Huang said.
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China's trade surplus plunges 63%
Chinese sales to U.S., Europe weaken, but economists say exports should rebound.
China's trade surplus plunged in February as sales of goods to the United States and Europe weakened and snowstorms disrupted the economy, the government reported Monday, but analysts said it appeared to be a onetime drop and exports should rebound.
The 63% drop in the trade gap from a year ago was due partly to a global slowdown but also to storms that hampered shipping and forced some factories to close, economists said. They said exports also looked unusually small because they were compared with a strong month last February.
"We think the sharp slowdown in China's export growth in February is temporary," Lehman Brothers economist Mingchun Sun said in a report to clients.
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China's trade surplus plunged in February as sales of goods to the United States and Europe weakened and snowstorms disrupted the economy, the government reported Monday, but analysts said it appeared to be a onetime drop and exports should rebound.
The 63% drop in the trade gap from a year ago was due partly to a global slowdown but also to storms that hampered shipping and forced some factories to close, economists said. They said exports also looked unusually small because they were compared with a strong month last February.
"We think the sharp slowdown in China's export growth in February is temporary," Lehman Brothers economist Mingchun Sun said in a report to clients.
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Fed pumps funds into ailing US economy
The US Federal Reserve is to pump $215 billion into the cash-strapped banking system amid tightening credit from the worst housing slump in decades.
The central bank says it has coordinated closely with foreign central banks to take action to address heightened liquidity pressures in term funding markets.
The announcement came just minutes before the US Labor Department reported the economy lost 63,000 jobs last month.
It is the second consecutive month of job losses and has triggered alarms that the world's largest economy is heading for a steeper slowdown.
It is the biggest drop in job numbers since March 2003.
The manufacturing, construction and retail sectors were hardest hit.
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The central bank says it has coordinated closely with foreign central banks to take action to address heightened liquidity pressures in term funding markets.
The announcement came just minutes before the US Labor Department reported the economy lost 63,000 jobs last month.
It is the second consecutive month of job losses and has triggered alarms that the world's largest economy is heading for a steeper slowdown.
It is the biggest drop in job numbers since March 2003.
The manufacturing, construction and retail sectors were hardest hit.
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Jobs get tossed out of stores
An economic downturn is eroding jobs in Columbus, a city where a vibrant retail landscape had been a key driver of economic growth.
As U.S. job growth hits the skids, a shrinking labor market means one thing for the nervous retail workers who reside in Columbus, Ohio: Their job is on shaky ground.
The nation's labor market lost a much larger-than-expected 63,000 jobs last month.
Retailing was hit hard, accounting for 34,000 job cuts across department stores, building supplies and garden equipment sellers and auto dealers.
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As U.S. job growth hits the skids, a shrinking labor market means one thing for the nervous retail workers who reside in Columbus, Ohio: Their job is on shaky ground.
The nation's labor market lost a much larger-than-expected 63,000 jobs last month.
Retailing was hit hard, accounting for 34,000 job cuts across department stores, building supplies and garden equipment sellers and auto dealers.
Read Complete Story
Final US Economic End-Game
Before getting started, I really need to thank several of my readers, because it was their intelligent questions that led me to this article. I hope it serves a useful purpose and helps to shed some light on what may potentially lie in store for our economy/way of life.
Today, with bad new all around, many make attempts to dissect the individual aspects of the myriad of economic problems that influence our problematic US economic situation, but few really try to think ahead and analyze the final end-game. With this post, I hope to do just that, and will attempt to answer the following six questions:
1) What is happening with regard to our economy?
2) Why would our monetary policy-masters want a weaker dollar?
3) Where do we go from here?
4) What long-term exit strategy can we expect to see from our monetary policy masters?
5) How does inflation help the Government and what are the impacts to its people?
6) How will people cope with reduced purchasing power and a much lower standard of living?
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Today, with bad new all around, many make attempts to dissect the individual aspects of the myriad of economic problems that influence our problematic US economic situation, but few really try to think ahead and analyze the final end-game. With this post, I hope to do just that, and will attempt to answer the following six questions:
1) What is happening with regard to our economy?
2) Why would our monetary policy-masters want a weaker dollar?
3) Where do we go from here?
4) What long-term exit strategy can we expect to see from our monetary policy masters?
5) How does inflation help the Government and what are the impacts to its people?
6) How will people cope with reduced purchasing power and a much lower standard of living?
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Friday, March 7, 2008
Nufarm makes acquisitions in UK and US
Nufarm Ltd says its acquisition of two crop protection firms in the United Kingdom and the United States for $236 million will boost annual earnings and help it meet unprecedented demand for agricultural chemicals.
Nufarm has acquired British phenoxy herbicides supplier AH Marks Holdings Ltd and has agreed to acquire Etigra LLC in the US, which supplies crop protection products to the turf and specialty markets.
The company said the acquisitions would lift forecast annual net profit by $5 million this financial year to $150 million, up from the previous forecast of $145 million.
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Nufarm has acquired British phenoxy herbicides supplier AH Marks Holdings Ltd and has agreed to acquire Etigra LLC in the US, which supplies crop protection products to the turf and specialty markets.
The company said the acquisitions would lift forecast annual net profit by $5 million this financial year to $150 million, up from the previous forecast of $145 million.
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Consumer confidence at lowest since 2002
Confidence in the economy dropped to a new low as worries about a possible recession, persistent problems in the housing and credit markets and lofty energy prices put people in a more gloomy mind-set.
According to the RBC Cash Index, confidence sank to a mark of 33.1 in early March, down from 48.5 in February. The new reading was the worst since the index began in 2002 and surpassed the previous low reached in February.
"The U.S. consumer is definitely in full defensive mode," said T.J. Marta, a fixed-income strategist at RBC Capital Markets.
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According to the RBC Cash Index, confidence sank to a mark of 33.1 in early March, down from 48.5 in February. The new reading was the worst since the index began in 2002 and surpassed the previous low reached in February.
"The U.S. consumer is definitely in full defensive mode," said T.J. Marta, a fixed-income strategist at RBC Capital Markets.
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US Economy: Home Foreclosures, Late Payments Rise
This is the VOA Special English Economics Report.
More bad news for the American housing market:
The Mortgage Bankers Association says housing repossessions are at their highest rates ever, led by California and Florida. And loan payments at least thirty days late are at their highest since nineteen eighty-five.
Problems in the housing market represent the greatest risks to the economy.
Central bank chief Ben Bernanke says helping the economy is now more important than fighting inflation. He told the Senate Banking Committee last week that conditions are more difficult now than they were in two thousand one. That was the last year in which the American economy was in a recession.
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More bad news for the American housing market:
The Mortgage Bankers Association says housing repossessions are at their highest rates ever, led by California and Florida. And loan payments at least thirty days late are at their highest since nineteen eighty-five.
Problems in the housing market represent the greatest risks to the economy.
Central bank chief Ben Bernanke says helping the economy is now more important than fighting inflation. He told the Senate Banking Committee last week that conditions are more difficult now than they were in two thousand one. That was the last year in which the American economy was in a recession.
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Job losses: Worst in 5 years
Payrolls sink in February, fueling recession anxiety. Unemployment rate declines, but that's because there are fewer people in the workforce.
Employers made their deepest cut in staffing in almost five years in February, the Labor Department reported Friday.
There was a net loss of 63,000 jobs, which is the biggest decline since March 2003 and weaker than the revised 22,000 jobs lost in January. Economists had forecast a gain of 25,000 jobs.
The weak report fueled already mounting recession fears and is likely to keep the Federal Reserve cutting interest rates further when it meets later this month.
"Based on today's Employment Report, if we are not in a recession, it is a darned good imitation of one," said Kevin Giddis, managing director of fixed income at Morgan Keegan. "We are in an unprecedented real estate and credit crisis that is whipping its way through the U.S. economy like a Midwestern tornado."
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Employers made their deepest cut in staffing in almost five years in February, the Labor Department reported Friday.
There was a net loss of 63,000 jobs, which is the biggest decline since March 2003 and weaker than the revised 22,000 jobs lost in January. Economists had forecast a gain of 25,000 jobs.
The weak report fueled already mounting recession fears and is likely to keep the Federal Reserve cutting interest rates further when it meets later this month.
"Based on today's Employment Report, if we are not in a recession, it is a darned good imitation of one," said Kevin Giddis, managing director of fixed income at Morgan Keegan. "We are in an unprecedented real estate and credit crisis that is whipping its way through the U.S. economy like a Midwestern tornado."
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Dollar continues its record decline
Greenback hits another all-time low against euro, declines against yen, after U.S. jobs cuts reach highest level in nearly 5 years.
The dollar sank to a new low Friday against the euro, and neared a three-year low against the Japanese yen, after data showed U.S. job cuts hitting the biggest monthly number in five years.
The U.S. Labor Department said American employers cut 63,000 jobs in February - the starkest sign yet that the United States is heading toward a recession or in one already.
Those fears pushed the 15-nation euro to $1.5463, its first-ever rise above $1.54. It marked the latest in a string of record highs before it settled back slightly to $1.5413 in afternoon European trading - still above the $1.5370 it bought late Thursday in New York.
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The dollar sank to a new low Friday against the euro, and neared a three-year low against the Japanese yen, after data showed U.S. job cuts hitting the biggest monthly number in five years.
The U.S. Labor Department said American employers cut 63,000 jobs in February - the starkest sign yet that the United States is heading toward a recession or in one already.
Those fears pushed the 15-nation euro to $1.5463, its first-ever rise above $1.54. It marked the latest in a string of record highs before it settled back slightly to $1.5413 in afternoon European trading - still above the $1.5370 it bought late Thursday in New York.
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The Debt Delusion
A second big American interest-rate cut in a fortnight, alongside an economic stimulus plan that united Republicans and Democrats, demonstrates that US policymakers are keen to head off a recession that looks like the likely consequence of rising mortgage defaults and falling home prices. But there is a deeper problem that has been overlooked: the US economy relies upon asset price inflation and rising indebtedness to fuel growth.
Therein lies a profound contradiction. On one hand, policy must fuel asset bubbles to keep the economy growing. On the other hand, such bubbles inevitably create financial crises when they eventually implod.
This is a contradiction with global implications. Many countries have relied for growth on US consumer spending and investments in outsourcing to supply those consumers. If America’s bubble economy is now tapped out, global growth will slow sharply. It is not clear that other countries have the will or capacity to develop alternative engines of growth.
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Therein lies a profound contradiction. On one hand, policy must fuel asset bubbles to keep the economy growing. On the other hand, such bubbles inevitably create financial crises when they eventually implod.
This is a contradiction with global implications. Many countries have relied for growth on US consumer spending and investments in outsourcing to supply those consumers. If America’s bubble economy is now tapped out, global growth will slow sharply. It is not clear that other countries have the will or capacity to develop alternative engines of growth.
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Thursday, March 6, 2008
Mixed Views On JBS's Purchase Of US Beef Operations
Market analysts and agricultural economists hold mixed views of the JBS SA (JBSS3.BR) purchase of National Beef and Smithfield Foods' (SFD) beef division.
If the deals are completed, JBS would be able to slaughter about 42,000 head of cattle on a daily basis in the U.S., including fed cattle and cows. Cargill Meat Solutions and Tyson Foods Inc. (TSN) can slaughter about 29,000 and 28,000 head, respectively, according to industry analysts.
Many analysts and commodity brokers question whether the federal government will allow both deals to be completed because JBS would have such a large share of the U.S. cattle and beef market. The current U.S. daily cattle slaughter capacity is estimated around 127,000 to 130,000 head.
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If the deals are completed, JBS would be able to slaughter about 42,000 head of cattle on a daily basis in the U.S., including fed cattle and cows. Cargill Meat Solutions and Tyson Foods Inc. (TSN) can slaughter about 29,000 and 28,000 head, respectively, according to industry analysts.
Many analysts and commodity brokers question whether the federal government will allow both deals to be completed because JBS would have such a large share of the U.S. cattle and beef market. The current U.S. daily cattle slaughter capacity is estimated around 127,000 to 130,000 head.
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Home sales stay weak in Realtors' report
Homes under contract flat in January but remain near record low, showing continued weakness in market.
The number of homes under contract for sale was unchanged in January, leaving that measure of the battered real estate market just barely above the record low, according to the latest reading from the National Association of Realtors.
The Realtors' Pending Home Sales Index came in at 85.9 in the month, the same as in December, which was the second-lowest reading on record.
The worst came last August at a revised reading of 85.8. That was when a collapse in the market for mortgage-backed securities put a squeeze on financing available for prospective home buyers.
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The number of homes under contract for sale was unchanged in January, leaving that measure of the battered real estate market just barely above the record low, according to the latest reading from the National Association of Realtors.
The Realtors' Pending Home Sales Index came in at 85.9 in the month, the same as in December, which was the second-lowest reading on record.
The worst came last August at a revised reading of 85.8. That was when a collapse in the market for mortgage-backed securities put a squeeze on financing available for prospective home buyers.
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Private Sector Loses 23,000 Jobs
The U.S. economy declined by 23,000 private sector jobs in February, according to the latest monthly report by payroll processor ADP, the first decline the report has shown since 2003.
Despite the overall decline, ADP saw a gain of 15,000 jobs among small businesses with between one and 49 employees, but that was more than offset by a decrease of 4,000 jobs among midsized businesses with between 50 and 499 employees, and 34,000 jobs among large businesses with more than 499 employees.
The goods-producing sector saw a decline of 70,000 jobs overall, while the service-providing sector experienced an increase of 47,000 jobs. The manufacturing industry lost 40,000 jobs, and the construction industry lost 30,000 jobs
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Despite the overall decline, ADP saw a gain of 15,000 jobs among small businesses with between one and 49 employees, but that was more than offset by a decrease of 4,000 jobs among midsized businesses with between 50 and 499 employees, and 34,000 jobs among large businesses with more than 499 employees.
The goods-producing sector saw a decline of 70,000 jobs overall, while the service-providing sector experienced an increase of 47,000 jobs. The manufacturing industry lost 40,000 jobs, and the construction industry lost 30,000 jobs
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Foreclosures hit all-time high
Over 900,000 borrowers are losing their homes, up 71% from a year ago, and a record number of home owners are behind on payments.
More home owners than ever are losing the battle to make their monthly mortgage payments.
Over 900,000 households are in the foreclosure process, up 71% from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04% of all mortgages, the highest rate in the report's quarterly, 36-year history.
Another 381,000 households, or 0.83% of borrowers, saw the foreclosure process started during the quarter, which was also a record.
Additionally, the number of mortgage borrowers who were over 30 days late on a payment in the last three months of 2007 is at its highest rate since 1985.
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More home owners than ever are losing the battle to make their monthly mortgage payments.
Over 900,000 households are in the foreclosure process, up 71% from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04% of all mortgages, the highest rate in the report's quarterly, 36-year history.
Another 381,000 households, or 0.83% of borrowers, saw the foreclosure process started during the quarter, which was also a record.
Additionally, the number of mortgage borrowers who were over 30 days late on a payment in the last three months of 2007 is at its highest rate since 1985.
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Dollar continues record decline
Euro keeps climbing against greenback, hitting new high of $1.5347.
The euro continued its record climb unabated Thursday, reaching a new high of $1.5347 before falling slightly back after the European Central Bank held its benchmark rate at 4% and another round of dour U.S. economic reports were released.
The euro hit its new high in European morning trading and fell back to $1.5317. It was the latest in a string of records for the 15-nation euro, following the $1.5302 it set on Wednesday before easing back to $1.5262 in New York.
Meanwhile, the British pound broke through $2 again after weeks of trading between $1.95 and $1.99; it pushed higher after the Bank of England also decided to keep its key refinancing rate unchanged at 5.25%.
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The euro continued its record climb unabated Thursday, reaching a new high of $1.5347 before falling slightly back after the European Central Bank held its benchmark rate at 4% and another round of dour U.S. economic reports were released.
The euro hit its new high in European morning trading and fell back to $1.5317. It was the latest in a string of records for the 15-nation euro, following the $1.5302 it set on Wednesday before easing back to $1.5262 in New York.
Meanwhile, the British pound broke through $2 again after weeks of trading between $1.95 and $1.99; it pushed higher after the Bank of England also decided to keep its key refinancing rate unchanged at 5.25%.
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Wednesday, March 5, 2008
Ford, GM And Toyota All Sell Fewer Cars In February
Ford Motor Co., General Motors Corp. and Toyota Motor Corp. on Monday all reported declines in February U.S. sales, reflecting the tough climate for consumers during the persistent housing slump and credit crunch.
Dearborn, Mich.-based Ford (F) said that it sold 196,681 cars and trucks last month, down 6.9% from 211,150 a year earlier. Another drop in fleet sales offset a strong showing on the retail side from the Focus sedan and the Edge crossover.
November 2007, which marked the end of a yearlong losing streak for Ford, was the last time the maker of the Blue Oval brand reported a year-over-year increase.
Ford's longtime best-selling F-Series pickup saw a 4.9% drop to 52,548 trucks, with demand stung by the decline in construction. Overall, trucks fell 5.6% while cars declined 9.3%.
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Dearborn, Mich.-based Ford (F) said that it sold 196,681 cars and trucks last month, down 6.9% from 211,150 a year earlier. Another drop in fleet sales offset a strong showing on the retail side from the Focus sedan and the Edge crossover.
November 2007, which marked the end of a yearlong losing streak for Ford, was the last time the maker of the Blue Oval brand reported a year-over-year increase.
Ford's longtime best-selling F-Series pickup saw a 4.9% drop to 52,548 trucks, with demand stung by the decline in construction. Overall, trucks fell 5.6% while cars declined 9.3%.
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More signs of job weakness
Two employment reports show February was another difficult month for jobs.
February was another bad month for jobs as two key employment reports showed more signs of labor weakness Wednesday.
In the private sector, nonfarm employment declined by 23,000 jobs for the month, according to the ADP National Employment Report.
The drop marks the first-ever decline in the two-year history of the report. Though the report did not exist in 2003, ADP estimates that the last decline in nonfarm private employment would have occurred in that year.
Service provider jobs grew 47,000 while employment in the goods-producing sector fell by 70,000, marking the 15th straight monthly decline in that category. Manufacturing jobs fell for the 18th straight month, declining by 40,000.
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February was another bad month for jobs as two key employment reports showed more signs of labor weakness Wednesday.
In the private sector, nonfarm employment declined by 23,000 jobs for the month, according to the ADP National Employment Report.
The drop marks the first-ever decline in the two-year history of the report. Though the report did not exist in 2003, ADP estimates that the last decline in nonfarm private employment would have occurred in that year.
Service provider jobs grew 47,000 while employment in the goods-producing sector fell by 70,000, marking the 15th straight monthly decline in that category. Manufacturing jobs fell for the 18th straight month, declining by 40,000.
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Oil at $104 for the first time
Crude supplies show an unexpected drop, sending prices to another intraday record.
Oil prices topped $104 a barrel Wednesday for the first time ever after a government report said supplies of crude fell significantly last week, instead of rising as expected.
U.S. light crude for April delivery reached $104.30, beating the previous the all-time intraday high of $103.95 set Monday. It eased slightly to $104.19, up $4.67 on the session.
Oil had traded up $2.05 to $101.57 a barrel just prior to the inventory report's release at 10:30 a.m. ET.
In its weekly report, the Energy Information Administration said crude stocks fell by 3.1 million barrels last week. Analysts were looking for a rise of 2.3 million barrels, according to a Dow Jones poll.
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Oil prices topped $104 a barrel Wednesday for the first time ever after a government report said supplies of crude fell significantly last week, instead of rising as expected.
U.S. light crude for April delivery reached $104.30, beating the previous the all-time intraday high of $103.95 set Monday. It eased slightly to $104.19, up $4.67 on the session.
Oil had traded up $2.05 to $101.57 a barrel just prior to the inventory report's release at 10:30 a.m. ET.
In its weekly report, the Energy Information Administration said crude stocks fell by 3.1 million barrels last week. Analysts were looking for a rise of 2.3 million barrels, according to a Dow Jones poll.
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