WASHINGTON — The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.
Skip to next paragraph
Readers' Comments
Share your thoughts.
* Post a Comment »
Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.
The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance.
The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money.
A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. In a letter to Mr. Geithner, Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives.
“We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he wrote Mr. Geithner on Saturday.
Still, Mr. Liddy seemed stung by his talk with Mr. Geithner, calling their conversation last Wednesday “a difficult one for me” and noting that he receives no bonus himself. “Needless to say, in the current circumstances,” Mr. Liddy wrote, “I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them.”
An A.I.G. spokeswoman said Saturday that the company had no comment beyond the letter. The bonuses were first reported by The Washington Post.
The senior government official, who was not authorized to speak on the record, said the administration was outraged. “It is unacceptable for Wall Street firms receiving government assistance to hand out million-dollar bonuses, while hard-working Americans bear the burden of this economic crisis,” the official said.
Of all the financial institutions that have been propped up by taxpayer dollars, none has received more money than A.I.G. and none has infuriated lawmakers more with practices that policy makers have called reckless.
The bonuses will be paid to executives at A.I.G.’s financial products division, the unit that wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed in many cases by subprime mortgages.
The bonus plan covers 400 employees, and the bonuses range from as little as $1,000 to as much as $6.5 million. Seven executives at the financial products unit were entitled to receive more than $3 million in bonuses.
Mr. Liddy, whom Federal Reserve and Treasury officials recruited after A.I.G. faltered last September and received its first round of bailout money, said the bonuses and “retention pay” had been agreed to in early 2008 and were for the most part legally required.
The company told the Treasury that there were two categories of bonus payments, with the first to be given to senior executives. The administration official said Mr. Geithner had told A.I.G. to revise them to protect taxpayer dollars and tie future payments to performance.
The second group of bonuses covers some 2008 retention payments from contracts entered into before government involvement in A.I.G. Indeed, in his letter to Mr. Geithner, Mr. Liddy wrote that he had shown the details of the $450 million bonus pool to outside lawyers and been told that A.I.G. had no choice but to follow through with the payment schedule.
The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place.
But the official said the administration will force A.I.G. to eventually repay the cost of the bonuses to the taxpayers as part of the agreement with the firm, which is being restructured.
A.I.G. did cut other bonuses, Mr. Liddy explained, but those were part of the compensation for people who dealt in other parts of the company and had no direct involvement with the derivatives.
Mr. Liddy wrote that A.I.G. hoped to reduce its retention bonuses for 2009 by 30 percent. He said the top 25 executives at the financial products division had also agreed to reduce their salary for the rest of 2009 to $1.
Ever since it was bailed out by the government last fall, A.I.G. has been defending itself against accusations that it was richly compensating people who caused one of the biggest financial crises in American history.
A.I.G.’s main business is insurance, but the financial products unit sold hundreds of billions of dollars’ worth of derivatives, the notorious credit-default swaps that nearly toppled the entire company last fall.
A.I.G. had set up a special bonus pool for the financial products unit early in 2008, before the company’s near collapse, when problems stemming from the mortgage crisis were becoming clear and there were concerns that some of the best-informed derivatives specialists might leave. It locked in a total amount, $450 million, for the financial products unit and prepared to pay it in a series of installments, to encourage people to stay.
Only part of the payments had been made by last fall, when A.I.G. nearly collapsed. In documents provided to the Treasury, A.I.G. said it was required to pay about $165 million in bonuses on or before Sunday. That is in addition to $55 million in December.
Under a deal reached last week, A.I.G. agreed that the top 50 executives would get half of the $9.6 million they were supposed to get by March 15. The second half of their bonuses would be paid out in two installments in July and in September. To get those payments, Treasury officials said, A.I.G. would have to show that it had made progress toward its goal of selling off business units and repaying the government.
The financial products unit is now being painstakingly wound down.
Saturday, March 14, 2009
Canada Prepared to Accelerate Asset Purchases to Help Economy
March 15 (Bloomberg) -- Canadian officials indicated they may broaden asset purchases to help lower borrowing costs and battle the effects a deepening global slump.
Bank of Canada Governor Mark Carney yesterday said purchases of non-government assets may be an option as the bank looks at policies beyond interest rate moves. In a separate interview, Finance Minister Jim Flaherty said he’s studying more efforts to shore up the commercial paper market.
“We have lots of options to look at,” Flaherty said in Horsham, England, on the sidelines of a meeting of finance ministers and central bankers from the Group of 20 “The key here is we’ll do what is necessary in order to make the markets function well in Canada.”
Canada’s economy shrank at a 3.4 percent annual pace in the fourth quarter, the most since 1991. Reports have also shown record job losses and trade deficits in recent months.
Carney signaled he’ll likely revise down his outlook for the world’s eighth-largest economy next month. The Bank of Canada’s forecast for 3.8 percent growth in 2010 is more than twice the pace predicted by the IMF.
“When we laid out the projections in the update in January, we also laid out some upside and downside risks,” Carney said in the interview. “It’s safe to say the downside risks, particularly around the outturn in the global economy, have materialized.”
Beyond Rates
Carney said purchasing non-government assets is an option the central bank may consider. Earlier this month the Bank of Canada cut its benchmark lending rate to a record low 0.5 percent, and said it is preparing to use policies beyond interest rate moves, if needed, to revive an economy hit by a recession and tight credit markets.
“As we bring out the framework, it will be consistent that the bank is managing credit easing or has a framework for managing credit easing and we’ll decide when and if to use it,” he said.
Credit conditions for corporations have tightened, with companies facing the worst prospects for obtaining loans or making new sales in a decade, according to a survey of executives by the Bank of Canada released Jan. 12.
Purchases of securities may help drive down longer-term interest rates, stimulating borrowing and economic growth.
Extraordinary Measures
Canadian policy makers left the door open for extraordinary measures earlier this month. The Bank of Canada said at its March 3 interest rate announcement that it will outline how it would implement such measures on April 23.
Fed Chairman Ben S. Bernanke has increased the central bank’s total assets by $1 trillion over the past year to revive the economy and stem the risk of deflation. In December, the Fed switched to using emergency credit programs as the main tool of monetary policy. The Bank of England this month began to acquire government bonds with newly created money.
So-called quantitative easing is designed to leave banks with so much cash that they stop hoarding and expand lending. It can involve a central bank buying securities and creating money to pay for them. A central bank can also try buying up securities to drive down longer-term interest rates, extending efforts to keep short-term rates low with benchmark rates.
Buying Assets
In Canada, the federal government has taken the lead in purchasing assets from the financial system in a bid to revive lending, including facilities to acquire as much as C$125 billion in mortgages from banks and C$12 billion in car loans and leases.
Carney said it’s logical for the government to purchase the mortgages through the state-owned Canada Mortgage and Housing Corp., rather than the central bank, because the agency already insured the assets. Still, the central bank has “providence” over “credit easing,” he said.
“It makes sense to run that through CMHC,” Carney said. “In terms of other potential measures, we’ll work with the government to decide how to design them.”
Flaherty said the finance department and the central bank are coordinating efforts.
“We both have a role. The key here is that the framework is a framework that matches what the bank can do with what the government can do,” Flaherty said. “I have regular discussions with the governor of the bank to make sure we don’t go off course, that what he proposes to do meshes with what the government is doing.”
Bank of Canada Governor Mark Carney yesterday said purchases of non-government assets may be an option as the bank looks at policies beyond interest rate moves. In a separate interview, Finance Minister Jim Flaherty said he’s studying more efforts to shore up the commercial paper market.
“We have lots of options to look at,” Flaherty said in Horsham, England, on the sidelines of a meeting of finance ministers and central bankers from the Group of 20 “The key here is we’ll do what is necessary in order to make the markets function well in Canada.”
Canada’s economy shrank at a 3.4 percent annual pace in the fourth quarter, the most since 1991. Reports have also shown record job losses and trade deficits in recent months.
Carney signaled he’ll likely revise down his outlook for the world’s eighth-largest economy next month. The Bank of Canada’s forecast for 3.8 percent growth in 2010 is more than twice the pace predicted by the IMF.
“When we laid out the projections in the update in January, we also laid out some upside and downside risks,” Carney said in the interview. “It’s safe to say the downside risks, particularly around the outturn in the global economy, have materialized.”
Beyond Rates
Carney said purchasing non-government assets is an option the central bank may consider. Earlier this month the Bank of Canada cut its benchmark lending rate to a record low 0.5 percent, and said it is preparing to use policies beyond interest rate moves, if needed, to revive an economy hit by a recession and tight credit markets.
“As we bring out the framework, it will be consistent that the bank is managing credit easing or has a framework for managing credit easing and we’ll decide when and if to use it,” he said.
Credit conditions for corporations have tightened, with companies facing the worst prospects for obtaining loans or making new sales in a decade, according to a survey of executives by the Bank of Canada released Jan. 12.
Purchases of securities may help drive down longer-term interest rates, stimulating borrowing and economic growth.
Extraordinary Measures
Canadian policy makers left the door open for extraordinary measures earlier this month. The Bank of Canada said at its March 3 interest rate announcement that it will outline how it would implement such measures on April 23.
Fed Chairman Ben S. Bernanke has increased the central bank’s total assets by $1 trillion over the past year to revive the economy and stem the risk of deflation. In December, the Fed switched to using emergency credit programs as the main tool of monetary policy. The Bank of England this month began to acquire government bonds with newly created money.
So-called quantitative easing is designed to leave banks with so much cash that they stop hoarding and expand lending. It can involve a central bank buying securities and creating money to pay for them. A central bank can also try buying up securities to drive down longer-term interest rates, extending efforts to keep short-term rates low with benchmark rates.
Buying Assets
In Canada, the federal government has taken the lead in purchasing assets from the financial system in a bid to revive lending, including facilities to acquire as much as C$125 billion in mortgages from banks and C$12 billion in car loans and leases.
Carney said it’s logical for the government to purchase the mortgages through the state-owned Canada Mortgage and Housing Corp., rather than the central bank, because the agency already insured the assets. Still, the central bank has “providence” over “credit easing,” he said.
“It makes sense to run that through CMHC,” Carney said. “In terms of other potential measures, we’ll work with the government to decide how to design them.”
Flaherty said the finance department and the central bank are coordinating efforts.
“We both have a role. The key here is that the framework is a framework that matches what the bank can do with what the government can do,” Flaherty said. “I have regular discussions with the governor of the bank to make sure we don’t go off course, that what he proposes to do meshes with what the government is doing.”
G-20 Pledges Sustained Growth Effort, Will Tackle Toxic Assets
March 15 (Bloomberg) -- Finance chiefs from the biggest developed and emerging economies pledged a “sustained” effort to end the global recession and to cleanse banks of toxic assets.
“We were seized by the fact that there was a sense of urgency,” U.K. Chancellor of the Exchequer Alistair Darling told reporters after the Group of 20 finance ministers and central bankers met in southern England yesterday. U.S. counterpart Timothy Geithner said there was a “clear commitment to do what’s necessary, to keep at it, to get the economy on track.”
Such promises marked a compromise at the end of a week in which U.S. calls for governments to spend more were rebuffed by euro-region ministers. The International Monetary Fund predicts the first global contraction in six decades and yesterday won a commitment to have its resources at least doubled to help it better fight the spreading turmoil.
“Our key priority now is to address the value of assets held on banks’ balance sheets, which are constraining banks’ lending” and damaging economies, the G-20 statement said. Banks are still hoarding cash after being stung by more than $1.2 trillion of writedowns and losses. Interbank lending rates this week rebounded to the highest level since Jan. 8.
The G-20 set a dozen principles to be followed as members take on impaired assets in an attempt to avoid an uneven approach that may distort capital flows and spark protectionism.
Hedge Funds
Among them: shareholders should be exposed by the “maximum possible” to losses or risks prior to a government intervening. There should also be flexibility when judging which assets can receive support, and it should be clear how they are valued.
The G-20 members also said they would strengthen ties between their individual banking supervisors. Credit rating companies, hedge funds, off-balance sheet vehicles and credit derivatives markets will be subjected to greater oversight.
“Support for the economy will serve for nothing if the financial system is not fixed,” French central bank Governor Christian Noyer told reporters yesterday.
The ministers met to craft an agenda for their leaders, who meet in London on April 2, as they struggle to get to grips with the toxic assets lying at the heart of the crisis.
Citigroup Inc., Commerzbank AG and Lloyds Banking Group Plc have lost more than three fifths of their value this year and the Standard and Poor’s 500 Financials Index has dropped 35 percent.
Worsening Economy
Data this week showed the outlook for recovery is darkening with Chinese exports plunging by a record, German factory orders sliding 38 percent in January and U.S. consumer confidence near a 28-year low.
President Barack Obama said in Washington yesterday investors can have “absolute confidence” in U.S. investments after China said it’s “worried” about its Treasury holdings.
G-20 central banks also committed to maintaining expansionary monetary policies for “as long as needed” after cutting interest rates to records and will use all the tools they can.
Geithner approached the G-20 meeting by lobbying his opposite numbers to follow the U.S. in injecting fiscal stimulus equivalent to at least 2 percent of their economy’s gross domestic product this year. European officials argued they had already spent enough, had bigger social safety nets and didn’t want to blow out budgets.
Overcoming Differences
Papering over those differences, the G-20 said the IMF will monitor budget policies and judge if more action is needed. The officials pledged to coordinate efforts and to maintain fiscal discipline and price stability in the long- run.
“Yes to stimulus packages, but without losing sight of feasibility,” Italian Finance Minister Giulio Tremonti told reporters. France’s Christine Lagarde said her concerns about a split before the meeting were overdone and that officials had instead “agreed that the relaunch has to go ahead on four wheels.”
Some Europeans nevertheless reiterated their concern that policy makers risk overdoing their response. Germany’s Peer Steinbrueck said “it makes no sense to pump more and more money into our economy” when financial markets are still brittle.
“We’re desperately looking for a solution in which those who haven’t caused the problems are spared,” said Steinbrueck. France and Germany agreed it’s “important to talk about an exit strategy” when the global economy recovers, he said.
In a bid to address some of those concerns and avoid future crises, G-20 officials said they were working to subject the financial system to more curbs and ensure regulations “dampen rather than amplify economic cycles.”
Options include introducing buffers that limit leverage and encourage banks to save capital in good times.
G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.
“We were seized by the fact that there was a sense of urgency,” U.K. Chancellor of the Exchequer Alistair Darling told reporters after the Group of 20 finance ministers and central bankers met in southern England yesterday. U.S. counterpart Timothy Geithner said there was a “clear commitment to do what’s necessary, to keep at it, to get the economy on track.”
Such promises marked a compromise at the end of a week in which U.S. calls for governments to spend more were rebuffed by euro-region ministers. The International Monetary Fund predicts the first global contraction in six decades and yesterday won a commitment to have its resources at least doubled to help it better fight the spreading turmoil.
“Our key priority now is to address the value of assets held on banks’ balance sheets, which are constraining banks’ lending” and damaging economies, the G-20 statement said. Banks are still hoarding cash after being stung by more than $1.2 trillion of writedowns and losses. Interbank lending rates this week rebounded to the highest level since Jan. 8.
The G-20 set a dozen principles to be followed as members take on impaired assets in an attempt to avoid an uneven approach that may distort capital flows and spark protectionism.
Hedge Funds
Among them: shareholders should be exposed by the “maximum possible” to losses or risks prior to a government intervening. There should also be flexibility when judging which assets can receive support, and it should be clear how they are valued.
The G-20 members also said they would strengthen ties between their individual banking supervisors. Credit rating companies, hedge funds, off-balance sheet vehicles and credit derivatives markets will be subjected to greater oversight.
“Support for the economy will serve for nothing if the financial system is not fixed,” French central bank Governor Christian Noyer told reporters yesterday.
The ministers met to craft an agenda for their leaders, who meet in London on April 2, as they struggle to get to grips with the toxic assets lying at the heart of the crisis.
Citigroup Inc., Commerzbank AG and Lloyds Banking Group Plc have lost more than three fifths of their value this year and the Standard and Poor’s 500 Financials Index has dropped 35 percent.
Worsening Economy
Data this week showed the outlook for recovery is darkening with Chinese exports plunging by a record, German factory orders sliding 38 percent in January and U.S. consumer confidence near a 28-year low.
President Barack Obama said in Washington yesterday investors can have “absolute confidence” in U.S. investments after China said it’s “worried” about its Treasury holdings.
G-20 central banks also committed to maintaining expansionary monetary policies for “as long as needed” after cutting interest rates to records and will use all the tools they can.
Geithner approached the G-20 meeting by lobbying his opposite numbers to follow the U.S. in injecting fiscal stimulus equivalent to at least 2 percent of their economy’s gross domestic product this year. European officials argued they had already spent enough, had bigger social safety nets and didn’t want to blow out budgets.
Overcoming Differences
Papering over those differences, the G-20 said the IMF will monitor budget policies and judge if more action is needed. The officials pledged to coordinate efforts and to maintain fiscal discipline and price stability in the long- run.
“Yes to stimulus packages, but without losing sight of feasibility,” Italian Finance Minister Giulio Tremonti told reporters. France’s Christine Lagarde said her concerns about a split before the meeting were overdone and that officials had instead “agreed that the relaunch has to go ahead on four wheels.”
Some Europeans nevertheless reiterated their concern that policy makers risk overdoing their response. Germany’s Peer Steinbrueck said “it makes no sense to pump more and more money into our economy” when financial markets are still brittle.
“We’re desperately looking for a solution in which those who haven’t caused the problems are spared,” said Steinbrueck. France and Germany agreed it’s “important to talk about an exit strategy” when the global economy recovers, he said.
In a bid to address some of those concerns and avoid future crises, G-20 officials said they were working to subject the financial system to more curbs and ensure regulations “dampen rather than amplify economic cycles.”
Options include introducing buffers that limit leverage and encourage banks to save capital in good times.
G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.
Friday, March 13, 2009
Fiat Gains Following Report of Peugeot Merger Project
March 13 (Bloomberg) -- Fiat SpA jumped to a one-month high in Milan trading after the Il Sole 24 Ore newspaper reported that Italy’s biggest carmaker is considering a merger with PSA Peugeot Citroen of France.
Turin-based Fiat rose 7.6 percent, or 33 cents, to 4.66 euros, and was up 3 percent as of 3 p.m. in Milan. Paris- based Peugeot climbed as much as 4.6 percent in the French capital and was later little changed at 15.2 euros.
Fiat Chief Executive Officer Sergio Marchionne is evaluating whether to present the merger plan to the company’s board, according to the newspaper, which didn’t say where it got the information. The Turin-based manufacturer said in a statement today that it regularly looks at opportunities for accords that will open new markets or cut production costs, but hasn’t asked the board to examine any merger transactions.
“On paper it looks attractive, but in reality it would be almost impossible because the social costs of restructuring would be so huge that no government would let it happen,” said Alain Michelis, an analyst at Societe Generale in Paris with a “buy” rating on Peugeot and a “hold” on Fiat. “Peugeot and Fiat themselves couldn’t afford a restructuring either.”
Fiat in January agreed to take a 35 percent stake in Chrysler LLC, the third-biggest U.S. automaker, in exchange for sharing small-car technology. Marchionne has said only about five or six major car manufacturers will survive the recession and has indicated that Fiat is open to a European alliance.
Looking for Partners
Societe Generale’s Michelis said he understands that Peugeot is looking for partners, but that Fiat is “not on the list.” Peugeot Citroen shareholder Christian Peugeot seemed to exclude a combination in an interview with Italian daily Il Giornale, which on March 9 cited him as saying that the company is independent and “wants to stay that way.” The Peugeot family owns 30 percent of stock.
“We can’t comment on rumors on mergers and acquisitions in the car industry,” Peugeot Citroen spokesman Hugues Dufour said today by telephone.
Peugeot CEO Christian Streiff said Feb. 11 he was interested in partners “complementary in products or in geography” rather in than rival European volume manufacturers. “We do not want a lot of restructuring to do,” the Financial Times quoted him as saying. The company confirmed the comments.
Peugeot has a commercial-vehicle partnership with Fiat and also cooperates with Munich-based Bayerische Motoren Werke AG on engines. Streiff has repeatedly declined to comment on reports of talks with the German company.
Jobs Protected
Il Sole said that Mediobanca SpA helped form the plan, according to which Fiat’s production structure would remain unchanged, helping to protect Italian jobs, while the headquarters of the merged company would be in Paris and Marchionne would head the combined group. Mediobanca isn’t aware of any merger plan between Fiat and Peugeot, an official said.
“The rumor of a merger has been around for a long time,” Italian bank Cassa Lombarda said today in a research note, adding that it, too, regards social costs as likely to prove too high to be acceptable. The bank said it is “more realistic that Fiat-PSA are working on alliances for new models or engines to share in mature, and more likely in emerging, markets.”
Fiat, controlled by Italy’s Agnelli family, might swap the Fiat Auto carmaking unit for a stake in Peugeot, UBS AG said in a Dec. 11 research note. Fiat may end up with a stake of as much as 45 percent in the newly merged company, Il Sole reported, citing no one.
Turin-based Fiat rose 7.6 percent, or 33 cents, to 4.66 euros, and was up 3 percent as of 3 p.m. in Milan. Paris- based Peugeot climbed as much as 4.6 percent in the French capital and was later little changed at 15.2 euros.
Fiat Chief Executive Officer Sergio Marchionne is evaluating whether to present the merger plan to the company’s board, according to the newspaper, which didn’t say where it got the information. The Turin-based manufacturer said in a statement today that it regularly looks at opportunities for accords that will open new markets or cut production costs, but hasn’t asked the board to examine any merger transactions.
“On paper it looks attractive, but in reality it would be almost impossible because the social costs of restructuring would be so huge that no government would let it happen,” said Alain Michelis, an analyst at Societe Generale in Paris with a “buy” rating on Peugeot and a “hold” on Fiat. “Peugeot and Fiat themselves couldn’t afford a restructuring either.”
Fiat in January agreed to take a 35 percent stake in Chrysler LLC, the third-biggest U.S. automaker, in exchange for sharing small-car technology. Marchionne has said only about five or six major car manufacturers will survive the recession and has indicated that Fiat is open to a European alliance.
Looking for Partners
Societe Generale’s Michelis said he understands that Peugeot is looking for partners, but that Fiat is “not on the list.” Peugeot Citroen shareholder Christian Peugeot seemed to exclude a combination in an interview with Italian daily Il Giornale, which on March 9 cited him as saying that the company is independent and “wants to stay that way.” The Peugeot family owns 30 percent of stock.
“We can’t comment on rumors on mergers and acquisitions in the car industry,” Peugeot Citroen spokesman Hugues Dufour said today by telephone.
Peugeot CEO Christian Streiff said Feb. 11 he was interested in partners “complementary in products or in geography” rather in than rival European volume manufacturers. “We do not want a lot of restructuring to do,” the Financial Times quoted him as saying. The company confirmed the comments.
Peugeot has a commercial-vehicle partnership with Fiat and also cooperates with Munich-based Bayerische Motoren Werke AG on engines. Streiff has repeatedly declined to comment on reports of talks with the German company.
Jobs Protected
Il Sole said that Mediobanca SpA helped form the plan, according to which Fiat’s production structure would remain unchanged, helping to protect Italian jobs, while the headquarters of the merged company would be in Paris and Marchionne would head the combined group. Mediobanca isn’t aware of any merger plan between Fiat and Peugeot, an official said.
“The rumor of a merger has been around for a long time,” Italian bank Cassa Lombarda said today in a research note, adding that it, too, regards social costs as likely to prove too high to be acceptable. The bank said it is “more realistic that Fiat-PSA are working on alliances for new models or engines to share in mature, and more likely in emerging, markets.”
Fiat, controlled by Italy’s Agnelli family, might swap the Fiat Auto carmaking unit for a stake in Peugeot, UBS AG said in a Dec. 11 research note. Fiat may end up with a stake of as much as 45 percent in the newly merged company, Il Sole reported, citing no one.
Japanese 10-Year Bonds Decline as Aso Orders Further Spending
March 14 (Bloomberg) -- Japan’s 10-year bonds completed a second week of losses after Prime Minister Taro Aso ordered a third spending plan, fanning concern debt supply will increase.
Ten-year yields reached the highest in a month after the Mainichi newspaper said yesterday that the next plan may total 20 trillion yen ($204.7 billion). Aso has already announced 10 trillion yen of spending since taking office. Government securities also slumped after Bank of America Corp., the biggest U.S. lender, said it was profitable and won’t need more federal aid, lifting up share prices in the U.S., Europe and Asia.
“Bond supply will be the key factor as the weaker the economy, the stronger and larger the stimulus package has to be,” said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life, which manages the equivalent of $54 billion in assets. A large economic stimulus plan may be financed through “an increase in bond issuance, so it’s very negative for the market.”
The yield on the 1.3 percent bond due March 2019 rose 2.5 basis points this week to 1.315 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.221 yen this week to 99.867 yen. The yield climbed half a basis point yesterday after touching 1.32 percent, the highest since Feb. 10.
Twenty-year yields increased two basis points this week to 1.9 percent. Ten-year bond futures for June delivery lost 0.17 this week to 138.67 at the Tokyo Stock Exchange. A basis point is 0.01 percentage point.
Fiscal Stimulus
“We cannot avoid the fact that there is a risk of further economic downturn,” Aso said at a news conference in Tokyo yesterday. “We must act before the risk becomes reality.”
Finance Minister Kaoru Yosano said the government will also inject 121 billion yen into three regional banks. The world’s second-largest economy shrank an annualized 12.1 percent in the three months ended Dec. 31, the sharpest contraction since 1974, the Cabinet Office said on March 12.
The government “appears to be increasingly determined to implement ample economic stimulus measures,” said Chotaro Morita, head of fixed-income strategy research at Barclays Capital in Tokyo. “If so, it will likely have to finance those measures with straightforward JGB issuance,” which is “bound to make the bond market a bit jittery.”
Japan’s Ministry of Finance plans to boost bond supply by 7 trillion yen to 113.3 trillion yen in the financial year beginning April 1.
Profitable Year
“We have been profitable for the first two months of the year,” Bank of America Chief Executive Officer Kenneth Lewis said on March 12. “We expect to be profitable” in 2009. The bank may earn $50 billion this year, measured before taxes and provisions, Lewis said.
The Nikkei 225 Stock Average yesterday completed the best week since Nov. 28, gaining 5.5 percent. Benchmark 10-year yields had a correlation of 0.74 with the Nikkei this month, according to Bloomberg data. A value of 1 would mean the two moved in lockstep.
zz
Ten-year yields reached the highest in a month after the Mainichi newspaper said yesterday that the next plan may total 20 trillion yen ($204.7 billion). Aso has already announced 10 trillion yen of spending since taking office. Government securities also slumped after Bank of America Corp., the biggest U.S. lender, said it was profitable and won’t need more federal aid, lifting up share prices in the U.S., Europe and Asia.
“Bond supply will be the key factor as the weaker the economy, the stronger and larger the stimulus package has to be,” said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life, which manages the equivalent of $54 billion in assets. A large economic stimulus plan may be financed through “an increase in bond issuance, so it’s very negative for the market.”
The yield on the 1.3 percent bond due March 2019 rose 2.5 basis points this week to 1.315 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.221 yen this week to 99.867 yen. The yield climbed half a basis point yesterday after touching 1.32 percent, the highest since Feb. 10.
Twenty-year yields increased two basis points this week to 1.9 percent. Ten-year bond futures for June delivery lost 0.17 this week to 138.67 at the Tokyo Stock Exchange. A basis point is 0.01 percentage point.
Fiscal Stimulus
“We cannot avoid the fact that there is a risk of further economic downturn,” Aso said at a news conference in Tokyo yesterday. “We must act before the risk becomes reality.”
Finance Minister Kaoru Yosano said the government will also inject 121 billion yen into three regional banks. The world’s second-largest economy shrank an annualized 12.1 percent in the three months ended Dec. 31, the sharpest contraction since 1974, the Cabinet Office said on March 12.
The government “appears to be increasingly determined to implement ample economic stimulus measures,” said Chotaro Morita, head of fixed-income strategy research at Barclays Capital in Tokyo. “If so, it will likely have to finance those measures with straightforward JGB issuance,” which is “bound to make the bond market a bit jittery.”
Japan’s Ministry of Finance plans to boost bond supply by 7 trillion yen to 113.3 trillion yen in the financial year beginning April 1.
Profitable Year
“We have been profitable for the first two months of the year,” Bank of America Chief Executive Officer Kenneth Lewis said on March 12. “We expect to be profitable” in 2009. The bank may earn $50 billion this year, measured before taxes and provisions, Lewis said.
The Nikkei 225 Stock Average yesterday completed the best week since Nov. 28, gaining 5.5 percent. Benchmark 10-year yields had a correlation of 0.74 with the Nikkei this month, according to Bloomberg data. A value of 1 would mean the two moved in lockstep.
zz
Asian Stocks Post Weekly Gain on Stimulus Optimism; Banks Rise
March 14 (Bloomberg) -- Asian stocks rose for the first time in five weeks as Japan and China signaled more measures to buttress their economies from the deepening global recession.
PetroChina Co., the nation’s largest oil producer, climbed 12 percent in Hong Kong after crude oil surged and Premier Wen Jiabao said China can boost spending plans any time. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, gained 4.5 percent in Tokyo after Prime Minister Taro Aso ordered more economic stimulus measures. Commonwealth Bank of Australia jumped 12 percent, pacing gains among financial companies, as three U.S. banks said earnings were improving.
“Markets can take comfort that countries with the ability to do so are providing fiscal stimulus, rather than waiting till it’s too difficult to fight the momentum,” said Tim Schroeders, who helps manage about $2.6 billion at Pengana Capital Ltd. in Melbourne. “We’re seeing some money parked in safe havens returning to the market.”
The MSCI Asia Pacific Index rose 3.9 percent to 74.72 this week, snapping a four-week, 14 percent decline. Japan’s Nikkei 225 Stock Average climbed 5.5 percent to 7,569.28, while Hong Kong’s Hang Seng Index rose 5.1 percent.
Chartered Semiconductor Manufacturing Ltd., the world’s third-biggest maker customized chips, plunged 48 percent after announcing a $300 million rights offering. Elpida Memory Inc., Japan’s biggest memory-chip maker, slumped 23 percent after a merger with Taiwanese rivals failed to materialize.
‘Government Support’
Governments from the U.S. to Japan and China have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II. Reports this week showed China’s industrial production slowed, Australia’s jobless rate rose and Japan’s economy shrank the most since 1974 in the fourth quarter.
Japan’s Aso said yesterday he will consult a panel of economists, industry leaders and government officials next week on measures to stimulate the world’s second-biggest economy. China’s Wen told reporters the country has “adequate ammunition” to revive its economy and can add to its 4 trillion yuan ($585 billion) stimulus package at any time.
Also this week, Malaysia unveiled an additional $16 billion of spending, while New Zealand’s central bank reduced its benchmark interest rate to a record low.
PetroChina jumped 12 percent to HK$5.75 in Hong Kong this week after crude prices surged. BHP Billiton, Australia’s largest oil producer, climbed 15 percent to A$31.66.
Oil Surges
Crude oil for April delivery rose 1.6 percent in the week to $46.25 a barrel, its fourth week of gains. The contract surged before a meeting by the Organization of Petroleum Exporting Countries where it may decide to cut production.
Mitsubishi UFJ gained 4.5 percent to 419 yen in Tokyo. Nomura Holdings Inc., the country’s largest brokerage, jumped 12 percent to 469 yen. Finance Minister Kaoru Yosano said the government will also inject 121 billion yen into three regional banks and discuss ways to support the stock market.
Commonwealth Bank of Australia, the nation’s second-biggest lender, climbed 12 percent to A$30.25 in Sydney. Australia New Zealand Banking Group Ltd., the nation’s third biggest, rose 9.1 percent to A$13.49.
Bank of America Corp. joined Citigroup Inc. and JPMorgan Chase & Co. in saying this week that it was profitable in the first two months of 2009.
The comments eased concerns about the global credit crisis that has caused writedowns and losses at institutions worldwide to swell to more than $1.2 trillion and helped a rally in global equities. The MSCI World Index gained 8.5 percent this week, the most since the period ended Nov. 28.
Fund Raising
“Positive comments from the U.S. banks are reassuring, but we’re not out of the woods yet,” said Nicole Sze, a Singapore- based investment analyst for Bank Julius Baer & Co., which manages $350 billion. “Investors are still waiting for concrete signs that the economy has bottomed, stimulus measures are working and that the global financial system has stabilized.”
Chartered Semiconductor, which joined HSBC Holdings Plc and Shinsei Bank Ltd. in seeking to raise capital, tumbled 48 percent to 13 Singapore cents.
Elpida Memory Inc. plunged 23 percent to 418 yen after Taiwan ruled out a state-led merger of local computer chipmakers that would have resulted in an investment in the Japanese company.
PetroChina Co., the nation’s largest oil producer, climbed 12 percent in Hong Kong after crude oil surged and Premier Wen Jiabao said China can boost spending plans any time. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, gained 4.5 percent in Tokyo after Prime Minister Taro Aso ordered more economic stimulus measures. Commonwealth Bank of Australia jumped 12 percent, pacing gains among financial companies, as three U.S. banks said earnings were improving.
“Markets can take comfort that countries with the ability to do so are providing fiscal stimulus, rather than waiting till it’s too difficult to fight the momentum,” said Tim Schroeders, who helps manage about $2.6 billion at Pengana Capital Ltd. in Melbourne. “We’re seeing some money parked in safe havens returning to the market.”
The MSCI Asia Pacific Index rose 3.9 percent to 74.72 this week, snapping a four-week, 14 percent decline. Japan’s Nikkei 225 Stock Average climbed 5.5 percent to 7,569.28, while Hong Kong’s Hang Seng Index rose 5.1 percent.
Chartered Semiconductor Manufacturing Ltd., the world’s third-biggest maker customized chips, plunged 48 percent after announcing a $300 million rights offering. Elpida Memory Inc., Japan’s biggest memory-chip maker, slumped 23 percent after a merger with Taiwanese rivals failed to materialize.
‘Government Support’
Governments from the U.S. to Japan and China have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II. Reports this week showed China’s industrial production slowed, Australia’s jobless rate rose and Japan’s economy shrank the most since 1974 in the fourth quarter.
Japan’s Aso said yesterday he will consult a panel of economists, industry leaders and government officials next week on measures to stimulate the world’s second-biggest economy. China’s Wen told reporters the country has “adequate ammunition” to revive its economy and can add to its 4 trillion yuan ($585 billion) stimulus package at any time.
Also this week, Malaysia unveiled an additional $16 billion of spending, while New Zealand’s central bank reduced its benchmark interest rate to a record low.
PetroChina jumped 12 percent to HK$5.75 in Hong Kong this week after crude prices surged. BHP Billiton, Australia’s largest oil producer, climbed 15 percent to A$31.66.
Oil Surges
Crude oil for April delivery rose 1.6 percent in the week to $46.25 a barrel, its fourth week of gains. The contract surged before a meeting by the Organization of Petroleum Exporting Countries where it may decide to cut production.
Mitsubishi UFJ gained 4.5 percent to 419 yen in Tokyo. Nomura Holdings Inc., the country’s largest brokerage, jumped 12 percent to 469 yen. Finance Minister Kaoru Yosano said the government will also inject 121 billion yen into three regional banks and discuss ways to support the stock market.
Commonwealth Bank of Australia, the nation’s second-biggest lender, climbed 12 percent to A$30.25 in Sydney. Australia New Zealand Banking Group Ltd., the nation’s third biggest, rose 9.1 percent to A$13.49.
Bank of America Corp. joined Citigroup Inc. and JPMorgan Chase & Co. in saying this week that it was profitable in the first two months of 2009.
The comments eased concerns about the global credit crisis that has caused writedowns and losses at institutions worldwide to swell to more than $1.2 trillion and helped a rally in global equities. The MSCI World Index gained 8.5 percent this week, the most since the period ended Nov. 28.
Fund Raising
“Positive comments from the U.S. banks are reassuring, but we’re not out of the woods yet,” said Nicole Sze, a Singapore- based investment analyst for Bank Julius Baer & Co., which manages $350 billion. “Investors are still waiting for concrete signs that the economy has bottomed, stimulus measures are working and that the global financial system has stabilized.”
Chartered Semiconductor, which joined HSBC Holdings Plc and Shinsei Bank Ltd. in seeking to raise capital, tumbled 48 percent to 13 Singapore cents.
Elpida Memory Inc. plunged 23 percent to 418 yen after Taiwan ruled out a state-led merger of local computer chipmakers that would have resulted in an investment in the Japanese company.
Thursday, March 12, 2009
Asian Stocks Rise as Recession Concern Eases; Canon, BHP Gain
March 13 (Bloomberg) -- Asian stocks rose, as banks and electronics makers led the regional benchmark index to the first weekly gain in a month, after Bank of America Corp. said it was profitable and Japan signaled more economic stimulus.
Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, rose 5.3 percent as the Mainichi newspaper reported Prime Minister Taro Aso will order his government to compile an additional stimulus package. Canon Inc., the world’s largest camera maker, jumped 7 percent after forecasting profit to increase. BHP Billiton Ltd., Australia’s biggest oil producer, rose 3.4 percent in Sydney as crude soared 11 percent yesterday.
“Nervousness about the stability of the financial system has been behind recent declines, and the retreat of those fears is a definite plus,” Kazuhito Suzuki, a strategist in Tokyo at Shinkin Asset Management Co., which oversees about $6.1 billion, said in an interview with Bloomberg Television. “The outlook today is bullish.”
The MSCI Asia Pacific Index rose 2.8 percent to 74.17 as of 11:14 a.m. in Tokyo, taking its advance this week to 3.1 percent. The gauge has slumped 17 percent this year, extending last year’s record 43 percent drop as the global recession decimated profits at companies from BHP to Canon.
Japan’s Nikkei 225 Stock Average gained 4.4 percent to 7,514.23, while Hong Kong’s Hang Seng Index rose 3 percent. Australia’s S&P/ASX 200 Index jumped 3.2 percent. All markets open for trading advanced except the Philippines.
Credit Ratings
Futures the U.S. Standard & Poor’s 500 Index lost 0.4 percent as Fitch Ratings cut its credit rating on billionaire Warren Buffett’s Berkshire Hathaway Inc. The S&P 500 jumped 4.1 percent yesterday as General Electric Co. said losing the top credit rating at Standard & Poor’s won’t hurt business.
Bank of America yesterday followed Citigroup Inc. and JPMorgan Chase & Co. in saying it was profitable in the first two months of 2009. The comments eased concerns about the global credit crisis that has caused writedowns and losses at institutions worldwide to swell to more than $1.2 trillion.
Mitsubishi UFJ Financial rose 5.6 percent to 418 yen in Tokyo. Mizuho Financial Group Inc., Japan’s second-largest bank, gained 3.5 percent to 177 yen.
Aso’s stimulus package may total 20 trillion yen ($205 billion) and the government may sell more bonds to pay for the measures, the Mainichi newspaper reported. Finance Minister Kaoru Yosano said today the government will sink funds into Minami-Nippon Bank Ltd. and Fukuho Bank Ltd.
Governments from the U.S. to Japan and China have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II.
Oil Surges
Canon climbed 7 percent to 2,440 yen in Tokyo. The company said yesterday its net income will increase to 150 billion yen in 2010 from this year’s forecast of 98 billion yen. That reflects Canon’s expectations that the global economy may recover next year.
BHP Billiton, the world’s biggest mining company, rose 3.4 percent to A$31.39 in Sydney. Woodside Petroleum Ltd., Australia’s second-largest oil producer, added 4.5 percent to A$37.60. Inpex Corp., Japan’s largest oil explorer, soared 4 percent to 677,000 yen in Tokyo.
Crude oil for April delivery rose 11 percent to $47.03 a barrel in New York, the biggest gain since Feb. 19. The contract surged before a meeting by OPEC this weekend where production may be cut for a fourth time.
Sony Corp., the world’s second-largest maker of consumer electronics, gained 6.5 percent to 1,848 yen. The company will buy equipment for manufacturing LCDs from Seiko Epson as part of an alliance, the companies said yesterday.
Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, rose 5.3 percent as the Mainichi newspaper reported Prime Minister Taro Aso will order his government to compile an additional stimulus package. Canon Inc., the world’s largest camera maker, jumped 7 percent after forecasting profit to increase. BHP Billiton Ltd., Australia’s biggest oil producer, rose 3.4 percent in Sydney as crude soared 11 percent yesterday.
“Nervousness about the stability of the financial system has been behind recent declines, and the retreat of those fears is a definite plus,” Kazuhito Suzuki, a strategist in Tokyo at Shinkin Asset Management Co., which oversees about $6.1 billion, said in an interview with Bloomberg Television. “The outlook today is bullish.”
The MSCI Asia Pacific Index rose 2.8 percent to 74.17 as of 11:14 a.m. in Tokyo, taking its advance this week to 3.1 percent. The gauge has slumped 17 percent this year, extending last year’s record 43 percent drop as the global recession decimated profits at companies from BHP to Canon.
Japan’s Nikkei 225 Stock Average gained 4.4 percent to 7,514.23, while Hong Kong’s Hang Seng Index rose 3 percent. Australia’s S&P/ASX 200 Index jumped 3.2 percent. All markets open for trading advanced except the Philippines.
Credit Ratings
Futures the U.S. Standard & Poor’s 500 Index lost 0.4 percent as Fitch Ratings cut its credit rating on billionaire Warren Buffett’s Berkshire Hathaway Inc. The S&P 500 jumped 4.1 percent yesterday as General Electric Co. said losing the top credit rating at Standard & Poor’s won’t hurt business.
Bank of America yesterday followed Citigroup Inc. and JPMorgan Chase & Co. in saying it was profitable in the first two months of 2009. The comments eased concerns about the global credit crisis that has caused writedowns and losses at institutions worldwide to swell to more than $1.2 trillion.
Mitsubishi UFJ Financial rose 5.6 percent to 418 yen in Tokyo. Mizuho Financial Group Inc., Japan’s second-largest bank, gained 3.5 percent to 177 yen.
Aso’s stimulus package may total 20 trillion yen ($205 billion) and the government may sell more bonds to pay for the measures, the Mainichi newspaper reported. Finance Minister Kaoru Yosano said today the government will sink funds into Minami-Nippon Bank Ltd. and Fukuho Bank Ltd.
Governments from the U.S. to Japan and China have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II.
Oil Surges
Canon climbed 7 percent to 2,440 yen in Tokyo. The company said yesterday its net income will increase to 150 billion yen in 2010 from this year’s forecast of 98 billion yen. That reflects Canon’s expectations that the global economy may recover next year.
BHP Billiton, the world’s biggest mining company, rose 3.4 percent to A$31.39 in Sydney. Woodside Petroleum Ltd., Australia’s second-largest oil producer, added 4.5 percent to A$37.60. Inpex Corp., Japan’s largest oil explorer, soared 4 percent to 677,000 yen in Tokyo.
Crude oil for April delivery rose 11 percent to $47.03 a barrel in New York, the biggest gain since Feb. 19. The contract surged before a meeting by OPEC this weekend where production may be cut for a fourth time.
Sony Corp., the world’s second-largest maker of consumer electronics, gained 6.5 percent to 1,848 yen. The company will buy equipment for manufacturing LCDs from Seiko Epson as part of an alliance, the companies said yesterday.
Stocks in Europe and Asia Decline; U.S. Index Futures Retreat
March 12 (Bloomberg) -- Stocks in Europe and Asia fell for the first time in three days and U.S. futures slid as companies from Bayerische Motoren Werke AG to K+S AG posted disappointing results and Japan’s economy shrank the most since 1974.
BMW, the world’s largest maker of luxury cars, tumbled 10 percent after posting full-year net income that trailed analysts’ estimates. K+S, Europe’s biggest producer of potash used in fertilizers, lost 9.7 percent on a forecast for “significantly” lower earnings this year. Mitsubishi UFJ Financial Group Inc. slumped 3.7 percent after Japan’s economy contracted 12.1 percent in the fourth quarter.
The MSCI World Index dropped 0.9 percent to 724.69 at 10:17 a.m. in London, extended its 2009 retreat to 21 percent. The gauge of 23 developed nations had rallied 6.1 percent in the past two days as JPMorgan Chase & Co. and Citigroup Inc. said they were profitable in January and February, bolstering speculation that the worst of the banking crisis may be over.
“The market will remain under pressure until we get some indication of the speed and strength of any economic recovery,” said Henk Potts, a London-based fund manager at Barclays Stockbrokers, which has about $45 billion under management. “We have seen horrendous economic data recently and the outlook for corporate profitability still is under severe pressure, which is a powerful mix of negativity.”
Futures on the Standard & Poor’s 500 Index slid 1 percent before reports on retail sales and jobless claims that may show the U.S. recession is deepening. Steel Dynamics Inc. retreated after cutting its forecast.
Dividend Cuts
The global economy may shrink for the first time since World War II and trade will likely decline the most in 80 years, the World Bank said this month. The MSCI World has fallen 49 percent in the past year as disappointing results at companies from Anglo American Plc to Nissan Motor Co. and dividend cuts by JPMorgan and General Electric Co. sent investors out of equities.
Europe’s Dow Jones Stoxx 600 Index lost 2 percent as Thomas Cook Group Plc fell. The MSCI Asia Pacific Index slipped 1 percent, snapping a two-day, 4.1 percent advance.
The dollar and the yen strengthened on speculation the deepening recession will increase demand for the two currencies as a refuge. The euro fell for the first time in three days against the dollar before a German report that economists say will show industrial production dropped for a fifth month, giving the European Central Bank more room to cut interest rates.
BMW, K+S, Bulgari
BMW tumbled 10 percent to 20.57 euros after reporting full- year net income of 330 million euros ($422 million), missing analysts’ estimates of 1.02 billion euros.
K+S dropped 9.7 percent to 30.72 euros after it forecast “significantly” lower earnings this year on a slump in demand for potash and magnesium products.
Bulgari SpA declined 5.9 percent to 3.02 euros as the world’s third-largest jeweler reported its biggest profit drop in a decade and cut its dividend. Fourth-quarter net income dropped 89 percent to 5.7 million euros ($7.27 million), based on full- year figures reported by the company. That missed the 23.4 million-euro estimate of analysts surveyed by Bloomberg News.
Thomas Cook Group led travel and leisure shares in the Stoxx 600 lower, falling 14 percent to 197.7 pence. Peter Fankhauser, head of Europe’s second-biggest travel company’s German business, said next year will be “more difficult” than 2009.
Earnings for 278 companies in the Stoxx 600 that reported results since Jan. 12 dropped 95 percent, according to Bloomberg data. That compares to a 58 percent contraction for the 472 companies in the S&P 500 that reported during the same period.
Steel Dynamics
Steel Dynamics slid 11 percent to $7.58 in Germany. The fourth-largest U.S.-based steelmaker by market value said it expects to lose at least 40 cents a share in the first quarter. The company had earlier projected profit of as much as 10 cents.
Mitsubishi UFJ slumped 3.7 percent to 396 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, fell 2.8 percent to 171 yen.
Gross domestic product in Japan shrank an annualized 12.1 percent in the three months ended Dec. 31, government figures today showed, as exports, output and business spending collapsed. The figure was less than the 12.7 percent reported last month.
BHP Billiton Ltd. and Antofagasta Plc led losses among raw- material producers as base metals retreated.
BHP Billiton, the world’s largest mining company, slid 3.3 percent to 1,286 pence as copper traded near a one-week low in Asia. Antofagasta slipped 6.7 percent to 499.75 pence as Royal Bank of Scotland Group cut the shares to “sell” from “hold.”
Intesa Sanpaolo SpA, Italy’s biggest bank by market value, slid 3 percent to 1.65 euros as Goldman Sachs Group Inc. lowered its recommendation to “sell” from “neutral.”
Enel, Carrefour
Enel SpA, whose 2007 purchase of Endesa SA made it Europe’s most indebted utility, added 2.8 percent to 3.47 euros. The company posted a 35 percent increase in full-year earnings and said it will sell up to 8 billion euros of new shares to reduce borrowings and protect its investment-grade credit rating.
Carrefour SA added 1.8 percent to 25.11 euros. Europe’s largest retailer said it will step up price cuts and reduce capital spending this year to help revive sales growth and cope with “challenging” business conditions.
Roche Holding AG slipped 1.9 percent to 142.8 Swiss francs after boosting its offer to buy the rest of Genentech Inc., ending a 7 1/2 month takeover battle. The world’s biggest maker of cancer drugs increased its offer to buy the rest of Genentech to $95 a share, valuing the acquisition at $46.8 billion. Genentech climbed 1.4 percent to $93.42 in Germany.
Retail sales in the U.S. probably fell in February for the seventh time in eight months as soaring job losses forced consumers to pull back, economists said before a Commerce Department report at 8:30 a.m. in Washington. Labor Department figures may show more than 600,000 Americans filed claims for unemployment benefits for a sixth straight week, the worst performance since 1982.
BMW, the world’s largest maker of luxury cars, tumbled 10 percent after posting full-year net income that trailed analysts’ estimates. K+S, Europe’s biggest producer of potash used in fertilizers, lost 9.7 percent on a forecast for “significantly” lower earnings this year. Mitsubishi UFJ Financial Group Inc. slumped 3.7 percent after Japan’s economy contracted 12.1 percent in the fourth quarter.
The MSCI World Index dropped 0.9 percent to 724.69 at 10:17 a.m. in London, extended its 2009 retreat to 21 percent. The gauge of 23 developed nations had rallied 6.1 percent in the past two days as JPMorgan Chase & Co. and Citigroup Inc. said they were profitable in January and February, bolstering speculation that the worst of the banking crisis may be over.
“The market will remain under pressure until we get some indication of the speed and strength of any economic recovery,” said Henk Potts, a London-based fund manager at Barclays Stockbrokers, which has about $45 billion under management. “We have seen horrendous economic data recently and the outlook for corporate profitability still is under severe pressure, which is a powerful mix of negativity.”
Futures on the Standard & Poor’s 500 Index slid 1 percent before reports on retail sales and jobless claims that may show the U.S. recession is deepening. Steel Dynamics Inc. retreated after cutting its forecast.
Dividend Cuts
The global economy may shrink for the first time since World War II and trade will likely decline the most in 80 years, the World Bank said this month. The MSCI World has fallen 49 percent in the past year as disappointing results at companies from Anglo American Plc to Nissan Motor Co. and dividend cuts by JPMorgan and General Electric Co. sent investors out of equities.
Europe’s Dow Jones Stoxx 600 Index lost 2 percent as Thomas Cook Group Plc fell. The MSCI Asia Pacific Index slipped 1 percent, snapping a two-day, 4.1 percent advance.
The dollar and the yen strengthened on speculation the deepening recession will increase demand for the two currencies as a refuge. The euro fell for the first time in three days against the dollar before a German report that economists say will show industrial production dropped for a fifth month, giving the European Central Bank more room to cut interest rates.
BMW, K+S, Bulgari
BMW tumbled 10 percent to 20.57 euros after reporting full- year net income of 330 million euros ($422 million), missing analysts’ estimates of 1.02 billion euros.
K+S dropped 9.7 percent to 30.72 euros after it forecast “significantly” lower earnings this year on a slump in demand for potash and magnesium products.
Bulgari SpA declined 5.9 percent to 3.02 euros as the world’s third-largest jeweler reported its biggest profit drop in a decade and cut its dividend. Fourth-quarter net income dropped 89 percent to 5.7 million euros ($7.27 million), based on full- year figures reported by the company. That missed the 23.4 million-euro estimate of analysts surveyed by Bloomberg News.
Thomas Cook Group led travel and leisure shares in the Stoxx 600 lower, falling 14 percent to 197.7 pence. Peter Fankhauser, head of Europe’s second-biggest travel company’s German business, said next year will be “more difficult” than 2009.
Earnings for 278 companies in the Stoxx 600 that reported results since Jan. 12 dropped 95 percent, according to Bloomberg data. That compares to a 58 percent contraction for the 472 companies in the S&P 500 that reported during the same period.
Steel Dynamics
Steel Dynamics slid 11 percent to $7.58 in Germany. The fourth-largest U.S.-based steelmaker by market value said it expects to lose at least 40 cents a share in the first quarter. The company had earlier projected profit of as much as 10 cents.
Mitsubishi UFJ slumped 3.7 percent to 396 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, fell 2.8 percent to 171 yen.
Gross domestic product in Japan shrank an annualized 12.1 percent in the three months ended Dec. 31, government figures today showed, as exports, output and business spending collapsed. The figure was less than the 12.7 percent reported last month.
BHP Billiton Ltd. and Antofagasta Plc led losses among raw- material producers as base metals retreated.
BHP Billiton, the world’s largest mining company, slid 3.3 percent to 1,286 pence as copper traded near a one-week low in Asia. Antofagasta slipped 6.7 percent to 499.75 pence as Royal Bank of Scotland Group cut the shares to “sell” from “hold.”
Intesa Sanpaolo SpA, Italy’s biggest bank by market value, slid 3 percent to 1.65 euros as Goldman Sachs Group Inc. lowered its recommendation to “sell” from “neutral.”
Enel, Carrefour
Enel SpA, whose 2007 purchase of Endesa SA made it Europe’s most indebted utility, added 2.8 percent to 3.47 euros. The company posted a 35 percent increase in full-year earnings and said it will sell up to 8 billion euros of new shares to reduce borrowings and protect its investment-grade credit rating.
Carrefour SA added 1.8 percent to 25.11 euros. Europe’s largest retailer said it will step up price cuts and reduce capital spending this year to help revive sales growth and cope with “challenging” business conditions.
Roche Holding AG slipped 1.9 percent to 142.8 Swiss francs after boosting its offer to buy the rest of Genentech Inc., ending a 7 1/2 month takeover battle. The world’s biggest maker of cancer drugs increased its offer to buy the rest of Genentech to $95 a share, valuing the acquisition at $46.8 billion. Genentech climbed 1.4 percent to $93.42 in Germany.
Retail sales in the U.S. probably fell in February for the seventh time in eight months as soaring job losses forced consumers to pull back, economists said before a Commerce Department report at 8:30 a.m. in Washington. Labor Department figures may show more than 600,000 Americans filed claims for unemployment benefits for a sixth straight week, the worst performance since 1982.
AI leads in share of passenger traffic Desi Carriers Account For 1/3rd Of Flow
New Delhi: Despite its huge losses, Air India has emerged as the number one carrier during October-December 2008, in terms of both passenger carriage (market share) and aircraft movement of the 79 international carriers that operate to and from India, according to figures released by the government.
However, in overall share, Gulf carriers are dominating. Eight of the top 20 airlines (in terms of passenger carriage) were Gulf carriers in the same period. While, AI had a 24% market share of international traffic in October-December quarter, Emirates followed with 10.3% share, with third highest aircraft movement. Jet, which had the second highest aircraft movement, is third on the passenger movement list with 9% market share. Kingfisher, which started international operations late last year, figures at number 46.
The Airports Authority of India’s (AAI) figures show how Gulf airlines have managed to upstage the past giants, European carriers, who were not so long ago the first choice of people travelling between India and the West.
The top 20 airlines dominate 71% market share. Of this 71%, Gulf carriers control 27% with Emirates leading the pack. The other biggies are Air Arabia, Qatar Airways, Saudi Arabian Airlines, Oman Air, Gulf Air, Etihad and Kuwait Airways. The five south-east Asian airlines in the top-20 list enjoyed a 13% share with Singapore Airlines in the forefront and others being Cathay Pacific, Thai, Sri Lankan and Malaysian.
Among the four European carriers in the top-20 list, Lufthansa and British Airways have over 3% share, while Air France and KLM are over 1% each. US carrier Continental is at number 20 with a 1% share. The total share of Indian carriers is about 33%. This means one-third of the people travelling to and from India fly Indian carriers. The remaining 66% use foreign airlines, where carriers from the Gulf are dominating.
“These airlines are a challenge to all other players operating here, including Indian airlines. They have been able to attract lot of traffic from India on two to three hour-long flights to the Gulf and then offer connections to rest of the world.
“Players like Emirates are using A-380s to fly non-stop to distant places from there. Lufthansa has already started reacting and it’s time Indian carriers also tackle this challenge,” said Kapil Kaul, India head, Centre for Asia Pacific Aviation.
Airport developers here are a worried lot. Gulf carriers are adding flights from non-metros and small towns. The impact: People flying from small places can bypass mega airports being developed at Mumbai and Delhi for flying to Europe, the US and Africa. They can fly straight to the Gulf and then take connecting flights.
However, in overall share, Gulf carriers are dominating. Eight of the top 20 airlines (in terms of passenger carriage) were Gulf carriers in the same period. While, AI had a 24% market share of international traffic in October-December quarter, Emirates followed with 10.3% share, with third highest aircraft movement. Jet, which had the second highest aircraft movement, is third on the passenger movement list with 9% market share. Kingfisher, which started international operations late last year, figures at number 46.
The Airports Authority of India’s (AAI) figures show how Gulf airlines have managed to upstage the past giants, European carriers, who were not so long ago the first choice of people travelling between India and the West.
The top 20 airlines dominate 71% market share. Of this 71%, Gulf carriers control 27% with Emirates leading the pack. The other biggies are Air Arabia, Qatar Airways, Saudi Arabian Airlines, Oman Air, Gulf Air, Etihad and Kuwait Airways. The five south-east Asian airlines in the top-20 list enjoyed a 13% share with Singapore Airlines in the forefront and others being Cathay Pacific, Thai, Sri Lankan and Malaysian.
Among the four European carriers in the top-20 list, Lufthansa and British Airways have over 3% share, while Air France and KLM are over 1% each. US carrier Continental is at number 20 with a 1% share. The total share of Indian carriers is about 33%. This means one-third of the people travelling to and from India fly Indian carriers. The remaining 66% use foreign airlines, where carriers from the Gulf are dominating.
“These airlines are a challenge to all other players operating here, including Indian airlines. They have been able to attract lot of traffic from India on two to three hour-long flights to the Gulf and then offer connections to rest of the world.
“Players like Emirates are using A-380s to fly non-stop to distant places from there. Lufthansa has already started reacting and it’s time Indian carriers also tackle this challenge,” said Kapil Kaul, India head, Centre for Asia Pacific Aviation.
Airport developers here are a worried lot. Gulf carriers are adding flights from non-metros and small towns. The impact: People flying from small places can bypass mega airports being developed at Mumbai and Delhi for flying to Europe, the US and Africa. They can fly straight to the Gulf and then take connecting flights.
SAVE AND SECURE Banks use digital signatures to cut costs, raise customers’ trust
Chennai: Cost-conscious banks are using technology to the hilt. HDFC Bank, Citibank and ABN Amro Bank are sending documents such as statement of accounts for savings, current & credit card accounts, electronic contract notes for equity brokerage transactions, etc using digital signatures. Not only do they save 90% on paper and time, customers too are lapping up these digitally signed documents as they are authentic and tamper-proof.
If you look at the statements that come from these banks, at the bottom right corner of the document will be a signature with a thumb impression. That’s a digital signature which adds authenticity to electronically received document for customers to establish trust with the sender. If anybody changes the signature or successfully tampers with it, the signature will change indicating wrongdoings.
“For messages sent through an insecure channel, a properly implemented digital signature gives the receiver reason to believe the message was sent by the claimed sender. Digital signatures are equivalent to traditional handwritten signatures in many respects; properly implemented digital signatures are more difficult to forge than the handwritten type,’’ said B Robert Raja, CMD, Odyssey Technologies, which focuses on information security software.
The uniqueness of these signatures has led to its popularity in the financial market and among domestic banks, while brokerages too have been quick to recognise the benefits. In India, besides Odyssey Technologies, other companies such as NSE IT (the tech arm of National Stock Exchange) also are players in this niche field.
“Customers can receive the digitally signed documents electronically much faster on their request or on execution of trade compared to paper document that needs to be sent through post or courier, which takes minimum of one business day apart from the day of transaction. As long as the customer’s mail box is not full, delivery is guaranteed, which is a major advantage over paper mail/courier receipt tracking,’’ Munish Mittal, EVP & head, technology solutions group at HDFC Bank said.
Banks send millions of crucial statements per month to customers. While the estimated per unit cost of sending paper account statements works out to Rs 7, the same when done electronically with digital signatures costs only Re 1. Calculating on one million such statements this immediately results in 86% savings right from the beginning.
As the number of statements rise, savings accrued to the bank also rise to 90% as cost of sending each statement is lowered to a mere 40 paise to send one crore documents, estimates suggest. Cost of electronic documents include capital cost amortised over three years and maintenance costs, including network charges, experts add.
At this stage, banks do not charge anything from customers to send digitally signed electronic documents as such solutions help save cost. “It pays for itself over a defined period of time depending upon the cost of solution and volume of such transactions,’’ Mittal of HDFC Bank says.
If you look at the statements that come from these banks, at the bottom right corner of the document will be a signature with a thumb impression. That’s a digital signature which adds authenticity to electronically received document for customers to establish trust with the sender. If anybody changes the signature or successfully tampers with it, the signature will change indicating wrongdoings.
“For messages sent through an insecure channel, a properly implemented digital signature gives the receiver reason to believe the message was sent by the claimed sender. Digital signatures are equivalent to traditional handwritten signatures in many respects; properly implemented digital signatures are more difficult to forge than the handwritten type,’’ said B Robert Raja, CMD, Odyssey Technologies, which focuses on information security software.
The uniqueness of these signatures has led to its popularity in the financial market and among domestic banks, while brokerages too have been quick to recognise the benefits. In India, besides Odyssey Technologies, other companies such as NSE IT (the tech arm of National Stock Exchange) also are players in this niche field.
“Customers can receive the digitally signed documents electronically much faster on their request or on execution of trade compared to paper document that needs to be sent through post or courier, which takes minimum of one business day apart from the day of transaction. As long as the customer’s mail box is not full, delivery is guaranteed, which is a major advantage over paper mail/courier receipt tracking,’’ Munish Mittal, EVP & head, technology solutions group at HDFC Bank said.
Banks send millions of crucial statements per month to customers. While the estimated per unit cost of sending paper account statements works out to Rs 7, the same when done electronically with digital signatures costs only Re 1. Calculating on one million such statements this immediately results in 86% savings right from the beginning.
As the number of statements rise, savings accrued to the bank also rise to 90% as cost of sending each statement is lowered to a mere 40 paise to send one crore documents, estimates suggest. Cost of electronic documents include capital cost amortised over three years and maintenance costs, including network charges, experts add.
At this stage, banks do not charge anything from customers to send digitally signed electronic documents as such solutions help save cost. “It pays for itself over a defined period of time depending upon the cost of solution and volume of such transactions,’’ Mittal of HDFC Bank says.
UNITED WE STAND Go vote, India Inc tells employees
Mumbai: Corporate India, among the worst hit by the 26/11 terrorist attacks in Mumbai, is using the emotional momentum that tragedy generated to get its employees to go out and exercise their franchise. From informal gatherings around water coolers, overflowing with conversations underlining the importance of one’s right to vote, to mailers being sent out to demystify the electoral process, all attempts are being made to encourage employees to cast their votes during the upcoming general elections.
FMCG major Hindustan Unilever (HUL) has internally sent out mailers, providing information on the electoral process and detailed FAQs list like how to get registered, what forms to fill up, where to collect voter identity cards, among other things. At informal gatherings and unit head meetings, sources said, employees are being encouraged to do their bit as part of the world’s largest democracy. An official from a leading corporate firm said: “Post 26/11, people have become very vocal about a lot of things. We tell them informally that they should vote if they so firmly believe in what they say.’’
Tata group company Tata Tea, which has been running a brand promotion campaign called ‘Jaago Re’ built around the theme of voter rights for over a year, has been actively taking the campaign to various IT and telecom companies like Infosys, Wipro, TCS and Tata Teleservices. Since IT companies house a large number of employees, the idea is to target a base of young techies. TCS, for instance, is the largest employer with 1.14 lakh employees on its rolls. The ‘Jaago Re’ campaign carries a social message and promotes voter registration. It targets the younger generation of firsttime voters. Said Sushant Dash, associate president, marketing at Tata Tea: “Various IT companies have been approached to create an awakening among the youth on the importance of exercising their right to vote as a means to bring about the change they seek.’’
According to Bangalore-based NGO Janaagraha, with which Tata Tea has tied up for the campaign, only 10% of the country’s youth votes.
The Aditya Birla group will notify its employees on how they could take time out on election day to cast their votes. “That itself will be an encouragement for them to go out and vote,’’ said Santrupt Misra, director (HR & IT), Aditya Birla Management Corporation.
Larsen & Toubro chairman A M Naik, however, said: “We will not tell our staff anything like this (to vote). This is a fact that people should know. At L&T, all our staff is educated. There are no illiterates. Unless they are out of town, 95% of our staff votes.’’ Videocon International chairman Venugopal Dhoot said: “We will mail all our staff that they should cast their votes. We will allow employees to take a 4-hour break any time on election day. If some employees are out of their domicile town, we will give them a day’s off so that they can exercise their voting rights.’’
FMCG major Hindustan Unilever (HUL) has internally sent out mailers, providing information on the electoral process and detailed FAQs list like how to get registered, what forms to fill up, where to collect voter identity cards, among other things. At informal gatherings and unit head meetings, sources said, employees are being encouraged to do their bit as part of the world’s largest democracy. An official from a leading corporate firm said: “Post 26/11, people have become very vocal about a lot of things. We tell them informally that they should vote if they so firmly believe in what they say.’’
Tata group company Tata Tea, which has been running a brand promotion campaign called ‘Jaago Re’ built around the theme of voter rights for over a year, has been actively taking the campaign to various IT and telecom companies like Infosys, Wipro, TCS and Tata Teleservices. Since IT companies house a large number of employees, the idea is to target a base of young techies. TCS, for instance, is the largest employer with 1.14 lakh employees on its rolls. The ‘Jaago Re’ campaign carries a social message and promotes voter registration. It targets the younger generation of firsttime voters. Said Sushant Dash, associate president, marketing at Tata Tea: “Various IT companies have been approached to create an awakening among the youth on the importance of exercising their right to vote as a means to bring about the change they seek.’’
According to Bangalore-based NGO Janaagraha, with which Tata Tea has tied up for the campaign, only 10% of the country’s youth votes.
The Aditya Birla group will notify its employees on how they could take time out on election day to cast their votes. “That itself will be an encouragement for them to go out and vote,’’ said Santrupt Misra, director (HR & IT), Aditya Birla Management Corporation.
Larsen & Toubro chairman A M Naik, however, said: “We will not tell our staff anything like this (to vote). This is a fact that people should know. At L&T, all our staff is educated. There are no illiterates. Unless they are out of town, 95% of our staff votes.’’ Videocon International chairman Venugopal Dhoot said: “We will mail all our staff that they should cast their votes. We will allow employees to take a 4-hour break any time on election day. If some employees are out of their domicile town, we will give them a day’s off so that they can exercise their voting rights.’’
Monday, March 9, 2009
Obama Looks to Limit Impact of Tactic Bush Used to Sidestep New Laws
WASHINGTON — Calling into question the legitimacy of all the signing statements that former President George W. Bush used to challenge new laws, President Obama ordered executive officials on Monday to consult with Attorney General Eric H. Holder Jr. before relying on any of them to bypass a statute.
Skip to next paragraph
Related
Text: Obama’s Memo on Signing Statements (pdf)
Blog
The Caucus
The Caucus
The latest on President Obama, the new administration and other news from Washington and around the nation. Join the discussion.
* More Politics News
Readers' Comments
Share your thoughts.
* Post a Comment »
* Read All Comments (123) »
But Mr. Obama also signaled that he intended to use signing statements himself if Congress sent him legislation with provisions he decided were unconstitutional. He promised to take a modest approach when using the statements, legal documents issued by a president the day he signs bills into law that instruct executive officials how to put the statutes into effect. But Mr. Obama said there was a role for the practice if used appropriately.
“In exercising my responsibility to determine whether a provision of an enrolled bill is unconstitutional, I will act with caution and restraint, based only on interpretations of the Constitution that are well-founded,” Mr. Obama wrote in a memorandum to the heads of all departments and agencies in the executive branch.
Mr. Obama’s directions were the latest step in his administration’s effort to deal with a series of legal and policy disputes it inherited from the Bush administration. They came the same day Mr. Obama lifted restrictions Mr. Bush placed on federal financing for research that uses embryonic stem cells.
Mr. Bush’s use of signing statements led to fierce controversy. He frequently used them to declare that provisions in the bills he was signing were unconstitutional constraints on executive power, and that the laws did not need to be enforced or obeyed as written. The laws he challenged included a ban on torture and requirements that Congress be given detailed reports about how the Justice Department was using the counterterrorism powers in the USA Patriot Act.
Since the 19th century, presidents have occasionally signed a bill while declaring that one or more provisions were unconstitutional. The practice became more frequent with the Reagan administration, but it initially drew little attention.
That changed under Mr. Bush, who broke all records, using signing statements to challenge about 1,200 sections of bills over his eight years in office, about twice the number challenged by all previous presidents combined, according to data compiled by Christopher Kelley, a political science professor at Miami University in Ohio.
Many of Mr. Bush’s challenges were based on an expansive view of the president’s power, as commander in chief, to take actions he believes necessary, regardless of what Congress says in legislation.
The American Bar Association declared that such signing statements were “contrary to the rule of law and our constitutional separation of powers,” and called on Mr. Bush and future presidents to stop using them and to return to a system of either signing a bill and then enforcing all of it, or vetoing the bill and giving Congress a chance to override that veto.
The Bush administration defended its use of signing statements as lawful and appropriate. And other legal scholars, while critical of Mr. Bush’s use of the device, said the bar association’s view was too extreme, because Congress sometimes passed important legislation that had minor constitutional flaws. They said it would be impractical to expect a president to veto the entire bill in such instances.
Mr. Obama’s approach may be geared to that kind of legislation. He issued the instructions as Congress was finishing up a huge omnibus spending bill filled with provisions that could affect presidential power, like requirements to get the approval of a committee before taking certain actions.
In his memorandum, Mr. Obama wrote, “Particularly since omnibus bills have become prevalent, signing statements have often been used to ensure that concerns about the constitutionality of discrete statutory provisions do not require a veto of the entire legislation.”
The Obama administration portrayed its approach as a major departure from that of Mr. Bush. But Senator Arlen Specter of Pennsylvania, the ranking Republican on the Senate Judiciary Committee, disagreed, saying Mr. Obama was “wrong” to embrace the view that signing statements can be constitutionally legitimate.
“I think the Constitution is explicit as to how you handle these situations, and if the president thinks something is unconstitutional, then he ought to veto it,” said Mr. Specter, an outspoken critic of Mr. Bush’s signing statements.
He called the practice a “dodge” and “a disregard for the separation of powers and co-equal branches of government.”
“It’s just insulting,” Mr. Specter said, “and there is no reason why we can’t follow the Constitution even if it takes a few days more.”
But Robert S. Turner, a Reagan administration lawyer who has testified before Congress in support of signing statements, said he was pleased Mr. Obama was willing to use the device if he decided that signing a bill was in the national interest but that obeying part of it would be unconstitutional — including provisions that might amount to an “usurpation of presidential power.” Some bills, Mr. Turner argued, “are unvetoable,” because parts are urgently needed.
Mr. Obama’s directive was consistent with what he said in the 2008 presidential campaign, when he criticized Mr. Bush’s use of signing statements as an abuse. He said he would use them in a more restrained manner. By contrast, the Republican presidential nominee, Senator John McCain of Arizona, pledged never to issue a signing statement.
In his directive, Mr. Obama said any signing statement issued before his presidency should be viewed with doubt, placing an asterisk beside all of those issued by Mr. Bush and other former presidents.
“To ensure that all signing statements previously issued are followed only when consistent with these principles,” he wrote, “executive branch departments and agencies are directed to seek the advice of the attorney general before relying on signing statements issued prior to the date of this memorandum as the basis for disregarding, or otherwise refusing to comply with, any provision of a statute.”
Skip to next paragraph
Related
Text: Obama’s Memo on Signing Statements (pdf)
Blog
The Caucus
The Caucus
The latest on President Obama, the new administration and other news from Washington and around the nation. Join the discussion.
* More Politics News
Readers' Comments
Share your thoughts.
* Post a Comment »
* Read All Comments (123) »
But Mr. Obama also signaled that he intended to use signing statements himself if Congress sent him legislation with provisions he decided were unconstitutional. He promised to take a modest approach when using the statements, legal documents issued by a president the day he signs bills into law that instruct executive officials how to put the statutes into effect. But Mr. Obama said there was a role for the practice if used appropriately.
“In exercising my responsibility to determine whether a provision of an enrolled bill is unconstitutional, I will act with caution and restraint, based only on interpretations of the Constitution that are well-founded,” Mr. Obama wrote in a memorandum to the heads of all departments and agencies in the executive branch.
Mr. Obama’s directions were the latest step in his administration’s effort to deal with a series of legal and policy disputes it inherited from the Bush administration. They came the same day Mr. Obama lifted restrictions Mr. Bush placed on federal financing for research that uses embryonic stem cells.
Mr. Bush’s use of signing statements led to fierce controversy. He frequently used them to declare that provisions in the bills he was signing were unconstitutional constraints on executive power, and that the laws did not need to be enforced or obeyed as written. The laws he challenged included a ban on torture and requirements that Congress be given detailed reports about how the Justice Department was using the counterterrorism powers in the USA Patriot Act.
Since the 19th century, presidents have occasionally signed a bill while declaring that one or more provisions were unconstitutional. The practice became more frequent with the Reagan administration, but it initially drew little attention.
That changed under Mr. Bush, who broke all records, using signing statements to challenge about 1,200 sections of bills over his eight years in office, about twice the number challenged by all previous presidents combined, according to data compiled by Christopher Kelley, a political science professor at Miami University in Ohio.
Many of Mr. Bush’s challenges were based on an expansive view of the president’s power, as commander in chief, to take actions he believes necessary, regardless of what Congress says in legislation.
The American Bar Association declared that such signing statements were “contrary to the rule of law and our constitutional separation of powers,” and called on Mr. Bush and future presidents to stop using them and to return to a system of either signing a bill and then enforcing all of it, or vetoing the bill and giving Congress a chance to override that veto.
The Bush administration defended its use of signing statements as lawful and appropriate. And other legal scholars, while critical of Mr. Bush’s use of the device, said the bar association’s view was too extreme, because Congress sometimes passed important legislation that had minor constitutional flaws. They said it would be impractical to expect a president to veto the entire bill in such instances.
Mr. Obama’s approach may be geared to that kind of legislation. He issued the instructions as Congress was finishing up a huge omnibus spending bill filled with provisions that could affect presidential power, like requirements to get the approval of a committee before taking certain actions.
In his memorandum, Mr. Obama wrote, “Particularly since omnibus bills have become prevalent, signing statements have often been used to ensure that concerns about the constitutionality of discrete statutory provisions do not require a veto of the entire legislation.”
The Obama administration portrayed its approach as a major departure from that of Mr. Bush. But Senator Arlen Specter of Pennsylvania, the ranking Republican on the Senate Judiciary Committee, disagreed, saying Mr. Obama was “wrong” to embrace the view that signing statements can be constitutionally legitimate.
“I think the Constitution is explicit as to how you handle these situations, and if the president thinks something is unconstitutional, then he ought to veto it,” said Mr. Specter, an outspoken critic of Mr. Bush’s signing statements.
He called the practice a “dodge” and “a disregard for the separation of powers and co-equal branches of government.”
“It’s just insulting,” Mr. Specter said, “and there is no reason why we can’t follow the Constitution even if it takes a few days more.”
But Robert S. Turner, a Reagan administration lawyer who has testified before Congress in support of signing statements, said he was pleased Mr. Obama was willing to use the device if he decided that signing a bill was in the national interest but that obeying part of it would be unconstitutional — including provisions that might amount to an “usurpation of presidential power.” Some bills, Mr. Turner argued, “are unvetoable,” because parts are urgently needed.
Mr. Obama’s directive was consistent with what he said in the 2008 presidential campaign, when he criticized Mr. Bush’s use of signing statements as an abuse. He said he would use them in a more restrained manner. By contrast, the Republican presidential nominee, Senator John McCain of Arizona, pledged never to issue a signing statement.
In his directive, Mr. Obama said any signing statement issued before his presidency should be viewed with doubt, placing an asterisk beside all of those issued by Mr. Bush and other former presidents.
“To ensure that all signing statements previously issued are followed only when consistent with these principles,” he wrote, “executive branch departments and agencies are directed to seek the advice of the attorney general before relying on signing statements issued prior to the date of this memorandum as the basis for disregarding, or otherwise refusing to comply with, any provision of a statute.”
Yen Drops for Third Day on Concern Japan’s Economy Is Worsening
March 10 (Bloomberg) -- The yen fell for a third day before government reports that analysts say will show Japan’s recession is deepening, reducing the appeal of the currency.
The euro approached a two-month high against the yen on speculation European investors will bring home earnings on overseas assets before the end of the financial quarter. South Korea’s won gained for a third day versus the greenback, climbing from near an 11-year low, after overseas investors bought more of the nation’s shares than they sold.
“Japan’s economic data are poor and the political situation is uncertain, which all bode ill for the yen,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-largest lender. “There is a possibility of the yen testing 100 per dollar shortly.”
The yen dropped to 125.16 versus the euro as of 11:16 a.m. in Tokyo from 124.65 late in New York yesterday. The currency fell to 98.89 per dollar from 98.84. The euro climbed to $1.2657 from $1.2611.
The yen fell against all 16 of most actively traded currencies before a Cabinet Office report that will show the leading index of business conditions in Japan fell to 77.4 in January from 80 in December, according to a Bloomberg survey. The coincident index, which shows current economic activity, dropped to 89.8 from 92.4, according to a separate survey. The reports are due at 2 p.m. in Tokyo.
“The incoming data is likely to illustrate the vulnerability of the Japanese economy,” said Takashi Matsumura, a Tokyo-based economist at Mizuho Research Institute Ltd., a unit of Japan’s second-largest banking group. “The weak data will be yen-negative.”
Machine Orders
Japanese machinery orders slumped 40 percent in January from a year earlier, according to another Bloomberg survey before a Cabinet Office report tomorrow. The world’s second- biggest economy shrank an annualized 12.7 percent last quarter, the government said Feb. 16, the biggest contraction since 1974.
The won rose 1.2 percent to 1,530.30 per dollar, according to Seoul Money Brokerage Services Ltd. The currency has dropped 18 percent this year, after sliding 26 percent in 2008, and touched 1,597 on March 6, the lowest level since 1998.
“There are offshore players who are selling dollars for the won after an excessive overshoot in the exchange rate in recent weeks,” said Roh Sang Chil, a currency dealer with Kookmin Bank in Seoul. “Rising stocks are lending support to the currency market. From April, we’ll see the overall situation improving.”
The euro approached a two-month high against the yen on speculation European investors will bring home earnings on overseas assets before the end of the financial quarter. South Korea’s won gained for a third day versus the greenback, climbing from near an 11-year low, after overseas investors bought more of the nation’s shares than they sold.
“Japan’s economic data are poor and the political situation is uncertain, which all bode ill for the yen,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-largest lender. “There is a possibility of the yen testing 100 per dollar shortly.”
The yen dropped to 125.16 versus the euro as of 11:16 a.m. in Tokyo from 124.65 late in New York yesterday. The currency fell to 98.89 per dollar from 98.84. The euro climbed to $1.2657 from $1.2611.
The yen fell against all 16 of most actively traded currencies before a Cabinet Office report that will show the leading index of business conditions in Japan fell to 77.4 in January from 80 in December, according to a Bloomberg survey. The coincident index, which shows current economic activity, dropped to 89.8 from 92.4, according to a separate survey. The reports are due at 2 p.m. in Tokyo.
“The incoming data is likely to illustrate the vulnerability of the Japanese economy,” said Takashi Matsumura, a Tokyo-based economist at Mizuho Research Institute Ltd., a unit of Japan’s second-largest banking group. “The weak data will be yen-negative.”
Machine Orders
Japanese machinery orders slumped 40 percent in January from a year earlier, according to another Bloomberg survey before a Cabinet Office report tomorrow. The world’s second- biggest economy shrank an annualized 12.7 percent last quarter, the government said Feb. 16, the biggest contraction since 1974.
The won rose 1.2 percent to 1,530.30 per dollar, according to Seoul Money Brokerage Services Ltd. The currency has dropped 18 percent this year, after sliding 26 percent in 2008, and touched 1,597 on March 6, the lowest level since 1998.
“There are offshore players who are selling dollars for the won after an excessive overshoot in the exchange rate in recent weeks,” said Roh Sang Chil, a currency dealer with Kookmin Bank in Seoul. “Rising stocks are lending support to the currency market. From April, we’ll see the overall situation improving.”
HSBC Rises in Hong Kong, Reversing Yesterday’s Last-Minute Drop
March 10 (Bloomberg) -- HSBC Holdings Plc jumped in Hong Kong, reversing a tumble in the closing seconds of trading yesterday that the city’s government said is being investigated.
The stock rose 14 percent to HK$37.65 at 10:18 a.m. local time. That returned the shares to where they traded before yesterday’s closing auction, when the price dropped to HK$33 from HK$37 in a single transaction.
Hong Kong’s Securities and Futures Commission is probing the closing-auction trade, Financial Secretary John Tsang told reporters today in comments broadcast by local television. The city’s stock exchange has pledged to improve the closing auction process to reduce volatility and forestall market manipulation.
“I wouldn’t comment on any individual stock, but I understand a lot of Hong Kong people are holding HSBC shares so the government is concerned about the drop,” Tsang said. “I have met with the SFC yesterday and they are investigating.”
The stock rose 14 percent to HK$37.65 at 10:18 a.m. local time. That returned the shares to where they traded before yesterday’s closing auction, when the price dropped to HK$33 from HK$37 in a single transaction.
Hong Kong’s Securities and Futures Commission is probing the closing-auction trade, Financial Secretary John Tsang told reporters today in comments broadcast by local television. The city’s stock exchange has pledged to improve the closing auction process to reduce volatility and forestall market manipulation.
“I wouldn’t comment on any individual stock, but I understand a lot of Hong Kong people are holding HSBC shares so the government is concerned about the drop,” Tsang said. “I have met with the SFC yesterday and they are investigating.”
Hewlett-Packard, Computer Sciences Mull Satyam Bid, Times Says
March 10 (Bloomberg) -- Hewlett-Packard Co. and Computer Sciences Corp. are assessing the possibility of acquiring a majority stake in Satyam Computer Services Ltd., India’s Economic Times reported today, without saying where it obtained the information.
Hewlett-Packard doesn’t comment on rumor or speculation, Christina Schneider, a spokeswoman for the Palo Alto, California- based computer maker, said by e-mail. Janet Herin, a spokeswoman at software-services provider Computer Sciences, and Michael Dickerson, a company spokesman, weren’t immediately available for comment after working hours.
Satyam became the subject of India’s biggest corporate fraud inquiry after founder Ramalinga Raju said Jan. 7 that he inflated assets by more than $1 billion. The Hyderabad, India-based computer-services provider yesterday invited bidders keen on buying a majority stake in the company to submit their interest by March 12.
Hewlett-Packard doesn’t comment on rumor or speculation, Christina Schneider, a spokeswoman for the Palo Alto, California- based computer maker, said by e-mail. Janet Herin, a spokeswoman at software-services provider Computer Sciences, and Michael Dickerson, a company spokesman, weren’t immediately available for comment after working hours.
Satyam became the subject of India’s biggest corporate fraud inquiry after founder Ramalinga Raju said Jan. 7 that he inflated assets by more than $1 billion. The Hyderabad, India-based computer-services provider yesterday invited bidders keen on buying a majority stake in the company to submit their interest by March 12.
Sunday, March 8, 2009
World Bank Says Global Economy Will Shrink in ’09 * S
WASHINGTON — In one of the bleakest assessments yet, economists at the World Bank predicted on Sunday that the global economy and the volume of global trade would both shrink this year for the first time since World War II.
The World Bank said in a new report that the crisis that began with junk mortgages in the United States was causing havoc for poorer countries that had nothing to do with the original problem.
As a result, it said, nations in Latin America, Africa and East Asia have had not only their growth stifled but their access to credit as well.
The bank’s assessment for 2009 was grimmer than those of most private forecasters. It did not provide a specific estimate, but bank officials said its economists would be publishing one in the next several weeks.
Even extremely pessimistic forecasters have predicted that the global economy would eke out a tiny expansion, on continuing if slowed growth outside the United States and Europe. In late January, the International Monetary Fund reduced its estimate for global growth this year to just 0.5 percent, the lowest level in more than 60 years.
In its new report, prepared for a meeting next week of finance ministers from the 20 industrialized and large developing countries, the World Bank warned that the financial disruptions are all but certain to overwhelm the ability of institutions like it and the International Monetary Fund to provide a buffer.
Robert B. Zoellick, president of the World Bank, pleaded for wealthy governments to create a “vulnerability fund” and to set aside a fraction of what they spend on stimulating their own economies to help others.
“This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis,” Mr. Zoellick said in a statement. “We need investments in safety nets, infrastructure, and small and medium-size companies to create jobs and to avoid social and political unrest.”
The bank said that developing countries, many of which had been growing rapidly in recent years, were being devastated by plunging exports, falling commodity prices, declining foreign investment and vanishing credit.
The impact of the global slowdown varies widely among countries, and the drop in prices for oil and other commodities has created both winners and losers. But the emerging-market countries face a combined financing shortfall of at least $270 billion and as much as $700 billion over the next year or two, the bank said.
Central European countries like Poland, Hungary and the Czech Republic are hurting from diminished exports to western Europe. They are also reeling from a severe credit crisis among major European banks, which have taken huge losses on American mortgages and mortgage-backed securities.
East Asian countries are experiencing plunging global trade. Demand for cheap manufactured goods has declined in the United States. That slump has hit many Asian countries both directly and indirectly.
Under the “vulnerability fund” proposal, when rich countries set stimulus financing for their own countries, they would set aside an additional 0.7 percent to help stabilize poorer countries.
Mr. Zoellick said the new fund could then make the money available to countries through the World Bank, the United Nations or other international financial institutions like the I.M.F.
He said the World Bank could triple its own lending in 2009 to $35 billion, though that would still be a small fraction of the shortfall facing poor countries.
The World Bank said in a new report that the crisis that began with junk mortgages in the United States was causing havoc for poorer countries that had nothing to do with the original problem.
As a result, it said, nations in Latin America, Africa and East Asia have had not only their growth stifled but their access to credit as well.
The bank’s assessment for 2009 was grimmer than those of most private forecasters. It did not provide a specific estimate, but bank officials said its economists would be publishing one in the next several weeks.
Even extremely pessimistic forecasters have predicted that the global economy would eke out a tiny expansion, on continuing if slowed growth outside the United States and Europe. In late January, the International Monetary Fund reduced its estimate for global growth this year to just 0.5 percent, the lowest level in more than 60 years.
In its new report, prepared for a meeting next week of finance ministers from the 20 industrialized and large developing countries, the World Bank warned that the financial disruptions are all but certain to overwhelm the ability of institutions like it and the International Monetary Fund to provide a buffer.
Robert B. Zoellick, president of the World Bank, pleaded for wealthy governments to create a “vulnerability fund” and to set aside a fraction of what they spend on stimulating their own economies to help others.
“This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis,” Mr. Zoellick said in a statement. “We need investments in safety nets, infrastructure, and small and medium-size companies to create jobs and to avoid social and political unrest.”
The bank said that developing countries, many of which had been growing rapidly in recent years, were being devastated by plunging exports, falling commodity prices, declining foreign investment and vanishing credit.
The impact of the global slowdown varies widely among countries, and the drop in prices for oil and other commodities has created both winners and losers. But the emerging-market countries face a combined financing shortfall of at least $270 billion and as much as $700 billion over the next year or two, the bank said.
Central European countries like Poland, Hungary and the Czech Republic are hurting from diminished exports to western Europe. They are also reeling from a severe credit crisis among major European banks, which have taken huge losses on American mortgages and mortgage-backed securities.
East Asian countries are experiencing plunging global trade. Demand for cheap manufactured goods has declined in the United States. That slump has hit many Asian countries both directly and indirectly.
Under the “vulnerability fund” proposal, when rich countries set stimulus financing for their own countries, they would set aside an additional 0.7 percent to help stabilize poorer countries.
Mr. Zoellick said the new fund could then make the money available to countries through the World Bank, the United Nations or other international financial institutions like the I.M.F.
He said the World Bank could triple its own lending in 2009 to $35 billion, though that would still be a small fraction of the shortfall facing poor countries.
A Rising Dollar Lifts the U.S. but Adds to the Crisis Abroad
As the world is seized with anxiety in the face of a spreading financial crisis, the one place having a considerably easier time attracting money is, perversely enough, the same place that started much of the trouble: the United States.
Skip to next paragraph
Related
Times Topics: Dollar
American investors are ditching foreign ventures and bringing their dollars home, entrusting them to the supposed bedrock safety of United States government bonds. And China continues to buy staggering quantities of American debt.
These actions are lifting the value of the dollar and providing the Obama administration with a crucial infusion of financing as it directs trillions of dollars toward rescuing banks and stimulating the economy, enabling the government to pay for these efforts without lifting interest rates.
And yet in a global economy crippled by a lack of confidence and capital, with lending and investment mechanisms dysfunctional from Milan to Manila, the tilt of money toward the United States appears to be exacerbating the crisis elsewhere.
The pursuit of capital suddenly seems like a zero sum game. A dollar invested by foreign central banks and investors in American government bonds is a dollar that is not available to Eastern European countries desperately seeking to refinance debt. It is a dollar that cannot reach Africa, where many countries are struggling with the loss of aid and foreign investment.
“Virtually all of the low-income countries are in very serious trouble,” said Eswar Prasad, a former official at the International Monetary Fund and a senior fellow at the Brookings Institution, the liberal-leaning research organization in Washington.
He went on: “This is the third wave of the financial crisis. Low-income countries are getting hit very hard. The flow of private capital to the emerging market has dried up.”
Private money invested in so-called emerging countries plunged from $928 billion in 2007 to $466 billion last year and is likely to fall to $165 billion this year, according to the Institute of International Finance.
Not that the United States is enjoying a great influx of money. Globally, investors are holding tight to cash and extracting it as quickly as they can from risky ventures.
In the United States, investments by foreigners have slowed markedly. But as Americans eschew foreign deals and keep their dollars at home, and as foreign central banks — especially China — buy Treasury bills, the United States is absorbing money that used to be scattered around the globe. And that is making money tighter elsewhere in the world.
The most immediate crisis appears to be in Eastern Europe, where investors borrowed exuberantly in foreign currencies — notably the euro and the Swiss franc — using those funds to build office towers and factories. Their debts are growing as their currencies decline in value, leading to bank losses and requiring government bailouts along with aid from the I.M.F..
Economists liken this episode to the financial crisis that assaulted much of Asia in the late 1990s. Then, as now, investors borrowed in foreign currencies. When investment left the region, local currencies plummeted, particularly in Thailand and Indonesia, setting off defaults and sowing job losses and poverty.
“Eastern Europe looks incredibly similar to Asia in the 1990s,” said Brad Setser, an economist at the Council on Foreign Relations in New York.
In one key regard, this crisis is more problematic: In the 1990s, the rest of the global economy was growing vigorously. Once danger abated, Asian countries were able to resume growth by selling goods to the United States, Europe, Japan and China.
Indeed, the very plunge in currencies that precipitated the crisis also provided a fix, making Thai, Malaysian, Indonesian and Korean goods that much cheaper on world markets.
This time, as many low-income countries again see their currencies fall, they are confronting a world beset by recession, in which demand for their products is weak and falling.
In a report released Sunday, the World Bank predicted that the global economy would shrink in 2009 for the first time in more than half a century and forecast that global trade would decline for the first time since the early 1980s.
“Depreciation isn’t enough now to offset the global contraction,” said Mr. Setser, noting that export powers like Japan, Korea, Taiwan and Brazil have had rapid declines in sales in recent months. “Everybody’s looking vulnerable. All commodity exporters are potentially subject to currency crises.”
Fears are growing that a much broader group of countries will plunge into trouble. Mr. Prasad’s list of potential danger zones includes Vietnam, the Philippines, Malaysia and Indonesia, as well as Pakistan and Ecuador.
In the Asian financial crisis, countries at the center of the storm were particularly vulnerable because the values of their currencies were mostly pegged to the dollar. Once central banks ran out of dollars to exchange for their own currencies, they lost their ability to influence the exchange rate. As a result, their currencies fell, turning already large debts into impossible debts.
Skip to next paragraph
Related
Times Topics: Dollar
American investors are ditching foreign ventures and bringing their dollars home, entrusting them to the supposed bedrock safety of United States government bonds. And China continues to buy staggering quantities of American debt.
These actions are lifting the value of the dollar and providing the Obama administration with a crucial infusion of financing as it directs trillions of dollars toward rescuing banks and stimulating the economy, enabling the government to pay for these efforts without lifting interest rates.
And yet in a global economy crippled by a lack of confidence and capital, with lending and investment mechanisms dysfunctional from Milan to Manila, the tilt of money toward the United States appears to be exacerbating the crisis elsewhere.
The pursuit of capital suddenly seems like a zero sum game. A dollar invested by foreign central banks and investors in American government bonds is a dollar that is not available to Eastern European countries desperately seeking to refinance debt. It is a dollar that cannot reach Africa, where many countries are struggling with the loss of aid and foreign investment.
“Virtually all of the low-income countries are in very serious trouble,” said Eswar Prasad, a former official at the International Monetary Fund and a senior fellow at the Brookings Institution, the liberal-leaning research organization in Washington.
He went on: “This is the third wave of the financial crisis. Low-income countries are getting hit very hard. The flow of private capital to the emerging market has dried up.”
Private money invested in so-called emerging countries plunged from $928 billion in 2007 to $466 billion last year and is likely to fall to $165 billion this year, according to the Institute of International Finance.
Not that the United States is enjoying a great influx of money. Globally, investors are holding tight to cash and extracting it as quickly as they can from risky ventures.
In the United States, investments by foreigners have slowed markedly. But as Americans eschew foreign deals and keep their dollars at home, and as foreign central banks — especially China — buy Treasury bills, the United States is absorbing money that used to be scattered around the globe. And that is making money tighter elsewhere in the world.
The most immediate crisis appears to be in Eastern Europe, where investors borrowed exuberantly in foreign currencies — notably the euro and the Swiss franc — using those funds to build office towers and factories. Their debts are growing as their currencies decline in value, leading to bank losses and requiring government bailouts along with aid from the I.M.F..
Economists liken this episode to the financial crisis that assaulted much of Asia in the late 1990s. Then, as now, investors borrowed in foreign currencies. When investment left the region, local currencies plummeted, particularly in Thailand and Indonesia, setting off defaults and sowing job losses and poverty.
“Eastern Europe looks incredibly similar to Asia in the 1990s,” said Brad Setser, an economist at the Council on Foreign Relations in New York.
In one key regard, this crisis is more problematic: In the 1990s, the rest of the global economy was growing vigorously. Once danger abated, Asian countries were able to resume growth by selling goods to the United States, Europe, Japan and China.
Indeed, the very plunge in currencies that precipitated the crisis also provided a fix, making Thai, Malaysian, Indonesian and Korean goods that much cheaper on world markets.
This time, as many low-income countries again see their currencies fall, they are confronting a world beset by recession, in which demand for their products is weak and falling.
In a report released Sunday, the World Bank predicted that the global economy would shrink in 2009 for the first time in more than half a century and forecast that global trade would decline for the first time since the early 1980s.
“Depreciation isn’t enough now to offset the global contraction,” said Mr. Setser, noting that export powers like Japan, Korea, Taiwan and Brazil have had rapid declines in sales in recent months. “Everybody’s looking vulnerable. All commodity exporters are potentially subject to currency crises.”
Fears are growing that a much broader group of countries will plunge into trouble. Mr. Prasad’s list of potential danger zones includes Vietnam, the Philippines, Malaysia and Indonesia, as well as Pakistan and Ecuador.
In the Asian financial crisis, countries at the center of the storm were particularly vulnerable because the values of their currencies were mostly pegged to the dollar. Once central banks ran out of dollars to exchange for their own currencies, they lost their ability to influence the exchange rate. As a result, their currencies fell, turning already large debts into impossible debts.
China to Overcome Global Recession First, Rogers Says
March 9 (Bloomberg) -- China’s stimulus spending will help its economy overcome the global recession sooner than the U.S. and other countries, investor Jim Rogers said.
China’s reserves allow the government to spend on projects that will make the nation more efficient and competitive as the global economy recovers, said Rogers, the author of “A Bull in China: Investing Profitably in the World’s Greatest Market.” Signs China is taking steps to liberalize its currency will also benefit the country, he added.
“I certainly expect China to come out of it sooner than the U.S.,” Rogers, chairman of Singapore-based Rogers Holdings, said in a Bloomberg TV interview in the city-state. “They seem to be spending the money on the right things. China is doing a far better job than the others.”
Premier Wen Jiabao reiterated last week the government’s pledge to “significantly increase” investment in 2009 to help counter the slowest growth in seven years. He didn’t specify new stimulus spending in addition to a 4 trillion yuan ($585 billion) plan announced in November.
The People’s Bank of China cut interest rates five times in the final four months of last year, including the biggest single reduction since the 1997-98 Asian financial crisis. The government is targeting growth of 8 percent in 2009, after the economy slowed to a 6.8 percent gain in the fourth quarter.
Yuan, Yen, Dollar
China will allow trade settlement in yuan with Hong Kong soon, central bank Governor Zhou Xiaochuan said at a briefing in Beijing on March 6. President Li Lihui of Bank of China Ltd., the nation’s largest foreign-exchange lender, said yesterday in Beijing the bank is already conducting trial international yuan settlements in Shanghai and Hong Kong.
“I’m glad to see they’re taking yet another step towards convertibility,” said Rogers, who in April 2006 accurately predicted oil would reach $100 a barrel and gold $1,000 an ounce. He said he owns Japanese yen as he expects more of the money to “come home.”
Rogers added he plans to sell his remaining U.S. dollar holdings later this year because the world’s largest economy isn’t a “safe haven” for investors.
“I plan later this year to get out of the rest of my U.S. dollars,” he said. “It’s had an artificial rally too but it’s a terribly flawed currency. The U.S. is printing money as fast as it can and that’s always throughout history led to currency problems down the road.”
Rogers on June 30 advised investors to avoid the dollar “at all costs” as the U.S. economy slows, and favored commodities. The dollar has risen against nine of the Group of 10 currencies since then, according to data tracked by Bloomberg.
Rogers added he remains bullish on agriculture and that commodities are “the only area of the world economy I know which is benefiting.” He said he owns “some” gold and silver, and regards silver as “cheaper.”
Water, power and other infrastructure companies’ shares are favored because their earnings are less vulnerable during the global slowdown, Rogers said.
China’s reserves allow the government to spend on projects that will make the nation more efficient and competitive as the global economy recovers, said Rogers, the author of “A Bull in China: Investing Profitably in the World’s Greatest Market.” Signs China is taking steps to liberalize its currency will also benefit the country, he added.
“I certainly expect China to come out of it sooner than the U.S.,” Rogers, chairman of Singapore-based Rogers Holdings, said in a Bloomberg TV interview in the city-state. “They seem to be spending the money on the right things. China is doing a far better job than the others.”
Premier Wen Jiabao reiterated last week the government’s pledge to “significantly increase” investment in 2009 to help counter the slowest growth in seven years. He didn’t specify new stimulus spending in addition to a 4 trillion yuan ($585 billion) plan announced in November.
The People’s Bank of China cut interest rates five times in the final four months of last year, including the biggest single reduction since the 1997-98 Asian financial crisis. The government is targeting growth of 8 percent in 2009, after the economy slowed to a 6.8 percent gain in the fourth quarter.
Yuan, Yen, Dollar
China will allow trade settlement in yuan with Hong Kong soon, central bank Governor Zhou Xiaochuan said at a briefing in Beijing on March 6. President Li Lihui of Bank of China Ltd., the nation’s largest foreign-exchange lender, said yesterday in Beijing the bank is already conducting trial international yuan settlements in Shanghai and Hong Kong.
“I’m glad to see they’re taking yet another step towards convertibility,” said Rogers, who in April 2006 accurately predicted oil would reach $100 a barrel and gold $1,000 an ounce. He said he owns Japanese yen as he expects more of the money to “come home.”
Rogers added he plans to sell his remaining U.S. dollar holdings later this year because the world’s largest economy isn’t a “safe haven” for investors.
“I plan later this year to get out of the rest of my U.S. dollars,” he said. “It’s had an artificial rally too but it’s a terribly flawed currency. The U.S. is printing money as fast as it can and that’s always throughout history led to currency problems down the road.”
Rogers on June 30 advised investors to avoid the dollar “at all costs” as the U.S. economy slows, and favored commodities. The dollar has risen against nine of the Group of 10 currencies since then, according to data tracked by Bloomberg.
Rogers added he remains bullish on agriculture and that commodities are “the only area of the world economy I know which is benefiting.” He said he owns “some” gold and silver, and regards silver as “cheaper.”
Water, power and other infrastructure companies’ shares are favored because their earnings are less vulnerable during the global slowdown, Rogers said.
Most Japan Stocks Fall on U.S. Jobs, Bank Concern; Inpex Rises
March 9 (Bloomberg) -- Most Japanese stocks fell as rising unemployment in the U.S. and the U.K. government’s takeover of Lloyds Banking Group Plc fanned concern the global economic slump will deepen.
Honda Motor Co., which gets more than half its profit from North America, sank 2.3 percent after U.S. unemployment jumped to the highest level in more than a quarter century. Insurer Tokio Marine Holdings Inc. sank 4 percent after London-based Lloyds said it will cede control to the government. Drugmakers declined as U.S. regulators sought additional data for Takeda Pharmaceutical Co.’s diabetes treatment. Inpex Corp., Japan’s biggest oil explorer, climbed 4.5 percent after crude advanced.
“We all knew the U.S. job market is in a harsh state,” Chisato Haganuma, a Tokyo-based strategist at Nomura Securities Co., said in an interview with Bloomberg Television. “Still, the outcome of the U.S. jobless report is really bleak.”
The Topix index slid 2.62, or 0.4 percent, to 718.77, with about three stocks falling for every two that advanced. The Nikkei 225 Stock Average added 19.14, or 0.3 percent, to 7,192.24 as of 10:09 a.m. in Tokyo.
The Nikkei has lost almost a fifth of its value this year on concern the global economic slowdown and credit turmoil will erode earnings. The gauge’s members traded at an average 0.83 times corporate net worth as of March 6, the lowest level on record dating back to July 1989, according to Nikkei Inc.
Current Account
Adding to evidence Japan’s recession is deepening, the government said today the nation had its first current-account deficit in 13 years in January. The deficit stood at 172.8 billion yen ($1.76 billion), compared with a median estimate by 22 economists for a gap of 15.3 billion yen.
The U.S. unemployment rate climbed to 8.1 percent in February, the Labor Department said on March 6, while economists had estimated 7.9 percent. Employers eliminated 651,000 jobs last month, and losses have now exceeded 600,000 for a third- straight month, the first time that’s happened since the tally began in 1939.
Honda, Japan’s No. 2 automaker, slid 2.3 percent to 2,100 yen, while smaller rival Mazda Motor Corp. lost 3.7 percent to 131 yen. Toyota Motor Corp., the biggest automaker globally, retreated 1.7 percent to 2,850 yen.
Tokio Marine, Japan’s No. 1 casualty insurer, sank 4 percent to 1,860 yen. Mitsui Sumitomo Insurance Group Holdings Inc. lost 6 percent to 1,864 yen. Both insurers were headed for a sixth-straight decline. Nissay Dowa General Insurance Co. lost 3.5 percent to 354 yen.
Share Sale
Lloyds, Britain’s biggest mortgage lender, said on March 7 it will relinquish control to the U.K. government in return for state guarantees covering 260 billion pounds ($367 billion) of risky assets. The government’s stake will increase to as much as 75 percent, making Lloyds the fourth U.K. bank to slip into state control since the government takeover of Northern Rock Plc in September 2007.
Shinsei Bank Ltd., the Japanese lender partly owned by investor Christopher Flowers, plunged 6.3 percent to 75 yen. The company will sell preferred shares to raise “several tens of billions of yen,” Shinsei said on March 6.
Takeda wasn’t traded as orders to sell outnumbered those to buy. The U.S. Food and Drug Administration said clinical data submitted by Takeda on its alogliptin medication was “insufficient” under new U.S. diabetes guidelines released in December, the Osaka-based company announced on March 6. Ratings on Takeda were cut to “sell” from “hold” at KBC Securities and to “neutral” from “buy” at Nomura Holdings Inc.
Inpex, Orix
Inpex jumped 4.5 percent to 648,000 yen, leading a gauge of resource companies to the biggest gain among the Topix’s 33 industry groups. Closest domestic rival Japan Petroleum Exploration Co. leapt 5.3 percent to 3,780 yen. Crude oil for April delivery jumped 4.4 percent to $45.52 a barrel in New York on March 6, the highest settlement in almost six weeks.
Orix Corp., Japan’s biggest non-bank financial company, climbed 4.6 percent to 2,145 yen after having lost 14 percent in the previous two days. Nomura raised the stock to “buy” from “neutral,” saying Orix has sufficient cash and concern about the company’s funding has been overdone.
Nikkei futures expiring in March inched up 0.6 percent to 7,210 in Osaka and gained 0.2 percent to 7,200 in Singapore.
Honda Motor Co., which gets more than half its profit from North America, sank 2.3 percent after U.S. unemployment jumped to the highest level in more than a quarter century. Insurer Tokio Marine Holdings Inc. sank 4 percent after London-based Lloyds said it will cede control to the government. Drugmakers declined as U.S. regulators sought additional data for Takeda Pharmaceutical Co.’s diabetes treatment. Inpex Corp., Japan’s biggest oil explorer, climbed 4.5 percent after crude advanced.
“We all knew the U.S. job market is in a harsh state,” Chisato Haganuma, a Tokyo-based strategist at Nomura Securities Co., said in an interview with Bloomberg Television. “Still, the outcome of the U.S. jobless report is really bleak.”
The Topix index slid 2.62, or 0.4 percent, to 718.77, with about three stocks falling for every two that advanced. The Nikkei 225 Stock Average added 19.14, or 0.3 percent, to 7,192.24 as of 10:09 a.m. in Tokyo.
The Nikkei has lost almost a fifth of its value this year on concern the global economic slowdown and credit turmoil will erode earnings. The gauge’s members traded at an average 0.83 times corporate net worth as of March 6, the lowest level on record dating back to July 1989, according to Nikkei Inc.
Current Account
Adding to evidence Japan’s recession is deepening, the government said today the nation had its first current-account deficit in 13 years in January. The deficit stood at 172.8 billion yen ($1.76 billion), compared with a median estimate by 22 economists for a gap of 15.3 billion yen.
The U.S. unemployment rate climbed to 8.1 percent in February, the Labor Department said on March 6, while economists had estimated 7.9 percent. Employers eliminated 651,000 jobs last month, and losses have now exceeded 600,000 for a third- straight month, the first time that’s happened since the tally began in 1939.
Honda, Japan’s No. 2 automaker, slid 2.3 percent to 2,100 yen, while smaller rival Mazda Motor Corp. lost 3.7 percent to 131 yen. Toyota Motor Corp., the biggest automaker globally, retreated 1.7 percent to 2,850 yen.
Tokio Marine, Japan’s No. 1 casualty insurer, sank 4 percent to 1,860 yen. Mitsui Sumitomo Insurance Group Holdings Inc. lost 6 percent to 1,864 yen. Both insurers were headed for a sixth-straight decline. Nissay Dowa General Insurance Co. lost 3.5 percent to 354 yen.
Share Sale
Lloyds, Britain’s biggest mortgage lender, said on March 7 it will relinquish control to the U.K. government in return for state guarantees covering 260 billion pounds ($367 billion) of risky assets. The government’s stake will increase to as much as 75 percent, making Lloyds the fourth U.K. bank to slip into state control since the government takeover of Northern Rock Plc in September 2007.
Shinsei Bank Ltd., the Japanese lender partly owned by investor Christopher Flowers, plunged 6.3 percent to 75 yen. The company will sell preferred shares to raise “several tens of billions of yen,” Shinsei said on March 6.
Takeda wasn’t traded as orders to sell outnumbered those to buy. The U.S. Food and Drug Administration said clinical data submitted by Takeda on its alogliptin medication was “insufficient” under new U.S. diabetes guidelines released in December, the Osaka-based company announced on March 6. Ratings on Takeda were cut to “sell” from “hold” at KBC Securities and to “neutral” from “buy” at Nomura Holdings Inc.
Inpex, Orix
Inpex jumped 4.5 percent to 648,000 yen, leading a gauge of resource companies to the biggest gain among the Topix’s 33 industry groups. Closest domestic rival Japan Petroleum Exploration Co. leapt 5.3 percent to 3,780 yen. Crude oil for April delivery jumped 4.4 percent to $45.52 a barrel in New York on March 6, the highest settlement in almost six weeks.
Orix Corp., Japan’s biggest non-bank financial company, climbed 4.6 percent to 2,145 yen after having lost 14 percent in the previous two days. Nomura raised the stock to “buy” from “neutral,” saying Orix has sufficient cash and concern about the company’s funding has been overdone.
Nikkei futures expiring in March inched up 0.6 percent to 7,210 in Osaka and gained 0.2 percent to 7,200 in Singapore.
Subscribe to:
Posts (Atom)
Posts
