Finance & Business World

Swarovski will open in July a licensed boutique store at Hartsfield-Jackson Atlanta International Airport through a partnership with Areas USA.

The 567-square-foot space will sell Swarovski’s line of fashion jewelry, watches, home accessories and décor objects.

Swarovski already has eight licensed boutiques in the United States with locations at Foxwoods Resort Casino, John F. Kennedy Airport, Dover Downs Hotel & Casino, the Palazzo Resort Hotel & Casino, the Venetian Las Vegas Resort Hotel Casino and the Eldorado Hotel Casino among others. It is aiming to have between 20 to 25 licensed boutiques opened by the end of 2010.

Swarovski also runs more than 230 retail stores throughout the country.

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Tesla Motors Inc. said Tuesday it expects its stock will sell in the $14 to $16 a share price range.

The Palo Alto-based electric car company said that it expects to raise up to $230 million between the 10 million shares it will sell in its initial public offering, the 3.3 million shares that Toyota Motor Corp. has agreed to buy and 1.1 million in additional shares its underwriters have the option to buy payday advance.

The company's market cap at the high end of the price range would be about $1.5 billion.

It has applied for the ticker symbol "TSLA" to trade on the Nasdaq exchange.

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Consumer prices fell in April for the first time in 13 months, giving the Federal Reserve more room to keep interest rates at historic lows to aid the economy. That’s good news for borrowers, but not for savers.

Record-low rates help borrowers who qualify for loans and want to take on more debt. The prime lending rate, used to set rates on some credit cards and consumer loans, is at its lowest point in decades.

But low rates hurt savers. They’re especially hard for people on fixed incomes who earn scant returns on their savings.

The 0.1 percent decrease in overall prices last month was pulled down by gas prices, which are expected to drop further this summer.

Core inflation, which excludes volatile food and energy prices, was flat in April, according to the Labor Department report Wednesday. Over the past 12 months, core inflation has risen just 0.9 percent — the smallest increase in 44 years.

The recession in 2007 and 2008 has kept inflation so low that some economists worry about the possibility of deflation — a destabilizing period of falling prices and wages.

"With the unemployment rate so close to 10 percent, it is entirely understandable that the Fed wants to stick with its commitment to leave rates at near-zero," said Paul Ashworth, senior U.S. economist at Capital Economics.

Ashworth said he thought the Fed wouldn’t start raising rates until late next year — and potentially not until 2012.

Economists had expected overall prices and core prices to edge up 0.1 percent in April. The drop in overall prices was the first decline since a similar dip in March 2009.

Energy prices fell 1.4 percent, the biggest one-month decline since March 2009. Gasoline prices dropped 2.4 percent. Analysts said they expect further declines in coming months as crude oil prices are down nearly 20 percent since April.

Food costs rose 0.2 percent, the same increase posted in March. Economists had expected a bigger increase because of a winter freeze on Florida vegetable and citrus crops.

Clothing costs dropped by 0.7 percent in April. The cost of new vehicles was unchanged. Airline tickets rose by 2.2 percent, one of the few areas to show price pressures last month.

Joel Naroff, president of Naroff Economic Advisors, said stable prices had allowed consumers to spend more freely despite slow growth in income and high unemployment. He said most businesses were "dealing with a sluggish economy and that means they have very little pricing power."

Inflation at such low levels raises concerns of deflation. But most economists believe that threat remains remote. The overall economy has begun growing again, and hiring is starting to pick up.

The U.S. has not had to battle deflation since the 1930s.

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Australia’s economy has less scope than previously expected for “robust” growth that doesn’t stoke inflation, central bank Governor Glenn Stevens said.

“Monetary policy must therefore be careful not to overstay a very expansionary setting,” Stevens told lawmakers at a parliamentary committee hearing in Canberra today.

Policy makers said this week their decision to unexpectedly keep interest rates unchanged this month was “finely balanced” amid concern that European sovereign-debt risks may weaken the global economic recovery. Stevens said borrowing costs in Australia are still between 50 and 100 basis points below what the central bank considers “normal.”

“Stevens is quite bullish on domestic growth, but whether that translates into a March hike is another matter,” said Adam Carr, an economist at ICAP Australia Ltd. in Sydney. “I don’t know what more they need to see to hike again — it should already be very clear cut.”

The Australian dollar traded at 89.25 U.S. cents at 9:56 a.m. in Sydney from 89.38 cents before the governor’s testimony began. The yield on two-year government bonds rose six basis points, or 0.06 percentage point, to 4.31 percent from 4.25 yesterday. A basis point is 0.01 percentage point.

Stevens was the first central banker in the world to raise borrowing costs three times last year, taking the cash rate target to 3.75 percent in December from 3 percent at the start of October.

‘Further Adjustments’

“If economic conditions evolve roughly as we expect, further adjustments to monetary policy will probably be needed over time to ensure that inflation remains consistent” with the bank’s target range of 2 percent to 3 percent, Stevens said.

Stevens’s testimony today came after the Federal Reserve Board raised the discount rate charged to banks for direct loans by a quarter point to 0.75 percent, another step in the U.S. central bank’s gradual retreat from its unprecedented actions to halt the deepest financial crisis since the Great Depression. The Fed left the benchmark overnight lending rate in a range of zero to 0.25 percent at its meeting on Jan. 27.

Traders are betting there is a 38 percent chance of a quarter- percentage-point rate increase when the Reserve Bank of Australia next meets on March 2, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 10:02 a.m. Prior to today’s testimony, chances of a move stood at 40 percent.

Below Normal

“We’re still below normal, I would say, which hitherto has been the appropriate place to be,” Stevens said. “There’s a little distance to go before you could characterize interest rates as normal.”

Stevens said unemployment has peaked at less than 6 percent, “much lower than we or most others forecast.”

Australia is experiencing its biggest jobs boom in five years. Employers added 194,600 workers in the five months through January, cutting the unemployment rate to an 11-month low of 5.3 percent, almost half European Union and U.S. levels.

The jobs surge should help spur the economy, one of the few to skirt last year’s global recession after Prime Minister Kevin Rudd distributed more than A$20 billion ($18 billion) in cash to households and began spending another A$22 billion on roads, railways and schools.

The central bank forecast on Feb. 5 that gross domestic product will rise at an annual pace of 3.25 percent in the three months through December 2010, up from 2 percent in the final quarter of 2009.

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A free-trade agreement between China and Southeast Asia comes into force today, consolidating a sixfold surge in economic activity over the past decade between countries representing a quarter of the world’s population.

The agreement expands a limited 2005 trade area between China and the 10-member Association of Southeast Asian Nations, scrapping tariffs on about 90 percent of goods. By 2015, duties must be cut to no more than 50 percent on “highly sensitive” items, including ambulances in Brunei, popcorn in Indonesia, snowboard boots in Thailand and toilet paper in China.

China’s economic clout in Southeast Asian countries has risen over the past decade as policy makers slashed tariffs on electronics, automobile parts and computer chips. Japan, India, Europe and the U.S. have followed China in courting Asean, home to investments from Intel Corp., the world’s largest maker of computer chips, and Toyota Motor Corp., the biggest carmaker.

“This FTA is going to make a difference at the margin to some Asean countries but not others,” said Razeen Sally, a director of the Brussels-based European Centre for International Political Economy, a trade-policy research group. “Basically it takes down the tariffs but does little on all the non-tariff barriers where you would have much bigger gains to trade.”

China’s trade with Asean has jumped sixfold since 2000 to $193 billion last year, surpassing that of the U.S. China’s share of Southeast Asia’s total commerce has increased to 11.3 percent from 4 percent in that time, whereas the U.S.’s portion of trade with the bloc fell to 10.6 percent from 15 percent, Asean statistics show.

Deficit Widens

During that time, Asean’s trade deficit with China widened by five times to $21.6 billion. The bloc reported a $21.2 billion trade surplus with the U.S. last year, down 12 percent from 2000.

The trade agreement would hit high-tariff industries in Indonesia and the Philippines more than other Asean countries, Sally said. Trade in parts and components, the “central artery” of China-Asean economic ties, won’t be affected much because most of those tariffs are already near zero, he said.

Opposition to the trade agreement has been loudest in Indonesia, where the government has sought to placate concerns that industries including textiles, food and electronics will suffer. Indonesia should renegotiate the deal because the textile industry may see its domestic market share decline by 50 percent as cheaper Chinese goods enter the market, said Ade Sudradjat, vice chairman of the Indonesian Textile Association.

The government is setting up a team to monitor trade practices, Hatta Rajasa, coordinating minister for the economy, told reporters in Jakarta Dec. 30.

“When a nation has cheap products, we must see whether there’s unfair trade in it, such as unfair subsidies,” he said. “We must be proactive.”

Port Inspection

Indonesia, Asean’s biggest economy and home to about 40 percent of the bloc’s 584 million people, has required Chinese exports of garments, electronics, shoes, toys and food to be shipped from designated ports with every container inspected upon arrival. China, poised to overtake Germany as the world’s largest exporter this year, faces 101 trade investigations in 19 countries, state-run Xinhua News Agency reported this month.

Asean governments should resist the temptation to raise non-tariff barriers, the association’s secretary general, Surin Pitsuwan, told Xinhua in an interview published today.

To help its exporters, China has halted the yuan’s gains against the dollar from July last year. In 2009 the yuan has remained largely unchanged against the dollar while Indonesia’s rupiah climbed 15.5 percent, Thailand’s baht advanced 4.2 percent and the Philippine peso increased 2.3 percent.

Asean includes Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam. Wide economic disparity has hindered the group’s efforts to form a single market, as the purchasing power of the group’s four richest countries was 10 times greater than that of the other members last year, according to statistics on the bloc’s Web site.

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Countries need to maintain stimulus programs to help support their economies because a further deterioration of the U.S. housing market and volatile oil prices pose risks to the global recovery, OECD Secretary-General Angel Gurria said.

“It’s very early to stop the stimulus,” the Organization for Economic Cooperation and Development’s Gurria said in an interview with Bloomberg yesterday in Busan, South Korea. The key “question will be when to move from policy-based recovery to self-sustained growth.”

The OECD in September predicted a “modest” recovery for the world’s leading industrialized economies, saying the Group of Seven nations will shrink 3.7 percent this year, rather than the 4.1 percent projected in June. The organization has also said weakness in corporate profits, hiring, incomes and housing markets would slow the subsequent rebound payday advance lender.

“There still are a number of downside risks” to growth, Gurria said in the interview. These include volatility in oil prices, “which can affect some other types of prices, including the price of food.” Governments are still to finish the recapitalization of banks, which “have not yet restarted lending at the natural pace,” he said.

The credit-market meltdown that led to a financial crisis has caused more than $1.6 trillion in losses and writedowns worldwide.

European Central Bank governing council member Christian Noyer said earlier this week banks need to shore up their capital base, recommending restraint in dividend distributions and compensation.

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Confidence among Japanese merchants rose in September, a boost economists say may not last as near- record unemployment and falling wages deter people from spending.

The Economy Watchers index, a survey of barbers, taxi drivers and others who deal with consumers, climbed to 43.1, the Cabinet Office said today in Tokyo. The index dropped for the first time in eight months in August.

The improvement in sentiment doesn’t indicate the economy’s recovery from its worst postwar recession is gaining traction, economists said. The unemployment rate is close to a record high and wages have dropped for 15 months, which may compel households to tighten their purse strings.

“We need to see a clear improvement in the labor market and wages before sentiment gains momentum,” said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo. “Consumer spending will weaken as support from government measures fades.”

Japan’s economy expanded in the second quarter for the first time in more than a year, helped by exports and 25 trillion yen ($282 billion) in government stimulus packages. Economists expect growth to slow in coming months.

“We can’t be optimistic about the current state of the economy,” Deputy Prime Minister Naoto Kan said this week, adding that the government may need to compile an extra budget to support the nation’s weakening job market online pay day loans.

The jobless rate dropped to 5.5 percent in August from a record 5.7 percent in July. Winter bonuses for Japan’s large companies will fall 13.1 percent to about 660,000 yen ($7,472), the biggest drop since the survey began in 1970, the Institute of Labor Administration reported this week.

Imports Fall

In another sign of weak demand, imports fell by a record amount in August, causing the current-account surplus to widen, the Finance Ministry said in a report today.

Households are shifting to cheaper stores including Uniqlo Co. and turning their back on luxury brands. Gianni Versace SpA will close its three Japanese stores and review its entire business strategy, Federico Steiner, spokesman for Versace in Milan, said on Oct. 6.

The starting salary for graduates fresh out of college this year rose 0.09 percent to 208,306 yen, according to the business lobby Keidanren, the smallest gain since the survey started in 1966.

“The drop in starting salary is a direct reflection of how severe this recession is,” said Hideshi Nitta, manager of the labor policy bureau at the Keidanren in Tokyo. “Growth will probably remain tepid next year.”

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Turkish Prime Minister Recep Tayyip Erdogan, who hosts the International Monetary Fund’s main annual meeting next week, wants to show that his $600 billion economy can survive the global crisis without new money from the lender.

Turkey has been the fund’s biggest borrower this decade, drawing about $43 billion to help recapitalize more than 20 failed banks. Erdogan, who heads an Islamist-rooted government that has been entrenching its power since a 2007 re-election, has resisted taking on new loans in more than a year of talks with the fund, even as the EU membership candidate sank into its deepest recession.

“Erdogan consistently said ‘no’ to the IMF, despite pressures from both the domestic and the overseas business community,” said Ahmet Akarli, an economist for Goldman Sachs Group Inc. in London. He likely saw dependency on IMF loans as incompatible with his “strategy of transforming Turkey into a leading global player and a heavyweight in its immediate region,” Akarli said.

Istanbul, a city of 12 million that straddles the two continents, will welcome about 15,000 delegates including finance ministers of the G-7 countries. They’re here to attend the annual meetings of the IMF and World Bank, the institutions set up after World War II to ensure financial stability and reduce poverty.

Turkish financial markets backed Erdogan’s go-it-alone strategy, posting gains even as Turkey refused IMF requests to reduce spending on local government and improve the country’s tax collection system.

Growing Power

Turkey’s benchmark ISE-100 stock index has added about 80 percent this year, exceeding the 57 percent gain on the benchmark MSCI Emerging Markets index. Yields on the country’s benchmark bonds have fallen by almost half, to a record low of 8.6 percent.

Erdogan, 55, is seeking to promote Turkey as a growing economic power and also a regional dealmaker. He’s mediated indirect peace talks between Syria and Israel, acted as a go- between in international talks with Iran over its nuclear program, and offered his country as a conduit to bring central Asian oil and gas to Europe.

The IMF and World Bank meetings are only held outside Washington once every three years and Turkey, venue for the 1955 summit, becomes the first country to host them twice — a publicity coup for Erdogan and his Justice and Development Party.

The IMF meetings “will take Turkey’s visibility to new levels,” Deputy Prime Minister Ali Babacan said on Sept 30.

No Walking Stick

Erdogan inherited an IMF program of spending cuts and state asset sales when he came to power in 2003, and stuck with it for five years. Now he’s balking at the fund’s demands for tighter budgets, and says Turkey no longer needs IMF cash.

“We’ve shown we can overcome crisis without the IMF,” he said on Sept. 17 in Istanbul, the city he ran as mayor between 1994 and 1998. “We’re trying to stand on our own two feet and move forward without a walking stick.”

Talks will resume once the annual meetings end, “and we’ll see what is needed,” fund Managing Director Dominique Strauss- Kahn said yesterday in Istanbul. “There’s no rush and no tension between Turkey and the IMF.”

The country’s banking system has weathered the global crisis without the need for government bailouts, after a decade of IMF-ordered changes to tighten regulation and risk management. Akbank TAS, the lender part-owned by Citigroup Inc., stayed profitable throughout the crisis and posted second-quarter net of $494 million, up 44 percent from a year earlier.

Limping Economy

Turkey’s manufacturing economy, though, is limping its way through the global slowdown, as European demand for Turkish-made cars, fridges and washing machines slumps. Net income at Ford Otomotiv Sanayi AS, the local unit of Ford Motor Co., fell 35 percent in the second quarter as exports slumped.

Gross domestic product dropped an annual 14.3 percent in the first quarter, the deepest contraction since quarterly records began in 1987. Unemployment among people under 24 jumped to 29 percent in February from 22 percent a year earlier.

The economy would have performed better if Erdogan had agreed IMF loans, Mustafa Koc, chairman of the country’s biggest industrial group Koc Holding AS, which is Ford’s local partner, said in Istanbul yesterday.

Ballooning Deficit

Higher spending to support the jobless, combined with lower tax revenue, is forcing the government to borrow more to fund a budget deficit forecast at 63 billion liras ($43 billion) this year, six times the target drawn up before the crisis struck.

That means Erdogan can’t cut off talks with the fund altogether. The country still owes about $8 billion to the IMF from earlier programs.

“They’ll keep the IMF talks in limbo for a while longer because that’s worked so far,” said Tevfik Aksoy, an economist at Morgan Stanley in London. “If global conditions worsen and it looks like there may be a need for money after all, then they’ll be able to announce it.”

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Billionaire hedge-fund manager George Soros called on the world’s leaders to create “global regulations” to ensure stability as the world emerges from the financial crisis.

“We need to establish proper regulation because the system we allowed to develop for the last 25 years did collapse,” Soros said today during a video link with a conference in Yalta, southern Ukraine. “The authorities need to agree on that, but whether they will be able to do that is an open question.”

President Barack Obama and other Group of 20 leaders meeting in Pittsburgh are uniting behind a plan to force banks to tie compensation more closely to risk and to tighten capital requirements, while they agreed to maintain stimulus measures to spur the global economy amid the worst financial crisis in more than six decades, according to officials from G-20 governments.

The regulatory “should not be led particularly by the U.S., but it is very important to bring China into it,” Soros said. He criticized the Obama administration on bank bailouts.

“That was a mistake,” Soros said. “More radical recapitalization should have been done even if that would have meant that the state would take temporary control of the banking system,” Soros said. “But Obama felt that it would not be accepted and decided they would not do it.”

Soros said he expects the U.S. economy to show “very slow” expansion over the next several years even after the government injected “tremendous amount of money” into the economy to renew growth.

‘Better Balance’

“Next year or the year after, there will be a drop, but it will not be severe,” Soros predicted faxless cash advance. “China has resources to sustain its economy and it will drive the global economy. Europe will be in better balance” than the U.S., “but I cannot see growth there either. Brazil will show good growth,” he said.

U.S. gross domestic product shrank at a 1 percent annual rate in the second quarter, less than the 1.5 percent decline projected by economists in a Bloomberg survey. The drop in GDP was the fourth in a row, the U.S.’s longest contraction since quarterly records began in 1947. The world’s largest economy has shrunk 3.9 percent since last year’s second quarter, marking the deepest recession since the Great Depression.

Withdrawing stimulus measures from the economy “will be a very risky operation,” Soros said. “I do not think we will see run-away inflation, but the fear will increase interest rates and cause slow growth.”

Derivatives Markets

Soros also said that derivatives markets should be under more control. “Some derivatives carry tremendous risks and they cause systemic risks,” he said. “This is why I think that some kinds of instruments need to be licensed and some instruments should be banned.”

He said the U.S. dollar likely will retain its position as a reserve currency.

“Clearly, the dollar has lost its dominant position as the most desirable and widely used reserve currency, but there is no alternative to the dollar,” said Soros. “There is general reluctance now to hold currencies, there is a flight toward commodities or real assets.”

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A third of companies are in crisis one year on from Lehman Brothers Holdings Inc.’s collapse and most are still cutting costs, a McKinsey & Co. survey found.

“A year after the global economic system nearly collapsed, many companies are finally finding ways to increase profits, but almost as many expect profits to continue falling,” the consulting firm said in an e-mailed report. “Executives also indicate that their broader economic hopes remain fragile.”

Federal Reserve Chairman Ben S. Bernanke said in a speech yesterday that the worst U.S. recession since the 1930s has probably ended, while warning growth may not be strong enough to quickly reduce the jobless rate. Stock markets have rallied and bond spreads have contracted this year amid hopes the global economy is rebounding.

Bonds have returned investors 13 percent this year, according to the Merrill Lynch Global Broad Market corporate bond index. The MSCI World stock index is up 22 percent.

Less than 10 percent of survey respondents expect sales to fall because consumers or businesses can’t get credit, McKinsey found. Just under 50 percent expect higher borrowing costs over the next five years.

China executives are no more likely than those in other countries to predict the start of a global rebound, though are particularly bullish on China’s economic prospects, with 82 percent expecting higher growth this year, McKinsey said.

Concern over trade restrictions has eased in the past six months, the survey said.

The firm said it received responses from 1,677 executives from all regions, industries, and company sizes.

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