01/24/2011 (5:16 am)

Goldman’s Long Bond Shows Inflation Concerns Are Waning - Bloomberg

Filed under: business, finance |

Goldman Sachs Group Inc.’s offering of 30-year bonds, its first in more than three years, signals waning concern among investors that inflation is accelerating.

The fifth-biggest U.S. bank by assets received $9 billion in orders for its $2.5 billion of debentures sold on Jan. 21, according to Mizuho Securities USA. The 6.25 percent senior bonds yield 170 basis points more than similar-maturity Treasuries, at the low end of a 5-basis-point range marketed by the New York-based firm, data compiled by Bloomberg show.

Economists are lowering forecasts for consumer price rises next year, with the median estimate declining to 1.9 percent this month from 2 percent in December, according to a Bloomberg survey of 55 economists. The record $13 billion auction of 10- year Treasury Inflation-Protected Securities on Jan. 20 attracted lower-than-average demand and the difference between yields on 10-year notes and TIPS narrowed the most since May.

“People aren’t too worried about inflation,” said Anthony Valeri, market strategist with LPL Financial Corp. in San Diego, which oversees $293 billion. “Goldman was noticing there’s some demand here and they could get that deal done.”

Thirty-year Treasuries yield 3.07 percentage points more than the consumer price index, above the average of 2.38 percentage points since the start of 2000. Goldman Sachs economists predict a 0.6 percent increase in personal consumption expenditures this year, compared with the median 1.05 percent of 59 economists surveyed by Bloomberg.

‘Satiate’ Demand

The bank’s last benchmark-sized offering of 30-year dollar- denominated bonds was in September 2007, Bloomberg data show. In that sale, Goldman Sachs issued $2.5 billion of 6.75 percent debt at a 190 basis-point spread, Bloomberg data show. Benchmark sales are typically at least $500 million.

“With Goldman Sachs doing a 30-year, it allows them to satiate some of the demand in the 30-year part of the curve and gets them close to all the buyers that are knocking on their door for bonds with duration,” said Timothy Cox, an executive director of debt capital markets at Mizuho in New York.

Elsewhere in credit markets, spreads on global company bonds narrowed for a third week, shrinking to the lowest since May. Securities issued by Petroleo Brasileiro SA in Brazil’s largest corporate debt offering rose on their first day of trading as issuance worldwide fell. Leveraged loan prices increased, reaching the highest level in more than three years during the period.

Yields on company debt from the U.S. to Europe and Asia narrowed 4 basis points relative to government bonds to 162 basis points, or 1.62 percentage points, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. Spreads, which have tightened 7 basis points this month, are down from 177 on Nov. 30 and at the lowest since reaching 158 on May 5.

Petrobras Bond Sale

Yields jumped to an average 3.98 percent from 3.93 percent on Jan. 14. The Barclays Capital Global Aggregate Corporate Index of bonds has gained 0.08 percent this month.

In emerging markets, relative yields widened 4 basis points to 239 basis points, according to JPMorgan Chase & Co. index data. During the past three months the index has ranged from a high of 279 on Nov. 30 to as low as 217 on Jan. 5.

Petrobras, Brazil’s state-controlled energy producer, sold $6 billion of bonds as worldwide issuance declined to $73.3 billion for the week, from $111 billion in the prior period, according to data compiled by Bloomberg.

The Rio de Janeiro-based company’s $2.5 billion of 5.375 percent notes due in 2021 rose on the first day of trading, climbing 1.52 cent from the issue price on Jan. 20 to 101.32 cents on the dollar, according to Trace, the bond price- reporting system of the Financial Industry Regulatory Authority.

Loans Climb

The cost of protecting corporate securities from default in the U.S. was little changed. Credit-default swaps on the Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 0.3 basis point to 83.6 basis points, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell for a second week, declining 4.6 to 100.

Credit-default swaps typically rise as investor confidence deteriorates and fall as it improves. Contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a swap protecting $10 million of debt.

The Standard & Poor’s/LSTA US Leveraged Loan 100 Index increased 0.3 cent for the week to 95.54 cents on the dollar after reaching 95.59 on Jan. 19, the highest since November 2007. The index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, has gained 1.98 percent this month. Speculative-grade debt is rated less than Baa3 by Moody’s Investors Service and BBB- by S&P.

‘Bumping Along’

Goldman Sachs may have offered the long-maturity debt to get ahead of an increase in borrowing costs, said LPL’s Valeri. Yields on 30-year Treasuries climbed last week to 4.61 percent, the highest since April.

“They’re probably saying, ‘Look, this 30-year’s still not performing well, it’s bumping along in terms of price, let’s get this debt done now before interest rates get higher,’” Valeri said. “As an investor you’re being compensated more to stand out on the yield curve. You’re getting more yield for extending the maturity.”

Michael DuVally, a spokesman for Goldman Sachs, said the firm doesn’t comment on its own deals.

Including Goldman Sachs’s offering, companies have issued $5.32 billion of 30-year debt in dollars this month, up from $1.5 billion of sales in December, Bloomberg data show. That compares with an $8.86 billion average in the first 11 months of 2010.

‘Buckets’ to Fill

“A lot of investors have buckets they need to fill up within their portfolios, and there’s a need for 30-year paper,” said Rajeev Sharma, a money manager at First Investors Management in New York, who helps oversee $1.5 billion of investment-grade credit. “It’s very hard to get 30-years out there.”

The U.S. auction of 10-year TIPS on Jan. 20 drew a yield of 1.17 percent, compared with an average forecast of 1.108 percent in a Bloomberg survey of nine of the Federal Reserve’s 18 primary dealers, who are obligated to bid in U.S. debt auctions. The yield at the last auction of the maturity on Nov. 4 was the lowest ever, 0.409 percent.

The sale was the largest 10-year TIPS offering since the government began selling inflation-indexed debt in 1997.

The bid-to-cover ratio, which gauges demand by comparing the amount offered with the amount sold, was 2.37, the lowest since April 2009. It was 2.91 at the last sale in November and averaged 2.73 at the past 10 offerings.

Negative Return

“Inflation expectations implied by TIPS are down this week,” Valeri said. “That’s probably motivating investors to feel more comfortable with long-term debt.”

Yields on 10-year TIPS show bondholders expect the consumer price index to increase 2.19 percentage points a year on average over the life of the debt. The CPI rate rose 1.5 percent in 2010 and is forecast to climb 1.7 percent this year, based on a Bloomberg survey of more than 60 economists.

The so-called breakeven rate on TIPS reached 2.41 on Jan. 5 and is up from 1.51 percent in August amid concern that the $600 billion of cash the Federal Reserve will print to buy Treasuries would cause faster inflation.

U.S. corporate bonds due in 15 years or more are poised for a fifth consecutive month of declines, losing 1.23 percent in January, the worst-performing class in the Bank of America Merrill Lynch indexes.

JPMorgan Sale

The last benchmark offering of 30-year debt by a U.S. bank was in October, when New York-based JPMorgan sold $1.25 billion of bonds, Bloomberg data show. The 5.5 percent securities paid a spread of 165 basis points. Goldman Sachs sold $1.3 billion of 50-year debt on Oct. 26, Bloomberg data show. The bonds were offered in $25 denominations and can’t be called, or redeemed, for five years, the bank said in a regulatory filing.

Goldman Sachs “is saying, ‘Hey, listen, the market wants this, let’s give it to them because if we do this a year from now, there’s a good chance rates could be up 100 basis points,’” Mizuho’s Cox said. “If you believe we’re in the beginning of a recovery, then you would certainly anticipate the 30-year to move up in yield.”

Source

01/07/2011 (10:35 am)

Obama Enters Political, Economic Quandary as He Weighs U.S. Tax Overhaul - Bloomberg

Filed under: bank, business |

President Barack Obama and his economic team are torn over whether to make overhauling the tax system a priority or relegate it to a brief mention in his annual State of the Union address, a top administration official said.

They are debating the risks if the plan fails to raise revenue that could be used to close trillion-dollar budget deficits, because the political pain may dwarf the fallout from last year’s health-care overhaul, the official said.

Administration officials are conferring with corporate leaders after Obama met Dec. 16 with 20 executives, including the chiefs of Google Inc. and Cisco Systems Inc., on ways to fuel the economy. Dorothy Coleman, vice president of tax and domestic policy at the National Association of Manufacturers, said her group has spoken with administration officials about fundamental tax overhaul.

Treasury Secretary Timothy Geithner has invited the chief financial officers of companies to a Jan. 14 meeting to continue the discussion, a department spokeswoman said. Jade West, head of the Tax Relief Coalition, a group of about 1,000 trade associations, many of them small, said her group hasn’t been approached. “They’re talking to the large CEOs,” she said.

Assessing Republicans

Obama aides also are sizing up the newly empowered Republicans in Congress, including freshmen backed by the Tea Party movement. While Republicans’ cooperation is needed, many want any rewrite of the code to reduce taxes, particularly on corporations.

Representative David Camp, chairman of the tax-writing House Ways and Means Committee, urged Obama to make tax overhaul a priority in his State of the Union speech later this month.

“Presidential interest in tax reform can only be helpful,” said Camp, a Michigan Republican.

House Majority Leader Eric Cantor, a Virginia Republican, told Obama in a Jan. 5 telephone conversation that members of both parties would work with him on changes to tax laws.

Senate Majority Leader Harry Reid, a Nevada Democrat, said Jan. 6 that the tax system “is broken and needs to be fixed,” and “the country is ripe for tax reform.”

One immediate obstacle is whether rewrites of the corporate and individual tax codes can be accomplished in tandem. Camp said he wants to tackle both issues together, while the Obama administration is considering addressing corporate tax policy first. Corporations paid $225 billion in income taxes in fiscal 2009, compared with $1.2 trillion paid by individuals, according to the Internal Revenue Service.

S Corporations

It would be “difficult” to separate the issues, said NAM’s Coleman. “One of the problems that we face among our membership, for example, is that a lot of manufacturers are organized as S corporations and pay taxes at the individual rate.”

The administration is more interested in tackling the corporate tax code separately, the top official said. Confronting individual tax rates may put Obama in a political box because he promised not to increase taxes on the first $200,000 of an individual’s income and the first $250,000 earned by a married couple. In December, Obama also agreed to extend for two years the lower top marginal rates paid by those with the highest incomes. Earlier in the year, Obama won congressional approval of a new 3.8 percent Medicare surtax on top earners that is scheduled to take effect in 2013.

Panels’ Recommendations

Subsequently, two committees created by Obama suggested options for revamping the tax code. A panel headed by former Federal Reserve Chairman Paul Volcker said corporate tax rates could be reduced in exchange for closing loopholes that benefit only some industries.

And members of a deficit-reduction commission led by Erskine Bowles, a Democrat who was chief of staff to President Bill Clinton, and former Senator Alan Simpson, a Republican from Wyoming, urged a wholesale rewrite of the code that jettisons all tax expenditures to reduce rates across the board.

Obama hinted last month that he may engage the issue more directly.

“We’re going to have to have a conversation over the next year,” he told NPR on Dec. 10. “We can get some broad bipartisan agreement that it needs to be done. But it’s going to require a lot of hard work to actually make it happen.”

Obama, Camp and neutral observers say the political and economic landscapes are very different from the last time Congress rewrote the tax code. In 1986, President Ronald Reagan and Congress agreed to reduce income tax rates across the board, an accomplishment made possible largely by eliminating thousands of preferences and, ultimately, by raising taxes on corporations.

Narrower Window

Today’s lawmakers don’t have the same luxuries. The top individual marginal rate is 35 percent, or 7 percentage points higher than what was set in 1986, but below the 50 percent of 1985. Businesses are clamoring for relief from a top 35 percent corporate tax rate that is the highest in the developed world.

“We’re not taxed too little,” Camp said. Other factors, including a jobless rate hovering around 10 percent, the migration of businesses to individual tax rolls, and slow economic growth, mean that “here is a very different framework for looking at tax reform than 25 years ago.”

Alice Rivlin, who was President Bill Clinton’s budget director, said the White House and Congress must be open to raising additional taxes from an overhaul.

‘Growth-Friendly’

“Revenue-neutral isn’t what we need at the moment,” Rivlin said. “We need to find a way of raising more revenue, but with a more efficient and more growth-friendly tax system.”

The White House is wrestling, the official said, with whether additional revenue can be squeezed out of the existing income system or whether a new revenue stream levied on consumption, in the form of either energy taxes or a value-added tax, should be proposed. Advisers see little appetite to gut tax expenditures such as the mortgage interest deduction, and don’t envision the engine for a final deal, the top official said.

Camp said he will hold hearings on an overhaul of the tax code, a process begun in the Senate Finance Committee last year. It will take presidential leadership to jump-start the effort, analysts said.

“The president has really got to get behind this with a very detailed plan and really make it the focus of his administration,” said Howard Gleckman, resident fellow at the Urban Institute and editor of the TaxVox blog.

Political Hazards

The Obama administration is divided over whether to invest the political capital, Gleckman said, because advocating tax reform in the abstract draws applause, while getting down to the business of eliminating popular benefits — such as subsidies for homeowners — quickly wipes out the goodwill.

“Good tax reform may, in the long run, be very good for the economy,” Gleckman said. “In the short run, how do you argue scaling back the mortgage interest deduction, getting rid of private purpose tax-exempt bonds, whatever, is going to be good for the economy when the mortgage guys and the real estate people and others are just going to jump down your throat?”

Obama and Republicans must accept that they are going to create winners and losers if they are going to accomplish anything, said former Representative Jim McCrery of Louisiana.

“They won’t try if all they do is look at the obstacles,” said McCrery, the Ways and Means Committee’s top Republican in 2007 and 2008. “There’s so many. It’s just a huge undertaking.”

A Complicated System

McCrery said Republicans should consider accepting marginally higher taxes in the aggregate if the cost of complying with a complicated system is sharply reduced. In her annual report released Jan. 5, the IRS’s National Taxpayer Advocate, Nina Olson, estimated that Americans spend 6.1 billion hours annually complying with the law.

“Republicans may have to compromise toward a tax system that generates more revenues as a percent of GDP,” McCrery said. “But if they can get a tax system in return that is more streamlined, more efficient, less costly from a compliance standpoint, more competitive, more attractive for capital investment and therefore more likely to create good jobs, it seems to me that there’s a trade-off.”

In return, he said, Democrats would have to accept reductions in future entitlement spending.

Source

12/23/2010 (2:06 pm)

India Seeks to Rein In Onion Prices, Bans Exports as Inflation Accelerates - Bloomberg

Filed under: business, management |

India’s government took emergency measures to cool onion prices after excess rainfall damaged crops and contributed to an acceleration in food inflation to a six-week high.

An index measuring wholesale prices of agricultural products including lentils, rice and vegetables compiled by the commerce ministry rose 12.13 percent in the week ended Dec. 11 from a year earlier, a trade ministry report showed in New Delhi today. The index gained 9.46 percent the previous week.

India, the world’s second-biggest onion grower, is trying to boost imports and has halted exports of all varieties of the vegetable, a key ingredient in the country’s fiery curries and biryani dishes. Opposition parties have criticized Prime Minister Manmohan Singh’s government for failing to check rising prices and the central bank has raised interest rates to contain inflation that’s triggered labor strikes and public protests.

“Everyone, irrespective of economic condition, would have to use it on a day-to-day basis and it is a very sensitive item both from an economic point of view and political point of view,” Siddhartha Sanyal, chief India economist at Barclays Bank Plc’s investment banking division, told Bloomberg Television in an interview today. “They cannot ignore it.”

Onion prices jumped 33.5 percent from a year earlier, the wholesale food report showed. Retail prices of onions have risen from as little as 10 rupees ($0.22) a kilogram in June to as much as 85 rupees, the Business Standard newspaper said today.

Pakistan Onions

The country reduced the import duty for onions to zero and ordered state-owned trading companies to import the vegetable, trade secretary Rahul Khullar said yesterday. The government has banned onion exports indefinitely.

India is importing the crop from neighboring Pakistan in a bid to contain prices, the Press Trust of India said yesterday. The government, in an advertisement in the Indian Express newspaper today, said that prices are likely to decline going forward.

Food prices aren’t dropping enough and an “upside risk” to inflation still persists, Reserve Bank of India Deputy Governor Subir Gokarn told reporters yesterday. The central bank predicts the benchmark wholesale-price inflation rate may slow to 5.5 percent by March 31 from 7.48 percent in November.

Governor Duvvuri Subbarao may resume monetary tightening in January after keeping borrowing costs on hold at a Dec. 16 policy meeting, said economists including Jay Shankar, chief economist at Religare Capital Markets Ltd. in Mumbai. The central bank has lifted interest rates six times in 2010.

The wholesale food-price index reading for the week ended Dec. 11 climbed 2.26 percent to 185.8 from a week earlier.

Source

11/25/2010 (7:08 pm)

Economy showed a little life last quarter

Filed under: business, news |

The economy grew a little faster over the summer than the government first thought. That modest pickup wasn’t nearly enough to significantly lower the nation’s high unemployment rate, and the Federal Reserve doesn’t expect the economy to improve much over the next couple of years.

The economy expanded at a 2.5 percent annual rate in the July-September quarter, the Commerce Department reported Tuesday. That was up from the 2 percent pace initially estimated, and better than the 1.7 percent growth rate in the April-June quarter.

Stronger spending by U.S. shoppers and better overseas sales of U.S. goods were the main forces behind an upward revision.

Still, the hiring picture hasn’t improved much — even with U.S. companies reporting their best quarterly profits after taxes on records dating back to 1947. After-tax profits climbed to $1.22 trillion in the July-September quarter, according to the Commerce report.

The nation’s unemployment rate has been stuck at 9.6 percent for the past three months. The Fed’s latest projections suggest that won’t change much for a few years.

The Fed predicts roughly 2.5 percent growth and between 9.5 percent and 9.7 percent unemployment for the rest of this year. Those are both downgraded forecasts from its June projections.

Growth will strengthen over the next three years, but not enough to bring unemployment down to more normal levels of around 5.5 percent to 6 percent, according to the Fed’s forecasts. At best, the Fed projects 3.6 percent growth in 2011, and 4.5 percent growth in 2012 and 2013.

The latest Fed projections also suggest no better than 8.9 percent unemployment next year, roughly 8 percent in the 2012 presidential election year and, at best, just under 7 percent for 2013.

Analysts generally say the economy would need to grow 5 percent for a full year to push down the unemployment rate by a full percentage point.

The Fed has acknowledged that progress in reducing unemployment has been “disappointingly slow.”

Source

11/20/2010 (9:57 pm)

House fails to extend unemployment benefits

Filed under: Stock market, business |

The House failed Thursday to pass a bill that would have given the unemployed three more months to file for extended jobless benefits.

The legislation would have extended the deadline to file for federal unemployment benefits to Feb. 28, sparing 4 million people from falling off the rolls. The deadline is currently Nov. 30.

Federal jobless payments, which last up to 73 weeks, kick in after the state-funded 26 weeks of coverage expire. These federal benefits are divided into tiers, and the jobless must apply each time they move into a new tier.

Congress has extended the deadline to file those applications four times in the past year. The last jobless benefits extension — which lasted six months and cost $34 billion — faced a lot of opposition on deficit conscious Capitol Hill before it finally passed in mid-July.

The $12.5 billion bill that was on the floor Thursday needed two-thirds approval, or 275 votes, a tough hurdle. The vote was 258 to 154.

Still, the bill was the opening salvo in what’s likely to be a highly charged debate on extending the safety net for the nation’s millions of unemployed. While the next step is unclear, it’s possible the extension will resurface in a larger bill, such as one that would extend the Bush tax cuts.

But it’s also likely lawmakers won’t meet the Nov. 30 deadline, meaning hundreds of thousands of people will start losing benefits. In the past, Congress has made the extension retroactive, so the jobless ultimately received all their checks.

Both House and Senate Democrats have said they would have liked to extend the deadline by a year, but the House settled on three months in hopes that it would pass more easily.

A growing chorus of Republicans say they will only support an extension if it is paid for — which it is not at this point. They point to unspent stimulus funds as a potential pot of money.

Lawmakers "ought to develop a consensus on how to extend these critical benefits in a fiscally responsible manner as we attempted to do in July," said Sen. Olympia Snowe, a Republican from Maine, who has supported previous extensions.

Those who support extending benefits are also racing to pass a bill before the Republicans take over control of the House in January, when it could become harder to bring the matter to the floor for a vote.

A $319 billion tab

The unemployed have collected $319 billion in jobless benefits over the past three years payday loans guaranteed no fax. Some $109 billion of that tab has been footed by the federal government, with the rest paid for by taxes levied on businesses.

The jobless now receive an unparalleled level of support while they look for new positions. Benefits last up to 99 weeks, far surpassing the previous record of 65 weeks during the recession of the mid-1970s.

"Terminating this emergency unemployment assistance will not only devastate families, but it also will hurt the entire economy by depressing consumer confidence and demand," said Rep. Sander Levin, a Michigan Democrat, the chairman of the House Ways and Means Committee,

Levin introduced the bill with Rep. Jim McDermott, a Washington Democrat, on Wednesday.

Some 8.5 million people are collecting unemployment benefits, including 4.8 million receiving federal benefits.

Advocates argue that this assistance is vital because it’s so tough to find work in today’s weak economy. The number of long-term unemployed, who have been out of a job for more than six months, stands at 6.2 million.

They note that the federal government has never ended extended benefits when the unemployment rate was above 7.4%. It’s now at 9.6%.

To bolster their position, lawmakers released two reports Wednesday that showed the importance of unemployment benefits to families and to the economy.

A non-partisan Congressional Budget Office report said that the benefits added a median contribution of $6,000 to families, meaning half received less and half received more, in 2009.

And a report by the Joint Economic Committee, a House-Senate panel now headed by Democrats, said ending the extended unemployment program would drain the economy of $80 billion and result in the loss of more than 1 million jobs over the next year. That’s because the unemployed are usually living so close to the edge that they spend their benefits immediately, generating economic activity.

Those opposed to extending the deadline are concerned about the impact on the deficit and about whether prolonged benefits keep the jobless from looking for work.

CNN Congressional Producer Deirdre Walsh contributed to this report. 

Source

11/16/2010 (6:12 am)

Caterpillar Buys Bucyrus for $7.6 Billion to Grow Mining Range - Bloomberg

Filed under: business, finance |

Sales at U.S. retailers climbed in October by the most in seven months, brightening the outlook for holiday shopping even as unemployment holds near 10 percent.

Purchases rose 1.2 percent, exceeding the highest forecast among economists surveyed by Bloomberg News, according to data from the Commerce Department issued today in Washington. Another report showed manufacturing in the New York region unexpectedly shrank in November as orders dropped.

Stock gains over the past two months and growing employment are helping households repair finances, indicating consumer spending will play a bigger role in the recovery. At the same time, merchants from J.C. Penney Co. to Wal-Mart Stores Inc. are offering promotions to guard against any letdown in the last two months of the year, typically the biggest shopping season and hiring time for retailers.

“We expect the holiday shopping season to really ramp up in November,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who forecast a 1.1 percent gain in sales. “The breadth of discounting” and steady income gains are “providing some support,” he said.

The improvement in spending comes as other parts of the economy show signs of cooling.

Manufacturing in the New York region contracted in November for the first time in more than a year, according to the Federal Reserve Bank of New York’s so-called Empire State Index. The measure, which covers New York, northern New Jersey and southern Connecticut, fell to minus 11.1 from 15.7 in October. Readings less than zero signal declines in activity.

Shares Climb

The Standard & Poor’s 500 Index fell 0.1 percent to 1,197.75 at the 4 p.m. close in New York as increasing concern over Fed policy and the government budget deficit wiped out earlier gains. The S&P Consumer Discretionary Index, which includes auto dealers, hotels and restaurants where sales are more sensitive to the economic outlook, fell 0.3 percent after having been up as much as 0.7 percent.

The median estimate of 74 economists surveyed projected retail sales would increase 0.7 percent. Forecasts ranged from increases of 0.4 percent to 1.1 percent. The Commerce Department revised the September rise up to 0.7 percent from the 0.6 percent gain previously reported.

Nine of 13 categories in today’s report showed an increase in demand, led by a 5 percent gain among auto dealers. Vehicles sold at a 12.25 million seasonally adjusted annual rate last month, the strongest performance since the government’s cash- for-clunkers program in August 2009, according to industry data released earlier this month.

Effect on Growth

Sales excluding automobiles advanced 0.4 percent, matching the median forecast of economists surveyed.

Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales improved 0.2 percent after a 0.4 percent gain the prior month.

Non-store merchants, which include Internet retailers, sporting goods and building material stores, were among the other categories that showed increasing demand.

The National Retail Federation has forecast November- December holiday sales will rise by 2.3 percent from a year ago, the most since 2006.

J.C. Penney, the third-largest U.S. department-store company, last week said third-quarter profit rose 63 percent. Fourth-quarter sales at stores open at least a year will rise 3 to 4 percent, the Plano, Texas-based company said in a Nov. 12 statement, adding that the holiday shopping environment will “remain highly promotional.”

Rebuilding Inventories

Companies may be stocking up ahead of the holidays in anticipation of better sales, another report showed today. Inventories rose 0.9 percent in September, more than forecast, according to figures from the Commerce Department. Auto dealers and building material stores led the advance.

The pace of job growth and Americans’ drive to pay down debt and boost savings may remain hurdles for retailers. Payrolls grew by 151,000 workers in October, the first gain in five months, and the unemployment rate held at 9.6 percent, the Labor Department said Nov. 5.

Joblessness will average 9.3 percent in 2011, according to the median forecast of economists surveyed by Bloomberg this month.

Shares over the past two months rallied in anticipation of more action by the Fed to spur growth. Policy makers this month announced a plan to buy an additional $600 billion of Treasuries through June with the aim of reducing joblessness and averting a drop in prices that would hurt the recovery.

The government may also be poised to extend support for American households.

Tax-Cut Extension

President Barack Obama has said he’s committed to extending tax cuts for middle-class Americans that are due to expire by the end of the year and indicated he’s willing to negotiate with Republicans an extension for the country’s highest earners.

The Democratic Party this month lost control of the House of Representatives to Republicans amid voter discontent over the outlook for the economy.

“It is good to see consumer spending coming back,” Rebecca Blank, the Commerce Department’s undersecretary for economic affairs, said in an interview. “If middleclass Americans see their taxes increase, that is going to have a negative effect. I’m very hopeful that we are going to maintain the current tax setting.”

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11/11/2010 (10:48 am)

Currency row hangs over summit of global leaders

Filed under: business, online |

Intensifying friction over currencies and trade loomed Wednesday as leaders of major economies converged on Asia for back-to-back summits aimed at safeguarding the still fragile global recovery.

President Barack Obama and other top leaders were arriving in Seoul, South Korea, for a two-day Group of 20 summit with the ambitious agenda of remaking the world economy to nurture stable growth and prevent a repeat of the financial meltdown in 2008.

But that gathering, and a weekend summit of Pacific Rim leaders in the Japanese port city of Yokohama, are taking place as those nations struggle to reconcile conflicting strategies for achieving those aims.

G-20 officials _ whose countries comprise 85 percent of all economic activity _ have pledged not to use their currencies as trade weapons. But tensions reignited last week when the U.S. Federal Reserve announced a $600 billion bond buying plan that angered many trading partners.

Obama, wrapping up a brief visit to Indonesia after touring India, defended the Fed’s move as a way to hasten a narrowing of huge gaps in trade and investment by engineering a weaker U.S. dollar _ thus putting pressure on countries with large trade and foreign exchange surpluses.

Other countries complain excess cash may flood into their markets seeking higher returns, pushing their currency values higher, squeezing their exporters and inflating bubbles in stocks or other assets that could destabilize their financial systems.

G-20 financial officials made little headway Wednesday in resolving the currency standoff, a summit spokesman, Kim Yoon-kyung, told reporters in Seoul.

“Critical agendas, such as establishing a clear guideline on limiting current account surpluses and deficits to sustainable levels and recent moves by Washington to print more money, were put on the table, but only highlighted differences between member countries,” Kim said.

Such issues were left unresolved to allow work on other issues that must be included in a declaration at the summit’s end, he said.

The G-20 first convened a leaders summit two years ago and has since supplanted the Group of Seven advanced nations as countries like China and India gained economic and political stature in their own right.

The aim is to craft a new global economic order to replace one powered by the U.S. running huge trade deficits while countries like China, Germany and Japan accumulate vast surpluses. One U.S. proposal, for example, calls for setting guidelines for when such imbalances might become potentially destabilizing.

China announced Wednesday that its trade surplus surged to its second-highest level this year in October, raising pressure on Beijing over its currency, which the U payday lenders.S. and other trading partners say is kept artificially weak, making its exports more competitive overseas.

Beijing maintains that the focus on its currency policies is misplaced.

If either side “chooses a confrontational approach, I think everybody will come out as losers,” said Vice Foreign Minister Cui Tiankai, an envoy to the Seoul talks.

On less somewhat less confrontational issues, the G-20 leaders are expected to endorse beefing up supervision of financial institutions and to voice support for giving developing countries more say in the International Monetary Fund.

In Yokohama, trade and foreign ministers of the Asia-Pacific Economic Cooperation forum were mulling moves toward a Pacific-wide free trade zone that would encompass more than half the world’s economic output.

“We are quite committed to that. We believe that open trade is indispensable to overcome the financial crisis and the economic crisis,” Mexican foreign minister Patricia Espinosa said on the sidelines of the meetings.

A failure to cooperate, rather than renewed financial woes, is the biggest threat, warned a report issued Wednesday by the Pacific Economic Cooperation Council, an APEC advisory group.

Debt troubles in Europe, weak U.S. growth and tensions over trade are clouding the global outlook and contributing to an “unprecedented crisis atmosphere,” the report said, citing a survey of 422 regional opinion leaders.

The report urged APEC to carry though with reforms needed to ensure more balanced, sustainable and equitable growth as the group reviews its progress toward the still unfulfilled goal, set in 1994, of achieving free trade and investment among developed members by 2010.

A regionwide arrangement, dubbed the Free Trade Area of the Asia-Pacific, could help untangle a slew of bilateral and regional agreements, and by lowering trade barriers, could boost growth.

A building block of that plan is a U.S.-backed free trade agreement called the Trans-Pacific Partnership. It now includes only four small economies _ Brunei, Chile, New Zealand and Singapore _ but the U.S., Australia, Malaysia, Vietnam and Peru are in talks to join them.

Though such moves could hurt farmers in South Korea and Japan who are outraged at the prospect of losing protective high tariffs, host Tokyo says it favors moving toward freer trade.

“In many ways, Japan has fallen behind the wave of creating freer economies,” Japanese Prime Minister Naoto Kan said Tuesday. “I think it’s time to steer once again toward opening the country.”

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10/16/2010 (3:32 pm)

Federal grants help local farmers markets

Filed under: business |

Albuquerque and Santa Fe are being allocated a total of $118,000 in federal grants to improve local farmers’ markets, and expand access to them by more low-income families.

The money is from the U.S. Department of Agriculture’s 2010 Farmers Market Promotion Program.

The city of Albuquerque will receive $63,914 to establish a sales and marketing organization to help create a permanent indoor/outdoor growers’ market in the city.

The Santa Fe Farmers Market Institute will get $54,086 to improve the Santa Fe Farmers Market with professional development workshops and consumer education. About $4,000 will be used to promote the existing electronic benefits program, which makes it possible for recipients of the Supplemental Nutrition Assistance Program and the Special Supplemental Nutrition Program for Women, Infants and Children to use assistance funds to purchase locally grown fresh fruits and vegetables.

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09/20/2010 (10:21 pm)

Foreclosure rates hold steady

Filed under: business |

The foreclosure crisis has entered a new phase: The number of properties entering the foreclosure process has dropped, and now nearly matches the number of repossessions.

The number of homeowners falling enough behind on their loans to attract initial notices of default was down 30% in August, RealtyTrac said Thursday. Eventually, that should translate into fewer people losing their homes.

But lenders repossessed more than 95,000 homes — a record — and that was up from 76,000 a year ago.

RealtyTrac spokesman, Rick Sharga, said the initial default rate should be higher, given the numbers of borrowers who have missed one or two payments. Normally, when a third payment is missed, lenders take immediate action.

"It appears that lenders are allowing delinquencies to go on longer before they issue notices of default," he said.

Lenders may delay filing for a couple of reasons. In some cases, a notice of default puts lenders on the clock; regulations force them to foreclose within a certain time frame, sometimes before they want to.

Second, borrowers might vacate their homes when they receive default notices, leaving the houses empty, subject to vandalism, and forcing lenders to take over the expense of maintaining them.

However, once lenders have begun the initial foreclosure process, they are moving quickly to repossession.

That’s in part because as housing markets have improved, as it has in California, lenders are able to resell foreclosed homes more quickly and avoid further losses payday loans direct lenders.

In other markets, according to Sharga, they may take homes back but not necessarily put them on the market again right away. That may represent a deliberate effort to manage the flow of foreclosures to prevent further erosion of home prices.

Not only would a flood of properties and lower prices hurt lenders’ profits, it would leave more mortgage borrowers owing more than their homes are worth. As more homeowners plunge underwater, more would default, causing a new round of home price drops and still more foreclosures.

For the 44th straight month, Nevada led all states in the rate of foreclosure filings. One in every 84 households there received some kind of filing during the month, more than four times the national average.

The other "sand states," Florida (one in 155 households), Arizona (one in 165) and California (one in 194) followed in a familiar foreclosure pecking order.

All of the top 10 metro area hot spots recorded drops in foreclosure activity during August. In the worst hit city, Las Vegas, filings dropped 25% year-over-year but still came to one for every 73 households.

Modesto and Stockton, both medium-sized cities in California’s Central Valley, closely trailed Las Vegas in filing rate. Rounding out the first five metro areas were Cape Coral and Miami. 

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07/21/2010 (7:14 pm)

National Fuel execs to ring closing bell

Filed under: business |

Top officials from National Fuel Gas Co. will be on Wall Street Wednesday, July 21 to ring the closing bell at the new York Stock Exchange.

The Williamsville-based energy company (NYSE: NFG) will celebrate 55 years as a listed company by ringing out the day’s trading at 4 p.m.

“The NYSE has long been a home to many of the world’s leading publicly traded companies and we are pleased to celebrate 55 years along side many of these respected businesses with a history as long as ours,” said a statement from CEO David Smith, who will lead the senior management team.

National Fuel was incorporated in 1902.

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