Finance & Business World

European officials praised Spain

Germany’s government says it is speeding up its plans to cut its borrowing as it works to balance its budget by 2016.

A senior official said Friday that the federal government will reduce its new borrowing between 2013 and 2016 to euro45.6 billion ($59.5 billion) from the previously planned euro73 billion.

A robust economy has helped increase Germany’s tax intake, allowing the country to run up less new debt. Germany plans to balance its budget in 2016, when it expects to borrow only euro1.1 billion.

Germany has pushed hard for the other 16 countries that use the euro as their currency to get their public finances in order as the continent recovers from the debt crisis.

The official briefed reporters on condition of anonymity because the plan hasn’t officially been released.

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Now that we know everything there is to know about The New iPad and are busily making plans to camp out overnight when it first hits stores, it

Bill Gross is now officially in the ETF business. Pimco launched the ETF version of its Total Return Fund Thursday, and experts say it could be a game changer.

The Pimco Total Return ETF () aims to mirror the performance of Pimco’s Total Return Fund (), the world’s largest bond mutual fund with nearly $245 billion in assets. And it will be managed by Pimco founder and chief investment officer Gross himself.

The fact that it is a version of such a popular fund and has Gross’ star power makes Pimco’s newest ETF a litmus test for the actively-managed ETF space.

So far, a good chunk of the 40 or so actively-managed ETFs, which represent just 0.5% of the total ETF market, have struggled to attract sizable assets and trading volumes.

The end of mutual funds is coming

But ETF industry watchers have been hoping Pimco’s ETF will usher in a change.

So does Gross.

"The Total Return ETF harnesses Pimco’s time-tested investment process and our skills as an active manager, and we believe it signals an important new phase in the development of the ETF marketplace," he said Thursday in a statement low fee payday advance.

Earlier this year, Gross said he expects the Total Return ETF will follow in the footsteps of its mutual fund version to become the largest ETF in the world.

But Standard and Poor’s cautions investors from flocking to the ETF out of the gates.

While the ETF version is less expensive that its mutual fund counterpart, boasting an gross expense ratio of 0.55% compared to 0.85%, it’s more expensive than the larger fixed income ETFs in the market, notes Todd Rosenbluth, S&P Capital IQ ETF analyst.

Rosenbluth also warned that the ETF’s holdings are likely to vary slightly from the mutual fund’s holdings, since the Securities and Exchange Commission restricts the use of derivatives in new ETFs.

Trading volume for the Pimco Total Return fund topped out at 550,375 shares, trading just under $100 apiece.  

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Greece

Shell Lubricants has informed employees that it will close its Wood River blending plant in Roxana and its St. Louis regional distribution center in O’Fallon, Mo.

Ninety-six people work at the two facilities.

A Shell spokesperson said the blending plant needed extensive upgrades. She said Shell does not own the plant and the company decided not to renew the current lease when it expires. With closure of the blending plant, the distribution center will no longer be optimally located for its functions, she said.

The blending plant employs 83 people and the distribution center employs 13. They produce and distribute bulk and packaged lubricants, including motor oil.

Shell built the huge Wood River Refinery in 1917 and owned and operated it for many years. The distribution center had operated since 2000. The two Shell Lubricants locations are the only Shell-operated businesses remaining in the St. Louis area. The blending plant is leased from ConocoPhillips, which now operates the refinery.

The blending plant is scheduled to close at the end of 2013. The distribution center will close at the end of this year.

Affected employees will be considered for other positions within the company or offered competitive severance packages, the company said in a written statement.

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By May, gas prices in the GTA could ratchet up by anywhere from 5 cents to 20 cents per litre.

Prices at the pump have already climbed by about 7 cents to 128.7 cents per litre in the last month. And while it is normal for gas prices to climb in the spring as motorists drive more and refineries close for maintenance, there are more factors at play this year.

How high can the prices get?

Jason Toews, co-founder of Gasbuddy.com sees prices reaching 150 cents to 155 cents per litre by May. Last year gas prices reached a high of 140.6 cents.

Petroleum analyst Robert McKnight says prices will reach between 143 cents to 147 cents a litre by April. That is a 12 to 15 per cent increase from the pump price you see today, he said.

Michael Ervin, vice-president of Calgary-based Kent Group, has a more conservative prediction of 4 cent to 7 cent per litre increase

South African Finance Minister Pravin Gordhan may push back next year

Gasoline prices jumped in January, leading overall consumer prices higher and offering a reminder of the risks energy costs pose to the economic recovery.

Despite the warning signal, overall consumer prices rose just 0.2 percent, the Labor Department said on Friday, which is unlikely to ring alarm bells at the Federal Reserve.

Strong jobs and factory data have eased worries U.S. economic growth could slow sharply, but tensions between Western nations and Iran still threaten to hand the economy a repeat of 2011 when a spike in energy prices hit the recovery hard.

“The greatest concern is that geopolitical strains in the Middle East will spill over into the oil market, pushing prices higher in a replay of last year’s oil price spike,” economists at Bank of America said in a note to clients.

For the Fed, an energy prices spike would represent a quandary: it could hurt the economy even as it boosts inflation. Gasoline prices increased 0.9 percent in January and they have continued to move higher this month.

“Consumers are going to feel a gasoline pinch in the first half of this year,” said Chris Christopher, an economist at IHS Global Insight.

The report also showed so-called core prices, which strip out food and energy costs, rose 0.2 percent, pushing the increase over the last 12 months up to 2.3 percent.

While the year-on-year reading on overall prices has been easing, the steady pick-up in core suggests inflation pressures are not subsiding as quickly as expected, and it could lead to some wariness at the Fed about launching another round of bond purchases to drive borrowing costs lower.

“At the margin it does lean against the case for more (bond purchases),” said JPMorgan economist Michael Feroli.

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Graphic on January U.S. CPI: link.reuters.com/xyr66s

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CAUTION REIGNS

U.S. stocks were little changed following the data, with investors reluctant to continue buying a day after the S&P posted its best daily gain in two weeks. Treasury debt prices edged down and the dollar was flat against a basket of currencies.

A separate report by the private Conference Board showed a gauge of future U.S. economic activity rose to a 3-1/2 year high in January on solid gains in manufacturing.

Last month, Fed Chairman Ben Bernanke left the door open to further Fed bond buying to boost growth, but a steady stream of upbeat data in recent weeks has led analysts to dial down their expectations for a further easing of monetary policy.

In January, used car and truck prices fell 1.0 percent and new vehicle prices were flat, moderating the overall gain in core prices. Policymakers watch core prices closely because they see them as a better guide to inflation trends.

Despite the spike in gasoline prices, overall energy prices rose just 0.2 percent because electricity prices were flat and costs to consumers for piped natural gas services fell 2.9 percent.

Even so, gasoline prices remain a threat to the economy, with oil hovering near $120 a barrel on Friday. Iran, which Western nations accuse of seeking to develop nuclear weapons, is facing sanctions that could cripple its oil exports.

After rising throughout January, the national price for regular unleaded gasoline in the United States rose to $3.58 a gallon in the week through Monday, according to the Energy Information Administration. It had started the year around $3.32 a gallon.

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