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Exception: MTL +1.42% ($20.00)
Fertilizers GREEN PM: CAGC +12.49%, AGU +0.49%, CGA +2%, MOS +1.47%, POT +1.32%, SYT +1.49%, TRA +1.34%
CASINOS Up PM: LVS +0.57% ($15.80), MGM +1.37% ($11.09), WYNN +0.54% ($61.70)
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>>Portugal CDS spreads go wider vs Germany PM...watch this during the day
EMERGING Stocks RED PM: EEM -0.22% ($37.12), FXE -0.02%, EWZ -1.07%, EDZ -0.84%, EDZ (short emerging) +0.76% ($6.63)
FUTURES: Oil 71.440, EURO: 1.3677, DXY: 80.430, GOLD: 1062.8, PLATINUM: 1471.3, SILVER: 14.975, S&P futures 1061 (+0.10), NASD Futures +0.7% (1,746.25),
GM: Weak Dollar Illusory as Correlated Trading Shows Gains Since Bretton Woods
By Ben Levisohn
Feb. 8 (Bloomberg) -- For all the concern over the $1.6 trillion U.S. budget deficit and record debt load, the dollar is as valuable now as 35 years ago.
Measured against a basket of currencies from the Group of 10 nations proportioned by how they trade against each other, the greenback is up about 3 percent since 1975, according to Bloomberg Correlation-Weighted Currency Indexes. That was four years after the Bretton Woods agreement, set up in 1944 to link currencies to the price of gold, collapsed. The U.K. pound has dropped 34 percent and the Canadian dollar has fallen 6 percent.
The U.S. dollar gained 6 percent since November after losing 12 percent in the first 11 months of 2009 as measured by the Bloomberg index. Barclays Capital and Morgan Stanley say the U.S. will grow faster than the rest of the developed world this year and 2011. At the same time, Europe faces worsening finances in Greece, Spain and Portugal, Japan’s economy is struggling and concerns about valuations in emerging markets are increasing.
“To quote Mark Twain, the reports of the dollar’s demise have been greatly exaggerated,” said Win Thin, a senior currency strategist in New York at Brown Brothers Harriman & Co., which manages about $40 billion in assets.
Rising Demand
Nowhere is that more evident than in the market for U.S. Treasuries. The amount of America’s government debt held by investors outside the U.S. rose 17 percent to $3.6 trillion in 2009 through November, according to the Treasury Department.
Purchases may continue to rise as investors seek refuge from growing sovereign credit risk in the euro area. The dollar “will benefit from relative liquidity of the U.S. Treasury markets,” Barclays Capital currency strategists led by David Woo in London said in a Feb. 5 report.
Barclays Capital economists said in a report the same day that U.S. gross domestic product may grow 3.6 percent this year, versus 2.5 percent for the developed world, and 3.1 percent in 2011, compared with 2.6 percent elsewhere. Japan’s GDP may expand 1.9 percent this year, and the euro zone 1.3 percent, they said.
A day earlier, strategists at New York-based Morgan Stanley boosted their dollar forecast, saying it will strengthen to $1.24 per euro by year-end from its previous estimate of $1.32. It traded at $1.3676 as of 6:46 a.m. in New York today. The firm sees the U.S. currency gaining to 109 yen from 89.42 today, and rallying to $1.49 to the pound from $1.5578
Reserve Currency
Investors and traders predicted last year the dollar would lose its position as the world’s reserve currency, which means it’s the first place central banks look to park their cash.
“With all the concerns about the problems with the U.S. financial system last year, the banking sector in the euro zone looked a bit more stable,” said Robert Sinche, chief strategist at Lily Pond Capital Management LLC in New York. “That created a sense of the euro as an alternative to the dollar.”
Central banks that disclose breakdowns of their reserves bought a record $60 billion worth of euros in 2009’s second quarter, more than half of their new cash in the period, based on International Monetary Fund data adjusted for exchange-rate changes using methodology developed by Barclays Capital.
They then reversed course, putting 15 percent of new reserves, or $17.8 billion, into euros in the third quarter, the smallest share of any period in which their reserves grew since early 2008. Central banks put 45 percent, or $52 billion, into dollars, up from 36 percent.
Rally by Default
Rather than a referendum on the U.S., the dollar may be rallying by default. Nouriel Roubini, the New York University professor who predicted the credit crisis, said on Feb. 4 that the greenback may weaken for the next three years.
Moody’s Investors Service said last week the U.S. government’s Aaa bond rating will come under pressure unless additional measures are taken to reduce budget deficits projected for the next decade. The ratio of government debt to GDP and revenue increased “sharply” during the seizure in credit markets and recession, Moody’s said.
“If the current upward trend in government debt were to continue and become irreversible, the rating could come under downward pressure,” said analysts led by Steven Hess, a senior credit officer at Moody’s in New York.
The Obama administration’s plan to offset spending by more than $1.2 trillion over 10 years showed larger deficits and higher debt levels than in the original budget, Moody’s said. The ratio of debt to GDP in the U.S. will continue to expand, reaching 76.5 percent in 2019 compared with an earlier forecast of 70.1 percent, Moody’s said.
Treasury Secretary Timothy F. Geithner said in an ABC News interview broadcast yesterday the U.S. isn’t in danger of losing its Aaa rating.
“Absolutely not,” Geithner said, when asked whether a downgrade is a concern. “That will never happen to this country.”
‘A Better Bet’
The U.S. Office of Management & Budget said America’s budget deficit will fall each year through 2014, to $706 billion from $1.56 trillion in 2010, as borrowing needs drop to $814 billion from $1.75 trillion.
“Under stress, people trust the U.S. to do the right thing,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. “The U.S. is a better bet.”
A global reserve currency must provide investors with the ability to invest, which requires liquid markets, and few capital controls, according to investors. China’s yuan can’t replace the dollar because it isn’t fully convertible and doesn’t float freely. The euro region and the markets for commodity currencies, such as the Australian, New Zealand and Canadian dollar, don’t have enough trading to absorb the amount of cash the reserve banks hold.
‘No Alternative’
“There is no alternative to the dollar, so it’s status as a reserve currency can’t be under threat,” said Adam Boyton, a senior foreign-exchange strategist at Deutsche Bank AG in New York.
The dollar’s preeminence will remain intact, as it continues to be the most widely used currency in business and finance worldwide, the Federal Reserve Bank of New York said in a report released Jan. 5. Some $580 billion in banknotes, or 65 percent of all bills in circulation, were held outside the U.S. as of March 2009, according to Fed data.
The greenback has an 86 percent share of the foreign- exchange market, more than twice the euro’s 37 percent. Its share of the international debt market is 39 percent.
“The international role of the dollar remains substantial a decade after the introduction of the euro, and despite changes in the value of the dollar and the financial turmoil that began in 2007,” Linda Goldberg, a vice president at the New York Fed, wrote in the report.
Relative Deficits
While the Congressional Budget Office expects America’s debt to reach 65 percent of GDP in 2010, that would still be below the 77 percent of GDP the European Commission expects for Germany, the U.K.’s 80 percent and Japan’s 180 percent.
“I would want to stay away from the euro, the euro zone and some of the emerging European currencies,” Michael Gomez, the co-head of emerging markets at Pacific Investment Management Co., said on Feb. 4 at a conference in Moscow. The Newport Beach, California-based firm manages the world’s biggest bond fund.
At their meeting this weekend in Iqaluit, Canada, Group of Seven finance ministers pledged to press ahead with economic stimulus measures. Canadian Finance Minister Jim Flaherty told reporters that “we need to continue to deliver the stimulus to which we are mutually committed and begin looking at exit strategies to move to a more sustainable fiscal track.”
Yen Gains
Rather than using a weighted average of exchange rates based on trade data, which is reported on lag and subject to revision, the Bloomberg Correlation-Weighted Currency Indexes calculate weights based on variances in exchange rates.
The indexes have a start date of Jan. 2, 1975, and a base value of 100. The index for the dollar was little changed at 102.69 today and the yen index was at 395.70. The Swiss franc index was at 271.20 and the euro index was at 107.60, from 271.23 and 107.58 on Feb. 5 respectively. The index for the euro replicates the German deutsche mark before 1999, when Europe’s common currency started trading.
The New Zealand dollar index fell 0.2 percent to 50.14 today, the Swedish krona index climbed 0.1 percent to 52.89 and the Australia dollar index dropped 0.2 percent to 64.07.
Though the dollar is the world’s reserve currency, it doesn’t affect the movement of foreign-exchange rates as much as the euro, the indexes show. Since the euro’s creation, its correlation to other G-10 currencies has steadily risen, overtaking the dollar in 2004 and all others by December 2008.
To contact the reporter on this story: Ben Levisohn in New York at blevisohn@bloomberg.net
Last Updated: February 8, 2010 06:58 EST
I'd have to say, just from entirely unscientific mettics (hearsay, rumors and limited personal experience), that the unemployment situation is hardly improving...at least not enough to move markets based on any long lasting and genuine fundamentals
but who cares, right? Happy days are here again, hooorah!
V
SPAM SPAM SPAM, black beans SPAM:
Xinhua: Interest in Apple's iPad wanes after launch
AAPL
English.news.cn 2010-02-06 08:13:38
SAN FRANCISCO, Feb. 5 (Xinhua) -- The announcement of Apple's tablet iPad and related media hype helped raise the awareness of the new device, but failed to convince consumers to buy one, said a survey released on Friday.
The survey, by online technology shopping site Retrevo, showed that about 48 percent of consumers said they had heard of the Apple tablet before the company formerly unveiled the device.
The percentage rose to 82 percent after Apple announced the long-anticipated iPad on Jan. 27 and said shipping will begin from March.
According to Retrevo, the results were based on study of more than 1,000 randomly selected users.
The survey also found that the number of respondents saying they had heard about the tablet but were not interested in buying one doubled from 26 percent before the announcement to about 52 percent following the launch.
Moreover, among people polled after the unveiling of iPad, 61 percent said they didn't think they needed an Apple tablet. The percentage was 49 percent before the iPad announcement.
"Not only did Apple fail to convince new buyers, it may have lost many potential buyers who now say they don't think they need an Apple tablet computer," Retrevo said in a posting on its blog.
Editor: Xiong Tong
http://news.xinhuanet.com/english2010/sci/2010-02/06/c_13165521.htm
(ERO/UUP/UDN) Futures Traders Increase Bets Euro Will Decline to a Record
By Allison Bennett
Feb. 5 (Bloomberg) -- Futures traders increased bets to a record level that the euro will decline against the U.S. dollar on concern budget deficits in Greece and other European nations will hamper the region’s economic growth.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain, the net position, was 43,741 on on Feb. 2, compared with 39,539 a week earlier, figures from the Washington-based Commodity Futures Trading Commission show.
“The current downward spiral in markets stems from confidence, which makes the solution a difficult one,” Sacha Tihanyi, a currency strategist at Bank of Nova Scotia in Toronto, wrote in a note to clients. “The markets are increasingly nervous about what path lies ahead for the euro zone and the euro.”
The price of default protection on government debt for Greece, Portugal and Spain rose to a record today on concern the nations’ efforts to rein in their budget shortfalls will hamper growth and cut tax revenue. Global stocks fell, with the MSCI World Index dropping 1 percent. Greece’s biggest union approved yesterday the second mass strike this month and tax collectors began a 48-hour walkout.
The euro declined for a third day, slumping 0.3 percent to $1.3678 at 5 p.m. in New York, from $1.3723 yesterday. The shared currency touched $1.3595, the least since May 20.
Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.
Each Friday the CFTC publishes aggregate numbers for long and short positions for speculators such as hedge funds and institutional investors that buy or sell futures to protect against price moves. Analysts and investors follow changes in speculators’ positions because such transactions can reflect an expectation of a change in prices.
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
Last Updated: February 5, 2010 17:05 EST
BL: Corn, Soybeans Drop as Dollar’s Rally Erodes Commodity Demand
By Jeff Wilson
Feb. 5 (Bloomberg) -- Corn declined to the lowest price in four months and soybeans fell as the dollar’s climb reduced the appeal of commodities as an alternative investment.
The dollar rose to an eight-month high against the euro on bets that rising budget deficits in nations such as Greece, Portugal and Spain will hamper Europe’s growth. Global equities fell to the lowest level since September and crude oil tumbled to a seven-week low.
“People are nervous about the health of the world economy,” said Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis. “The stock market is wobbly and crude oil is falling, and that reduces the flow of speculative money into commodities.”
Corn futures for March delivery fell 2.5 cents, or 0.7 percent, to $3.515 a bushel on the Chicago Board of Trade. Earlier, the most-active contract touched $3.475, the lowest price since Oct. 6. This week, the grain fell 1.4 percent, the fourth straight decline.
Soybean futures for March delivery fell 0.5 cent to $9.135 a bushel. Yesterday, the price touched $9, the lowest level since Oct. 6. The oilseed was down for the fifth straight week.
Demand for corn on the spot market has slowed on speculation that sales will increase from Brazil and Argentina, Schultz said. The nations are the biggest exporters behind the U.S.
Combined production in the South American countries will rise 3.8 percent to 66 million tons this year, the U.S. Department of Agriculture said on Jan. 12.
“The weather remains favorable for big crops,” Schultz said. “U.S. exports are likely to slow” as buyers will favor cheaper and higher-quality supplies from Brazil and Argentina, Schultz said.
Corn is the biggest U.S. crop, valued at $47.4 billion in 2008, followed by soybeans are second at $27.4 billion, government data show.
To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
Last Updated: February 5, 2010 15:55 EST
TM: Toyota Sued in Canada Over Hybrid Brake Defect Claims (Update1)
By Margaret Cronin Fisk
Feb. 6 (Bloomberg) -- Toyota Motor Corp., the world’s largest automaker, was sued in Canada in a class-action case claiming defects in the braking system of its Prius and Lexus hybrid vehicles, a law firm said.
Merchant Law Group said it filed a claim yesterday in Victoria, British Columbia, against the automaker on behalf of Canadian owners of 2010 Toyota Prius and Lexus HS250h hybrids. The lawsuit, which seeks reimbursement of purchase prices or payment equal to a loss in resale value, claims the vehicles’ brake systems are defectively designed because they shut off brake power to save energy.
“The energy reclaiming nature of these vehicles as part of braking makes them dangerous for use,” attorney Tony Merchant said in a statement sent to Bloomberg. “As the vehicle switches to the brake pad system, there is a lapse where the vehicle has no braking power.”
Toyota is facing at least 30 class-action, or group, lawsuits in the U.S. and Canada connected to multiple recalls over sudden acceleration of its vehicles. More than half of these lawsuits blame Toyota’s electronic throttle control system for these events. The Canada hybrid lawsuit isn’t connected to those cases.
Quebec Lawsuit
The Merchant firm in Regina, Saskatchewan, said it also sued Toyota Canada Inc. and Toyota North America and that it filed a separate claim yesterday in Quebec.
Sandy Di Felice, director of external affairs with Toyota Canada in Toronto, said yesterday the company hadn’t been served and wasn’t aware of either lawsuit.
Toyota has been investigating reports that Prius owners driving at low speeds on bumpy or icy roads may experience moments in which the car continues to coast for about a second after the brakes are applied because of the anti-lock brake system.
The company said this week that it changed the design of Prius brake software at the end of January to correct the situation. The carmaker said it is considering steps dealers can take for current Prius owners, including exchanging some parts.
There has been no recall of the 2010 Prius or Lexus HS250h announced in the U.S. and Canada.
The case is Marklely v. Toyota Canada Inc., 10-0540, Supreme Court, British Columbia (Victoria).
Toyota already has recalled millions of other cars to fix a gas-pedal defect that can cause the vehicles to accelerate out of control. A House Oversight and Government Reform Committee panel will hold a hearing on the recalls on Feb. 10. Today, the panel’s top Republican, Darrell Issa of California, said he will ask Chairman Edolphus Towns to broaden the inquiry to include the actions of transportation officials in George W. Bush’s administration.
Issa said in an e-mailed statement that he will send Towns, a New York Democrat, a letter asking him to summon former Transportation Secretary Mary Peters and former National Highway Traffic Safety Administration chiefs David Kelly and Nicole Nason to testify at the Feb. 10 hearing.
To contact the reporter on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net.
Last Updated: February 6, 2010 13:54 EST
Post "Avatar": JPMorgan Said to Raise Almost $700 Million for Digital Theaters
By Michael White
Feb. 6 (Bloomberg) -- JPMorgan Chase & Co. raised almost $700 million to equip the three biggest U.S. theater chains with digital screens and projectors that can show 3-D movies, according to a person with knowledge of the plan.
Digital Cinema Implementation Partners, a collaboration between Regal Entertainment Group, AMC Entertainment Holdings Inc. and Cinemark Holdings Inc., is likely to announce the funding in about two weeks, said the person, who requested anonymity because the details are private.
The financing, delayed since 2008 because of the credit crunch, will speed theater conversions as Hollywood studios increase production of 3-D films, which command premium ticket prices. News Corp.’s “Avatar” has taken in $2.1 billion, the most of any picture, since it opened Dec. 18, according to researcher Box Office Mojo.
Brian Marchiony, a spokesman for New York-based JPMorgan, declined to comment. Dick Westerling, a spokesman for Nashville, Tennessee-based Regal, Robert Copple, a spokesman for Plano, Texas-based Cinemark, and Sun Dee Larson, a spokeswoman for AMC, didn’t immediately return calls seeking comment after business hours.
Distributing movies digitally allows studios to save money on printing shipping reels. It also enables theaters to adjust lineups more quickly based on demand. Studios will contribute funds to repaying the financing based on the number of digital films shown.
3-D Films
The equipment can also be upgraded to show 3-D films, which Hollywood studios are relying on to bolster revenue as DVD sales decline. At least 16 pictures are planned this year, including DreamWorks Animation SKG’s “How to Train Your Dragon,” according to researcher Hollywood.com Box-Office.
The funding will supply equipment for 12,000 screens and is awaiting sign-off by studios, the Los Angeles Times reported yesterday.
DCIP resumed its effort to raise the money last year after putting it on hold amid the credit crisis. The group was seeking $525 million in senior debt and $200 million in equity through its jointly owned Digital Cinema Implementation Partners, two people with knowledge of the situation said in September.
The plans were scaled back from August 2008, when DCIP Chief Executive Officer Travis Reid said the group aimed to raise $1 billion to refit more than 14,000 U.S. and Canadian theaters.
Regal fell 25 cents to $14.70 yesterday in New York Stock Exchange composite trading. Cinemark was little changed at $14.33. Closely held AMC is based in Kansas City, Missouri.
To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net.
Last Updated: February 6, 2010 10:52 EST
Xinhua: World economic center shifting rapidly eastward, says British economist
English.news.cn 2010-02-05 17:07:19
By Xinhua writers Hai Yang, Zhao Jialin
MOSCOW, Feb. 4 (Xinhua) -- The center of the world economy "is shifting eastwards quite quickly," says the director of the London School of Economics and Political Science.
"Undoubtedly the center of gravity of the world economy is shifting eastwards quite quickly, with the rapid growth of China and India in particular, and the financial crisis has accentuated that trend, because the Western economies have been worse hit than has China," Howard Davies told Xinhua during an interview atthe Russian Forum 2010.
Davies said that if one looks at financial markets, the big trend has been the development of large surpluses in China that then have had to be reinvested in western countries.
"So, it's the Chinese trade surplus and the huge increase in their holdings of Western assets that's really the decisive element in world financial markets today," Davies said.
Davies also said that the global economy is no longer the same as in the past when the Group of Eight (G-8) was supposed to be discussing economic development.
The expansion of the G-8 to include China, India, Brazil and other emerging countries to form the Group of Twenty (G20) "is a positive improvement," he said, because those countries "now form a hugely important part of the world economy."
Meanwhile, Davies warned that the current recovery is "quite fragile because it is somewhat artificial."
Practically every country in the world currently has very loose monetary and fiscal policies, Davies said.
It remains unknown, he said, "whether the recovery is yet robust enough to survive on its own, in other words, to survive without fiscal support from governments."
"I think even in China, the huge government fiscal stimulus package introduced at the end of 2008 undoubtedly has had a big effect on China. And I think without that we would not see the Chinese economy growing at 10 or 11 percent," he said.
Editor: Fang Yang
http://news.xinhuanet.com/english2010/indepth/2010-02/05/c_13165039.htm
You must be at least .25c high to post on this board, LOL
Xinhua: China reiterates opposition against planned Obama-Dalai meeting
English.news.cn 2010-02-06 00:19:57
BEIJING, Feb. 5 (Xinhua) -- China on Friday reiterated its "constant and clear" stance of opposing the Dalai Lama's visit to the United States and any contact between the monk and U.S. leaders.
China has lodged solemn representation to the U.S. after White House spokesperson Robert Gibbs indicated Thursday that the Dalai Lama will visit the White House and meet with President Barack Obama later this month, Foreign Ministry spokesman Ma Zhaoxu said in a statement.
"China resolutely opposes the visit by the Dalai Lama to the United States, and resolutely opposes U.S. leaders having contact with the Dalai Lama," Ma said, noting such a position is "constant and clear."
"During President Obama's November visit to China, Chinese leaders had elaborated such stance," he said.
"We urge the U.S. to realize the high sensitivity of Tibet-related issues, to seriously treat with China's stance and concern, not to permit the Dalai Lama's visit and not to arrange meetings between him and U.S. leaders so as to avoid further undermining China-U.S. ties," Ma said.
Related:
Chinese central gov't holds press conference on talks with Dalai Lama envoys
BEIJING, Feb. 2 (Xinhua) -- China's State Council Information Office held a press conference Tuesday morning to brief media on the latest talks between central government officials and private representatives of the Dalai Lama.
Zhu Weiqun, executive deputy head of the United Front Work Department of the Communist Party of China (CPC) Central Committee, is expected to talk about the meeting and answer reporters' questions at the press conference, which started at 10:00 a.m....
China rebuts Dalai Lama's claim as "legal representative" of Tibetans
BEIJING, Feb. 2 (Xinhua) -- A Chinese central government official Tuesday dismissed the Dalai Lama's claim as being "legal representative" of Tibetans.
"The Chinese government and the government of Tibet Autonomous Region under its leadership are the only representatives of Tibetans," Zhu Weiqun, executive vice minister of the United Front Work Department (UFWD) of the Communist Party of China (CPC) Central Committee, said in a statement to media at a press conference...
Chinese central gov't says views "sharply divided" at talks with Dalai Lama envoys
BEIJING, Feb. 2 (Xinhua) -- The Chinese central government and the Dalai Lama side had "sharply divided" views in the latest talks "as usual," a senior official said Tuesday.
Zhu Weiqun, executive vice minister of the United Front Work Department of the Communist Party of China (CPC) Central Committee, told a press conference, "We have been accustomed to such a viewpoint confrontation as views had been divided in previous talks" between the central government and the private representatives of the Dalai Lama...
China warns U.S. of detrimental effect of meeting Dalai Lama
BEIJING, Feb. 2 (Xinhua) -- A senior Chinese official Tuesday warned of serious damage to Sino-U.S. relations if U.S. leaders were to meet with the Dalai Lama, saying the move would "harm others but bring no profit to itself either."
The U.S. side would violate international rules by making such a decision, said Zhu Weiqun, executive vice minister of the United Front Work Department (UFWD) of the Communist Party of China (CPC) Central Committee, at a press conference...
Over 40 Chinese foreign missions harassed by Dalai Lama followers last year: official
BEIJING, Feb. 2 (Xinhua) -- Some 10,000 followers of the Dalai Lama staged harassing and wrecking activities in front of more than 40 Chinese foreign missions last year, a Chinese official said Tuesday.
Sita, vice minister of the United Front Work Department of the Communist Party of China (CPC) Central Committee, disclosed the figures at a press conference to brief media on the talks between central government officials and the Dalai Lama's private representatives last week...
Tibet to keep to its own path with or without the Dalai Lama: official
BEIJING, Feb. 2 (Xinhua) -- Tibet will keep to its own path with or without the Dalai Lama, said a Chinese central government official Tuesday.
The central government hoped the Dalai Lama, already 75, could settle his own affairs concerning his own prospect when he was still alive and would not pass away abroad, said Zhu Weiqun, executive vice minister of the United Front Work Department of the Communist Party of China (CPC) Central Committee, at a press conference here...
Huntsman: U.S.-China relationship most complex, important
BEIJING, Feb. 2 (Xinhua) -- The U.S.-China relationship was the most complex and important relationship in the world, U.S. Ambassador to China Jon Huntsman said on Tuesday.
"It is the most complex and important relationship in the world today with many facets of relationship and many points of connection between the United States and China," Huntsman told a press briefing on Tuesday...
Randt: U.S.-China relationship growing despite potential friction
HONG KONG, Feb. 5 (Xinhua) -- The relationship between the United States and China has been growing despite potential friction over trade and other issues, said Clark T. Randt Jr., former U.S. ambassador to China, at a lecture in Hong Kong on Friday.
Randt said the potential trade friction, which should not be surprising given the dire economic situation and the upcoming mid- term elections in the United States, was more likely to come from the Congress rather than the administration..
Editor: Mu Xuequan
http://news.xinhuanet.com/english2010/china/2010-02/06/c_13165358.htm
BL: Taiwan Pushes China Steel, Biggest Polluters to Enter Global Carbon Market
By Yu-huay Sun
Feb. 5 (Bloomberg) -- Taiwan is forcing some of its largest companies such as China Steel Corp.’s Dragon Steel unit to cut emissions or begin buying carbon credits on global markets.
The government will set up an offshore company to help them acquire United Nations-authorized credits that represent gas reductions made in other nations, Stephen Shen, head of the Environmental Protection Administration, said in an interview.
Taiwan, seeking to rein in greenhouse gases, has begun withholding permits for expansion from some of the biggest polluters unless they reduce emissions or start competing with European and Japanese buyers in the $120 billion carbon market. One of the projects at stake is Formosa Plastics Group’s $8.7 billion plan to boost energy and chemicals production.
“For heavy industries, such as electricity, steel and petrochemical, costs will rise,” said Peter Tzeng, an analyst at Polaris Securities Co. in Taipei.
Lowering companywide carbon-dioxide emissions by an amount equal to half of what a new plant would produce may become a benchmark in government approval of large industrial projects, Shen said from Taipei. The policy may be applied to the NT$280 billion ($8.7 billion) expansion by Formosa Plastics, parent of the island’s only publicly traded refiner, he said.
The policy is a stopgap until permanent limits are set in the Greenhouse Gas Reduction Act under debate in parliament.
Companies are resisting the requirement, which adds costs.
‘Throwing Money Overseas’
Taiwan Power Co. is requesting that the environmental agency retract its Sept. 2 demand that the island’s biggest electricity producer start estimating the amount of credits it needs to buy over the next 15 years, Chief Engineer Tu Yueh-yuan said by telephone on Feb. 3. The company accounts for about 30 percent of the island’s emissions.
Carbon credits may increase the cost of output by “tens of billions” of New Taiwan dollars, which the utility will have to pass on to customers, Tu said. “It’s like throwing money overseas,” she said. “How could we do something like that?”
The industrialized island releases about three times more heat-trapping gases per person than the world average, Bloomberg data show. The nation contributes 1 percent of world carbon output and emitted about 3 percent less last year, Shen said.
UN Certified Emission Reductions credits for December delivery fell 0.5 percent to 11.5 euros ($15.80) on London’s European Climate Exchange. That reduced this year´s gain to 4.7 percent for the credits in the second-biggest carbon market.
Credit-Price Impact
“This is of course bullish for the CER price,” said Emmanuel Fages, an analyst in Paris at Orbeo, Societe Generale SA’s carbon-trading venture with Rhodia SA. New demand from Taiwan won´t be enough to change the “fundamental equilibrium for CER” prices, he said in an e-mailed response to questions.
The government could potentially allow companies to acquire as much as half of their carbon credits overseas under the gas- reduction bill in the legislature, according to Shen.
The proposal, which may become law next year, may impose a cap-and-trade program in Taiwan in five to six years, similar to Europe´s carbon rules. Voluntary reduction and emissions limits based on energy efficiency will precede that, according to Shen.
Dragon Steel Corp. has agreed to reduce overall gas output in return for adding a furnace that doubles capacity. The unit of Taiwan´s largest mill may become the nation´s first company to buy carbon credits for regulatory compliance, Shen said, an assertion its parent company disputed.
Dragon Steel´s Plan
While Dragon Steel´s expansion to 5 million metric tons of steel a year is slated for 2013, the company aims to meet the carbon requirement by deploying late-model emissions-reduction technology, said Chung Le-min, China Steel executive vice president. “I’m confident we don’t need to buy carbon credits,” he said in an interview.
An alternative way to meet emissions rules is to invest in projects that reduce emissions at other companies.
“Producers of alternative energy, including wind and solar, will benefit” because they may attract investment, Tzeng of Polaris Securities said.
The government’s proposed offshore company, most likely in Japan, will help Taiwanese companies accrue carbon-dioxide credits certified by the United Nations in a “cost-effective way,” Shen said, without elaborating.
The East Asian island remains outside UN-set carbon controls because it’s not a UN member, unlike European countries and Japan. They dominate carbon-market purchases, used to meet their targets under the 1997 UN-brokered Kyoto climate treaty.
Emissions Pledges
Taiwan’s President Ma Ying-jeou has pledged to cut carbon emissions to 2008 levels between 2016 and 2020 and to 2000 levels by 2025. Local companies, so far not bound by law to offset greenhouse-gas output, already may voluntarily buy credits in non-UN markets such as the Chicago Climate Futures Exchange or sponsor carbon-cutting projects such as wind farms.
CPC Corp., Taiwan’s state-run oil refiner, will plant trees on the island to help reduce emissions as it expands capacity to produce petrochemicals, Lin Maw-wen, a vice president at the company, said.
Emissions more than doubled from 1990 to 2007. Taiwan Power has erected wind-power turbines since 2002, while Formosa Plastics has planted more than 1 million trees in Mailiao.
The island’s carbon-dioxide emissions reached 13.2 tons per capita in 2006, compared with the world average of 4.5 tons, according to the most recent data on Bloomberg.
The majority of UN members recognize only the government in Beijing, which claims Taiwan as part of its territory. The island and China have been administered separately since a civil war in 1949. Taiwan has formal diplomatic ties with 23 nations, mostly in Latin America, the Pacific and Africa.
To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net
Last Updated: February 5, 2010 09:07 EST
BL: `Piigs' Don't Fly in Barclays Notes as Portugal, Greece Grapple With Debt
Swine Acronym Ordered Out of Barclays Capital Reports (Update1)
By Alexis Xydias, Rita Nazareth and Lynn Thomasson
Feb. 5 (Bloomberg) -- At Barclays Capital, Piigs won’t fly.
The securities unit of London-based Barclays Plc told analysts yesterday not to use the acronym for Portugal, Italy, Ireland, Greece and Spain in notes to clients, according to a memo obtained by Bloomberg News. The mandate from Valerie Monchi was sent to research staff.
The Piigs nickname has grown increasingly popular in the last month as investors dumped assets in the euro zone’s smaller economies on concern the countries will struggle to control budget deficits. Stocks in Spain, Portugal and Greece plunged today, with the Athens Stock Exchange Index falling to the lowest level since April. Yields on Greece’s 10-year bonds and Portugal’s 2-year securities have jumped to the highest levels against German bunds since the late 1990s.
“By denigrating a nation in the process of trying to describe a financial situation, it sort of puts the people in that country behind the eight ball,” said Peter Sorrentino, a senior money manager at Cincinnati-based Huntington Asset Advisors who is visiting Italy in March. His firm oversees $12.8 billion. “It serves no one’s interest. We’re all in the same boat together.”
Investment banks from Citigroup Inc. to JPMorgan Chase & Co., both based in New York, have used the term in research reports. There were no instances of it in Barclays notes obtained by Bloomberg.
“The Piigs remain front-and-center,” analysts led by Adam Crisafulli of JPMorgan in New York wrote in a report yesterday. CLSA Asia-Pacific Markets analyst Christopher Wood recommended a “Piigs widening spread trade” in a June 2009 report.
Public Debt
Mark Lane, a spokesman for Barclays in New York, declined to comment. So did Duncan Smith of Citigroup and Brian Marchiony of JPMorgan.
Portugal’s public debt will rise to 91 percent of gross domestic product by 2011 from 77 percent last year, according to European Commission forecasts. More than one in three Italian households that got a mortgage to buy a residential property is struggling to meet the loan repayments, a study from Bologna- based research center Nomisma showed yesterday.
Ireland’s economy shrank 7.5 percent in 2009 and the government is cutting spending to reduce a deficit that widened to 11.7 percent of gross domestic product last year, almost four times the European Union limit.
Greece’s debt will increase to 135 percent of GDP, from 113 percent, and Spain’s will climb to 74 percent from 54 percent, the European Commission estimates. Greece faces opposition to proposed deficit cuts, with its biggest union set to approve a mass strike, the second scheduled for this month.
‘Highly Intelligent’
The Spanish government had to increase the amount it pays to borrow yesterday after confidence in Portugal was shaken when it cut an issue of 12-month bills to 300 million euros ($412 million) from a planned 500 million euros.
Usage of Piigs grew following the rise of the BRICs acronym for Brazil, Russia, India and China, coined by Goldman Sachs Group Inc. Chief Global Economist Jim O’Neill to describe four of the world’s biggest emerging markets.
The Web site of the Humane Society of the United States describes pigs as “highly intelligent, curious animals who engage in complex tasks and form elaborate social groups.”
“If there’s a cute nickname to use so you don’t have to say five names out loud over and over again, that’s fine with me,” said Julius Ridgway, a financial adviser at Medley & Brown LLC, which oversees about $400 million in Jackson, Mississippi. “It’s just silly.”
To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net; Lynn Thomasson in New York at lthomasson@bloomberg.net.
Last Updated: February 5, 2010 06:25 EST
BL: `Piigs' Don't Fly in Barclays Notes as Portugal, Greece Grapple With Debt
Swine Acronym Ordered Out of Barclays Capital Reports (Update1)
By Alexis Xydias, Rita Nazareth and Lynn Thomasson
Feb. 5 (Bloomberg) -- At Barclays Capital, Piigs won’t fly.
The securities unit of London-based Barclays Plc told analysts yesterday not to use the acronym for Portugal, Italy, Ireland, Greece and Spain in notes to clients, according to a memo obtained by Bloomberg News. The mandate from Valerie Monchi was sent to research staff.
The Piigs nickname has grown increasingly popular in the last month as investors dumped assets in the euro zone’s smaller economies on concern the countries will struggle to control budget deficits. Stocks in Spain, Portugal and Greece plunged today, with the Athens Stock Exchange Index falling to the lowest level since April. Yields on Greece’s 10-year bonds and Portugal’s 2-year securities have jumped to the highest levels against German bunds since the late 1990s.
“By denigrating a nation in the process of trying to describe a financial situation, it sort of puts the people in that country behind the eight ball,” said Peter Sorrentino, a senior money manager at Cincinnati-based Huntington Asset Advisors who is visiting Italy in March. His firm oversees $12.8 billion. “It serves no one’s interest. We’re all in the same boat together.”
Investment banks from Citigroup Inc. to JPMorgan Chase & Co., both based in New York, have used the term in research reports. There were no instances of it in Barclays notes obtained by Bloomberg.
“The Piigs remain front-and-center,” analysts led by Adam Crisafulli of JPMorgan in New York wrote in a report yesterday. CLSA Asia-Pacific Markets analyst Christopher Wood recommended a “Piigs widening spread trade” in a June 2009 report.
Public Debt
Mark Lane, a spokesman for Barclays in New York, declined to comment. So did Duncan Smith of Citigroup and Brian Marchiony of JPMorgan.
Portugal’s public debt will rise to 91 percent of gross domestic product by 2011 from 77 percent last year, according to European Commission forecasts. More than one in three Italian households that got a mortgage to buy a residential property is struggling to meet the loan repayments, a study from Bologna- based research center Nomisma showed yesterday.
Ireland’s economy shrank 7.5 percent in 2009 and the government is cutting spending to reduce a deficit that widened to 11.7 percent of gross domestic product last year, almost four times the European Union limit.
Greece’s debt will increase to 135 percent of GDP, from 113 percent, and Spain’s will climb to 74 percent from 54 percent, the European Commission estimates. Greece faces opposition to proposed deficit cuts, with its biggest union set to approve a mass strike, the second scheduled for this month.
‘Highly Intelligent’
The Spanish government had to increase the amount it pays to borrow yesterday after confidence in Portugal was shaken when it cut an issue of 12-month bills to 300 million euros ($412 million) from a planned 500 million euros.
Usage of Piigs grew following the rise of the BRICs acronym for Brazil, Russia, India and China, coined by Goldman Sachs Group Inc. Chief Global Economist Jim O’Neill to describe four of the world’s biggest emerging markets.
The Web site of the Humane Society of the United States describes pigs as “highly intelligent, curious animals who engage in complex tasks and form elaborate social groups.”
“If there’s a cute nickname to use so you don’t have to say five names out loud over and over again, that’s fine with me,” said Julius Ridgway, a financial adviser at Medley & Brown LLC, which oversees about $400 million in Jackson, Mississippi. “It’s just silly.”
To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net; Lynn Thomasson in New York at lthomasson@bloomberg.net.
Last Updated: February 5, 2010 06:25 EST
(CVS/WAG) Lipitor Patent Expiration May Bring Earnings `Windfall' to CVS, Walgreen
Lipitor Patent Expiration May Bring Earnings `Windfall' to CVS, Walgreen
By Carol Wolf and Shannon Pettypiece
Feb. 5 (Bloomberg) -- Profit at CVS Caremark Corp. and Walgreen Co., the largest U.S. pharmacy chains, may rise at least 20 percent starting next year as branded drugs with more than $100 billion in sales become available as generics.
The record arrival of generic drugs, which can be twice as profitable for pharmacies as branded products, will bring an earnings “windfall” to CVS and Walgreen from 2011 through 2013, said Derek Taner, who manages the $1 billion Invesco Aim Global Health Care Fund from Houston. Drugs losing patent protection include the world’s two best sellers, Pfizer Inc.’s cholesterol pill Lipitor and the blood thinner Plavix.
The cycle isn’t fully accounted for in analysts’ estimates and not reflected in the stock prices, according to Taner and John Massey, a money manager at SunAmerica Asset Management Corp. Both used the companies’ earnings growth during the last major introduction of generics, in 2006 and 2007, to come up with estimates.
“There is a tremendous amount of profit to be had and that profit continues to roll through for a period of time,” Massey, based in Jersey City, New Jersey, said in a telephone interview. “It’s a multiyear process that builds on the next period.”
Taner sees increases of at least 20 percent in the companies’ earnings in 2011, 2012 and 2013. Sales won’t rise as fast because generics are cheaper than the branded products, he said. Massey estimates profit at Walgreen and CVS will rise 20 percent to 30 percent in 2011, 2012 and part of 2013, before the growth starts slowing down.
‘Robust’ Pipeline
CVS Chief Financial Officer Dave Denton said it’s too early to make predictions because profits will be determined by pricing, and prices are unknown.
“The generic pipeline is robust,” Denton, 44, said in a Feb. 1 telephone interview. “The percentage boost is not something we have analyzed to that level of depth. Pricing is very competitive and we can’t know for sure what it will look like at that time.”
Generic drugs tend to be more profitable than branded ones, especially in the early phases after patents expire, Wade D. Miquelon, chief financial officer of Deerfield, Illinois-based Walgreen, said in an interview.
“It will definitely help us, but to that magnitude, considering there are other things that play in, I would hesitate to give any guidance,” said Miquelon, 45. “There are lots of moving parts in this business and different people factor them in different ways.”
Walgreen, CVS Shares
Walgreen, the largest U.S. drugstore chain, fell 14 cents to $33.31 at 4:15 p.m. in New York Stock Exchange composite trading. The stock jumped 49 percent last year. Woonsocket, Rhode Island-based CVS, up 12 percent in 2009, declined 8 cents to $31.07.
Analysts project CVS’s earnings per share will advance 11 percent in 2011 and 14 percent in 2012. Walgreen’s may rise 17 percent in each of those years, according to average estimates.
Drug stores pay as much as 90 percent less for generic drugs than for the branded equivalent, said Adam J. Fein, president of Philadelphia-based Pembroke Consulting, a health- care consulting firm. The pharmacies don’t reduce prices to customers and third-party payers such as insurance companies by as much, which adds to profit, he said.
Those pricing tactics have given pharmacies average gross margins of 48 percent on generics compared with 8.9 percent for branded drugs, Fein estimates. He based his calculations on a 2008 report from the U.S. Department of Health & Human Services, which provided data on more than 18,000 prescriptions filled under the Medicare program, including almost 11,000 generics.
Bigger and Longer
The last large wave of patent expirations came in 2006 and 2007, when branded drugs generating sales of $43 billion faced generic competition, according to Norwalk, Connecticut-based IMS Health Inc., a market research firm. That helped boost CVS earnings per share by 20 percent in 2007 and Walgreen’s by 19 percent in the fiscal year that ended in August 2007.
“This cycle is bigger and it’s longer” than the introduction of generic drugs in 2006 and 2007, Taner, the Invesco fund manager, said in an interview. Invesco increased its holdings to 5.68 million Walgreen shares and 5.96 million CVS shares as of Sept. 30, according to Bloomberg data.
CVS and Walgreen will also benefit because they have expanded in recent years, gaining pricing power, said Massey, the SunAmerica investor. Still, prices pharmacies pay for drugs won’t drop as much in the next cycle because there are fewer manufacturers as a result of mergers.
TriCor, Lipitor
Most patents expire 20 years from the date of the application with the U.S. Patent and Trademark Office, allowing generic drugmakers to enter the market. The time frame can change based on various extensions and litigation. Because of a boom in drug development starting in the 1980s, a number of patents are about to lapse.
Branded drugs with $24 billion in global sales face possible competition from generics this year, according to IMS. They include Pfizer’s Effexor XR, used to treat depression, in July. Generics of drugs with $42 billion in sales may come to the market in 2011, including Abbott Laboratories’ cholesterol drug TriCor in March and Lipitor, the best-selling drug with $12.4 billion in 2008 revenue, in November of that year.
Any potential profit from Lipitor won’t come until 2012 and 2013, said CVS’s Denton.
A generic version of Plavix, from Sanofi-Aventis SA and Bristol-Myers Squibb Co., may arrive on the U.S. market in early 2012. Plavix was the No. 2 drug in 2008 with $9.45 billion in revenue. In total, drugs that generate $109 billion in sales face competition in the next four years, according to IMS data.
Share Gains
Massey, the SunAmerica money manager, sees CVS shares rising to $54 over the next six to twelve months, a 74 percent increase from today’s closing price. The price is based on a multiple of 16 times Massey’s estimate for 2011 earnings-per- share of $3.20. Analysts surveyed by Bloomberg project adjusted earnings of $3.10, on average.
Walgreen’s stock may rise to $45 a share over the same period, assuming a multiple of 15 times a 2011 earnings estimate of $3 a share, Massey said. Analysts project $2.70 on average for fiscal 2011.
SunAmerica funds own CVS and Walgreen shares and have $13 billion in assets under management, he said.
PBM Unit
CVS stands to gain more than Walgreen from generic introductions, Richard England, an Atlanta-based money manager with Atlanta Capital Management Co., said in a telephone interview. Atlanta Capital owned 3.45 million CVS shares as of Sept. 30, after selling about 58,000 shares, according to Bloomberg data. It held no Walgreen stock.
CVS has improved the performance of its pharmacy benefits management, or PBM, unit, England said. The PBM unit accounts for about half CVS’s sales, following its 2007 acquisition of Caremark RX Inc. CVS said in November that it had lost $4.8 billion in 2010 contracts, including $3.7 billion in the third quarter, because of pricing and customer service issues.
“Even if they didn’t get it fixed, they would clearly benefit from this,” England said of the arrival of generic drugs. “It’s a very significant positive for CVS and it’s absolutely not priced into the stock.”
To contact the reporters on this story: Carol Wolf in Washington at cwolf@bloomberg.net; Shannon Pettypiece at spettypiece@bloomberg.net.
Last Updated: February 5, 2010 16:43 EST
(TM) Toyota Tells U.S. Dealers to Expect Update Next Week on Prius Brake Plan
By Alan Ohnsman
Feb. 6 (Bloomberg) -- Toyota Motor Corp., grappling with record U.S. recalls, said it told U.S. dealers to expect an update early next week on steps the company plans to take to address complaints over brakes on the 2010 model Prius hybrid.
“We notified dealers in a short letter yesterday that we believe we’ll have more specific information on our plans for Prius next week,” said John Hanson, a spokesman for Toyota’s U.S. sales unit. “We know dealers have customers coming to them who are concerned and we’re trying to give them as much information as we can, as fast as we can.”
Toyota, the world’s largest automaker, didn’t tell dealers it will make a formal “announcement” on a fix for Prius and hasn’t yet determined whether a recall is necessary, he said.
Should the Toyota City, Japan-based company recall the latest version of Prius, the world’s best-selling hybrid car, it would add to the perception of quality problems at Toyota. The company has already recalled 5.6 million cars and light trucks in the U.S. since November to correct flaws linked to unintended acceleration, an issue Toyota says isn’t connected to Prius brakes.
Japan’s Nikkei newswire reported last week that Toyota would recall 270,000 Priuses in Japan and the U.S. to correct software in the braking system. Toyota hasn’t confirmed that report.
Complaints in U.S.
The National Highway Traffic Safety Administration said it has 124 complaints from U.S. drivers about Prius brakes. Toyota has said it’s investigating reports that Prius owners driving at low speeds on bumpy or icy roads have experienced moments in which the car continues to coast for about a second after the brakes are applied because of the anti-lock brake system.
NHTSA isn’t aware of a plan by Toyota to announce a fix for brakes on Prius hybrids next week, Olivia Alair, a spokeswoman for the agency, said in an e-mailed message.
The company said this week it altered software on Priuses built in Japan last month to correct the issue. A class action suit against the automaker was filed in Canada yesterday over alleged defects in the Prius braking system.
Toyota’s U.S. sales unit is based in Torrance, California.
To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net
Last Updated: February 6, 2010 14:33 EST
UKT: US jobs report 'disappointing in virtually all respects'
Concerns about the fragility of the US economic revival returned after an increase in the number of Americans claiming unemployment benefits for the first time.
By James Quinn
Published: 7:52PM GMT 04 Feb 2010
Ahead of Friday's eagerly anticipated non-farm payroll numbers for January, US government data showed that first-time unemployment benefit claims rose by 8,000 to 480,000 last week, against a forecast of a 10,000 fall in new claims, with regular claims holding steady at 4.6m.
Jan Hatzius, Goldman Sachs chief US economist, said the data was "disappointing in virtually all respects", especially as earlier problems processing claims, which had been causing unexpected blips, have now been resolved.
The consensus forecast for Friday's non-farm payrolls – which covers private and public sector employment – is zero, indicating that no jobs will have been lost, nor any created.
The gloomy labour market news was at odds however with strong sales figures from a number of major retailers, with wholesaler Costco reporting an 8pc increase in like-for-like sales in January, department store chain Nordstrom seeing a 14pc increase, and even fashion retailer Abercrombie & Fitch – which had not seen a monthly sales increase since April 2008 – reporting an 8pc rise.
The buoyant figures were matched by the government's business productivity index, showing a 6.2pc advance in the final three months of 2009.
http://www.telegraph.co.uk/finance/economics/7159175/US-jobs-report-disappointing-in-virtually-all-respects.html
UKT: US recovery risks being hobbled by growing army of long-term unemployed
The US economy's recovery risks being hampered by the creation of a new army of long-term unemployed, whose number has more than doubled in the past 12 months.
By James Quinn
Published: 3:26PM GMT 05 Feb 2010
Although a widely-watched monthly jobs report on Friday showed that the unemployment rate fell to 9.7pc in January from 10pc in December, the report also revealed that 41.2pc of those without work - or 6.3 million people - have now been so for more than six months and are officially classed as long-term unemployed.
Statistics released earlier this week showed that 4.6m Americans continue to claim long-term unemployment benefit, signalling 1.7m of those defined as long-term unemployed either do not want to claim or are no longer eligible.
These figures are important, as those out of work for significant periods typically find it harder to find work even once a robust recovery begins, and because they can create a drag on their wider families’ economic output, restricting consumption.
Overall, Friday's report showed a mixed picture, with more jobs lost than expected but a slight improvement in the overall unemployment rate. Some 20,000 Americans lost their jobs in January, worse than US economists had predicted.
But the unemployment rate fell, down from 10pc in December to 9.7pc, the lowest in five months, with 14.8m people out of work at the end of last month, compared to 15.3m at the end of the prior month, an improvement of some 500,000 people.
However the bulk of the improvement related to an increase in those not long for work in January – up 409,000 to 2.5m. Of those, 1.1m were so-called ‘discouraged workers’ – who were not looking because they believed no jobs were available – while the remainder did not so do for because of other reasons including family responsibilities.
The mixed report left stock markets uncertain how to immediately respond. The Dow Jones Industrial Average was off 0.6pc, while the Standard & Poor's 500 was 0.5pc weaker.
With all the past revisions accounted for, some 8.4m Americans have lost their jobs since the start of the US recession in December 2007. The new statistics also showed that those who are in work are working longer – in part to cover the work of redundant former colleagues – with the average work-week rising to 33.3 hours – the highest in a year – from 33.2 hours.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7166775/US-recovery-risks-being-hobbled-by-growing-army-of-long-term-unemployed.html
DJIA: 6000, lol
UKT: Eurozone 'pigs' are leading us all to slaughter
The financial crisis is coming to a new, potentially more deadly phase, says Jeremy Warner.
By Jeremy Warner
Published: 7:17PM GMT 05 Feb 2010
Are we about to enter a third, and this time fatal, leg of the financial crisis? The problems of euroland which have so unsettled markets this week – and in particular those of Portugal, Ireland, Greece and Spain (the "pigs", as they have become known in financial circles) – are worrying enough in themselves.
But they are also a proxy for much wider concern about how national governments extract themselves from the fiscal and monetary mire they have created in fighting the downturn. It's proving messy, though, and they are running the risk of provoking an even worse crisis in the process.
Think of the three phases of the economic implosion like this. The first was a fairly conventional, if extreme, banking crisis where a cyclical overexpansion of credit and lending suddenly, and violently, corrects itself in a great outpouring of risk aversion.
In the second phase, governments and central banks attempt to counter the economic consequences of this crunch with unprecedented levels of fiscal and monetary support. Temporarily, at least, it seemed to work.
Until now, investors have been happy to finance the resulting deficits, in part because government bonds have seemed the only safe place to put your funds, but also because central banks have, in effect, been creating money to compensate for the paucity of private-sector credit. The mechanism varies from region to region, but much of this new money has found its way into deficit financing.
We are now entering the third, inevitable phase of the crisis where markets question the ability of even sovereign nations to repay their debts. Unnerved by this loss of fiscal and monetary credibility, governments and central banks are being forced, much sooner than they would have wished, to start withdrawing their support.
I say earlier than they would have wished because the recovery is not yet assured. Private demand and credit provision remain subdued. Policy-makers knew they would eventually have to abandon their fiscal and monetary support, but the timing of it may no longer be a matter of choice.
The first tremors around these so-called "exit strategies" occurred in Dubai a few months back when the emirate, fearing for its own solvency, shocked markets by announcing that it no longer stood behind the debts of its financially stretched state-owned enterprises. In this case, Dubai's fellow and richer emirate, Abu Dhabi, eventually came to the rescue.
It is much less clear that Greece, Spain, Portugal and Ireland can rely on similar support, either from richer members of the euro area or the European Central Bank.
For the "pigs", membership of the euro excludes the easy option, which is to devalue and turn on the printing presses according to local needs. Instead, monetary policy, and increasingly fiscal policy too, are dictated by Germany and France, the core euro nations.
Whether the fiscal consolidation demanded is politically feasible looks questionable. And even if these countries do succeed in making the necessary adjustments, they may face a classic deflationary debt spiral, where slashing the deficit causes the economy to shrink further which, in turn, increases the deficit.
Little surprise, then, that one of the big bets in markets right now is that these distressed members of the euro will be forced either into default, or rather like Britain with the ERM in the early 1990s, out of the single currency altogether. Serious knock-on consequences for creditor economies would follow.
Yet to true believers in the doomsday scenario, even an outcome as extreme as this would not be the end of the crisis. Fiscal ruin is not confined to the southern European nations. The hors d'oeuvre consumed, it would be on to the main course – the default of one or more of the big, triple-A rated sovereigns. Financial and economic chaos would follow quickly in its wake.
There's a world of worry out there, fed by self-interested speculators, which is proving hard to counter. Yet things rarely work out as predicted, and though nobody should be in any doubt about the scale of the economic adjustment still to be made in Western economies, more benign outcomes are still possible. Bigger, advanced economies with their own currencies are better placed to manage their exits than the "pigs".
However, right now, both Washington and London seem gripped by the sort of political paralysis that can indeed prove lethal. We should not assume that the sudden loss of market confidence that has afflicted Greece – essentially a developing market economy that should never have been in the euro in the first place – will be confined to the "pigs". The burgeoning size of public indebtedness the world over makes all economies vulnerable.
Even so, this week's tremors should be seen as more of a warning than the beginning of a fatal endgame. The austerity of tighter fiscal and monetary conditions is coming to all of us. With or without the compliance of policy-makers, the markets will impose it. But it doesn't have to be a rout.
http://www.telegraph.co.uk/finance/comment/jeremy-warner/7168631/Eurozone-pigs-are-leading-us-all-to-slaughter.html
WS 24/7: China Vs. US Chickens
Posted: February 5, 2010 at 6:07 am
Obama will meet with China “enemy of the state”, the Dalai Lama, spiritual leader of Tibet. The Chinese government has already protested the visit. The US will sell $6.4 billion in arms to Taiwan, which China views as a rouge province over which it should have dominion. The People’s Republic say it will retaliate by cutting off purchases of goods from the US companies which build the weapons.
All of this happens against a backdrop of American government complaints about the value of the yuan and a trade war which includes tariffs of some Chinese-made rubber tires exported to the US.
The American chicken has become the latest victim of the escalating tensions between the world’s No.1 and No.3 economies.
The mainland will levy heavy tariffs on the import of American chicken products. Some of these duties are as high as 80% and involve goods from Tyson ((TSN) and Pilgrim’s Pride (PPC). The two companies rely enough on exports that there sales and earnings could be significantly affected by the Chinese decision.
The news shows the extent to which China is willing to retaliate against US trade actions and the extent to which the American government will go to ignore Chinese wishes on military and human rights issues. The pace at which the disputes are growing is accelerating and 2010 may well end up as the year in which the tensions between two radically different forms of government and two widely different trade philosophies boil over.
It is hard to say what the effects of an all out trade war between the US and China might bring. China could substantially damage US companies such as Wal-Mart (WMT) and McDonald’s (MCD) by restricting their businesses in China which have become a significant part of their global revenue. The US could block the import of inexpensive Chinese goods which are sold by thousand of retail firms and product companies. These corporations are unlikely to be able to source inexpensive goods to replace those from China, if they can be replaced at all. China’s manufacturing capacity is unmatched around the world.
A severe limit on Chinese goods would probably eventually help revive the crushed US manufacturing base which has been decimated by the collapse of American industries, especially auto manufacturing. But, a drop in Chinese imports probably means that US consumer will pay more for many goods. US labor costs are not likely to match those in China. “Made in the USA” is nice in theory, but expensive for the people who buy the products that are made.
Douglas A. McIntyre
http://247wallst.com/2010/02/05/china-vs-us-chickens/#more-59316
WS 24/7: Bank Failures In 2010 May Hit 200, Up Over 40%
Posted: February 6, 2010 at 7:56 am
The FDIC was probably wise to get its member banks to prepay their fees for 2010, 2011, and 2012. The agency brought in $45 billion by the action, just as its capital base went into the red early last October. The FDIC could have taken in the funds from the Treasury Department instead, but that would have meant another “loan” for the financial system by the taxpayers.
Analysts now expect 200 or more banks to fail this year. Sixteen have already gone under.
A survey of MarketWatch showed that bank analysts believe that the 200 failures will cost the government as much as $50 billion. Part of the forecasts are based on the 552 banks on the FDIC “problem” bank list at the end of the third quarter of 2009. Bank analyst firm KBW told MarketWatch that “the main banking subsidiaries of Flagstar Bancorp (FBC), Sterling Financial Corp. (STSA) and Amcore Financial Inc.(AMFI) may be vulnerable.”
The predictions raise the question of whether the FDIC is well enough capitalized to handle the burden of this level of failure and whether the 200 bank number is too conservative. RealtyTrac has forecast that mortgage foreclosures will rise to three million this year, up slightly from 2009. Commercial real estate lost 37% of its value last year 3.4% of mortgages in the sector were in default. Many of the residential and commercial loan losses have not hit bank balance sheets yet, and experts believe that regional and community banks are at particularly high risk as these loans fail.
The FDIC will not be able to get banks to “prepay” fees again. There is some chance it could raise the fees that it charges that firms whose assets it insures. But, the Treasury is the lender of last resort for the bank regulator, and that means taxpayers may well be pulled into the financial bailout business again.
Douglas A. McIntyre
http://247wallst.com/2010/02/06/bank-failures-in-2010-may-hit-200-up-over-40/