www.therochesterdemocrat.com/ee/index.php en editor@TheRochesterDemocrat.com Copyright 2012 2012-02-08T15:42:26+00:00 http://www.therochesterdemocrat.com/index.php/weblog/german_exports_set_record_of_a_trillion_euros/ {summary} Europe, Exports




BBC News Business
8 February 2012 Last updated at 03:50 ET


Germany's trade surplus reached 158bn euros (£132bn; $209bn) in 2011 on record exports that rose 11.4% to top 1tn euros for the first time.

The national statistics office also said that imports rose 13.2% to reach an all-time high of 902bn euros.

In 2010, the trade surplus for Europe's biggest economy was 155bn euros.

Meanwhile, the Bank of France has warned that the eurozone's second biggest economy would stagnate in the first three months of 2012.

German exports to countries outside the 27-nation European Union showed the strongest growth last year, up 13.6% to 432.8bn euros.

Exports to other EU countries rose 9.9% to 627.3bn euros. Of those, 420.9bn euros went to the eurozone bloc, an 8.6% rise.

Germany's balance of payments, a broader measure of exchanges with other countries that includes financial transactions, showed a surplus of 136bn euros 2011, down from 142bn euros the year before.

Also on Wednesday, the Bank of France said the country's economy was likely to see zero growth in the first three months of 2012.

The French economy, the second-largest in the eurozone, has posted a trade deficit for 2011 of almost 70bn euros.





]]> 2012-02-08T15:42:26+00:00 http://www.therochesterdemocrat.com/index.php/weblog/greek_leaders_agree_on_a_rescue_framework/ {summary} Europe, Financial




Bloomberg News
February 6, 2012


Greek Prime Minister Lucas Papademos struck a tentative deal with political parties on austerity measures demanded by international creditors as European leaders maintained pressure to complete terms for a 130 billion-euro ($171 billion) rescue package.

Chiefs of the three parties supporting Papademos’s interim government agreed in a five-hour meeting yesterday to make additional reductions this year equal to 1.5 percent of gross domestic product, according to an e-mailed statement from the premier’s office in Athens. The leaders are due to meet again today at about midday to work on the detail of an agreement after setting a framework for bank recapitalizations, ensuring the viability of pension funds and for measures to reduce wage and non-wage costs to boost competitiveness.

With the country’s stability at stake, the accord marked a step forward as Athens played host to parallel negotiations over the weekend to secure the domestic consensus needed to win a second bailout while persuading Greece’s private creditors to accept bigger writedowns on their debt holdings.

This week, “Greece will be left, right and centre taking it right down to the wire,” said Erik Nielsen, chief global economist at UniCredit SpA in London.

‘Make or Break’

Euro-area finance chiefs told Greek Finance Minister Evangelos Venizelos in a Feb. 4 conference call that an increase in the bailout package wasn’t forthcoming, underscoring their frustration at a lack of progress on fixing the economy. The effort to keep Greece from tumbling into default presents what Deutsche Bank AG Chief Executive Officer Josef Ackermann called a “make or break” moment.

The euro fell, losing 0.65 percent to $1.3072 as of 10:30 a.m. in Athens.

Papademos is meeting the three party leaders today to hammer out the details of the measures. Antonis Samaras, the head of the second-biggest party, New Democracy, indicated he would oppose some measures that the so-called troika of international creditors have put forward.

“They are asking us for greater recession, which the country can’t take,” Samaras said as he left the meeting with Papademos. “I will fight to avoid that.”

Greece’s efforts to win a second bailout from the so-called troika -- the European Commission, the European Central Bank and the International Monetary Fund -- have hung in the balance over the past three days as negotiations in Athens failed to clinch an agreement. Venizelos said on Feb. 4 the talks were “on razor’s edge.”

Bond Redemption

Facing a 14.5 billion-euro bond payment on March 20 and general elections as soon as April, Papademos must heed international demands for greater austerity to complete the talks on a second aid package in time. Open questions involve how much more aid Greece needs, how much more austerity is required, and how to involve the European Central Bank in the private-sector creditor debt swap.

“If we determine that it’s all going wrong in Greece, then there won’t be a new program -- and that means in March you’ll have a declaration of bankruptcy,” Luxembourg’s Jean-Claude Juncker, who chairs euro finance meetings, told Der Spiegel magazine in an interview published yesterday.

Next Election

Guarantees from Greek political leaders such as Samaras, who leads in opinion polls, are key to securing the funds from the EU and IMF. International lenders want assurances that whoever wins the next election, which could be held in April, will stick to pledges made now to receive financing.

George Papandreou, the former prime minister who still leads the Pasok socialist party, the biggest in the Greek parliament, met with party members after the meeting to discuss the party’s response.

In a letter sent separately to Papademos, he proposed that Papademos’s mandate be extended to boost confidence among lenders the pledges will be implemented. That is an option likely to be opposed by Samaras, who has called for elections as soon as the new financing is agreed.

Agreement on a new plan, which includes a writedown of Greek debt held by private creditors, has been held up by insistence on the part of the EU and IMF on structural reforms that will underpin a return to competitiveness for the Greek economy as well as new fiscal measures for this year.

Rescue Blueprint

The rescue blueprint includes a loss of more than 70 percent for bondholders in a voluntary debt exchange and loans that will probably exceed the 130 billion euros now on the table. A formal offer for the debt swap must be made by Feb. 13 to allow all procedures to be completed before the March 20 bond comes due.

“One thing is clear: the Greek drama continues to unfold,” Joachim Fels, chief economist at Morgan Stanley wrote in a note yesterday. “A really, really bad scenario for the euro area -- a Greek default and departure from the euro area -- simply cannot be excluded.”

Greece has lagged behind budget targets set when it won an initial, taxpayer-funded rescue of 110 billion euros in May 2010, prompting euro-area threats to cut off aid and hastening a German push to make bondholders contribute. The country’s economy shrank 6 percent last year, according to the most recent IMF estimates, the budget deficit is still close to 10 percent of GDP and unemployment is about 18 percent.

Even after a second bailout, Greece may be saddled with too much debt, too little growth and too large a budget hole to do without even more money, which euro nations led by Germany are increasingly reluctant to offer.

Troika Measures

The troika wants the country to detail over 4 billion euros of measures to meet targets for 2011 and 2012 because wage cuts will deepen the recession and cause a shortfall this year, one government official told reporters in Athens.

The troika argues that cutting private-sector holiday allowances is among reforms necessary to boost competitiveness in the country. Those opposed say the cuts would deepen the country’s recession, now in its fifth year.

Papademos met yesterday with the lead negotiators on the debt accord with Greece, Charles Dallara, managing director of the International Institute of Finance, and Jean Lemierre, a senior adviser to the chairman of BNP Paribas SA. The debt swap, Venizelos said on Feb. 4 “is now the easiest part of the process.”

Creditors are prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds in the exchange, said a person familiar with the talks, who declined to be identified because a final deal hasn’t been struck yet.


]]> 2012-02-06T14:55:15+00:00 http://www.therochesterdemocrat.com/index.php/weblog/losses_of_japanese_electronic_firms_worsen/ {summary} Asia, Business

Bloomberg News
February 6, 2012


Japan’s biggest makers of phones, televisions and chips say they’ll lose about $17 billion this year, about three-quarters of what Samsung Electronics Co. (005930) will spend on research to lengthen the lead over its competitors.

Sony Corp. (6758) more than doubled its annual loss forecast for the year ending March 31 as it announced a new chief executive officer, while Panasonic Corp. (6752) and Sharp Corp. predicted the worst losses in their histories. Their combined losses compare with the $22 billion that Samsung, Asia’s largest consumer- electronics company, said it will invest in capital expenditures.

Japanese companies hurt by a stronger yen, flooding that swamped Thailand factories and weaker demand for their TVs may not be able to regain ground lost to Samsung and Apple Inc. That’s prompting Sony and Panasonic to focus on sectors including medical devices, solar panels and rechargeable batteries in an effort to revive earnings.

“Japan’s consumer-electronics makers are in a total breakdown,” said Masamitsu Ohki, a fund manager at Stats Investment Management Co., a Tokyo-based hedge fund. “They need to compete with ideas, not technology.”

Samsung is the world’s biggest maker of TVs, memory chips and flat-screen panels, and the second-biggest manufacturer of mobile phones. The Suwon, South Korea-based company and its affiliates plan to spend 47.8 trillion won ($43 billion) this year on new product research and upgrading plants.

Harsh Competition

Samsung, which doesn’t forecast annual results, reported a 17 percent increase in fourth-quarter net income.

“The Japanese consumer electronics makers shouldn’t compete with the Koreans in the same market,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo. “The environment surrounding Japanese manufacturers is very harsh.”

Panasonic, Sony and Nikon Corp. gained in Tokyo trading today as Asia-Pacific markets rose after U.S. jobs data beat estimates, raising expectations that exports will increase.

Panasonic gained 6.3 percent to 637 yen on the Tokyo Stock Exchange, and Sony advanced 4 percent to 1,492 yen. Nikon surged 11 percent after raising its full-year operating profit forecast by 7.5 percent on higher-than-expected demand for digital cameras.

The MSCI Asia Pacific Index (MXAP) added 0.5 percent.

Recovery Measures

Panasonic’s reform of TV and chip operations, cost cuts, buying more parts from Asian producers and a recovery from flood damages will probably boost profit by about 250 billion yen ($3.3 billion) in the year starting April 1, the company said Feb. 3.

President Fumio Ohtsubo “highlighted bold recovery measures,” Shiro Mikoshiba, an analyst at Nomura Holdings Inc. in Tokyo with a “buy” rating on Panasonic shares, said in a report today. “Panasonic continues to be among electronics makers with prospects of large profit increases next fiscal year,” said the analyst.

Sony, Japan’s largest electronics exporter, predicted its loss in the year ending in March will widen to 220 billion yen, the first time since the Tokyo-based company began trading in 1958 that it’s had four consecutive annual losses.

Kazuo Hirai, named last week to take over as CEO starting April 1, said he will review the businesses and close less- competitive ones. Sony, worth more than $100 billion in 2000, is now valued at about $19 billion.

Strong Yen, Weak Won

Panasonic, Japan’s biggest appliance maker, forecast a 780 billion yen loss, the worst since the Osaka-based company was founded in 1918. Sharp, the maker of Aquos TVs, predicted a loss of 290 billion yen, its worst in a century.

Thailand’s worst floods in 70 years shut factories making cameras and hard-disk drives, disrupting production and causing shortages during the holiday shopping season.

Samsung also benefits from the strengthening Japanese currency against the dollar, compared with the weakening won against the greenback.

The yen’s 7.3 percent surge against the dollar and 11 percent gain against the euro in 2011 damped the repatriated value of Japanese companies’ overseas sales. Sony earned 70 percent of its revenue outside Japan and Panasonic 48 percent.

Manufacturers have been forced to both relocate production outside of Japan and to press their suppliers for cost cuts.

Apple’s Record Profit

By comparison, the won depreciated 1.3 percent against the dollar in the past year, helping Samsung, which earned 85 percent of its revenue in 2010 outside South Korea.

Samsung’s profit in the quarter ended December advanced 17 percent to 4 trillion won, helped by smartphone sales that kept pace with Cupertino, California-based Apple. (AAPL) Sales rose 13 percent to 47.3 trillion won.

“Samsung is a marvelous manufacturer,” said Edwin Merner, president of Atlantis Investment Research in Tokyo, who manages $300 million. “They can make good things at a very low price. Sony can’t do that.”

Apple had a net income of $13.1 billion in the quarter ended Dec. 31, ranking it among the highest quarterly profits on record and putting the company in the same league as Exxon Mobil Corp. and Russia’s Gazprom OAO.

“Apple changed the paradigm of thinking,” Stats Investment’s Ohki said. “It would be very hard for the Japanese companies to recover unless they can get back the de facto standard for products like mobile phones from Apple.”

That’s what Sony wants to do. The company will strengthen mobile devices and expand in new areas such as medical, Hirai said Feb. 2.

Sony TV

In the television business, Sony hasn’t had a profit in the past seven years selling Bravia models, while bigger rivals Samsung and LG Electronics Inc. are profitable in the sector. Last year, Sony exited a joint venture with Samsung that makes panels as part of revamping the business, that’s set for an eighth year of losses in the year to March 31.

Sony’s financial services, music and movies businesses were all profitable in the year to March 2011, according to data compiled by Bloomberg.

“We weren’t able to select areas where we want to concentrate, so we ended up keeping products that became commoditized,” Hirai said. “We want to make our focus clear soon.”


]]> 2012-02-06T14:34:34+00:00 http://www.therochesterdemocrat.com/index.php/weblog/us_economy_likely_began_2012_with_solid_job_growth/ {summary} Employment






WASHINGTON (AP) - The U.S. economy likely produced another solid month of hiring in January, a promising start for 2012.

Economists forecast that employers added a net 155,000 jobs last month and that the unemployment rate remained 8.5 percent for a second straight month, according to a survey by Factset.

The unemployment rate has fallen for four straight months. It's at its lowest level in nearly three years. The government will the January unemployment report Friday morning.

A gain of 155,000 jobs would be down slightly from December, when employers added a net 200,000. Still, it would mark the seventh straight month in which at least 100,000 jobs have been added. That hasn't happened since 2005.

On Friday, the government will also issue its annual revisions to earlier jobs figures. The revisions are expected to show that hiring was stronger over the past two years than previously thought. The government has said the economy added about 1.6 million jobs last year, nearly twice as many as in 2010.

Even with the gains, the job market faces a long way back to full health. The U.S. has about 6 million fewer jobs than it did when the recession began in late 2007.

And analysts expect seasonal layoffs to weigh on the January job figures. The government, for example, reported a big gain in the number of courier and messenger jobs in December. That largely reflected hiring by delivery services, such as UPS and FedEx, which bulked up to handle online holiday sales. Most of those jobs were probably lost last month.

Still, several reports signaled this week that the economy is improving gradually. Manufacturers expanded at the fastest pace in seven months in January, a private survey showed.

And fewer people sought unemployment benefits last week, the Labor Department said. The four-week average of applications fell to its second-lowest level since June 2008. The drop shows that companies are cutting fewer jobs, which usually leads to more hiring.

Americans spent more at big chain retail stores last month compared with a year earlier. And automakers began 2012 with a strong sales gain in January. Healthier auto sales can boost a range of companies, from steel makers to parts suppliers to shippers.

The economy expanded at a 2.8 percent annual pace in the October-December quarter, a full percentage point higher than in the previous quarter.

Even so, economists expect slower growth this year. Much of the fourth quarter's expansion was due to companies ordering more goods to restock their warehouses. Restocking is likely to slow in the first three months of this year. That would drag on growth.

Europe's financial crisis could also slow demand for U.S. goods. And average wages failed to keep up with inflation last year. That leaves consumers with less spending power, which can hamper growth.


]]> 2012-02-03T14:09:49+00:00 http://www.therochesterdemocrat.com/index.php/weblog/china_economy_heading_for_hard_landing_as_exports_decline_shilling_says/ {summary} Asia




By Ye Xie and Christine Harvey - Feb 2, 2012
Bloomberg News


China’s economy is headed for a “hard landing” this year as weaker demand overseas chokes off exports, said Gary Shilling, who correctly forecast the U.S. recession that began in December 2007.

A Chinese government report yesterday showed that export orders fell last month even as manufacturing expanded. The Shanghai Composite Index (SHCOMP) dropped 1.1 percent yesterday as stronger manufacturing boosted concern that the world’s second- largest economy will decelerate further as the government refrains from loosening monetary policy to tame inflation and curb property prices.

“They slammed on the brakes,” Shilling, president of A. Gary Shilling & Co., a Springfield, New Jersey-based consultancy firm, said at the Bloomberg Link China Conference in New York yesterday. “Transition is not easy because they are geared up to exports.”

China’s economy expanded 10.4 percent annually in the past 10 years, five times the pace of the U.S., as the government boosted spending on roads and bridges and manufacturers exported everything from toys to socks. Shilling defines a hard landing as a growth rate below 6 percent.

The economy grew at a 9.2 percent rate in 2011 and its expansion will slow to 8.5 percent this year, according to economists’ estimates compiled by Bloomberg.

China’s official purchasing managers’ index increased to 50.5 from 50.3 in December, exceeding the median estimate in a Bloomberg survey for a reading below the 50 level that divides expansion from contraction. The data may have been distorted by the weeklong New Year holiday. Readings for new export orders and imports contracted for a fourth month.

Shifting to Consumption

The economy will grow at least 8 percent over the next decade as growing domestic consumption and investment in new industries offset the export slowdown, according to Carlyle Group LP and Leeb Capital Management.

“China is likely to grow between 8 and 10 percent or so for the next 10 years,” said David Rubenstein, co-chief executive officer of Carlyle, a private-equity firm. “China to me is the most attractive place in the world to invest” outside the U.S., he said at the conference.

Policy makers are transforming their economy toward consumption to reduce the reliance on exports and policy initiatives encouraging entrepreneurship will power economic growth, said Rubenstein.

Stephen Leeb, president of Leeb Capital, said China’s investment in new industries, such as renewable energy, will help the economy “easily” maintain an annual growth rate between 8 percent and 10 percent.

Property Slowdown

“The next 10 years are going to be probably among the most intense in the history of any industrial country in terms of creating new industries,” Leeb said at the conference.

Shilling, 74, has been calling for a hard landing in China since at least a year ago, advising clients to sell copper and the Australian dollar as a play on the downturn.

Shilling forecast the U.S. recession in 2007 and warned investors a year earlier that residential real estate was a bubble about to burst. As the Standard & Poor’s 500 index fell a more-than 12-year low in March 2009, he said that higher unemployment would curb consumer spending, leading to “weaker stocks.” The gauge has since rallied 96 percent.

China’s growth will be undermined by a cooling property market, said Michael Shaoul, chairman of New York-based Marketfield Asset Management, which manages $1.3 billion.

Lower housing prices will feed “rapidly to the construction, and then it feeds back to the credit system,” said Shaoul. “That’s the problem China is going to face in the next 12 to 15 months.”

About 61 percent of investors in a Bloomberg survey in December said that they anticipate a crash in the financial industry by late 2016. China’s new loans totaled $4 trillion in the past three years, twice the size of the Italian economy, raising concern that some of the lending to local governments and property developers will turn sour.

China’s government won’t allow the nation’s banks to trigger another credit crisis, said Joseph Taylor, an emerging- markets strategist at Boston-based Loomis, Sayles & Co., which oversees $163 billion in assets.

“Banks are still the instrumentality of the state,” Taylor said at the conference. “They won’t be allowed to go under. They won’t be allowed to trigger a systemic crisis.”

While the economy won’t get to crisis point, growth will probably slow because China has had “almost no success” in increasing consumption as a percentage of gross domestic product, and the nation has too much bad debt, Taylor said.



]]> 2012-02-02T17:58:08+00:00 http://www.therochesterdemocrat.com/index.php/weblog/quarterly_profit_falls_12.2_at_times_co/ {summary} Business



By AMY CHOZICK
NY Times
Published: February 2, 2012


The New York Times Company reported on Thursday that its fourth-quarter profit declined 12.2 percent as rising subscription and digital advertising revenue at its largest newspapers could not offset the continued drop-off in print advertising.

Net income was $58.9 million, or 39 cents a share, compared with $67.1 million, or 44 cents a share, in the period a year earlier.

For the full year, the company reported a net loss of $39.7 million, or 27 cents a share, compared with a profit of $107.7 million, or 71 cents a share, in 2010.

Revenue for the fourth quarter declined 2.8 percent, to $643 million. For the year, revenue at the Times Company was $2.32 billion, down 2.9 percent. Operating profit fell 4.5 percent, to $106.7 million, for the quarter and dropped 75.8 percent, to $56.7 million, for the year.

The results reflected the continuing struggles of print advertising throughout the industry, as marketers and readers continue to migrate online. Across the company, advertising revenue declined 7.1 percent in the fourth quarter. Print advertising was down 7.8 percent and digital advertising declined 4.9 percent, dragged down by a 25.9 percent revenue drop-off at the company’s About.com property.

The results were brighter at the company’s News Media Group, which includes The New York Times, The Boston Globe and The International Herald Tribune. There, digital advertising was up 5.3 percent and circulation revenue was up 4.7 percent in the fourth quarter, reflecting the growth of online subscriptions at
The Times.

Still, every main advertising category spent less at the company’s newspapers in the most recent quarter than they did in the period a year earlier, led by real estate classified advertising, which fell 17.3 percent.

In a continued effort to shed its peripheral assets, the Times Company also said Thursday that it had agreed to sell an additional part of its stake in Fenway Sports Group, owner of the Boston Red Sox, for $30 million, pending the approval of Major League Baseball. Last July the company sold more than half its stake to three separate buyers for $117 million.

The $39.7 million loss for 2011 includes a $161.3 million write-down largely from the company’s smaller regional newspapers in Florida, Alabama and elsewhere. The Times Company announced in December that it had agreed to sell its regional newspapers for $143 million to Halifax Media Holdings, but that sale is not reflected in the 2011 figures.

The results come as the Times Company begins its search for a chief executive to succeed Janet L. Robinson, who left the company after seven years in the post after the issue of a leadership change was raised by the company’s chairman, Arthur Sulzberger Jr. Her departure cost the company $4.5 million in a retirement and consulting agreement, or 2 cents a share. Ms. Robinson’s total exit package could reach five times that amount, according to people familiar with her severance package but unauthorized to discuss it publicly.

Last March, the company introduced its digital pay subscription service at NYTimes.com, viewed by many analysts as a risky but potentially crucial factor in the company’s financial future.

In the six months ended Sept. 30, The Times had the second-largest paid subscription Web site among newspapers behind The Wall Street Journal’s 537,469 subscribers, according to the Audit Bureau of Circulations.

“In 2011 we made significant strides in our strategy to transform and rebalance our company,” Mr. Sulzberger, now the acting chief executive, said in a statement. “Our fourth-quarter results demonstrate the continued focus on building The Times’s digital subscription base.”

The company projected high single-digit circulation revenue growth in the first quarter of 2012 driven by a 4 percent price increase on home delivery of The Times and a 50-cent increase on Monday-to-Saturday newsstand sales.

Mr. Sulzberger said the “economic environment remained challenging” but added that the company would continue to look for “new innovative approaches to expand our reach on new devices, in new markets and through social media.”

In a sign of the economic future newspapers will confront, digital advertising in 2011 accounted for a larger chunk of overall advertising revenue — about 27.7 percent compared with 26.3 percent in 2010.

The company reported that it had $280 million cash on hand at the end of the quarter and a total debt of $773.1 million.


]]> 2012-02-02T17:41:57+00:00 http://www.therochesterdemocrat.com/index.php/weblog/eurozone_unemployment_hits_new_record1/ {summary} Employment, Europe, Recession



BBC News Business
31 January 2012 Last updated at 06:44 ET


Unemployment in the eurozone hit a record high at the end of last year, the Eurostat agency has said.

The jobless rate in the 17 countries that use the single currency was 10.4% in December, unchanged from November's figure which was revised up from 10.3%.

Some 16.5 million people were out of work in the eurozone in December, up 751,000 on the year before.

The highest unemployment rate remains in Spain (22.9%), while the lowest is in Austria (4.1%).

Unemployment has been rising throughout 2011, as the debt crisis in the region has continued. In December 2010, the unemployment rate in the euro area was 10%.

Investment delays

Guillaume Menuet, economist at Citigroup, said he expected the number of people out of work to increase throughout 2012.

"If you think about the direction of employment expectations that you see across various business surveys, the outlook for employment doesn't look particularly enticing, simply because the uncertainty is very high.

"In many cases you find firms continuing to delay investment projects. For those that are still making profits, hiring is being frozen, and for those which are under pressure to hit results or losing money, job losses are becoming the only solution that they have," he said.

In the 27 EU countries, the unemployment rate was 9.9% in December, with 23.8 million people out of work. November's figure was also revised up from 9.8% to 9.9%.

The biggest increases over the past year were seen in Greece, Cyprus and Spain.

The largest falls took place in Estonia, Latvia and Lithuania.

Deteriorating situation

The issue of jobs and economic growth was a key area for discussion at this week's summit of EU leaders in Brussels.

On Monday, figures showed that the Spanish economy shrank by 0.3% in the last quarter of 2011. It is now widely expected that Spain will enter recession in the first quarter of this year.

Also on Monday, France cut its growth forecast for this year to 0.5% from 1% "to take into account the deterioration of the economic situation".

At the Brussels summit, 25 of the 27 member states agreed to join a fiscal treaty, aimed at much closer co-ordination of budget policy across the EU to prevent excessive debts accumulating.

The UK and the Czech Republic did not sign up to it. UK Prime Minister David Cameron said he had "legal concerns" about the use of EU institutions in enforcing the treaty, while the Czechs cited "constitutional reasons" for their refusal.




]]> 2012-02-02T14:09:20+00:00 http://www.therochesterdemocrat.com/index.php/weblog/chinas_manufacturing_industry_holds_up_against_global_slowdown/ {summary} Asia, International Economics, Manufacturing





By Bloomberg News - Feb 1, 2012


Chinese manufacturing indexes rose in January as the world’s second-biggest economy withstood weaker exports driven by Europe’s debt crisis and a government-induced property slowdown.

The official purchasing managers’ index increased to 50.5 from 50.3 in December, exceeding the median estimate in a Bloomberg News survey for a reading below the 50 level that divides expansion from contraction. The data may have been distorted by a weeklong holiday. A separate gauge from HSBC Holdings Plc and Markit Economics rose to 48.8. India’s manufacturing grew at the fastest pace in eight months.

Premier Wen Jiabao yesterday reiterated his government will “fine-tune” economic policies as needed after the central bank held off on a reduction in bank-reserve requirements that some analysts had forecast for January. Indexes for export orders, imports and employment in the official PMI showed a deeper decline, underscoring an International Monetary Fund warning last week that the euro area’s crisis could trigger another global recession.

“Today’s data further confirmed a soft-landing story for China,” said Ken Peng, a Beijing-based economist at BNP Paribas SA. “However, consumer demand may weaken after holiday effects disappear,” and global “uncertainties” and the Chinese government’s efforts to curb property prices “will continue to weigh on exports and industrial production,” Peng said.

That will result in a bigger slowdown in China’s growth in the coming months, he said.

India Manufacturing

A PMI gauge for India rose to 57.5 in January from 54.2 in December, according to HSBC and Markit, an acceleration that may stoke inflation and reduce scope for the central bank to cut interest rates.

The MSCI Asia Pacific Index fell 0.3 percent at 3:46 p.m. in Tokyo on cuts to profit forecasts for Japanese companies and speculation that China may refrain from immediate monetary loosening.

The Lunar New Year holiday, which ran from Jan. 22 through Jan. 28, helped increase consumer spending and domestic demand, the Beijing-based statistics bureau said in a statement on its website. The festival provided a “temporary boost” to the data, said Yao Wei, a Hong Kong-based economist at Societe Generale SA.

The official PMI reading, released by the statistics bureau and logistics federation, compared with a median estimate of 49.6 from 17 analysts. Eleven forecast a contraction.

A gauge of output rose to 53.6, the highest since May. Readings for new export orders and imports contracted for a fourth month and an index of employment dropped to 47.1, the lowest in almost three years.

The purchasing managers’ index released by HSBC was unchanged from the preliminary reading released Jan. 20. While it was the third straight contraction, the gauge rose from 48.7 in December and 47.7 in November.

The federation’s index is based on a survey of managers at more than 820 companies in 28 industries, while the HSBC indicator surveys more than 430 companies.

The official PMI report suggests manufacturing “has stabilized somewhat due to supportive fiscal and monetary policies,” said Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd., who accurately predicted today’s reading. “Stronger-than-expected PMI also provides solid evidence that a hard landing for China’s economy is very unlikely.”

‘More Accommodative’

Even with today’s gain, Chinese officials will lean toward being “more accommodative” in their monetary policy to protect against risks in the property market and a “still uncertain outlook,” Liu said.

Another report today said China’s home prices fell for a fifth month in January as the government continued to control the property market, the longest losing streak since SouFun Holdings Ltd. started tracking the data.

South Korea’s exports unexpectedly fell for the first time in more than two years in January and inflation moderated to the slowest pace in 12 months as Europe’s debt crisis dimmed the outlook for demand, reports today showed. Hong Kong’s economy grew a less-than-estimated 3 percent in the fourth quarter from a year earlier as Europe’s debt crisis damped exports.

Australia Home Prices

In Australia, house prices plunged by the most on record in 2011 as global economic uncertainty and concerns about its impact at home kept a lid on demand.

Later today in Europe, reports may show gauges of manufacturing in Germany and France in January held at their preliminary estimates, showing expansion in the former and contraction in the latter, according to separate Bloomberg surveys.

China’s economy grew 8.9 percent in the final three months of 2011, the least in 10 quarters, as exports rose at a slower pace and property curbs hurt output of products including steel and cement. Expansion may slide to about 7.5 percent this quarter and 7.6 percent in the three months through June until policies to spur growth kick in, according to Nomura Holdings Inc.

The government has so far refrained from following Asian nations including Thailand in lowering benchmark interest rates and held off in a cut in bank reserve requirements that Industrial Bank Co. and Barclays Capital Asia Ltd. had forecast for January.
Adding Cash

Instead, the People’s Bank of China has added cash to the financial system through reverse-repurchase operations. The money-market rate in January had its biggest monthly drop since July after the central bank added the most funds in almost four years.

The banking regulator asked the country’s five largest banks to conduct stress tests on lending to local government financing vehicles and on property loans, the 21st Century Business Herald reported today.

The IMF last week cut its 2012 growth forecast for the nation to 8.2 percent from an earlier estimate of 9 percent. Rio Tinto Group (RIO), the world’s third-largest mining company, and Anglo American Plc said last week China’s growth will remain resilient to a contraction in Europe, underpinning a long-term expansion in demand for raw materials.

Today’s government report was “broadly positive,” said Dong Tao, a Hong Kong-based economist at Credit Suisse AG. Even so, “export orders surprised on the weak side.” The data indicate China’s economy is expanding at a 7 percent to 9 percent pace with a “declining risk” of a so-called hard landing, he said.





]]> 2012-02-01T13:30:21+00:00 http://www.therochesterdemocrat.com/index.php/weblog/manufacturing_output_in_u.k._unexpectedly_returns_to_growth_after_declines/ {summary} Europe, Global Finance, Manufacturing




By Scott Hamilton - Feb 1, 2012
Bloomberg News


A U.K. manufacturing index jumped to an eight-month high in January and unexpectedly returned to growth after a quarter of contraction as production rebounded.

The factory gauge, based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply, rose to 52.1 from a revised 49.7 in December, Markit said in a report on its website today. The median forecast of 28 economists in a Bloomberg News survey was for a reading of 50, the level that divides expansion from contraction.

Separate reports today showed manufacturing indexes for Europe, China and India also rose in January. Still, the debt crisis in the euro area, the U.K.’s biggest export market, has dimmed the outlook for manufacturers, and Bank of England Governor Mervyn King said last week that policy makers can increase stimulus again if needed to aid the economy.

“The U.K. manufacturing sector has sprung to life in the first month of 2012 to defy any economic gloom, but it is too early to say whether this trend is sustainable,” CIPS Chief Executive Officer David Noble said in the report. “The boost in output is also welcome, but in reality is bolstered by manufacturers working through existing backlogs, which can only be a short-term fix.”

Global Indexes

A manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region rose to 48.8 from 46.9 in December, London-based Markit Economics said today. The official Chinese purchasing managers’ index increased to 50.5 from 50.3 in December. The data may have been distorted by a weeklong holiday. A separate Chinese gauge from HSBC Holdings Plc and Markit Economics rose to 48.8. India’s manufacturing grew at the fastest pace in eight months.

The U.K. economy shrank 0.2 percent in the fourth quarter as manufacturers cut output and services stagnated, leaving Britain on the brink of another recession.

The IMF last week cut its 2012 British growth forecast to 0.6 percent from 1.6 percent as it predicted a mild recession in the 17-nation euro zone and slowing growth in China. Ernst & Young says the U.K. economy may contract again in the current quarter, marking its first double-dip recession in more than three decades.

Factory output, which accounts for about 10 percent of U.K. gross domestic product, contracted 0.9 percent in the fourth quarter, the biggest drop for more than two years, official data on Jan. 25 showed.

Growth Outlook

“We believe that the U.K. will avoid recession and post some positive, if moderate, growth” in the first quarter, David Tinsley, an economist at BNP Paribas SA in London, said in a note. “Today’s number supports our view.”

Fenner Plc, the world’s largest conveyor-belt maker, said on Jan. 11 that there is “uncertainty over the global economic outlook” and predicted sales growth rates will slow.

With the government constrained by its pledge to all but eradicate a budget deficit of 9 percent of GDP, pressure is growing on the Bank of England to expand it 275 billion-pound ($434 billion) bond buying program when the current round of purchases ends this month.



]]> 2012-02-01T13:25:19+00:00 http://www.therochesterdemocrat.com/index.php/weblog/global_manufacturing_picks_up_as_europes_slump_eases/ {summary} Europe, International Economics, Manufacturing




By Simone Meier - Feb 1, 2012
Bloomberg Financial News


Global manufacturing picked up in January, with factory indexes from China to Germany and the U.K. showing growth.

Chinese manufacturing indexes rose as the world’s second- biggest economy withstood weaker exports driven by Europe’s debt crisis and a government-induced property slowdown. Economists forecast that a U.S. gauge rose to the highest since June. In Germany, Europe’s largest economy, output grew for the first time since September. Manufacturing contracted less than initially estimated in the euro region.

“There are signs that the global economy, the global manufacturing cycle, is finding its feet,” said Nick Kounis, head of macro research at ABN Amro in Amsterdam. “Things are no longer deteriorating. On the other hand, we’re not seeing signs of a sharp rebound. We’re not out of the woods yet in terms of the European economy at least.”

The strength of Germany’s economy has helped to soften the region’s economic slump as companies boost spending and output to meet export demand. The danger posed by the euro area’s debt crisis prompted the International Monetary Fund to cut its forecast for growth throughout the world and warn that the turmoil may threaten a global recession.

Five-Month High

A manufacturing gauge based on a survey of purchasing managers in the euro region rose to 48.8 from 46.9 in December, London-based Markit Economics said today. It had previously reported a gain to 48.7. A reading below 50 indicates contraction.

With today’s report adding to some signs of economic stabilization, Markit Chief Economist Chris Williamson said the region “may avoid a slide back into recession.”

The euro erased losses after the data were released, trading at $1.3134 at 12:55 p.m. in Brussels, up 0.4 percent. The Stoxx Europe 600 index was up 1.5 percent to 258.09.

Markit’s report that the euro-area manufacturing gauge reached a five-month high followed positive news from Asia. The official Chinese purchasing managers’ index increased to 50.5 from 50.3 in December, though the data may have been distorted by a weeklong holiday. A separate gauge from HSBC Holdings Plc and Markit rose to 48.8. India’s manufacturing grew at the fastest pace in eight months.

‘Soft-Landing Story’

“Today’s data further confirmed a soft-landing story for China,” said Ken Peng, a Beijing-based economist at BNP Paribas SA. “However, consumer demand may weaken after holiday effects disappear,” and global “uncertainties” and the Chinese government’s efforts to curb property prices “will continue to weigh on exports and industrial production,” he said.

U.S. manufacturing probably grew at a faster pace in January, a sign the industry will lead the U.S. expansion early this year, economists said before a report today.

The Institute for Supply Management’s factory index rose to 54.5, the highest since June, from 53.1 in December, according to the median estimate of 81 economists surveyed by Bloomberg News. Readings greater than 50 signal growth. Construction spending increased 0.5 percent in December after a 1.2 percent gain the previous month, other data may show.

Peter Loescher, chief executive officer of Siemens AG (SIE), Europe’s largest electrical engineering company, said in an interview on Jan. 24 that while he sees a “mild recession” in Europe, the U.S. is showing a “stable environment.”

‘Still Positive’

“We clearly stick to the targets despite the fact that the real economy is impacted by the crisis in Europe,” he said. “The underlying business is still positive.”

The German output gauge reached the highest in six months, while Austria also reported an expansion, Markit said. In the Netherlands, France, Ireland and Italy, the indicator showed a contraction last month. While a gauge of new export orders dropped for a seventh straight month in January, companies reported the weakest decline since July.

In the U.K., manufacturing returned to growth in January after shrinking in the previous three months, a report showed.

“Euro-area manufacturing has started 2012 surprisingly well,” Williamson said. “The concern is that new orders have yet to return to growth, even in Germany, suggesting that companies will be reluctant to expand capacity and take on more staff until signs of stronger demand have appeared.”

Job gains in Germany and France were offset by losses elsewhere, according to Markit. Companies in Greece and Spain eliminated jobs at the fastest pace, it said. European unemployment held at 10.4 percent in December.

“We are cautious about 2012 given the uncertainty in the global economy, and Europe in particular,” Frans van Houten, chief executive officer of Royal Philips (PHIA) Electronics NV, the world’s largest lightbulb maker based in Amsterdam, said on Jan. 30. “Europe is not a great place for growth right now.”



]]> 2012-02-01T13:17:34+00:00 http://www.therochesterdemocrat.com/index.php/weblog/japanese_auto_parts_firms_to_pay_us_anti-trust_fine/ {summary} Asia, Business, Trade




BBC News Business
30 January 2012 Last updated at 19:58 ET


Japan's Yazaki Corporation and Denso Corporation have agreed to plead guilty and pay fines for fixing prices of parts supplied to US manufacturers.

Yazaki will pay $470m (£300m), the second-largest antitrust fine in US history, while Denso has agreed to pay $78m.

The two auto part makers have been accused of fixing prices for as long as ten years.

Four Yazaki executives will also serve up to two years in a US prison.

"Our investigation is still active and ongoing," said Sharis Pozen of the Department of Justice's Antitrust Division.

'Pernicious cartel'

Yazaki and Denso are among the world's largest auto part suppliers. Any conspiracy to fix prices of parts by such major players is likely to have an impact on the overall cost of manufacturing the vehicles and also affect the selling price.

The Justice department's Ms Pozen said the consumers were financially hurt and authorities were working to ensure that such instances do not happen in the future.

"Criminal antitrust enforcement remains a top priority and the Antitrust Division will continue to work with the FBI and our law enforcement counterparts to root out this kind of pernicious cartel conduct," she said.

The Justice department did not give details of which US manufacturers were affected and how much extra they had to pay.

Yazaki said that it was fully cooperating with the US authorities and had also launched an internal probe into the matter.

"In order to prevent any recurrence, the company has intensified its various efforts including conducting thorough internal investigations, reviewing internal rules, conducting regular educational programs and monitoring activities," the firm said in a statement.




]]> 2012-01-31T17:13:39+00:00 http://www.therochesterdemocrat.com/index.php/weblog/eurozone_unemployment_hits_new_record/ {summary} Business, Europe




BBC News Business
31 January 2012 Last updated at 06:44 ET


Unemployment in the eurozone hit a record high at the end of last year, the Eurostat agency has said.

The jobless rate in the 17 countries that use the single currency was 10.4% in December, unchanged from November's figure which was revised up from 10.3%.

Some 16.5 million people were out of work in the eurozone in December, up 751,000 on the year before.

The highest unemployment rate remains in Spain (22.9%), while the lowest is in Austria (4.1%).

Unemployment has been rising throughout 2011, as the debt crisis in the region has continued. In December 2010, the unemployment rate in the euro area was 10%.

Investment delays

Guillaume Menuet, economist at Citigroup, said he expected the number of people out of work to increase throughout 2012.

"If you think about the direction of employment expectations that you see across various business surveys, the outlook for employment doesn't look particularly enticing, simply because the uncertainty is very high.

"In many cases you find firms continuing to delay investment projects. For those that are still making profits, hiring is being frozen, and for those which are under pressure to hit results or losing money, job losses are becoming the only solution that they have," he said.

In the 27 EU countries, the unemployment rate was 9.9% in December, with 23.8 million people out of work. November's figure was also revised up from 9.8% to 9.9%.

The biggest increases over the past year were seen in Greece, Cyprus and Spain.

The largest falls took place in Estonia, Latvia and Lithuania.

Deteriorating situation

The issue of jobs and economic growth was a key area for discussion at this week's summit of EU leaders in Brussels.

On Monday, figures showed that the Spanish economy shrank by 0.3% in the last quarter of 2011. It is now widely expected that Spain will enter recession in the first quarter of this year.

Also on Monday, France cut its growth forecast for this year to 0.5% from 1% "to take into account the deterioration of the economic situation".

At the Brussels summit, 25 of the 27 member states agreed to join a fiscal treaty, aimed at much closer co-ordination of budget policy across the EU to prevent excessive debts accumulating.

The UK and the Czech Republic did not sign up to it. UK Prime Minister David Cameron said he had "legal concerns" about the use of EU institutions in enforcing the treaty, while the Czechs cited "constitutional reasons" for their refusal.


]]> 2012-01-31T16:35:57+00:00 http://www.therochesterdemocrat.com/index.php/weblog/more_pressure_on_europe_for_solution_to_debt_crisis/ {summary} Europe, International Economics



January 28, 2012
NY TIMES
By JACK EWING


DAVOS, Switzerland — World leaders turned up the pressure on Europe on Saturday to erect a more formidable wall of money against the sovereign debt crisis, warning that the euro zone continues to pose a severe threat to the global economy.

George Osborne, the chancellor of the Exchequer in Britain, said a bigger firewall was “a key to unlocking further confidence,” while Christine Lagarde, managing director of the International Monetary Fund, said the fund should be big enough to eliminate any doubts about European resolve.

“If it is big enough, it will not get used,” she said on Saturday during a panel discussion at the World Economic Forum here.

Echoing comments by United States officials, including Treasury Secretary Timothy F. Geithner on Friday, leaders in Davos said that aid to the euro zone from the rest of the world would be contingent on a larger commitment by Europe. Some critics have said it is perverse that the I.M.F., which is financed partly by developing countries, should be aiding wealthy Europe.

“Europe has to be making more effort; otherwise, I don’t think developing countries will want to pay more for the I.M.F.,” said Motohisa Furukawa, the Japanese official responsible for economic and fiscal policy.

The firewall, known formally as the European Stability Mechanism, would have a lending capacity of 500 billion euros ($656 billion) when it begins operating in July, replacing a temporary fund. European leaders are debating ways to increase the bailout fund’s resources to aid overindebted countries, but they face powerful opposition from voters in countries like Germany and have so far failed to act boldly enough to reassure financial markets.

In the short term, though, leaders have gained some breathing room because of emergency cash that the European Central Bank has provided to banks, a measure that has calmed markets. Euro zone leaders are more focused on dealing with what they see as the more immediate danger of a Greek default, and less on testing their taxpayers’ patience by increasing the size of the firewall.

Top officials and economists from outside Europe warned of complacency, and on Saturday in Davos they presented a much more pessimistic view of the European crisis than has been heard in previous days. While many European leaders and businesspeople have argued that the risk of a catastrophic breakup of the euro zone has declined, leaders of other regions said the crisis still had the potential to sow global misery.

“I’ve never been as scared as now about the world,” said Donald Tsang, chief executive of Hong Kong. He said the effect on the world financial system is unpredictable. “We do not know how deep this hole would be when the whole thing implodes on us,” he said.

Ms. Lagarde said: “No one is immune. It’s not just a euro zone crisis. It’s a crisis that could have collateral effects, spillover effects around the world.”

The undercurrent of their remarks was that European policy still lacks credibility in the eyes of the world.

“This has got to have an effect on influence, on perceptions of power in the world that are going to be significant for years to come,” said Robert B. Zoellick, president of the World Bank Group.

Nouriel Roubini, a professor of economics at New York University known for his pessimistic views, forecast Saturday that Greece would have to leave the euro zone this year, and said that there was at least a 50 percent chance that the euro zone would break up within three to five years.

“The euro zone is a slow-motion train wreck,” Mr. Roubini said during a separate panel discussion.

Speakers on Saturday did not say how big they thought the European firewall should be. But, again echoing American officials, they agreed it should be so enormous that no investor would question its integrity. That has not been true of Europe’s financial commitment so far, which has consistently failed to restore market faith in the euro.

Without mentioning Germany by name, Ms. Lagarde said that European countries that are able to should do more to increase domestic consumer spending and slow down efforts to cut government outlays.

“Some countries have to go full speed ahead and do that fiscal consolidation that is so much needed,” Ms. Lagarde said. “But other countries have space and can do something. They should certainly explore what they can do to boost growth in order to help themselves but also to help the rest of the zone.”

The European Central Bank continued to draw praise for providing emergency cash to banks and avoiding a credit squeeze.

“There is not going to be a Lehman-style moment in Europe,” said Mark J. Carney, governor of the Canadian central bank, referring to the collapse of investment bank Lehman Brothers in 2008, which helped set in motion the financial crisis. But he added, “That is different than having a well, fully functioning banking system.”

The officials also drove home the message that Europe cannot expect more help from the outside world, by way of the I.M.F., unless it does more to help itself.

As the Greek government made slow progress on Saturday to reach a deal with creditors to reduce its overall debt, Mr. Osborne expressed amazement that such a tiny country continued to pose a threat to global stability.

“The danger is that the tail wags the dog throughout this crisis,” he said.



]]> 2012-01-28T21:10:43+00:00 http://www.therochesterdemocrat.com/index.php/weblog/private_investors_near_deal_on_greek_debt/ {summary} Europe, International Economics







ATHENS, Greece (AP) - Greece and its private investors are close to a deal that will significantly reduce the country's debt and pave the way for it to receive a much-needed euro130 billion bailout.

Negotiators for the investors announced the tentative agreement Saturday and said it could become final next week.

Under the agreement, the investors would take a hit of more than 60 percent on the euro206 billion of Greek debt they own.

Here's how it would work: private investors would receive new bonds whose face value is half of the existing bonds. The new bonds would have a longer maturity and pay an average interest rate of slightly less than 4 percent (compared with an estimated 5 percent on the existing bonds).

Without the deal, which would reduce Greece's debt load by at least euro120 billion, the private investors' bonds would likely become worthless. Many of these investors also hold debt from other eurozone countries, which could also lose value in the event of a Greek default.

The agreement taking shape is a key step before Greece can get a second, euro130 billion bailout from its European Union partners and the International Monetary Fund, although there are other issues involved before Greece can get that aid. This would be Greece's second bailout. The EU and the IMF signed off on a euro110 billion aid package for Greece in May 2010, most of which has already been disbursed.

Greece faces a euro14.5 billion bond repayment on March 20, which it cannot afford without additional help.

Private investors hold roughly two-thirds of Greece's debt, which has reached an unsustainable level - nearly 200 percent of the country's economic output. By restructuring the debt held by private investors, Greece and its EU partners are hoping to bring that ratio closer to 120 percent by the end of this decade.

In return for the first bailout, Greece's public creditors - the International Monetary Fund, the European Union and the European Central Bank - have unprecedented powers over Greek spending. However, austerity alone will not fix Greece's problem. The country must also find ways boost its economic output, which at the moment is shrinking.

If no debt-exchange deal is reached with private creditors and Greece is forced to default, it would very likely spook Europe's - and possibly the world's - financial markets. It could even lead Greece to withdraw from the euro.

The banks, insurance companies and other private holders of Greek bonds are being represented by Charles Dallara, managing director of the Washington-based Institute of International Finance, and Jean Lemierre, senior adviser to the chairman of the French bank BNP Paribas.

The main creditor negotiators will leave Greece on Sunday and will remain in close consultation with Greek and other authorities.



]]> 2012-01-28T21:04:30+00:00 http://www.therochesterdemocrat.com/index.php/weblog/finance_chiefs_reassure_ceos_over_european_crisis/ {summary} Europe, Global Finance






DAVOS, Switzerland (AP) - Leading finance chiefs sought to reassure anxious global business leaders on Friday that Europe is on track to solve its crippling debt crisis before it drags the world's economies down. Europe's top banker said investors, burned after trusting the region's governments too much, now trust them too little.

The finance chiefs said the picture in Europe has changed over the past two months as the European Central Bank has loaned billions of euros to fragile banks, indebted countries have pushed through convincing reforms and EU leaders have come near to building a closer fiscal union that would make their common currency stronger.

Several also signaled Friday that Greece is close to clinching a crucial debt-reduction deal with private bondholders - a key element in Europe's efforts to stem a two-year debt crisis that is causing ripples around the globe. The crisis is a central topic at the World Economic Forum, a gathering of government and business leaders at the Swiss ski resort of Davos.

"They're making progress on reforms, they're changing the institutions of Europe to put better discipline on fiscal policy," said U.S. Treasury Secretary Timothy Geithner. "You have three new governments doing some very tough things. You have an ECB doing what central banks have to do. You see them move to try to strengthen the financial sector."

Mario Draghi, head of the European Central Bank, said a combination of actions - including super-cheap, long-term loans to shaky banks on the continent and a couple of interest rate cuts - have helped Europe avoid deeper financial trouble.

"We have avoided a major credit crunch, a major lending crisis," he said.

Draghi said borrowing rates would remain high "for quite a while" because bond markets are overestimating the risk involved in holding European government debt after years of underestimating it. But he called market pressure "the most potent engine for reform in different governments."

Geithner said the fate of the U.S. economy - and by extension of the rest of the world - hinges on Europe's debt crisis, along with potential tensions with Iran. He said the main piece of unfinished business for Europe is building a bigger fund to help troubled economies survive.

But while French Finance Minister Francois Baroin said that fund needs to be increased to calm markets, his German counterpart, Wolfgang Schaeuble, indicated that his government is not prepared to do so. Germany, as Europe's biggest economy, would face the biggest bill.

"We must not give the wrong incentives," Schaeuble said. "You can make any figure. It will not work if the real problems will not be solved."

Both, together with Spanish Economy Minister Luis de Guindos Jurado and European Monetary Affairs Commissioner Olli Rehn, agreed that the idea of issuing "eurobonds" backed jointly by all eurozone governments is a nonstarter for now. They didn't rule out the possibility that such bonds could be introduced once confidence in Europe's public finances is restored, with Guindos calling that a "final target."

Schaeuble said eurobonds would provide bad incentives by allowing debt-ridden countries to "spend money you don't have on the bill of others."

Many economists have said eurobonds are needed to solve the crisis as they could reduce the borrowing costs of heavily indebted countries by pooling them with bonds of stronger economies like Germany's.

Professor Nouriel Roubini, the renowned economist who predicted the financial crash of 2008, is one who thinks that eurobonds have to form part of a eurozone strategy to fend off the possibility of a breakup.

The eurozone "could be a slow-motion train wreck," Roubini said.

Europe has been grappling with the crisis ever since Greece conceded at the end of 2009 that its public finances were in far worse shape than previously thought. Greece remains at the epicenter of the crisis over two years later. Its borrowing costs remain too high for it to borrow in the markets so a second European-led bailout is in the offing.

The finance chiefs signaled Friday that a deal is at hand that could help ease some of the near-term tensions.

Greece has been negotiating with the a group representing banks and other lenders in the hopes that they will forgive half of Greece's debt in exchange for Greek assurances that it will pay back the other half without defaulting on its loans. The deal would also let Greece repay over a longer period at a lower interest rate - negotiators have been trying to agree on what that rate will be.

Schaeuble said he is "quite optimistic" about a deal, while Rehn said he hopes a deal can be reached "if not today, maybe by the weekend."

Agreement between Greece and its creditors is needed before Europe and the International Monetary Fund agree to a second multibillion-euro bailout package.

At the heart of the problem is that the 17 countries that use the euro use a single currency but have different fiscal policies. That changes the nature of their debt, said Adair Turner, chairman of Britain's banking regulator the Financial Services Authority.

"That debt is more equivalent to the State of California debt than the U.S. federal debt," he said.

That's why all but one of the 27 EU countries - the United Kingdom has refused to participate - are discussing a closer fiscal union. On Monday, leaders meet in Brussels to work out the details of that new compact.

Schaeuble and Baroin noted that even the agreement in principle to forge closer ties has calmed markets since a December summit, as borrowing rates have dropped and stock markets have risen.

"It's amazing," Draghi said. "If you compare today with even five months ago, the euro area is another world."

The crisis threatens more than Europe: the U.N.'s refugee chief warned Friday that it is fueling conflicts around the world. Antonio Guterres told The Associated Press that rising food prices and growing unemployment are hitting those already at the bottom hardest, sparking conflict in places like South Sudan and exacerbating hotspots including Afghanistan, Iraq and Somalia.



]]> 2012-01-28T14:21:07+00:00 http://www.therochesterdemocrat.com/index.php/weblog/fitch_downgrades_5_eurozone_nations/ {summary} Bonds, Europe, International Economics







FRANKFURT, Germany (AP) - Fitch Ratings downgraded the debt of Italy, Spain and three other countries that use the euro on Friday, a possible setback as European leaders work to contain the continent's debt crisis.

The lower government-debt ratings for Italy, Spain, Belgium, Cyprus and Slovenia could make it more expensive for these countries to borrow.

Fitch said its decision was based on the deteriorating economic outlook in Europe, a concern that Europe's bailout fund is not large enough and a belief that European leaders are not acting quickly or boldly enough to prevent the debt crisis from worsening.

The downgrade came after European financial markets had closed. The major stock indexes of Germany, France and Britain fell slightly on Friday, while the euro rose 0.83 percent to $1.3189.

Government debt ratings can play a significant role in determining countries' borrowing costs. The higher the costs the greater the likelihood of default for a heavily indebted country.

Ireland, Greece and Portugal have been cut off from bond market borrowing because of investors' fears that they might default. They have had to take bailout loans from other eurozone governments and the International Monetary Fund.

Lower debt ratings do not guarantee higher borrowing costs, however.

Borrowing costs for many European countries have fallen in recent weeks despite Standard and Poor's decision on Jan. 13 to lower its ratings for nine countries that use the euro. This reflects growing investor confidence in those countries' economic policies and the impact of the European Central Bank's decision to loan hundreds of billions of euros to banks at very low rates. Some of that money has been used to buy government bonds, which are paying higher interest rates and enabling banks to earn a tidy profit.

The latest example was on Thursday, when Italy borrowed nearly $6.5 billion in two-year bonds at an interest rate of 3.76 percent. It paid 4.85 percent in a comparable bond auction in December.

Fitch lowered its ratings for the five countries by one notch and placed a negative outlook on all of them - meaning there is more than a 50 percent chance of a further downgrade over the next two years.

Italy was lowered to a rating of A-, while Spain was downgraded to A. The rating of a sixth country, Ireland, was affirmed at BBB+, but it also received a negative outlook.

Fitch also issued a warning to Italy, a recent focus of the crisis because of its €1.9 trillion ($2.5 trillion) in debt and sluggish, bureaucracy-choked economy. The agency said the third-largest eurozone economy would face permanently higher borrowing costs that would make it harder to keep its debt under control. It resisted stronger ratings action because of the "strong commitment" of the new Italian government under Prime Minister Mario Monti to balance the country's budget and make Italy a better place to do business.

European leaders have been criticized for moving too slowly in tackling the crisis, which started in October 2009 when Greece admitted it was in deep financial trouble.

Led by Germany, the eurozone's largest member, governments have resisted sweeping solutions such as pooling their borrowing power in so-called eurobonds and have balked at increasing the financing of their bailout funds from €500 billion. Efforts have focused instead on making bailed-out countries try to cut spending and reduce their budget deficits. The 17 members have also agreed to come up with a treaty requiring national laws to limit deficits.

At the World Economic Forum gathering in Davos this week, leading European finance chiefs have sought to reassure anxious global business leaders that Europe is on track to solve its debt crisis.

But Fitch said that European leaders' "gradualist" approach to tackling the crisis meant that Europe will continue to face episodes of severe financial volatility that would erode government's ability to repay debt.

Fitch said the eurozone's difficulties would be compounded by a shrinking economy.

"The eurozone crisis will only be resolved as and when there is broad economic recovery," Fitch said. "It is evident that further substantial reforms of the governance of the eurozone will be required to secure economic and financial stability, including greater fiscal integration."

Greece is locked in talks to secure a crucial debt relief deal with private investors while also tackling demands from its European partners and the IMF for deeper economic reforms.

Failure on either front would force the recession-bound country to default on its debt in less than two months, pouring new fuel on the fires of Europe's debt crisis.



]]> 2012-01-28T01:53:56+00:00 http://www.therochesterdemocrat.com/index.php/weblog/ford_posts_biggest_profit_since_98_misses_estimates/ {summary} Automobiles / Trucks


By Keith Naughton - Jan 27, 2012 6:19 AM CT
Bloomberg Financial News
January 27, 2012



Ford Motor Co. (F), fueled by a one-time tax gain, posted $20.2 billion in net income for 2011, the most since 1998, while overseas operations dragged down fourth- quarter profits, leading shares to slide before normal trading.

Ford reported its 11th consecutive profitable quarter, with net income of $13.6 billion, or $3.40 cents a share, compared with $190 million, or 5 cents, a year earlier. Excluding one- time costs, the profit was 20 cents a share, trailing the 25- cent average estimate of 15 analysts surveyed by Bloomberg.

It was the third straight annual profit for Chief Executive Officer Alan Mulally, 66, who has improved quality and expanded the lineup with fuel-efficient models like the Fiesta subcompact. Net income was boosted by a non-cash gain of $12.4 billion from eliminating a valuation allowance against deferred tax benefits, Ford said. Profit excluding some items for 2011 was $8.8 billion or $1.51 a share, which fell short of the $1.99 average of 14 analysts’ estimates.

“It was another good solid year, but the gains weren’t quite as dramatic as in previous years,” said Efraim Levy, an analyst for S&P Capital IQ, who has a “buy” rating on Ford. “It will get tougher going forward.”

Ford fell 5.3 percent to $12.12 at 7:16 a.m. in New York. The shares are up 19 percent this year through yesterday after falling 36 percent last year.
‘Level of Confidence’

Ford removed the valuation allowance, created in 2006 as it began reporting operating losses, because it expects to be profitable in the future and to use the tax benefits, according to a U.S. regulatory filing last year. Ford lost $30.1 billion from 2006 to 2008, as truck and sport-utility vehicle sales collapsed and the economy fell into the worst recession since the Great Depression.

“They’re telling the world that they’ve attained a level of confidence in their ability to generate substantial amounts of income for the foreseeable future,” said Robert Willens, a corporate tax specialist and president of Robert Willens LLC of New York. “It’s quite a positive, forceful statement on their ability to prosper going forward.”

In the fourth quarter, the Dearborn, Michigan-based automaker was hamstrung by a weakening European market and flooding in Thailand that wiped out profits in its Asian operations, Chief Financial Officer Lewis Booth told analysts Jan. 10.

Ford said its fourth-quarter automotive operating margin fell to 2.2 percent from 3 percent a year earlier.

In Europe, Ford said its pretax operating loss widened to $190 million from a loss of $51 million a year earlier. In Asia- Pacific and Africa, Ford reported a pretax operating loss of $83 million, down from a $23 million profit last year.
North America

In North America, where Ford generates most of its sales and profits, the second-largest U.S. automaker reported pretax operating income of $889 million, up from $670 million last year. Ford’s U.S. sales rose 11 percent last year and it gained market share for the third consecutive year for the first time since 1970.

“Ford is still a North American company,” said Brian Johnson, an analyst with Barclays Capital. “In 2012, we’re looking for the U.S. sales rate to recover, their market share to remain solid and their pricing to remain solid with products like the Escape and the Fusion refreshed” with new styling.
Production Plans

Fourth-quarter sales rose 6.5 percent to $34.6 billion as Ford boosted North American production by 14 percent during the period to 674,000 cars and trucks. The average estimate for total fourth-quarter revenue was $33.5 billion, according to the average of four estimates.

Ford reiterated it will produce 675,000 cars and trucks in North America during the first quarter, up 18,000 vehicles from last year. Ford said today it will cut production in South America, Europe and Asia Pacific Africa this quarter.

Globally, Ford said it plans to produce 1.4 million cars and trucks in the first quarter, down 51,000 vehicles from last year.

For the year, Ford’s revenue rose 13 percent to $136.3 billion, compared with an average forecast of $134.7 billion from five analysts surveyed.

Consumers paid an average of $32,028 for the company’s models last year, up 25 percent from 2002 and the highest price Ford vehicles have ever commanded, according to online auto researcher Edmunds.com.
Automotive Debt Rises

Automotive debt, which excludes Ford Motor Credit, was $13.1 billion at year’s end, an increase from $12.7 billion on Sept. 30, the company said.

The company will contribute $3.5 billion to its global pension plans, including $2 billion to the U.S. plan.

Ford said it will pay $2,450 to each of its 41,600 U.S. hourly workers for second-half 2011 profits.

Ford has more debt than rivals because it borrowed $23 billion in late 2006, after Mulally arrived from Boeing Co. and before credit markets froze. That enabled the automaker to avoid the bailouts and bankruptcies that befell the predecessors of General Motors Co. (GM) and Chrysler Group LLC in 2009.

“Ford’s doing everything right except getting their stock price up,” said Gary Bradshaw, a fund manager at Dallas-based Hodges Capital Management, which owns about 250,000 Ford shares. “They’ve got their costs down, good products, good engineering and good leadership. Ford can do surprisingly well this year.”



]]> 2012-01-27T13:42:19+00:00 http://www.therochesterdemocrat.com/index.php/weblog/new-home_purchases_fall_2011_worst_ever_for_new_house_sales/ {summary} Housing







WASHINGTON (AP) - Fewer Americans bought new homes in December. The decline made 2011 the worst year for new-home sales on records dating back nearly half a century.

The Commerce Department said Thursday new-home sales fell 2.2 percent last month to a seasonally adjusted annual pace of 307,000. The pace is less than half the 700,000 that economists say must be sold in a healthy economy.

About 302,000 new homes were sold last year. That's less than the 323,000 sold in 2010, making last year's sales the worst on records dating back to 1963. And it coincides with a report last week that said 2011 was the weakest year for single-family home construction on record.

The median sales prices for new homes dropped in December to $210,300. Builders continued to slash price to stay competitive in the depressed market.

Still, sales of new homes rose in the final quarter of 2011, supporting other signs of a slow turnaround that began at the end of the year.

Sales of previously occupied homes rose in December for a third straight month. Mortgage rates have never been lower. Homebuilders are slightly more hopeful because more people are saying they might consider buying this year. And home construction picked up in the final quarter of last year.

"Although this decline was unexpected, it does not change the story that housing has likely bottomed," said Jennifer H. Lee, senior economist at BMO Capital Markets.

Ian Shepherdson, chief economist at High Frequency Economics, said easier lending requirements, historically low mortgage rates and improved hiring all point to consistent, albeit slow, rises in sales in the coming months.

"A sustained rise in new home sales is imminent," he said. "Homebuilders say so too, and they should know."

Hiring is critical to a housing rebound. The unemployment rate fell in December to its lowest level in nearly three years after the sixth straight month of solid job growth.

Economists caution that housing is a long way from fully recovering. Builders have stopped working on many projects because it's been hard for them to get financing or to compete with cheaper resale homes. For many Americans, buying a home remains too big a risk more than four years after the housing bubble burst.

Though new-home sales represent less than 10 percent of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.

A key reason for the dismal 2011 sales is that builders must compete with foreclosures and short sales - when lenders accept less for a house than what is owed on the mortgage

Builders ended 2011 with a third straight year of dismal home construction and the worst on record for single-family home building. But in a hopeful sign, single-family home construction, which makes up 70 percent of the market, increased in each of the last three months.



]]> 2012-01-27T04:52:05+00:00 http://www.therochesterdemocrat.com/index.php/weblog/dow_approaches_highest_level_since_2008/ {summary} Stock Market







(AP) -- The Dow Jones industrial average rose above its highest closing price since the financial crisis Thursday morning but the rally quickly fizzled, leaving stocks slightly lower in afternoon trading.

Solid news on factory orders and strong earnings from U.S. manufacturers highlighted the economy's growing momentum before the market opened. The Dow and broader indexes turned negative after weaker reports on home sales and future economic growth were released in the late morning.

The Dow and other indexes are still up sharply for the year, and the Dow is near its highest level since May 2008. Traders appear less afraid of spillover damage from the European debt crisis, and data on jobs and manufacturing have been consistently strong.

"With global risk off center stage and attention going back to the fundamentals, this market was ready to explode, which is exactly what it is doing," said Doug Cote, chief market strategist with ING Investment Management.

Before the market opened, the government reported that unemployment claims rose only modestly last week after a steep decline the week before. The long-term trend still indicates an improving job market.

Orders to factories for long-lasting manufactured goods increased in December for the second straight month, and a key measure of business investment rose solidly.

That strong demand was apparent in quarterly earnings reports from U.S. manufacturers. 3M stock rose 1.3 percent after its fourth-quarter profit beat Wall Street's estimates.

Caterpillar, the world's biggest heavy equipment maker, soared three percent, the most of the 30 companies in the Dow, after beating analysts' estimates last quarter. The company expects to do the same this year as global demand remains high.

Stocks traded broadly higher until mid-morning, when the government reported an unexpected drop in new home sales in December, capping the worst year for home sales on records dating to 1963. The decline underscored the housing market's continued drag on the economy.

A private gauge of future economic activity also grew more slowly than expected.

The Dow was down 16 points at 12,740 as of 2:45 p.m. Eastern time. It had traded up as much as 85 points early Thursday. 3M and Caterpillar led the gains.

AT&T fell 2.1 percent, tempering the Dow's rise, after its earnings missed Wall Street's forecasts. The company remains heavily dependent on Apple's iPhone, which it pays to subsidize, but recently lost its exclusive rights to sell the phone in the U.S.

The Dow is within reach of its post-financial crisis high of 12,810, reached in April 2011. The last time it closed higher than that was on May 20, 2008, when it settled at 12,826. The Dow's post-crisis high during the trading day was 12,928, reached in May 2011.

The Dow is up 4.5 percent so far this year. The S&P 500 and Nasdaq have gained even more.

The Dow would need to rise another 11 percent to get to its record high close of 14,164, reached on Oct. 9, 2007.

The Standard & Poor's 500 index fell 7 points to 1,318. It was dragged lower by volatile financial companies and telecommunications firms including AT&T. The Nasdaq composite index shed 13 points to 2,805.

Stocks had their highest close in eight months Wednesday after the Federal Reserve said it plans to keep interest rates extremely low until late 2014 to encourage lending and investment and support the economic recovery.

The announcement lifted investments across many markets and continents. Bond prices rose in the U.S. and Europe. So did commodities, the euro, emerging market currencies and European stocks.

The yield on the 10-year Treasury note fell to 1.93 percent from 1.99 percent late Wednesday. The prospect of more bond-buying by the Fed helped make Treasurys more attractive. A bond's yield falls as demand for it increases.

A strong bond auction by Italy also brightened Europe's outlook, signaling to investors that lenders believe Italy will not be dragged into the debt crisis. And Greece resumed talks with its lenders over writing off some of its crushing debt.

Benchmark indexes in France, England, Germany and Italy closed up one to two percent.

Among the other U.S. companies making big moves after reporting quarterly earnings:

- Time Warner Cable Inc. rose 7.1 percent after the company reported earnings that were far above analysts' estimates. The national cable TV provider also raised its dividend 17 percent to 56 cents per share and announced plans to buy back more of its own stock.

- United Continental Holdings, the parent company of United and Continental airlines, surged 7.2 percent. The company's fourth-quarter loss narrowed, its adjusted earnings were more than double what analysts had expected and the cost of integrating the two companies fell.

- Netflix soared 23.3 percent, the most of any stock in the S&P 500, after the video streaming and DVD-by-mail company reported a huge gain in customers and a bigger fourth-quarter profit than analysts had expected.

- Colgate-Palmolive rose 1.9 percent after saying it will raise prices in the U.S. for the first time in years to cover higher costs for materials. The company's profit declined last quarter, but core sales in emerging markets were much stronger.



]]> 2012-01-27T04:48:22+00:00 http://www.therochesterdemocrat.com/index.php/weblog/treasury_sells_10-year_tips_at_negative_yield_for_first_time/ {summary} U.S. Treasury







Jan. 19 (Bloomberg) -- The U.S. sold a record $15 billion in 10-year Treasury Inflation Protected Securities at a negative yield for the first time with investors willing to pay a premium to guard against the threat of rising consumer prices.

The TIPS were auctioned at a so-called high yield of negative 0.046 percent, compared with a forecast of negative 0.027 percent, the average estimate in a Bloomberg News survey of eight of the Federal Reserve’s 21 primary dealers that are required to bid on U.S. debt sales. The last four sales of five- year TIPS were at negative yields.

Inflation-indexed notes rise or fall in value tracking changes in the consumer price index calculated by the Labor Department. Inflation adjustments will be added to the notes’ principal and be payable at maturity. Yields on conventional Treasuries at almost record lows has raised the attractiveness of TIPS to some investors as a hedge against inflation as the economy shows signs of strengthening.

“You’re losing purchasing power for the privilege of lending to the U.S. government,” said Eric Van Nostrand, an interest-rate strategist in New York at primary dealer Credit Suisse Group AG. “The success of this auction suggests demand for TIPS remains strong.”

The cost of living in the U.S. was little changed in December for a second month. The unchanged reading in the consumer-price index reported by the Labor Department today in Washington compared with a median forecast of a 0.1 percent gain, according to a Bloomberg News survey of 78 economists.

Break-Even Rate

Consumer prices increased 3 percent in the 12 months ended in December, the biggest annual gain since 2007, or since the start of the global financial crisis.

The difference between yields on U.S. 10-year notes and TIPS, a gauge of expectations for inflation over the life of the debt known as the break-even rate, was 2.10 percentage points. The average over the past decade is 2.13 percentage points.

TIPS returned 14 percent in 2011, versus 9.8 percent for conventional Treasuries, according to Bank of America Merrill Lynch index data.

The 2.91 ratio of bids to debt sold today topped the average of 2.79 at the previous 10 offerings. Indirect bidders, a class of investors that includes foreign central banks, purchased 36.3 percent of the securities, compared with 41.5 percent at the past 10 sales. Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, bought 13.4 percent, versus 9.67 percent of the last 10 auctions.

The last offering of 10-year TIPS, an $11 billion sale on Nov. 17, drew a yield of 0.099 percent.


]]> 2012-01-23T12:50:24+00:00 http://www.therochesterdemocrat.com/index.php/weblog/sales_of_existing_u.s._homes_end_2011_on_high_note/ {summary} Homes / Mortgages





Jan. 20 (Bloomberg) -- Sales of previously owned U.S. homes rose in December to the highest level since January 2011, adding to evidence residential real estate was stabilizing heading into the new year.

Purchases increased for a third month, climbing 5 percent to a 4.61 million annual rate, the National Association of Realtors said today in Washington. The gain helped push the number of houses on the market to a six-year low.

Less-expensive properties, a pickup in employment and the lowest mortgage rates on record may give Americans the confidence to take on their biggest investment, buying a house. At the same time, the foreclosure crisis continues to threaten parts of the country, which will probably inhibit more broad- based gains in the industry that triggered the recession.

“It’s going to be a slow process, but we are finally starting to see signs that an adjustment is occurring in housing,” said Troy Davig, a senior U.S. economist at Barclays Capital Inc. in New York. “You’re going to have some markets where foreclosures were less of an issue and those markets are going to do quite well.”

Most stocks rose, erasing a loss for the Standard & Poor’s 500 Index in the final minutes of trading, as banks gained and results from International Business Machines Corp. to Intel Corp. boosted technology shares. The S&P 500 climbed 0.1 percent to 1.315.38 at the close in New York.

In Europe today, U.K. retail sales rose 0.6 percent in December after falling 0.5 percent the prior month, the Office for National Statistics said in London. Price cuts helped demand for clothes and computers as well as sales at department stores. The annual price deflator, a measure of price increases, fell to a 16-month low of 2.4 percent.

China Manufacturing

Elsewhere, data out of China signaled manufacturing may contract for a third month. A preliminary January purchasing managers’ index was 48.8 compared with a final reading of 48.7 for December, HSBC Holdings Plc and Markit Economics said today. The dividing line between contraction and expansion is 50.

The median forecast of 75 economists surveyed by Bloomberg News projected sales of U.S. existing homes would rise to a 4.65 million annual rate in December. Estimates ranged from 4 million to 5 million. The real-estate agents’ group revised the November reading down to a 4.39 million rate from a previously reported 4.42 million pace.

Milder weather may have helped bring out homebuyers. The average temperature was 35 degrees Fahrenheit (2 degrees Celsius) in December, 1.7 degrees above the month’s average from 1901-2000, according to the National Climatic Data Center.

Inventories Drop

The number of properties on the market dropped 9.2 percent to 2.38 million, the fewest since March 2005. At the current sales pace, it would take 6.2 months to sell those houses, down from 7.2 months at the end of November. A range of seven months to eight months supply is consistent with stable home prices, the group has said.

A drop in foreclosures may be helping reduce the glut of houses up for sale. Foreclosure filings fell 14 percent in November from the same month in 2010, partly the result of a holiday-eviction moratorium by mortgage giants Fannie Mae and Freddie Mac, according to a report last month by RealtyTrac Inc.

The market must digest more than 14 million distressed properties -- 1.5 million homes in the foreclosure process, 3.5 million with delinquent mortgages and at least 10 million “underwater” properties, whose owners owe more than the homes are worth -- before the foreclosure crisis will subside, according to Irvine, California-based RealtyTrac.

The threat is more regional than general, said Barclays’ Davig, indicating the market may be able to overcome the challenge as the employment grows.

Foreclosure States

“We still have four high foreclosures states -- Arizona, Florida, Nevada, California -- that have a huge glut of inventories,” Davig said. “Inventories are doing a better job of adjusting in other parts of the country,” he said.

Existing-home sales, tabulated when a contract closes, rose 1.4 percent from the same month last year, today’s report showed. A total of 4.26 million previously owned houses were sold in 2011, up from 4.19 million the prior year. Demand peaked at 7.1 million in 2005 during the housing boom. In 2008, sales totaled 4.1 million, the least since 1995.

The median price of a previously-owned home declined 2.5 percent to $164,500 from $168,800 in December 2010, today’s report showed.

“December was a nice finish to a tough year,” Lawrence Yun, the group’s chief economist, said in a news conference today as the figures were released. “If that can be sustained, we are talking about a genuine recovery in 2012.”

Single-Family

Sales of existing single-family homes increased 4.6 percent to an annual rate of 4.11 million. Purchases of multifamily properties, including condominiums and townhouses, climbed 8.7 percent to a 500,000 pace.

Purchases rose in all four regions, led by an 11 percent gain in the Northeast and an 8.3 percent increase in the Midwest.

Homebuilders are growing more optimistic the housing market is recovering. The National Association of Home Builders/Wells Fargo sentiment index rose this month to the highest level since June 2007 as sales and buyer traffic improved.

The economy added 200,000 jobs in December and the unemployment rate declined to an almost three-year low of 8.5 percent, Labor Department figures showed earlier this month. Meantime, mortgage rates have fallen to a record-low 3.88 percent as of Jan. 19, according to data by Freddie Mac.

‘Value Proposition’

“Consumers are beginning to realize that housing represents an undeniable value proposition, and accordingly demand is growing,” Stuart Miller, chief executive officer at Miami-based Lennar Corp., said on a Jan. 11 conference call. “As I look ahead to 2012, I’m cautiously optimistic that we’re seeing a real bottom form and that we will begin to see signs of recovery.”

Nonetheless, Federal Reserve officials are concerned about the outlook for housing. “Weak demand to purchase homes and the restricted supply of mortgages has put considerable downward pressure on house prices in many areas,” they said in a Jan. 5 report delivered to Congress.

Streamlining the refinancing process, easing borrowing requirements to allow investors to buy single-family properties in bulk and modifying existing loans were among measures the central bank’s report proposed to assist the housing market.


]]> 2012-01-21T11:32:33+00:00 http://www.therochesterdemocrat.com/index.php/weblog/roubini_sees_significant_2012_slowdown_in_chinese_economy/ {summary} Asia, GDP, International Economics





Jan. 20 (Bloomberg) -- China’s economy will slow in 2012, prompting policy makers to reduce interest rates and loosen lending restrictions, said Nouriel Roubini, the economist who predicted the 2008 financial crisis.

“It’s going to be a significant growth slowdown this year,” Roubini, co-founder of Roubini Global Economics LLC, said in a Bloomberg TV interview today. “Housing is deflating. Export growth is slowing down. If they don’t do something -- stimulus in monetary and fiscal credit -- the risk is that the growth will slow down well below 8 percent.”

China’s gross domestic product increased 9.2 percent last year, matching the slowest pace since 2002, as the housing market cooled and the European debt crisis eroded export demand. The central bank cut the amount banks must keep in reserve last month for the first time in three years, and the government has allowed its five biggest banks to boost first-quarter lending and may relax capital requirements, people with knowledge of the matter said this week.

The world’s second-largest economy, China will further reduce the reserve-requirement ratio for banks in the first half of this year and reduce benchmark rates for the first time since 2008 to “jump start the economy,” Roubini said. Growth below 8 percent will create “political noise” as China undergoes a leadership transition, he said.

China is in the midst of a planned shift in its ruling elite that will culminate late this year at the 18th Communist Party Congress. The meeting, which occurs every five years, will probably see Vice President Xi Jinping tapped as China’s next president and Li Keqiang, currently vice premier, put forward as prime minister.

Roubini, a professor at New York University, predicted the U.S. housing bubble before the market peaked in 2006, while failing to foresee a rebound in global stocks in 2009.

Home prices fell last month in 52 of 70 Chinese cities from November, according to government data released on Jan. 18. Exports increased 13.4 percent in December from a year earlier, slowing from 24.5 percent in August, according to customs bureau data.


]]> 2012-01-21T11:27:07+00:00 http://www.therochesterdemocrat.com/index.php/weblog/venture_capital_investments_up_19_percent_in_4q/ {summary} Investment







SAN FRANCISCO (AP) - Funding for startups rose 19 percent in the fourth quarter as venture capitalists fueled money into more companies in the Internet, clean technology and other sectors.

According to a study released Friday, startup investments grew to $6.57 billion in the October-December quarter from $5.52 billion in the same period in 2010. The volume of deals, though, did not keep up with the amount of money invested. There were 844 deals completed in the fourth quarter, down from 861 a year earlier.

Called the MoneyTree report, the study was conducted by PriceWaterHouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

For all of 2011, venture investments jumped 22 percent to $28.43 billion, in 3,673 deals. That's up from $23.26 billion in 2010, when the money went to 3,526 deals.

Venture capitalists piped $133.9 million into 80 seed-stage companies in the fourth quarter. That's down from $233.2 million going to 90 such startups in the fourth quarter of 2010. The decline suggests some caution on the part of venture capitalists looking at the newest, often most risky, startup investments.

A total of 364 early-stage companies snapped up $2.27 billion in venture funding during the quarter. That compares with $1.48 billion going to 318 early-stage startups in the last three months of 2010. The report said 222 companies in the expansion stage received $2.36 billion in funding, compared with 270 companies snagging about the same amount a year earlier. In the later stage, 178 startups received $1.8 billion in the fourth quarter, while $1.4 billion went to 183 companies a year earlier.

By industry, software companies received the most funding with $1.76 billion snagged in the fourth quarter, followed by biotechnology with $1.27 billion.

San Francisco-based internet storage locker Dropbox Inc. got the single-largest investment during the quarter, $250 million. In second place was Better Place Inc., which is based in Palo Alto and builds infrastructure and systems for electric vehicles, with $200 million.

John S. Taylor, head of research at the National Venture Capital Association, said the figures show "cautious optimism."


]]> 2012-01-20T21:19:29+00:00 http://www.therochesterdemocrat.com/index.php/weblog/china_pledges_measures_to_stabilize_trade_as_global_growth_slows/ {summary} Asia, Trade







Jan. 14 (Bloomberg) -- China will take measure to stabilize its exports and imports as slowing global growth creates a “grim situation” for trade, said Zhang Xiaoqiang, a vice chairman at the nation’s top economic planning agency.

“Downward risks for the global economy are increasing,” the National Development and Reform Commission’s Zhang said at a forum in Beijing today. “The difficult situation will make competition for product exports among countries fiercer.” China will take steps to stabilize and improve trade policy, including the lowering of import taxes for some consumer goods, helping smaller businesses get financing and keeping its currency “basically stable,” he said.

Premier Wen Jiabao pledged earlier this month to preserve growth and said the nation wouldn’t “stand still” in the face of difficult conditions. China, which reported the slowest export growth in two years for December as the European debt crisis eroded overseas demand, introduced a 4 trillion yuan ($633 billion) stimulus and froze gains by the yuan to counter the effects of the 2008 financial crisis.

“Looking into 2012, the global economy will remain sluggish,” Zeng Peiyan, a former vice premier, said at the same forum today. “Western developed economies are encountering hardships never seen since World War II and the unstable elements and uncertainty that will be faced by developing nations and emerging economies is also increasing,” said Zeng, now chairman of the China Center for International Economic Exchanges, which hosted the event.

Export Difficulties

China’s exports will face a “grim situation” this year, particularly in the first half, the NDRC’s Zhang said. In addition to slowing global demand, the rising cost of energy, raw materials, labor and land are other challenges for Chinese exporters, he said.

Appreciation of the yuan is also adding pressure, Zhang said. China’s currency has risen more than 8 percent against the dollar since regulators allowed gains to continue in June 2010. Those gains will continue for “a certain period,” Zhang said without giving more detail.

The nation’s exports expanded 13.4 percent in December, the smallest increase since gains resumed in 2009 after the financial crisis, excluding holiday distortions. Import growth moderated to 11.8 percent, also the slowest pace in two years.

China will actively expand imports, Zhang said. The government will lower import taxes for some consumer goods and also for some raw materials, energy and imports of advanced equipment, he said, without giving details.

Company Financing

China will also help the nation’s small- and medium-sized companies obtain financing, Zhang said.

Obtaining bank loans became more difficult this year for smaller companies, many of which are exporters, after the government instituted lending limits in a campaign to rein in inflation and property prices.

Zhang said that loan rates for smaller companies able to secure funds were 30 percent to 50 percent higher than the benchmark rate set by the central bank. The People’s Bank of China one-year benchmark lending rate is 6.56 percent. Smaller companies also have to pay additional charges such as guarantee fees, thereby boosting their borrowing costs to more than 12 percent, Zhang said, without giving a time period.


]]> 2012-01-20T00:34:24+00:00 http://www.therochesterdemocrat.com/index.php/weblog/kodak_files_for_ch._11_bankruptcy_protection/ {summary} Business







ROCHESTER, N.Y. (AP) - Photography icon Eastman Kodak has filed for Chapter 11 bankruptcy protection, as it seeks to boost its cash position and stay in business.

The move comes as the ailing company has failed to find a buyer for its trove of 1,100 digital imaging patents. Kodak said in November that it could run out of cash in a year if it didn't sell the patents, for which it hoped to fetch billions.

Eastman Kodak Co. said early Thursday that it has secured $950 million in financing from Citigroup Inc. (C), and expects to be able to operate its business during bankruptcy reorganization and pay employees. The Rochester, N.Y.-based company, which was pummeled by foreign competition and then severely shaken by the digital revolution, has invested huge sums in new lines of inkjet printers that are finally on the verge of turning a profit.

CEO Antonio Perez said in a statement that the bankruptcy filing is "a necessary step and the right thing to do for the future of Kodak."

The company and its board are being advised by Lazard, FTI Consulting Inc. and Sullivan & Cromwell LLP. Dominic DiNapoli, vice chairman of FTI Consulting, will serve as chief restructuring officer. Kodak expects to complete its U.S.-based restructuring during 2013.

On its website, Kodak assured customers that the nearly $1 billion in debtor-in-possession financing would be sufficient to pay vendors, suppliers and other business partners in full for goods and services going forward. The bankruptcy filing in the Southern District of New York does not involve Kodak's international operations.

The Chapter 11 filing had been rumored for weeks. Multiple directors have resigned from Kodak's board and the company last week announced that it realigned and simplified its business structure in an effort to cut costs, create shareholder value and accelerate its long-drawn-out digital transformation. Since the start of the year, Kodak said it now has two business units - commercial and consumer - instead of three.

Previously, Kodak's business segments were divided into its traditional film and photo paper products, consumer digital imaging and graphic communications, which included printing equipment. Home photo printers, commercial inkjet presses, workflow software and packaging are viewed as Kodak's new core. Kodak has said it hopes the printer, software and packaging businesses will more than double in size by 2013 and account by then for 25 percent of its revenue, or nearly $2 billion.

Kodak did not announce job cuts as part of the bankruptcy protection filing. The company's payroll has plunged below 19,000 from 70,000 a decade ago.


]]> 2012-01-19T17:33:13+00:00 http://www.therochesterdemocrat.com/index.php/weblog/china_said_to_consider_relaxing_capital_requirements_for_banks/ {summary} Asia, Banking







Jan. 19 (Bloomberg) -- China’s banking regulator is weighing a plan to relax capital requirements for lenders after the world’s second-largest economy expanded at the slowest pace in 10 quarters, four people with knowledge of the matter said.

The China Banking Regulatory Commission is delaying implementing the most stringent capital adequacy ratios and may lower risk weightings for loans to small businessmen and companies, the people said, declining to be identified as the matter is confidential. The watchdog may also allow banks to increase the excess bad-loan reserves used in calculating risk buffers, they said.

The proposals signal that China’s policy makers are under pressure to ease credit after economic growth slowed to 8.9 percent in the fourth quarter. The central bank in December cut the reserve requirement for banks for the first time since 2008. Relaxing the capital rules may allow banks to provide more loans without having to raise funds from equity or bond sales.

The risk weighting on personal operating loans given to small businessmen may be cut to 75 percent from the current 100 percent, while the ratio on loans to small and micro-sized firms would be lowered to 50 percent from 75 percent, two of the people said. The banks had 14.6 trillion yuan ($2.3 trillion) of such loans outstanding in August, accounting for 27 percent of total advances, according to the CBRC.

The regulator is yet to complete setting how capital requirements will be calculated, and hasn’t told banks how long the implementation may be delayed, the people said this week.

A press official for the CBRC, who refused to be named due to the agency’s rules, declined to immediately comment.

Weaker Economic Outlook

The regulator also warned banks this month to resist demand for credit from local governments as new officials in cities, towns and villages pursue projects that bolster growth, a person with knowledge of the matter said. Such requests may rise as local leaders appointed in a nationwide shuffle seek funds to help create jobs in their regions, the person said.

China is prepared for an economic slowdown and mild moderation is “desirable,” Ma Jiantang, head of the nation’s statistics bureau, said on Jan. 17. Banks including BNP Paribas SA, Nomura Holdings Inc. and UBS AG forecast weaker economic expansion in China this quarter as Europe’s debt crisis curbed export demand and the property market weakened.

Chinese banks advanced 7.47 trillion yuan of new loans in 2011, a decrease of about 5 percent from the year earlier, according to the central bank, after the government tightened monetary policy to cool inflation. The central bank will let the five biggest lenders increase first-quarter lending by a maximum of about 5 percent from a year earlier, two people at state lenders who have knowledge of the matter said this week.

Risk Buffers

The People’s Bank of China last month allowed lenders to set aside less of their deposits, cutting the reserve ratio by 50 basis points for the biggest banks to 21 percent. New loans in December were also the highest since April, signs that the government is loosening monetary policy to encourage lending.

The proposed changes to the risk buffers also come after China in October named securities regulator Shang Fulin to oversee the $17 trillion banking industry, which includes four of the world’s eight largest lenders by market value. Under former Chairman Liu Mingkang, CBRC tightened rules to prevent a record $2.7 trillion of credit extended in 2009 and 2010 from inflating asset bubbles and saddling lenders with bad loans.

The banking regulator said in August that it would require the country’s largest or so-called systemically important lenders to have a minimum capital adequacy ratio of 11.5 percent by the end of 2013. Smaller banks would be required to have at least 10.5 percent under “normal conditions” by the end of 2016, the CBRC had said.

Basel Standards

That is at least two years earlier than the date of compliance set by the Basel Committee on Banking Supervision, which developed a global regulatory standard on capital adequacy and liquidity of banks. The Basel III rules give the world’s largest lenders until 2019 to increase their core capital ratios to as much as 9.5 percent of risk-weighted assets.

Chinese banks may have to raise about 860 billion yuan in stock over six years to meet the stricter capital rules, a person with knowledge of estimates compiled by the watchdog said in April. Lenders will probably need an additional 1.26 trillion yuan in supplementary capital by the end of 2016, assuming economic growth of 8 percent a year and 15 percent credit expansion, the person said at that time.


]]> 2012-01-19T02:47:51+00:00 http://www.therochesterdemocrat.com/index.php/weblog/sp_500_caps_best_start_to_year_since_1987_on_economic_optimism/ {summary} U.S. Economy







Jan. 18 (Bloomberg) -- U.S. stocks rose, giving the Standard & Poor’s 500 Index its best start to a year since 1987, after confidence among homebuilders topped forecasts, Goldman Sachs Group Inc. rallied and concern about Europe eased.

Goldman Sachs climbed 6.8 percent as earnings beat estimates amid lower compensation costs. Bank of America Corp. and JPMorgan Chase & Co. jumped at least 4.6 percent, leading the gains in the Dow Jones Industrial Average. PulteGroup Inc. and Lennar Corp. added more than 4.3 percent, pacing an advance in homebuilders. A measure of chipmakers rose the most in the S&P 500 among 24 industries, rallying 3.9 percent.

The S&P 500 increased 1.1 percent to 1,308.04 at 4 p.m. New York time, closing above 1,300 for the first time since July. The Dow advanced 96.88 points, or 0.8 percent, to 12,578.95. The Nasdaq Composite Index climbed 1.5 percent to 2,769.71. The Russell 2000 Index jumped 1.8 percent to 779.26.

“It’s great to see the market up,” John Carey, a Boston- based money manager at Pioneer Investments, said in a telephone interview. The firm oversees about $220 billion. “People are realizing that Europe is important, but it’s not the whole world. They are looking at the economic numbers in the U.S. and seeing that we’re not going back into a recession. The economy is still growing. We might be all right at the end of the day.”

The S&P 500 has risen 4 percent this year as measures of commodity, financial and industrial shares rallied at least 6.4 percent. The Morgan Stanley Cyclical Index of companies most- tied to the economy has surged 11 percent in 2012, with Alcoa Inc. and Caterpillar Inc. soaring at least 15 percent.

Highest Since 2007

Stocks climbed today as confidence among U.S. homebuilders rose in January to the highest level since 2007. Equities extended gains as an official told reporters that Greece’s government could forge an agreement with private creditors by the end of this week after talks resumed in Athens today. The International Monetary Fund is proposing to raise its lending capacity by as much as $500 billion to safeguard the economy.

“Investors need a new excuse to commit more capital,” Michael Shaoul, chairman of Marketfield Asset Management in New York, which oversees $1.3 billion, said in a telephone interview. “The acute stress of Europe has moderated. Given that we already have good economic data, the most obvious new excuse is earnings. I would expect a decent earnings season.”

Companies in the benchmark index, which beat profit estimates in the previous 11 quarters, probably will report a 4.6 percent increase in per-share earnings during the September- December period, analysts’ estimates compiled by Bloomberg show.

Homebuilders Rally

Nine out of 10 industries in the S&P 500 rallied as financial and technology gauges advanced at least 1.6 percent. A gauge of homebuilders in S&P indexes climbed 4.6 percent. PulteGroup added 5.9 percent to $7.94. Lennar jumped 4.4 percent to $23.

Goldman Sachs rose 6.8 percent to $104.31. Chief Executive Officer Lloyd C. Blankfein cut compensation 21 percent in 2011 as he reduced costs and focused on international growth to offset a slowdown in trading, which contributes most of the firm’s revenue. Goldman Sachs’s higher-than-estimated earnings contrasted with previous reports from Citigroup Inc., which fell short of analysts’ estimates, and JPMorgan, which matched projections.

Some of the largest financial companies also climbed. Bank of America advanced 4.9 percent to $6.80. JPMorgan added 4.7 percent to $36.54.

Bank of New York Mellon Corp. fell 4.6 percent to $20.30. The world’s biggest custody bank said fourth-quarter earnings declined 26 percent on a restructuring charge and lower revenue from businesses tied to financial markets.

Sales Forecast

The Philadelphia Semiconductor Index surged 5 percent as all of its 30 stocks advanced. Linear Technology Corp. jumped 12 percent, the most in the S&P 500, to $33.32. The maker of semiconductors for industrial equipment and cars forecast fiscal third-quarter sales that would beat analysts’ estimates.

Yahoo! Inc. gained 3.2 percent to $15.92 as Jerry Yang’s exit may remove a barrier to find a buyer or negotiate a sale of stakes in Asian assets valued at more than $10 billion. Now that the co-founder and one-time chief executive officer has cut his leadership ties to Yahoo, newly appointed CEO Scott Thompson has freer rein to unwind the company’s part-ownership of Alibaba Group Holding Ltd. and Yahoo Japan Corp.

U.S. companies that beat analysts’ earnings estimates are an exception, rather than the rule, for the fourth-quarter reporting season getting under way. Only 47.1 percent of companies in the S&P 500 that posted quarterly results between Dec. 1 and yesterday exceeded the average projection, according to data compiled by Bloomberg.

Financial Crisis

So-called positive surprises have surpassed 50 percent at a comparable point in every other quarterly reporting period for the past four years. The previous low was 51.5 percent in the third quarter of 2008, when a global financial crisis was taking hold.

“Early reporters’ results” are one of two reasons to expect the current earnings season to be disappointing, Thomas M. Doerflinger, a strategist at UBS AG, wrote yesterday in a report. The other is that many companies are likely to cut estimates for this year.

]]> 2012-01-19T02:45:49+00:00 http://www.therochesterdemocrat.com/index.php/weblog/auto_plants_at_capacity_buoying_u.s._economy/ {summary}



By Jeff Green - Jan 17, 2012 11:01 PM CT
BLOOMBERG NEWS


Bobbi Marsh puts her 11-year-old son to bed each night and then heads to her job at General Motors Co.’s metal-stamping plant in Lordstown, Ohio. Photographer: David Maxwell/Bloomberg

Bobbi Marsh puts her 11-year-old son to bed each night and then heads to her job at General Motors Co. (GM)’s metal-stamping plant in Lordstown, Ohio. She gets home in time to make him breakfast.

Marsh, 34, is one of thousands of auto workers in the U.S. benefiting from the return of a third shift at factories -- often from 11 p.m. to 7 a.m. -- translating to 24-hour-a-day production at many plants for the first time since the industry collapse in 2009. At the nadir, some plants ran only one eight- hour shift.

The new third shifts, adding more than 4,300 jobs in four states at GM alone, bring jobs to the economy and revenue to governments as well as demand at odd hours for everything from daycare and dentistry to financial services and food. U.S. auto plants this year may operate at about 81 percent of capacity after falling as low as 49 percent in 2009, according to estimates from IHS Automotive in Northville, Michigan.

“It’s been great: I can spend all evening with my son,” said Marsh, 34, a three-year GM employee who lives near the plant about 60 miles southeast of Cleveland. She switched from working evenings to the overnight shift when it was reinstated last year and sleeps from about 8 a.m. to 2 p.m. “It does take a different kind of person to work third shift, but I love it.”

Automakers are increasing production at the car plants after the U.S. light-vehicle sales rose by at least 10 percent for two straight years for the first time since 1984 and grew at a faster rate than China, the world’s biggest auto market, for the first time in at least 13 years. States that were hard-hit by the downturn, such as Michigan and Ohio, are among the biggest beneficiaries, adding jobs at places like Ross’ Eatery & Pub and Tony M’s.

15 Plants

GM, Ford Motor Co. (F), Chrysler Group LLC, Nissan Motor Co. and Kia Motors Corp. (000270) have either added U.S. production beyond the traditional two shifts or announced plans to do so at 15 plants, including six in Michigan, since GM and Chrysler emerged from bankruptcy in the middle of 2009.

“There’s no question we’re running full-out,” said Kim Rodriguez, a principal at KPMG’s auto-consulting business in Detroit. “After China, the U.S. was the market where executives expect the most growth, which is staggering considering where we were.”

Businesses from auto suppliers to trucking companies are hustling to add capacity and find new workers to adapt to the increased production, she said.

Restaurant Hours

For GM worker Marsh in Ohio, the new job means off-hour grocery trips to the 24-hour Giant Eagle supermarket and late- night orders from Ross’ Eatery & Pub, which gets 75 percent of its restaurant business from the three shifts at the Lordstown complex that builds the Chevrolet Cruze sedan. The restaurant now runs from 6 a.m. to 1 a.m. to accommodate the new shift, expanding last year from 8 a.m. to 11 p.m.

“We had been treading water for what seemed like an eternity -- it was just me, my mom and my aunt running the place” during the auto crisis, said owner Earl Ross, 36. He now employs 20, up from the three family members just a couple of years ago, to supply the plant with fried chicken, burgers and his signature $6.99 Philly steak sandwich.

Ohio added 79,300 jobs through November 2011 from December 2010, an improvement from a decade when only Michigan among U.S. states lost a larger percentage of jobs, according to the federal Bureau of Labor Statistics. Ohio was second in the nation to Michigan in vehicle production in 2010, according to the state Department of Development.

Market Growing

The momentum for added production is expected to continue this year as auto deliveries may rise about 5.6 percent to 13.5 million, the average estimate of 10 analysts surveyed by Bloomberg. Vehicle sales rose 11 percent in 2010 and 10 percent last year after sales fell to a 27-year low of 10.4 million sales in 2009.

A third shift at a Midwestern U.S. auto plant typically requires about 1,000 direct workers and creates about 7,850 spinoff jobs ranging from police and fire workers to construction, retail and restaurant employees, according to estimates from the Center for Automotive Research in Ann Arbor, Michigan. About a third of the positions are within 60 miles of the plant.

Michigan gained 63,500 jobs in 2011, according to the Research Seminar in Quantitative Economics at the University of Michigan. It was the first job gain in the state since the turn of the century. The group predicts a net gain of 26,000 jobs this year, 28,500 in 2013, and 46,800 in 2014.

Tony M’s Lasagna

The overnight shift at GM’s sport-utility vehicle factory in Delta Township, Michigan, near the state capital of Lansing, has meant a 40 percent increase in business at Tony M’s restaurant nearby, said Stefan Farrell, the general manager at the eatery that specializes in pizza and lasagna.

The restaurant, which boasts a highly guarded sauce recipe, has expanded the business hours from 7 a.m. to 2 a.m. each day, from the 11 a.m. to 10 p.m. workday before the third shift was added in 2010, he said.

About 15 workers who drive trucks delivering parts overnight at the plant were eating nearby as he talked, he said.

“When GM is down, it’s a ghost town,” said Farrell, who said last week he personally drove 15 pizzas in one batch to the factory on a food run.

Chrysler and Ford are adding so-called third crews, which use new workers to allow the plants to operate more hours of the week by adding rotating crews that include both day and evening shifts and also include Saturday and Sunday, rather than running later into the night on a full third shift.

Weekend Output

Ford will have four plants in Kentucky, Michigan and Illinois on the three-crew system within the next year, meaning those plants will run about 120 hours out of the 168 hours possible, instead of the 100 hours for a two-shift run. Chrysler’s Jeep Grand Cherokee plant in Detroit will add a similar system next year.

The benefits are being felt outside the traditional Midwestern U.S. auto heartland.

Nissan (7201) already runs three shifts on its Altima sedan assembly line at the Canton, Mississippi, factory, said Bill Krueger, vice chairman of Nissan’s Americas operations. The automaker is studying a third shift at its largest North American plant in Smyrna, Tennessee, as well, he said.

“It’s in our future,” Krueger said.

Suppliers’ Shifts

Auto suppliers nearby are talking about adding third shifts in Rutherford County, Tennessee, which is home to the Nissan plant and about a 75-minute drive from Volkswagen’s Chattanooga factory, said Holly Sears, the vice president of economic development for the Rutherford County Chamber of Commerce.

“Every single auto supplier we’ve talked to recently has a positive outlook for 2012 and 2013,” she said.

West Point, Georgia, with about 3,500 residents, has seen new hours at dentist offices, banks, health clubs and other businesses since the Kia (00270) factory there added a third shift last June, said Randy Jackson, vice president of human resources at the 3,000-employee operation.

Nellie’s Day Care in West Point has added eight to 10 kids who spend the night, a majority from Kia employees, as the third shift was added, said Bo Barber, 46, who took over operations for the 24-year-old business from his mother Nellie about five years ago. A year ago, they had none.

The children, ranging in age from three to seven, may get a light meal before bedtime and then the staff helps them get ready in the morning, he said. The overnight business required an additional worker for the daycare center, which serves a total of about 46 kids on all three shifts with six employees, Barber said.

Investors have been talking about opening another daycare center in the area to cater to workers on all three shifts and several area doctors are planning to operate an urgent care clinic with extended hours, Jackson said.

“Third shifts are beginning to sprout up in a lot of places now,” said Jackson, who has worked at U.S. auto factories for 31 years. “Businesses are expanding here and it’s helping the community.”


]]> 2012-01-18T15:06:13+00:00 http://www.therochesterdemocrat.com/index.php/weblog/portugal_launches_labor_reforms_amid_recession/ {summary} Europe, Labor







LISBON, Portugal (AP) - Portugal is to cut holiday entitlement, introduce more flexible working hours and cut compensation for layoffs in a package of labor reforms aimed at reversing the country's steep economic decline, officials said Tuesday.

Outdated labor practices were among the factors blamed for a decade of slender growth and mounting debts that compelled Portugal to take a euro78 billion ($99.6 billion) financial rescue package last year.

Its financial plight has aggravated Europe's sovereign debt crisis and brought fears that its economic downturn, compounded by austerity measures, could eventually force it to follow Greece and restructure its debt.

Standard & Poor's last week downgraded Portuguese debt to junk status amid forecasts the economy will contract by 3.1 percent this year. Portugal went into a double-dip recession last year when Moody's and Fitch Ratings, the other two leading ratings agencies, classified the country's debt as junk. The yield, the interest rate Portugal pays on its debt, for a 10-year bond has risen to 14.2 per cent following the S&P downgrade.

The jobless rate, meanwhile, has climbed to a record 13.2 percent, with unions staging strikes and protests against the center-right government's policies.

The labor law changes were agreed in the early hours of Tuesday morning after 17 hours of talks between the government, trade unions and business leaders.

Portugal committed to the reforms in return for the bailout granted by its European partners and the International Monetary Fund. The European union and other international bodies had long pressed Portugal to modernize its labor laws.

The bailout deal was signed by all the country's main political parties, but agreement on detailed measures required months of negotiations with unions and business confederations.

Economy and Employment Minister Alvaro Santos Pereira said the reforms would make the Portuguese economy more competitive and drive fresh growth.

He said the agreement "shows the world and the markets ... that we are laying the foundations to beat this crisis."

Full details of the agreement, which is due to be signed at a ceremony with Prime Minister Pedro Passos Coelho on Wednesday, were not immediately available.

However, delegates who attended the talks did say the changes included: shortening workers' annual vacation entitlement from 25 days to 22, scrapping at least three public holidays, reducing layoff payouts, cutting overtime pay levels, and giving companies 150 work hours per employee without overtime to be used by employer as and when they were needed.

Also, jobless people who accept work that pays less than their unemployment benefit are to keep 50 percent of that benefit.

But the government had to ditch its controversial proposal allowing companies to demand that staff work an extra 30 minutes a day without overtime pay. The novel measure, the government claimed, would have reduced unit labor costs and thereby made exports cheaper.

But trade unions balked at the idea, saying it would overturn labor movements' long struggle for an eight-hour day, and the main opposition Socialist Party also opposed it, arguing there was no economic study to support the government's claim. Business leaders were also lukewarm on the measure, saying it would bring limited benefits.

Tuesday's agreement won the blessing of the General Workers' Union, one of the country's two main trade union confederations. However, the General Confederation of Portuguese Workers, the other group, said it would fight the measures.


]]> 2012-01-18T14:55:59+00:00 http://www.therochesterdemocrat.com/index.php/weblog/prepare_for_a_meeting_of_monetary_cardinals_as_euro_end-game_nears/ {summary} Europe


Mike "Mish" Shedlock
Tuesday, January 17, 2012
Source: http://globaleconomicanalysis.blogspot.com


Steen Jakobsen, chief economist for Saxo Bank in Denmark, has some very interesting thoughts to share on the sovereign debt crisis in Europe. His six major points are:

• More austerity cannot possibly work.
  
• Voters have lost the faith and willingness needed to repair the current EU and Eurozone construct
  
• Credit and debt cycle is busted. Irving Fisher's Debt-Deflation Model is in progress.
  
• The end-game is near for Europe. Prepare for a meeting of the cardinals
  
• Nicolas Sarkozy is falling apart and likely to lose to Marine Le Pen in the first round of French elections
  
• The "Hope Trade" in equities is in Extreme Overvaluation. Be nimble and cash-rich now to be able to take advantage of deep discounts coming up later.
  

Faith in Eurozone Dissipating Fast

Please consider More apathy, less austerity - faith in Eurozone dissipating fast written below as a complete guest post in entirety.

From Steen ...

In my travels to Madrid I made the following observations:

Sarkozy was in Madrid last night and when questioned on French downgrade he said three times to three different journalist: 'I don't understand the question, you need to clarify it'. The journalists here are amazed at how arrogant he was/is but more importantly it seems Sarkozy is 'falling apart'. He knows he is likely to lose to Marine Le Pen - and he needs to do something desperate and he will. I am in Paris later today and will report more.
On Spain - there is the same apathy I observed in Milan this time last year - people appear to have already given up on 2012 - but...

More austerity is not possible - a worker is lucky to make 1000 eur a month! How do you cut 20 percent of that?
Taxes have just gone up - more than 1 million people live for less than EUR 400 a month!!!!
Plus I continue to hear of people being laid-off from major banks. Apparently one such major bank initiated big cuts on Friday (yet to be reported?) firing high salary employees like private bankers.

The end game is just one of two:

1. The debt trap leads to collapsing growth, rising fiscal imbalances and stock market tanks 25/30 percent leading to a call for a 'meeting of the cardinals' - which ends up addressing the real issue: who pays the bill and how do we create an internal devaluation of the poor Eurozone countries combined with a move to true solidarity and fiscal transfer. (Germany pays!)
More of the same - the German fiscal compact makes the rich in the north more rich and the poor in the south even more poor. The current account trends continue and the world comes to an 'Atlas Shrugged' moment where there is only the public sector left. Social riots become the norm, Greece leaves the EU, Portugal follows, and things get out of control leading to the EU breaking up.

Voters have lost the faith and willingness needed to repair the current EU and Eurozone construct. The only thing left is to possibly take the loss, either by democratising the loss - a part nationalisation of banks like the Swedish bank model - or through a Schumpeter model of destruction of capital.

2. The world simply will not see enough growth in 2012 to service the massive debt despite a 1 percent effective financing rate. This economic gravity will prevail despite the big hopes for the European Central Bank's Long-term Refinancing Operation and QE3 in the US (via US dollar unlimited swaps lines).

Yes we have LTRO and yes we will see more LTRO ahead but the private sector is contracting more than banks and governments are able to sustain. This is becoming a classic Irving Fischer theory; excessive debt leads to deflation and ultimately new beginnings.

I have never been more confident than now that this game is just months or a few quarters away from breaking down. Prepare for that meeting of Cardinals!

The credit and debt cycle is busted. Keep watching the 'new capital of 2012' being deployed into 'hope trades' but also note that my favourite cyclical model is now in extreme overvaluation territory!

Finally, the dislocation of capital and credit creates huge opportunities in the credit space and in stocks. Be nimble, be cash rich not because you have to be afraid of the future but because the resetting of prices will create deep discounts which could create double digit returns for a decade when this forecasted fire ends sometime in 2012.

Safe travels,
Steen

Major Agreement

I am in essential agreement with all of Steen's points having said the same things on many occasions. I only have a couple small differences.

The chart of the S&P does not say much to me. Indeed one can look at various points where indiactors were at extremes and the market kept rising anyway.

However, his main point "be nimble and cash-rich now to be able to take advantage of deep discounts coming up later" is 100% spot-on.

In regards to Marine Le Pen, I do not know if she is "likely" to defeat Sarkozy in the first round, but certainly EuroSkeptics are on the rise and it is a very reasonable possibility.

Regardless, polls show Hollande would beat either Le Pen or Sarkozy, so Sarkozy's days are indeed "likely" numbered.

For an analysis of Le Pen, please see

- September 16 2011: Eurozone Breakup Logistics (Never Believe Anything Until It's Officially Denied)
- December 12 2011: Will Sarkozy Survive the First Round in French Elections? Regardless, Sarkozy's Replacement Will Be Worse; Socialist challenger François Hollande Would Renegotiate EU Deal; Bickering Before Ink is Dry
- January 15 2012: "Let the Euro Die" Candidate Trails Sarkozy by Slight 2 Percentage Points; Will Sarkozy Survive the First Round Vote? Eurozone About to Become Unglued

March Polls

Le Pen 24%
Strauss-Kahn 23%
Sarkozy’s 20%

Strauss-Kahn was forced out over sexual allegations in late Spring.

December Polls

Round 1

François Hollande 31.5%
Nicolas Sarkozy 26%
Marine Le Pen 13.5%
Francois Bayrou 13%

Round 2

François Hollande 57%
Nicolas Sarkozy 43%

January Polls

François Hollande 27%
Nicolas Sarkozy 23.5%
Marine Le Pen 21.5%

Round 2

François Hollande 57%
Nicolas Sarkozy 43%

Certainly Le Pen has gained much on Sarkozy in just the last month. As Steen commented, the "arrogant Sarkozy is falling apart" and will not win round 2 even if he survives round 1 one on April 22, 2012.


Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.



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