US households may lack income to spend more

August 31, 2009
HOUSEHOLD income in the United States is essentially stagnant, raising doubts about whether consumers already hurt by job losses can sustain an economic recovery.

The now-ended Cash for Clunkers program helped lift consumer spending last month and is expected to deliver a bigger boost this month. But any economic rebound likely would falter if shoppers lack the income to spend more in the long run.

Especially in the US, consumer spending is essential: It drives about 70 percent of economic activity - more than for most European nations and well above the rates in developing countries such as China.

US retailers already are paying the price for flat income growth and weak consumer spending. A survey of big retail chains showed that shoppers remained tightfisted last month. That raised fears not just about back-to-school sales but also about the make-or-break holiday shopping season.

"Consumers just don't have the financial firepower to go out and spend more," said Mark Zandi, chief economist at Moody's Economy.com. "Unless businesses curtail their job cuts, the recovery could very well peter out."

Americans' purchasing power has been battered by the 6.7 million jobs that have vanished since the recession began in December 2007. Companies also have cut costs by forcing workers to take unpaid days off or to work only part time.

And some consumers have pared their spending because their pay hasn't kept pace with their expenses or because they're using more money to save or reduce debt. Personal incomes were unchanged last month, the Commerce Department said last Friday. It was the eighth month out of the past 10 in which incomes have either fallen or failed to grow.

Consumer spending edged up 0.2 percent last month, matching economists' expectations. But the flat reading on incomes was weaker than the small rise economists had expected.

"It may take consumers fully a year to get back on their feet," said Sal Guatieri, an economist at BMO Capital Markets.

With incomes remaining unchanged last month even as spending rose, the personal savings rate dipped to 4.2 percent of after-tax income, from 4.5 percent in June.

The savings rate has been rising in recent months, after having sunk below 1 percent early last year. More people, facing layoffs, falling home equity and shrunken investment portfolios, are struggling to rebuild nest eggs.

Economists expect the savings rate to rise further in coming months, possibly topping 6 percent. If so, it would prolong the nation's sluggish spending and economic activity.

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Swiss hand list of taxpayers to France

August 31, 2009
FRANCE has received a list of 3,000 French taxpayers with bank accounts in Switzerland as part of a double taxation agreement signed between the two countries last week, according to a report in a French newspaper yesterday.

French Budget Minister Eric Woerth was quoted in the weekly Journal du Dimanche as saying the accounts contained some 3 billion euros (US$4.3 billion), "some of which is very likely linked to tax evasion."

Woerth called on the account holders to come forward and bring their tax affairs in order by the end of this year. He ruled out an amnesty for tax evaders. "That would be an indefensible injustice," he said according to the interview published on the paper's Website.

Swiss officials could not immediately be reached for comment.

If confirmed, it would be the second time Switzerland has agreed to set aside its strict banking secrecy rules and hand over the names of foreigners suspected of tax evasion.

Earlier this month Switzerland agreed to give the United States the names of 4,450 American taxpayers suspected of setting up secret offshore accounts with the help of Swiss bank UBS AG. The deal was part of a settlement to end a long-running US probe against UBS, which became the focus of Washington's efforts to crack down on tax evaders.

European countries, led by France and Germany, have demanded similar access to information about their citizens with Swiss bank accounts. A meeting of the 30-nation Organization for Economic Cooperation and Development in April agreed to impose economic sanctions against those countries that refuse to abide by the Paris-based watchdog group's guidelines for tax information exchange.

The Swiss government has since pledged to sign a dozen new or revised tax data exchange agreements.

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Gold rallies after consumer confidence data

August 30, 2009
Gold futures on the COMEX Division of the New York Mercantile Exchange ended much higher on Friday as the disappointing consumer confidence data fueled gold's safe-haven appeal. Silver and platinum both gained.

Gold price for December delivery rose 11.50 U.S. dollars, or 1.2 percent to finish at 958.80 dollars an ounce, touching as high as 964.60 earlier in the session.

Consumer confidence still remains at its lowest level in four months. Reuters/University of Michigan Surveys of Consumers said its final index of confidence fell to 65.7 in August from 66 in the previous month. This is also the second month in a row confidence has fallen.

The weak confidence in consumer market, which is considered as the most important aspect of U.S. economy, raised worries on the pace of recovery, which strengthened gold's attraction of safe-haven.

December silver finished at 14.815 dollars per ounce, up 56.4 cents. October platinum climbed 5.40 dollars to 1245.90 dollars an ounce.

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U.S. consumer spending rises 0.2% in July

August 30, 2009
U.S. consumer spending edged up 0.2 percent in July, but personal income remained almost flat from the previous month, according to a government report released Friday.

With the help of the popular Cash for Clunkers program that generated the sale of nearly 490,000 vehicles worth more than 2 billion U.S. dollars, the rise in consumer spending last month matched economists' expectations, the Commerce Department said.

Personal income increased 3.8 billion dollars, or less than 0.1percent in July, a weaker showing than the expected 0.2 percent gain.

With incomes flat as spending increased, the personal savings rate dropped 0.3 percentage, from 4.5 percent in June to 4.2 percent in July. The savings rate was 2.6 percent a year ago.

Consumer spending, which accounts for about 70 percent of the economy, is a key factor indicating the trend of the economy.

The Federal Reserve has pushed a key interest rate to a record low near zero in an effort to boost the economy and is pledging to keep rates low for a considerable period even as the economy begins to grow again.

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U.S. economy shrinks 1% in Q2

August 30, 2009

The American economy shrank at an annual rate of 1 percent in the second quarter, a better-than-expected showing, the U.S. Commerce Department reported Thursday.

The department's new estimate for the second-quarter gross domestic product (GDP) was unchanged from the initial figure it released last month.

The drop, while representing a record fourth consecutive decline, was far smaller than the previous two quarters. It also was stronger than the 1.5 percent decline that private economists expected.

The new GDP estimate, the department said, was based on more complete sources than that of the estimate issued last month. In the previous estimate, the real GDP decrease was also 1.0 percent.

In the first quarter, the U.S. real GDP contracted at a much deeper 6.4 percent.

The revision showed a drop of 1.0 percent in consumer spending, the main driver of economic activity, instead of a prior estimate of a 1.2 percent decline.

Federal spending increased 11.0 percent in the second quarter, in contrast to a decrease of 4.3 percent in the first.

The housing sector remained a drag on the economy, with real residential fixed investment falling by 22.8 percent, compared with a decrease of 38.2 percent in the previous quarter.

Exports fell 5.0 percent while imports decreased 15.1 percent, a phenomenon that could contribute to GDP growth.

Businesses cut inventories more than initially expected but that weakness was offset by upward revisions in other areas.

Analysts said that the unchanged revision of the real GDP in the second quarter was a positive signal to the U.S. economy.

Political leaders, though, were not that optimistic.

"We are a long way away from a completely healthy financial system and a full economic recovery." President Barack Obama said two days ago when he nominated Federal Reserve Chairman Ben Bernanke for a second term.

Unemployment, home foreclosures and bank failures are still mounting in the U.S.

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U.S. stocks face dilemma in coming weeks

August 29, 2009

Wall Street faces an interesting few weeks as commentators debate whether the recovery in the Dow Jones average this year is the start of a new bull market or heading for a fall.

Since the beginning of March, when the Dow Jones average hit a multi-year-low at 6,547, the index has increased more than 50 percent.

"To a certain degree, the market is perhaps sitting on the head of a pin. The market could easily be moved one way or the other," Theodore Weisberg, a stock trading veteran with Seaport Securities, told Xinhua earlier this week.

The Federal Reserve Chairman Ben Bernanke claimed the economy was "on the verge of recovery" last Friday. However, Nouriel Roubini, the New York University professor who predicted the financial crisis, said the chance of a double-dip recession was increasing because of risks related to the ending of global monetary and fiscal stimulus programs.

According to Weisberg, "The obvious answer is perhaps Bernanke is correct, which is being evidenced by the continuous strength in the stock market. We know that the stock market is a leading indicator, not a trailing indicator. It tends to look ahead three, six or 12 months. The tape simply says, I think, that it is looking ahead at an improving U.S. economy.

"But on the other hand, the financial press have had many stories about perhaps the market has in fact got away ahead of itself. The economy really is not as robust as we like to believe," he added. "It's a bit of dilemma."

Despite the signs of recovery, some analysts hold that the economy is still fragile, noting that a number of companies have been able to report better-than-expected earnings in the first half-year in large part because of aggressive cost-cutting measures and outsourcing, not stronger sales. Revenue is still sagging as consumers forgo spending to shore up their savings.

The stock market surge was not only based on positive economic fundamentals and corporate earnings, but also driven by excess liquidity, said Li Shanquan, vice president of OppenheimerFunds Inc.

The Bush and Obama administrations launched enormous economic stimulus plans to free up the frozen liquidity, which was caused by the worst financial crisis since the Great Depression. Partly because of these aggressive efforts, there are some signs that the economy has stabilized. Meanwhile, the massive money flow poses inflation threats and other side-effects.

The Federal Reserve faced a tricky balancing act ahead: how to make sure an economic recovery gains needed momentum, while guarding against inflation or another bubble-induced crisis, Li pointed out.

Warren Buffett, one of the most successful investors in the world, expressed worries in a recent article in the New York Times: "The threat of inflation may be as ominous as that posed by the financial crisis itself."

The Federal Reserve's recent policy statements implied that its short-term interest rate for banks will remain near zero percent, probably into next year and Obama's decision to renominate Bernanke Tuesday shows the president has opted for continuity in U.S. economic policy.

"But the policy may change sooner or later. As many countries will seek to reverse their economic policies, the financial marketwill probably take on fluctuations in a large scope," said Li.

Weisberg says: "The market wants to do better and perhaps the economy is improving. But we are certainly technically overbought. We are due for a correction and it's not going to take much to get that correction, the real test for all of us will be when we get that sell off and we will get it."

"I would agree with those traders that say that September is problematical. Something about the fall (September and October) basically tends to make the market very nervous. Also bear in mind, October is the end of the fiscal year for a lot of mutual funds. So there tends to be a lot of window-dressing in October," he added.

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Wall Street reins in gains as oil retreats

August 29, 2009

Wall Street erased early gains Friday, as oil retreated from the day's high and offset upbeat earnings or outlook from Dell Inc. and Intel Corp.

Energy stocks weighed on the market, as crude oil pared early gain and natural gas tumbled nearly 5 percent. Meanwhile, retailers and consumer companies also lost ground. Nasdaq outpaced other major indexes on better-than-expected profit at Dell and Intel's increased sales forecast.

Intel, the world's biggest chipmaker, climbed 4.6 percent, after raising its sales forecast for this quarter, adding to evidence that computer demand is recovering.

Meanwhile, Dell Inc., the world's second largest marker of personal computers, reported late Thursday that its profit and revenue topped estimates.

The market seemed unfazed, after the U.S. Commerce Department posted that consumer spending rose 0.2 percent in July. And confidence among U.S. consumers this month dipped to 65.7, better than forecast, from 66 in July.

The Dow Jones fell 31.97 to 9,548.66. Broader indexes moved mixed. The Standard &Poor's 500 index dipped 1.06 to 1,029.92 and the Nasdaq rose 6.62 to 2,034.35.

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Global investors look for simple, safe investment

August 28, 2009
Simplicity, safety and quality are now the goals of global investors for making their investment, according to a latest study by a United States asset management organization.

Investors or clients were looking for simplicity that was defined by transparency and liquidity of the investment's strategies being used, said Kirk West, Managing Director for Asia and Japan of Principal Global Investors (Singapore) Ltd., here on Tuesday.

Kirk West said that clients were also keen on safe investments that would provide capital protection and quality investments that was defined by consistent risk adjusted return.

The objective for the research study entitled "Future of Investment: the next move?" was to analyze the possible scenarios for the evolution of the global asset management industry and its existing models as a result of the global financial crisis.

West said that the majority of the surveyed 225 asset managers and pension funds from 30 countries had expected intensified regulatory pressures and fee compression for the next three years.

Principal Global Investors Chief Operation Officer Barbara McKenzie said that 45 percent of the respondents did not expect the worst to be over until the first half of next year.

"In the retail space, return of money will be more important than return on money as the clients' priorities of asset investment have changed," said McKenzie.

She said that the study also indicated that governments in all regions were keen to encourage private pension, while the business model associated with the segmentation scenario was gaining traction.

McKenzie highlighted that the four critical successful factors to further develop a vibrant asset management industry including investment capabilities, an alignment of interest between managers and clients, the service proposition, and business capabilities.

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New US home sales take off

August 28, 2009
NEW United States home sales surged 9.6 percent last month, rising for the fourth straight month and beating expectations as the housing market marches steadily back from its historic downturn.

The US Commerce Department Wednesday said sales rose to a seasonally adjusted annual rate of 433,000 units from an upwardly revised June rate of 395,000. Sales are now up 32 percent from the bottom in January, but off 69 percent from the frenzied peak four years ago.

Last month's sales pace was the strongest since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 390,000 units. The last time sales rose so dramatically was in February 2005.

The median sales price of US$210,100, however, was still down 11.5 percent from US$237,300 a year earlier.

There were 271,000 new homes for sale at the end of last month, down more than 3 percent from May. At the current sales pace, that represents 7.5 months of supply - the lowest since April 2007. The decline means builders have scaled back construction to the point where supply and demand are coming into balance.

Buyers, meanwhile, are rushing to tap a federal tax credit that covers 10 percent of the home price, or up to US$8,000 for first-time owners. Home sales must be done by the end of November for buyers to qualify.

Builders and real estate agents are pressing Congress for that credit to be extended. If it isn't, sales could reverse their upward trend.

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IDB forecasts drop of L. America remittances in 2009

August 27, 2009
The remittances sent by Latin American and Caribbean migrants to their countries of origin are expected to drop 11 percent in 2009, said a recent survey by the Inter-American Development Bank (IDB).

IDB said that cash remittances are expected to reach 62 billion U.S. dollars this year, down 11 percent from those of last year, reflecting the impact of the global economic crisis on migrants, most of them living in industrialized countries hit by recessions, such as the United States, Spain and Japan.

"The crisis is clearly limiting migrants' capacity to send money to their countries of origin," said IDB President Luis Alberto Moreno. "Nevertheless, remittances have decreased less than other private financial flows to the region, as migrants continue to make sacrifices to aid their families."

The report said that even people who have lost their jobs are still sending money back home, usually using their savings.

The report was based on data from a survey carried out between March and June on 1,350 Latin American and Caribbean migrants, combined with desk research and statistical analysis of migration and unemployment.

Remittances from the U.S. are likely to drop by 11 percent to 42.3 billion dollars this year, while those from Europe are expected to decrease by 14 percent to about 9 billion dollars.

Remittances from other countries are expected to drop by 4.5 percent to 10.4 billion dollars.

According to the survey, migrants to the U.S. sent remittances with less frequency and in smaller amounts than in 2008.

In 2008, migrants averagely made 15 transfers back home while the number is expected to drop to 12 this year. The average amount sent per transfer is expected to slip from 241 dollars to 230 dollars.

About 45 percent of the respondents said that they cut the amount of money they send home, while more than one third of them have reduced their daily expenses, and one fifth have a second job.

The decline could affect more than 4 million people in Latin America and the Caribbean, almost one third of them in Mexico, the largest recipient of remittances in the region.

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What's the next stop for "Cash for Clunkers"?

August 27, 2009

Three billion U.S. dollars used up in 30 days, the "crazy" Cash for Clunkers program in the United States is expected to come to an end. According to U.S. media reports, the U.S. Government announced last Thursday that the popular "Cash for Clunkers " program is scheduled to terminate at 8 pm EDT on August 24, and by then dealers must submit all applications to the government.

There has been only a month since the plan was announced on July 27, so why is the U.S. government eager to order a halt? The U.S. government said because the program was going amazingly well, it will soon use up the budget of 3 billion U.S. dollars.

As a result of consumers "unexpected" favor for the program, just four days after details of the program was released, the National Automobile Dealers Association (NADA) informed the Department of Transportation (DOT) that the one billion U.S. dollars the project originally scheduled would have been used up. On August 6, the U.S. House of Representatives approved an additional two billion U.S. dollars.

The primary reason for American consumers being so "crazy" is, of course, because it is cost-effective. Secretary-General Rao Da, of the China Passenger Car Association said "compared with other countries, the amount of subsidies in the United States ranks the highest; 4000 U.S. dollars for per vehicle, which is equivalent to one third of the price of low or middle-grade new cars."

In addition, the huge base of the U.S. auto market is also another reason. "There are more than 200 million vehicles in America, with more than 1.2 million vehicles scrapped each year. The vehicle scrapping rate reaches 6%."

Ford Motor's chief sales analyst George Pipas said with stimulation of the plan, the U.S. auto market will witness rise for the first time since October 2007.

On August 13, Ford Motor Company confirmed that the Ford Focus sedan has increased production.

However, there are still complicated new issues caused by Cash for Clunkers.

Dealers are racking their brains over the question: how to sell cars when the program ends? Besides, funds are a problem. Those dealers who have taken part in the Cash for Clunkers program need to pay in advance, and obtain subsidy funds from the government later. Due to complicate procedures, at present part of the funds has not reached dealers' hands, leading to difficulties in dealers' operations.

Analysts worry that if the dealer can not get subsidy from the government as soon as possible, they will run into debt, which in the end offsets positive results of this Cash for Clunkers program.

In addition, the program's effect in promoting environmental protection, energy conservation is clearly not evident.

Where will the U.S. auto industry go after the program? At this point, neither the U.S. government nor the auto industry can give an answer.

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Wall Street rises on upbeat economic data

August 26, 2009
Wall Street rose moderately higher Tuesday, as better-than-expected consumer confidence and home prices boosted the market.

The Conference Board's Consumer Confidence index rose to 54.1 in August from 46.6 in July, the first gain in three months and much better than 47.5 economists had expected.

The reading bolstered optimism the recession is ending, as consumer spending accounts for more than two-thirds of economic activities.

Meanwhile, investors also digested better-than-estimated home prices report. The Standard & Poor's/Case-Shiller Home Price index, which measures changes in home prices in 20 major cities, declined15.4 percent from a year earlier, the smallest drop since April 2008.

The gauge rose from the prior month by the most in four years, signaling the real estate crisis that triggered the worst recession since the 1930s is easing.

Moreover, traders also got alleviated, after President Barack Obama announced the reappointment of Ben Bernanke to a second four-year term as Federal Reserve chairman.

The Dow Jones rose 75.58 to 9,584.86. Broader indexes also went higher. The Standard & Poor's 500 index added 7.10 to 1,032.67 and the Nasdaq rose 11.11 to 2,029.09.

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Dollar falls against most major currencies

August 26, 2009
The U.S. dollar fell against most major currencies on Tuesday as some positive economic reports reduced safety demand for the U.S. currency.

Home prices in the largest 20 metropolitan areas in the United States rose 0.7 percent in June on a seasonally adjusted basis, according to the S&P/Case-Schiller house price index released by Standard & Poor's. It was the first month-to-month increase in house prices since May 2006.

The price improvement was broad-based with 15 of the 20 major cities showing gains in June. Although the overall 20-city composite is still 15.5 percent lower than a year ago, the June increase suggests May could turn out to be the cyclical low, said analysts of Nomura Global Economics.

The Conference Board reported that its consumer confidence index rose to 54.1 in August from 47.4 in July, well above a general forecast of 47.9 points. The improvement was led by the forward-looking consumer expectations subcomponent, which jumped 10.1 points to its highest level since December 2007.

While the improvement in August is a good sign, analysts are not expecting a quick recovery in consumer confidence. "It is not likely that we will see a sustained improvement in September," said Brian Bethune, Chief U.S. Financial Economist of IHS Global Insight.

U.S. President Barack Obama nominated Ben Bernanke as Chairman of the Federal Reserve for a second term on Tuesday. The nomination sparked speculation that a continuation of Bernanke's monetary policy will weaken the dollar.

The euro bought 1.4309 dollars in late New York trading compared with 1.4288 dollars it bought late Monday. The pound fell to 1.6396 dollars from 1.6482 dollars.

The dollar rose to 1.0850 Canadian dollars from 1.0773 Canadian dollars, and fell to 1.0611 Swiss francs from 1.0634 Swiss francs. It fell to 94.20 Japanese yen from 94.54 Japanese yen.

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Gold rises slightly on weak dollar, paring gains as oil plunges

August 26, 2009
Gold futures on the COMEX Division of the New York Mercantile Exchange ended higher on Tuesday as dollar went down, but gains were limited by falling oil. Silver was up, but platinum inched down.

Gold price for December delivery rose 2.30 U.S. dollars, or 0.2 percent, to finish at 946 dollars an ounce.

Buoyed by a weak dollar, which raised gold's appeal of hedging dollar's depreciation risk earlier in the session, the precious metal climbed to as high as 956.30 dollars. That is more than 12 dollars above the previous closing price.

However, gold's rally in the morning session was weighed by plummeting crude oil in New York. The benchmark oil contract for October delivery tumbled 2.26 dollars, or 3 percent, to 72.11 dollars per barrel by the end of gold floor trading time. Oil's drop is usually considered as a sign that the inflation risk is waning. As a result, gold had to give up most of its earlier gains.

On economy front, the Conference Board reported consumer confidence index rose to 54.1 in August from 47.4 in July, well above economists' expectations of 48.0. Meanwhile, the Congressional Budget Office estimated U.S. budget deficit will total 1.6 trillion dollars in 2009.

December silver finished at 14.346 dollars per ounce, up 11.5 cents. October platinum fell 30 cents to 1,247.80 dollars an ounce.

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Oil touches $75 on spreading economic optimism

August 25, 2009
U.S. car dealers watched their lots grow empty on Monday as crowds rushed to trade in gas guzzlers during the final weekend of the popular Cash-for-Clunkers program.

The hectic pace of the 3-billion-dollar rebate program accelerated in the final weekend, after the government announced the program would end at 8 p.m. Monday, two weeks earlier than expected.

Adding to the urgency, some dealers had said they would stop Cash-for-Clunkers sales even earlier to make sure the government reimbursed them for the rebates, or because they didn't have enough eligible cars left.

Though short of some new models, such as the Ford Focus, Honda Civic, Toyota Corolla and Nissan Altima, many dealers were still selling as many cars as they could before Monday night's deadline.

Cash-for-Clunkers has been wildly successful in spurring new-car sales and getting gas-guzzling models off the road, though some energy experts have said the pollution reduction is too small to be cost-effective.

Customers receive rebates of between 3,500 dollars and 4,500 dollars, depending on the improvement in fuel efficiency from their old vehicle to their new one.

As of early Friday, nearly half a million cars had been sold through the program.

But the new sales left many dealers worried about not being reimbursed by the government. As of Friday, dealers had been reimbursed for just a small fraction of the billions in sales.

Earlier this month, U.S. President Barack Obama signed into law a 2-billion-dollar expansion of the program after the first 1 billion dollars ran out in the first days of the program. U.S. Congress approved a transfer of unspent funds from the 787-billion-dollar stimulus package to refuel the program.

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OPEC weekly oil prices drop slightly

August 25, 2009
The weekly average prices of the Organization of Petroleum Exporting Countries (OPEC) kept dropping to 70.69 U.S. dollars per barrel last week, down 0.74 dollars slightly compared to the previous week, the Vienna-based cartel said Monday.

OPEC weekly average oil prices reached 72.04 dollars a barrel in the first week of this month, which was also the highest this year. However, the prices kept declining afterwards and fell to 71.43 dollars in the second week and 70.69 dollars in the third.

On the first trading day of last week (Aug. 17), the OPEC daily average oil price reached its bottom, falling from 71.14 dollars per barrel on Aug. 14 to 68.04 dollars.

However, in the next few days, the prices kept rising and rebounded to 72.57 dollars a barrel on August 20. While the price fell 0.35 dollars again to 72.22 dollars on August 21.

The strong volatility of the oil prices within a week was mainly due to the reduction in U.S. crude oil stocks, falling by 6.1 million barrels according to the figure released by American Petroleum Institute (API) on Aug. 18, and leading to the continual raising of international oil prices for several days.

However, the figures of U.S. Energy Information Administration (EIA) and other bodies showed later that the reduction in U.S. crude oil inventories was not because of the increased consumption, but the capacity utilization rate of domestic refinery rose by 0.5to 84 percent.

For a period of time, the change in U.S. stock index and dollar exchange rate would continue to affect the international oil prices.

As the possibility of the world economic recession bottoming out is raising, the increasing investor confidence would result in stock raises, which would be a strong support for the commodity prices including crude oil.

In addition, the continuing weakness of U.S. dollars would also be an important factor to stimulate oil prices. Due to bullish of stock market and the weakness of U.S. dollar, the international oil prices would be likely to keep raising with volatility.

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Dollar rises as investors waiting for economic data

August 25, 2009
The dollar rose against most major currencies on Monday as investors are expecting more signs of economic recovery from data due later this week.

No important economic data was released on Monday. The Conference Board will report its consumer confidence index for August on Tuesday. The U.S. Commerce Department will report durable goods orders and new home sales on Wednesday.

Reports about revised U.S. GDP data of the second quarter, personal income and consumption, and Michigan consumer sentiment index are also coming this week.

In the past months, foreign exchange investors took the dollar as a safety haven currency. The dollar moved in opposite direction with stocks as good news boost stock prices and hurt safety haven demand for the dollar.

Analysts said this type of trade may not last for much longer. Vassili Serebriakov, currency strategist with Wells Fargo, said if the downturn is really nearing an end, investors should soon conclude that an economic recovery is good news for the greenback.

"Even if stocks do rally further, that may not be a negative. The dollar could stabilize because the U.S. economy is stabilizing," he said.

The euro bought 1.4288 dollars in late New York trading compared with 1.4336 dollars it bought late Friday. The pound fell to 1.6396 dollars from 1.6482 dollars.

The dollar fell to 1.0773 Canadian dollars from 1.0827 Canadian dollars, and rose to 1.0634 Swiss francs from 1.0572 Swiss francs. It rose to 94.54 Japanese yen from 94.24 Japanese yen.

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Bernanke most optimistic for US economy to expand again

August 24, 2009
FEDERAL Reserve Chairman Ben Bernanke has offered his most optimistic outlook since the financial crisis struck, saying the United States economy is on the verge of growing again.

Speaking at an annual Fed conference last Friday, Bernanke acknowledged no missteps by the central bank in managing the worst crisis since the Great Depression. But he conceded that consumers and businesses are still having trouble getting loans, even though the financial system is gradually stabilizing.

Economic activity in both the US and around the world seems to be leveling out, and the economy is likely to start growing again soon, Bernanke said in a speech at an annual Fed conference in Jackson Hole, Wyoming.

The mood was decidedly more hopeful than it was last summer, when a sense of foreboding hung over the forum just before the financial crisis erupted.

Despite his upbeat tone, Bernanke cautioned that the recovery is likely to be "relatively slow at first."

Unemployment, now at 9.4 percent, is widely expected to hit double digits later this year and to remain high for many months.

The financial markets have stabilized, and some businesses and consumers have found it easier to get loans. Still, the banking system has yet to return to normal, Bernanke said.

Financial institutions face further losses on soured investments. And many businesses and households still can't get the credit they need to fuel the economy, he said.

"Although we have avoided the worst, difficult challenges still lie ahead," Bernanke told the gathering of fellow bankers, academics and economists. "We must work together to build on the gains already made to secure a sustained economic recovery."

Reviewing the past year's crisis, Bernanke outlined the many emergency measures the Fed and other regulators took to help ward off a global financial meltdown. He declined to acknowledge critics' arguments that regulators failed to detect signs of the crisis before it occurred - or that Wall Street bailouts sent a message that big companies that make reckless bets would be rescued with taxpayer money.

A US$700 billion taxpayer-funded bailout program to prop up financial institutions incensed many Americans.

So did the repeated bailouts of AIG, which paid hefty bonuses to employees who worked in the division that brought down the firm.

Some analysts said Bernanke appeared to be angling to keep his job for another term.

"The lack of any mea culpa suggests the Fed chairman wants to be reappointed," said Richard Yamarone, economist at Argus Research. "When you go on an interview, you never speak of your shortcomings."

President Barack Obama will have to decide in coming months whether to reappoint or replace Bernanke, whose term expires early next year.

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Crude climbs on hopeful data

August 24, 2009
OIL rose nearly US$1 toward US$74 a barrel to settle at a 10-month high last Friday as data in the United States promised economic recovery and a potential revival in energy demand.

US crude for October delivery settled up 98 cents at US$73.89 per barrel, the highest settle since October 20. London Brent crude for October settled up 86 cents at US$74.19.

Crude rose US$6.38 over the week, nearly 10 percent, from the US$67.51 settle on August 14.

"The primary source of support again tended to be spillover from the financial space that included a weakening dollar and associated strengthening in the stock indexes," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

The US dollar was down against the euro, helping to support commodity prices, with investors showing some appetite for risk. Home sales data for last month showed recovery in the US housing market, while Federal Reserve Chairman Ben Bernanke said that the global economy appears to be recovering.

The US National Association of Realtors said sales of previously owned homes jumped 7.2 percent last month, the fastest sales pace in nearly two years.

US equities rose last Friday, sending the S&P 500 index to a 10-month intraday high on economic optimism.

Tighter regulation of the energy market may take the edge off high prices, Commerzbank said in note last Thursday.

"The significant rise in the oil price in the first half of the year is due in large part to a recovery in investment by financial investors," analyst Eugen Weinberg at Commerzbank wrote in their Commodities Spotlight Energy newsletter. "If their influence is reduced by the (Commodity Futures Trading Commission's) actions and sanity prevails, the oil price will fall."

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Gold rallies on weak dollar, housing data

August 23, 2009
Gold futures on the COMEX Division of the New York Mercantile Exchange ended much higher on Friday as the Fed Reserve chairman Bernanke's comments on economy recovery sent dollar lower. Silver and platinum both closed higher.

Gold price for December delivery rose 13 U.S. dollars, or 1.3 percent, to finish at 954.70 dollars an ounce.

Bernanke, speaking at the start of a two-day gathering of bankers and academics, said the global economy is now beginning to emerge from its worst crisis and that "prospects for a return to growth in the near term appear good."

Those words pressured the greenback, which is usually an alternative asset to hedge economy turmoil, to go down. The dollar index slid to 78.10 from 78.389 on late Thursday by the end of gold floor trading time.

Buoyed by Bernanke's optimistic opinion, oil prices jumped to a new high for the year. Crude for October delivery rose 98 cents to settle at 73.89 dollars a barrel, providing some support to the precious metal.

On the economy front, the U.S. housing market continues rebounding and the pace is faster than expected. The National Association of Realtors reported that home sales jumped 7.2 percent in July, posting the largest monthly increase in at least 10 years.

December silver finished at 14.199 dollars per ounce, up 28.6 cents. October platinum rose 17.20 dollars to 1,259.20 dollars an ounce.

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Wall Street rallies on Bernanke's speech, home data

August 23, 2009
Wall Street rallied on Friday as Federal Reserve Chairman Ben Bernanke said the economy is indeed on the verge of recovery.

At an annual Fed conference in Wyoming, Bernanke said that the prospects for a return to growth in the near term appear good.

A bigger-than-expected jump in home sales also gave stocks a boost. The National Association of Realtors said on Thursday that home sales rose 7.2 percent to a seasonally adjusted annual rate of 5.24 million in July, from a pace of 4.89 million in June. It was the fourth straight monthly increase and the highest level of sales since August 2007. Economists had expected a rise of 2.2 percent.

Gap Inc. advanced after reporting second-quarter profit that beat analysts' estimates.

Meanwhile, ConocoPhillips and Exxon Mobil led energy stocks higher, as crude oil rose above 74 U.S. dollars per barrel on the New York Mercantile Exchange for the first time this year.

The Dow Jones average rose 155.91, or 1.7 percent, to 9,505.96.The Standard & Poor's 500 index rose 18.76, or 1.9 percent, to 1,026.13, while the Nasdaq composite index rose 31.68, or 1.6 percent, to 2,020.90.

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U.S. extends consumer lending program to promote economic recovery

August 19, 2009
The U.S. Federal Reserve and the Treasury Department announced Monday that they approved an extension of the Term Asset-Backed Securities Loan Facility (TALF). At this time, they did not anticipate any further additions to the types of collateral that are eligible for the facility.

"Conditions in financial markets have improved considerably in recent months," the Fed said in a statement. "Nonetheless, the markets for asset-backed securities (ABS) backed by consumer and business loans and for commercial mortgage-backed securities (CMBS) are still impaired and seem likely to remain so for some time."

The statement said that to promote the flow of credit to businesses and households and to facilitate the financing of commercial properties, the Fed and Treasury have approved extending TALF loans against newly issued ABS and legacy CMBS through March 31, 2010.

Because new CMBS deals can take a significant amount of time to arrange, the Fed and Treasury approved TALF lending against newly issued CMBS through June 30, 2010.

The Fed and Treasury had previously authorized TALF loans through Dec. 31, 2009.

The Fed and Treasury added they are holding in abeyance any further expansion of the types of collateral eligible for TALF. The securities already eligible for collateralizing TALF loans include the major types of newly issued, triple-A-rated ABS backed by loans to consumers and businesses, and newly issued and legacy triple-A-rated CMBS.

Last week, the Fed delivered a vote of confidence in the economy, saying the downturn appeared to be "leveling out." Fed officials also said they would slow the pace of a program to buy 300 billion U.S. dollars worth of Treasury securities, an effort aimed at keeping mortgage rates affordable. The central bank said it planned to shut down the program at the end of October.

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Wall Street plunges amid global sell-off

August 18, 2009
Wall Street plunged on Monday amid global sell-off, as investors around the world feared the recent rally of equities had outpaced the prospects for economic growth.

Stocks on overseas markets extended the heavy selling that began on Wall Street Friday, triggered by a weaker than expected reading on consumer confidence.

The Shanghai composite index fell 5.8 percent, the worst one-day drop since November, while the Japanese Nikkei stock average declined 3.1 percent due to a weaker-than-expected GDP growth for the second quarter.

After months of hoping for an economic recovery, investors now worry about sluggish consumer spending, which accounts for two thirds of the U.S. economy's growth.

The market took a hit last week by a sharp drop in the Reuters/University of Michigan consumer sentiment index, which followed a surprisingly weak July retail sales report from the U.S. Department of Commerce.

Meanwhile, oil prices dipped below 66 U.S. dollars a barrel on the New York Mercantile Exchange Monday.

Lowe's Cos., the second largest U.S. home improvement retailer, fell more than 10 percent on Monday after releasing its quarterly report. The company said poor weather and cautious consumer spending had caused sales to fall 19 percent in the second quarter, missing analysts' forecasts.

The Dow Jones average fell 186.06, or 2 percent, to 9,135.34. The S&P 500 index fell 24.36, or 2.4 percent, to 979.73, while the Nasdaq fell 54.68, or 2.8 percent, to 1,930.84.

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Japan's GDP rises for first time in five quarters

August 18, 2009

The Japanese economy grew for the first time in five quarters, indicating that the nation is now emerging from its worst postwar slump, a preliminary report showed Monday.

The country's seasonally adjusted gross domestic product, which excludes influences from price fluctuations, increased 0.9 percent in real terms in the April-June period from the previous quarter, according to the Cabinet Office's report. On an annualized basis, real GDP was up 3.7 percent.

The last time Japan's GDP grew was in the January-March period in 2008.

After the "Lehman Shock" in September, real GDP contracted by double-digit figures in the October-December period and January-March period from the preceding quarters.

If GDP continues to rise at the rate of the latest quarter, the real growth rate for fiscal 2009 from fiscal 2008 is expected to be minus 2.0 percent.

"The effects from the economic stimulus measures will also appear in subsequent quarters. There is a possibility that the real growth rate for fiscal 2009 will top minus 3.3 percent estimated by the Cabinet Office," Yoshimasa Hayashi, state minister in charge of economic and fiscal policies, told reporters after the latest GDP figures were released.

However, a full-fledged recovery is still far away.

The real GDP amount in the April-June quarter stood at 526 trillion yen on an annualized basis, much smaller than the peak of 569 trillion yen in the January-March period of 2008.

Nominal GDP, which reflects price fluctuations and is closer to what people feel in their daily lives, shrank 0.2 percent, or an annualized 0.7 percent, in the April-June period on a seasonally adjusted basis. It was the fifth consecutive quarter of decline.

The rebound in real GDP in the April-June quarter was led by a recovery in exports, particularly to China, and consumer spending.

Exports rose 6.3 percent from the previous quarter for the first increase in five quarters.

With a total budget of 4 trillion yuan (about 56 trillion yen), the Chinese government expanded domestic demand through economic stimulus measures, including public works projects and subsidies to buy cars and household appliances. The positive effects spread to Asian exporters, including Japan.

Consumer spending, which accounts for more than half of Japan's GDP, increased in the April-June period for the first time in three quarters, apparently led by the government's economic stimulus measures, such as the Eco-Point system for household appliances and tax cuts for purchases of environmentally friendly vehicles.

According to the Cabinet Office, new car sales increased in the April-June period, led by hybrid cars. In the January-March period, new vehicle sales plunged by more than 10 percent from the previous quarter.

However, corporate investments in plants and equipment shrank for the fifth consecutive quarter because of still-uncertain economic prospects.

Housing investments also decreased for the second straight quarter.

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US price fall a double-edged sword

August 18, 2009
CONSUMER prices in the United States have fallen more in the past year than in any 12-month period in nearly six decades - a huge break for shoppers but also a reminder that prices are being restrained by weak spending that's likely to slow an economic recovery.

The recession and lower energy costs kept a lid on prices for last month, causing consumer inflation to fall to zero. Most economists think prices are now in a sweet spot: ultra-low inflation without a serious risk of deflation - a destabilizing spiral of falling prices and wages.

"Right now, there is no inflation out there," said David Wyss, chief economist at Standard & Poor's in New York. "The big issue is still a lack of economic growth."

Wall Street remained nervous last Friday that recession-battered consumers could short-circuit any economic rebound after the Reuters/University of Michigan index of consumer sentiment posted a significant drop for the first part of August. It was a much weaker showing than expected.

The Dow Jones industrial average lost about 76 points, and broader stock indexes fell, too.

In Friday's report on consumer inflation, the Labor Department said prices were flat last month and have fallen 2.1 percent over the past 12 months - the steepest drop since a similar decline for the period ending in January 1950.

Core inflation, which excludes volatile energy and food prices, showed a small 0.1 percent rise last month and over the past 12 months has risen 1.5 percent - right in the Federal Reserve's comfort zone.

The 12-month fall reflects a 28.1 percent drop in energy costs, which peaked at this time last year, when oil hit a record US$147 per barrel and gas rose above US$4 per gallon.

Since then, energy prices have tumbled. Other price pressures have disappeared, too, as the country has struggled to cope with waves of layoffs and the worst recession since World War II.

Gasoline prices, on a seasonally adjusted basis, fell 0.8 percent last month. The average price at the pump is currently US$2.65 per gallon, up from US$2.50 a month ago but well below the record high of US$4.11 per gallon hit in July 2008.

Airfares rose 2.1 percent last month, while clothing costs jumped 0.6 percent - two rare examples of big price gains in the month.

The low prices could pinch America's retirees. Because inflation has hit zero, economists expect the country's 50 million Social Security recipients will get no annual cost-of-living increase in their benefit checks in January next year.

That would be a marked change from this year, when benefits rose 5.8 percent, the biggest jump in more than a quarter-century.

The cost-of-living gain is figured by comparing the Consumer Price Index for the July-September period of one year to the same period in the next year. Last year's cost-of-living adjustment reflected a big jump in energy costs.

"This year will be payback time," said Mark Zandi, chief economist at Moody's Economy.com.

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Japan's economy grows in Q2

August 17, 2009
Japan's gross domestic product (GDP) achieved the first growth in five quarters, up by an annualized 3.7 percent in real terms in the April-June quarter, the cabinet office said Monday.

The expansion in GDP, which was lifted by consumer and government spending, came following a revised annualized 11.7 percent plunge in the previous quarter and a revised 13.1 percent dive in the October-December quarter of 2008.

On a quarter-on-quarter basis, the economy rose 0.9 percent in the second quarter, said the office in a preliminary report.

Meanwhile, consumer spending was up 0.8 percent quarter-on-quarter in real terms while corporate capital spending dipped 4.3 percent, according to the report.

Public investment jumped 8.1 percent, pushed by the government's fiscal stimulus packages to fight the recession, compared with a 9.5-percent fall in housing investment.

GDP is the total market value of the goods and services produced domestically during a specific period of time. Real GDP figures are adjusted for changes in the value of money or assessed by purchasing power.

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Five more banks closed in the US

August 17, 2009
US regulators on last Friday shut down Colonial BancGroup Inc., a lender in real estate development, in the biggest US bank failure this year, and also closed four banks in Arizona, Nevada and Pennsylvania.

The closures boosted to 77 the number of federally insured banks that have failed in 2009.

The Federal Deposit Insurance Corp. was appointed receiver of the banks: Montgomery, Ala.-based Colonial, with about $25 billion in assets; Community Bank of Arizona, based in Phoenix; Union Bank, based in Gilbert, Ariz.; Community Bank of Nevada, based in Las Vegas; and Dwelling House Savings and Loan Association, located in Pittsburgh.

The FDIC approved the sale of Colonial's $20 billion in deposits and about $22 billion of its assets to BB&T Corp., which is based in Winston-Salem, N.C. The failed bank's 346 branches in Alabama, Florida, Georgia, Nevada and Texas will reopen at the normal times starting on Saturday as offices of BB&T, the FDIC said.

The agency established a temporary government bank for Community Bank of Nevada to give depositors about 30 days to open accounts at other financial institutions. The failed bank had assets of $1.52 billion and deposits of $1.38 billion as of June 30.

Community Bank of Arizona had assets of $158.5 million and deposits of $143.8 million as of June 30, while Union Bank had assets of $124 million and deposits of $112 million as of June 12. The FDIC said that MidFirst Bank, based in Oklahoma City, has agreed to assume all the deposits and $125.5 million of the assets of Community Bank of Arizona, as well as about $24 million of the deposits and $11 million of the assets of Union Bank. The FDIC will retain the rest for eventual sale.

Dwelling House had $13.4 million in assets and $13.8 million in deposits as of March 31. PNC Bank, part of Pittsburgh-based PNC Financial Services Group Inc., has agreed to assume all of Dwelling House's deposits and about $3 million of its assets; the FDIC will retain the rest for eventual sale.

The failure of Colonial is expected to cost the deposit insurance fund an estimated $2.8 billion.

The 77 bank failures nationwide this year compare with 25 last year and three in 2007.

As the economy has soured - with unemployment rising, home prices tumbling and loan defaults soaring - bank failures have cascaded and sapped billions out of the deposit insurance fund. It now stands at its lowest level since 1993, $13 billion as of the first quarter.

While losses on home mortgages may be leveling off, delinquencies on commercial real estate loans remain a hot spot of potential trouble, FDIC officials say. If the recession deepens, defaults on the high-risk loans could spike. Many regional banks hold large numbers of them.

The number of banks on the FDIC's list of problem institutions leaped to 305 in the first quarter - the highest number since 1994 during the savings and loan crisis - from 252 in the fourth quarter. The FDIC expects US bank failures to cost the insurance fund around $70 billion through 2013.

The May closing of struggling Florida thrift BankUnited FSB is expected to cost the insurance fund $4.9 billion, the second-largest hit since the financial crisis began. The costliest was the July 2008 seizure of big California lender IndyMac Bank, on which the insurance fund is estimated to have lost $10.7 billion.

The largest US bank failure ever also came last year: Seattle-based thrift Washington Mutual Inc. fell in September, with about $307 billion in assets. It was acquired by JPMorgan Chase &Co. for $1.9 billion in a deal brokered by the FDIC.

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Dollar rebounds as weak consumer sentiment boosts safety haven demand

August 17, 2009
The dollar rebounded against most major currencies on Monday after a weak consumer sentiment report boosted safety haven demand for the U.S. currency.

The Reuters/University of Michigan index of consumer sentiment declined by 2.8 points to settle at 63.2 points in the first two weeks of August. It was the lowest level since March 2009. Sentiment for current economic conditions tumbled by a sharp 5.6 points to 64.9 points. The expectations index fell by 1.1 point to 62.1 points.

The sharp drop of consumer sentiment was connected with further deterioration in labor market conditions, with declines in July payroll employment levels and general downward pressure on wages and salaries and other non-wage income, analysts said.

The U.S. Federal Reserve reported that industrial production rose by 0.5 percent in July, the first increase since last October. The Labor Department reported that consumer prices were flat in July compared to June as energy prices fell. Prices fell by 2.1 percent year-on-year, the worst in decades.

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Wall Street sinks on sentiment data

August 16, 2009
Wall Street retreated Friday, as confidence among U.S. consumers unexpectedly fell in August for a second consecutive month as concern over jobs and wages grew.

The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2, the lowest level since March. Economists had expected a reading of 68.5 compared with 66.0 in the final July report. The measure reached a three-decade low of 55.3 in November.

Major indexes extended early losses after the sentiment report. On other economic data, the U.S. Commerce Department said Friday consumer prices showed no changed in July, in line with analysts' expectations and far below the 0.7 percent jump in June. Prices fell 2.1 percent year on year, the biggest annual decline since a similar drop in the period ending in January 1950.

Raw-materials producers fell 2.7 percent as a group for the steepest loss among 10 industries in the S&P 500, as crude oil fell to a two-week low and metals prices slumped. J.C Penney slid 6.2 percent, after the third- largest U.S. department-store chain gave a third-quarter forecast trailing analysts' estimates.

The Dow Jones lost 76.79, 0.82 percent, to 9,321.40. Broader indexes also lost ground. The Standard & Poor's 500 index dipped 8.64, or 0.85 percent, to 1,004.09 and the Nasdaq fell 23.83, or 1.19 percent, to 1,985.52.

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Energy prices slump with consumers still nervous

August 16, 2009
ENERGY prices finished the week sharply lower, giving up more than 4 percent yesterday on evidence that consumers are unlikely to take the lead in an economic recovery.

Oil, which has been propped up by optimism that people will begin spending more, tumbled after a week-ending report suggested those hopes may be premature.

Benchmark crude for September delivery lost US$3.01 to settle at US$67.51 a barrel on the New York Mercantile Exchange, a low point for the month. In London, Brent prices gave up US$1.07 to settle at US$72.41 a barrel on the ICE Futures exchange.

Natural gas prices fell to its lowest level this year. The contract for September delivery dropped 9.8 cents to settle at US$3.238 per 1,000 cubic feet.

Energy prices sank early in the day along with equities markets after the Reuters/University of Michigan index of consumer sentiment fell sharply in the first part of this month.

The report comes amid a string of weak earnings reports from major retailers, which continued to arrive yesterday. Abercrombie & Fitch Co. reported its third straight quarter of double-digit sales declines. J.C. Penney Co. posted a second-quarter loss and said it expects sluggish sales for the rest of the year.

It is becoming increasingly difficult to ignore the lack of enthusiasm from consumers, who account for about 70 percent of all US economic activity.

Newedge analyst Antoine Halff said oil prices are headed for an extended fall later this year or early next year if the economy doesn't show a bolder move toward recovery.

"There's greenshoots all over the place, but consumer confidence isn't following," Halff said.

Investors who have pumped money into crude as a hedge against the weaker dollar are eventually going to be discouraged by slumping energy demand from consumers and businesses, he said.

Already, government reports have shown huge amounts of crude and natural gas being plowed into storage. In just the past two weeks, crude levels have risen by nearly 7 million barrels.

The price for crude contracts that don't require delivery until four to five months from now is higher than prices contracts that must be settled in September. But that's not a sign that traders think there will be more demand in several months.

Rather, those buying crude are adding in the cost of storage because so little is being used to make gasoline and other fuels.

In fact, refiners have cut back on production for the past four weeks.

Meanwhile, the Federal Reserve said factories, mines and utilities increased production in July more than expected, driven by the auto makers and the cash-for-clunkers program. It was only the second time production rose since December 2007.

In other Nymex trading, gasoline for September delivery gave up 8.12 cents to settle at US$1.938 a gallon. Heating oil fell 6.18 cents to settle at US$1.841 a gallon.

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U.S. air travel down 9.5% in first five months of 2009

August 16, 2009
U.S. airlines served 282 million passengers in the first five months of this year, a 9.5-percent decrease on a year-on-year basis, U.S. business news outlets reported Friday.

Figures released by the U.S. Bureau of Transportation Statistics also show that, in the current economic downturn, nearly all U.S. airlines, except Southwest Airlines and US Airways, suffered steep drops in the number of passengers during the period.

American Airlines dropped 10.6 percent, United Airlines 14.3 percent, Continental 11.5 percent and Northwest Airlines 20.2 percent, according to the bureau.

Southwest dropped 5.3 percent in the same time frame while US Airways was down 7.5 percent.

From January to May, Southwest served the most passengers overall, followed by American Airlines.

Meanwhile, statistics also show U.S. air travel in May was down9.3 percent from a year earlier, the 14th consecutive monthly year-to-year decline in air passenger totals nationwide.

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U.S. business inventories drop for tenth straight month

August 15, 2009
Inventories held by U.S. businesses on shelves and backlots fell for the tenth straight month in June, the longest stretch in seven years, the Commerce Department reported Thursday.

U.S. business inventories declined by 1.1 percent in June, slightly larger than the 0.9 percent drop economists expected.

According to data released by the department, the June weakness in inventories was led by a decrease of 1.7 percent in stockpiles held by wholesalers. Meanwhile, manufacturers' inventories declined 0.8 percent in June.

But business sales at all levels rose 0.9 percent in June, the first increase in nearly a year.

The total business inventories-to-sales ratio at the end of June was down to 1.38 from 1.41 in May. The ratio is a measure of how long it would take to deplete stocks at the current sales pace.

Usually, falling inventories are seen as a sign of lack of confidence in future demand or as a result of an unexpected increase in sales. Analysts look at the inventories-to-sales ratio to determine how to interpret the data.

The longest stretch in seven years of declines in business inventories came as companies struggled to cope with the prolonged recession, which started in December 2007.

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Gold gains slightly as dollar falls after retail sales, jobless data

August 15, 2009
Gold futures on the COMEX Division of the New York Mercantile Exchange ended higher on Thursday as dollar dropped more on discouraging retail sales and jobless data, fueling the yellow metal's hedge appeal. Silver and platinum both finished higher, too.

Gold price for December delivery rose 4 U.S. dollars, or 0.4 percent, to finish at 956.50 dollars an ounce.

The Commerce Department reported on Thursday that retail sales fell 0.1 percent last month versus economists' expectations of a gain of 0.7 percent.

Meanwhile, the Labor Department said initial claims for jobless benefits increased 4,000 to a seasonally adjusted 558,000 for the week ending on Aug. 8, although Analysts expected the number to drop to 545,000.

By the end of gold floor trading time, the dollar index, which measures the U.S. dollar against a basket of six major currencies, stood at 78.358, down from Wednesday's 78.798.

Analysts indicated that the Federal Reserve's decision on Wednesday that it would keep interest rates low for an "extended period" continued weighing on the greenback.

September silver finished at 14.987 dollars per ounce, up 40.2 cents. October platinum rose 28.30 dollars to 1,272.70 dollars an ounce.

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Wall Street edges higher despite weak economic data

August 14, 2009
Wall Street traded slightly higher on Thursday despite worse-than-expected economic data.

The U.S. Commerce Department posted that sales at U.S. retailers unexpectedly fell in July as a boost from the cash-for-clunkers automobile incentive program failed to overcome cuts in other spending. The 0.1 percent decrease in sales, the first drop in three months, followed a revised 0.8 percent gain in June.

Meanwhile, the Labor Department said the number of Americans filing first-time claims for jobless benefits unexpectedly rose last week, while the number of people on unemployment rolls dropped to the lowest since April, signaling the labor market may be stabilizing as the recession eases.

However, financials led the big board higher, after billionaire John Paulson's hedge fund bought shares in banks. Bank of America rose 6.7 percent.

Wal-Mart Stores Inc. rose 2.7 percent after the world's largest retailer reported better-than-expected second quarter earnings. Wal-Mart also raised the low end of its profit guidance.

The Dow Jones industrial average rose 36.58, or 0.4 percent, to9,398.19. The Standard & Poor's 500 index rose 6.92, or 0.7 percent, to 1,012.73, while the Nasdaq composite index rose 10.63,or 0.5 percent, to 2,009.35.

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Rising number of Americans file for personal bankruptcy

August 14, 2009

July saw record number of Americans filing for personal bankruptcy in the past five years as a way to cancel debt or re-structure payments to deal with personal financial problems.

According to statistics released by the American Bankruptcy Institute (ABI), 126,434 Americans filed for bankruptcy in July, the highest monthly total since 2005, and a total of 1.4 million Americans could file for personal bankruptcy by the end of the year.

From January through June, 675,351 Americans filed for bankruptcy, a 36.5 percent rise from the same period last year.

In the United States, individuals can file for bankruptcy if they meet with severe financial problems.

"Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year," ABI Executive Director Samuel Gerdano said in a statement.

Analysts said most people file for bankruptcy out of necessity. Of all the people that file for personal bankruptcies, nearly 40 percent of them file due to some financial crisis outside of their control. In the recent economic recession, foreclosure is the main factor.

But in many cases this financial crisis is some serious health issue. For those who do not have health insurance, a catastrophic illness such as cancer, can wipe them out financially.

Even for many people with health insurance, the combination of premiums and deductibles can put a major dent in their finances. Especially hit hard are the elderly and families where a single woman is the head of the household.

The second biggest reason that people file for bankruptcy is either the loss of a job or divorce.

Not only people from the working class have filed for personal bankruptcy. There are more cases of celebrities doing the same thing.

Movie actor Stephen Baldwin sought bankruptcy protection in July from creditors after lenders began foreclosure procedures against his home.

Lenny Dykstra filed for Chapter 11 bankruptcy in a petition that says the former Major League Baseball All-Star owes between 10 million and 50 million dollars. Dykstra's filing comes in the wake of more than 20 lawsuits he faces tied to his activities as a financial entrepreneur, including The Players Club, a glossy magazine for athletes that he launched last year.

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Global smartphone sales up 27% in Q2: Gartner

August 13, 2009
Global smartphone sales surged 27 percent in the second quarter this year, representing the fastest-growing segment of the generally slump mobile device market, research firm Gartner reported on Wednesday.

Despite the rapid growth of smartphone sales, a total of about 286 million mobile phones were sold worldwide in the quarter, a 6.1-percent decrease compared with the year-ago period, Gartner said.

"Given the higher margins, smartphones offer the biggest opportunity for manufacturers. It is the fastest-growing market segment and the most resistant to declining average selling prices," Carolina Milanesi, research director at Gartner, said in a statement.

Nokia maintained its leadership position in the global smartphone market with sales of about 18.4 million units, followed by Blackberry maker Research in Motion (RIM), which sold 7.7 million smartphones in the quarter. Apple remained third with sales of 5.4 million units.

Several much-anticipated smartphones were launched in the second quarter, including Nokia's N97, Apple's iPhone 3G S and Palm's Pre.

According to Gartner, N97 met little enthusiasm at its launch and has sold just 500,000 units in the quarter since it started to ship in June, compared to iPhone 3G S which sold 1 million units in its first weekend after launch.

The full potential of iPhone 3G S, which was brought to market at the end of the quarter, "will only start to show in the sales figures in the second half of 2009," Gartner predicted.

Palm's Pre attracted a lot of media attention but showed mixed results at the cash register as sales only reached 205,000 units in the quarter.

"Palm currently ranks tenth in the smartphone market and Gartner remains concerned about its ability to gain traction outside the U.S. market, where its brand is less strong," Gartner's principal analyst Roberta Cozza said.

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Dollar falls after Fed decisions

August 13, 2009
The dollar fell against most major currencies on Wednesday after the U.S. Federal Reserve said it would keep interest rates low for an extended period.

The Fed decided to keep its key rate at zero to 0.25 percent at its monetary policy meeting on Wednesday, in line with expectations. The central bank said it "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period".

Information received since the Federal Open Market Committee met in June suggests that economic activity is leveling out, said the Fed in a statement released after the meeting.

The Fed said the U.S. economic activity is likely to remain weak for a time and committed to employ all available tools to promote economic recovery and to preserve price stability. It also decided to gradually slow the pace of buying Treasury securities to "promote a smooth transition in markets."

The euro bought 1.4214 dollars in late New York trading compared with 1.4148 dollars it bought late Tuesday. The pound rose to 1.6511 dollars from 1.6476 dollars.

The dollar fell to 1.0879 Canadian dollars from 1.1015 Canadian dollars, and fell to 1.0772 Swiss francs from 1.0819 Swiss francs. It rose slightly to 96.23 Japanese yen from 96.02 Japanese yen.

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U.S. federal deficit hits 1.27 trillion USD

August 13, 2009
The U.S. federal deficit has topped 1.27 trillion U.S. dollars in the first 10 months of this fiscal year, according to Treasury Department statistics released on Wednesday.

The department reported that the U.S. federal government spent 180.7 billion dollars more than it made in July, pushing the red ink so far in the current fiscal year to a new record.

The huge deficit in the 10 months of the current fiscal year started in October was more than triple the amount of red ink incurred during the year-ago period. The deficit for all of 2008 was 454.8 billion dollars.

The Obama administration is forecasting that the budget deficit would rise to an all-time high of 1.84 trillion dollars in the current fiscal year, about four times the record set last year.

Under the administration's estimates, the 1.84-trillion-dollar deficit will be followed by a red ink of 1.26 trillion dollars in 2010, and will never dip below 500 billion dollars over the next decade.

The administration estimates the deficits will total 7.1 trillion dollars from 2010 to 2019.

The worsening budget deficit reflects the soaring costs of the government's economic stimulus package and financial rescue program, and the recession, which has resulted in sharp decline in tax revenue.

While tax revenues are down, the government is paying out more than expected for unemployment benefits and food stamps.

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U.S. Fed says economy leveling out, holds key interest rate near zero

August 13, 2009

The U.S. Federal Reserve said on Wednesday that the U.S. economic activity is "leveling out," and decided to keep a key interest rate unchanged at a record low of between zero and 0.25 percent to prop up the economy.

Information received recently suggested that "economic activity is leveling out," the Fed said. But it also noted that "economic activity is likely to remain weak for a time."

In recent weeks, conditions in financial markets have improved further, said the central bank in a statement following its two-day policy-making meeting in Washington.

Meanwhile, "household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit," it said, adding that "businesses are still cutting back on fixed investment and staffing but are making progress in bringing inventory stocks into better alignment with sales."

Although the economy is stabilizing, the Fed believes that the economy will keep a lid on inflation.

"The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures," and the Fed "expects that inflation will remain subdued for some time," the Fed said.

Against this backdrop, the Fed decided to hold the key interest rate, or federal funds rate, which commercial banks charge each other for overnight loans, unchanged.

The decision means that commercial banks' prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay around 3.25 percent, the lowest rate in decades.

Moreover, the Fed said that the interest rate is likely to remain at the current low level for "an extended period."

The Fed also decided to stay the course on existing programs intended "to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets."

As announced in previous meetings, the Fed will purchase a total of up to 1.25 trillion U.S. dollars of agency mortgage-backed securities and up to 200 billion dollars of agency debt by the end of the year.

In addition, the Fed will buy up to 300 billion dollars of Treasury securities by autumn, as part of its plan to bring down interest rates it cannot directly control, according to a statement.

The central bank also said it would gradually slow the pace of its program to buy 300 billion worth of Treasury securities so that it will shut down at the end of October, versus September. Sofar, it has bought about 253 billion dollars in Treasury bonds.

Doing so would help the ailing economy because many kinds of debt -- from mortgages to corporate bonds -- are linked to Treasury rates. Fed purchases could boost Treasury prices and drive down their rates. That would ripple through and lower rates on other kinds of debt.

The Fed's decision to leave the interest rate unchanged was in line with economists' expectations.

Most economists believe that the Fed will keep the target range for its bank lending rate between zero and 0.25 percent through the rest of this year and probably into next year to help spur the economy.

Fed Chairman Ben Bernanke has predicted that the recession will end later this year. On Wednesday, the Fed said it continues to "anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability."

The U.S. economy fell at a more subdued 1.0 percent pace in the second quarter, a strong signal that the worst recession since the Great Depression in 1930s has eased. The second-quarter fall, the fourth straight quarterly decline, was much better than the 1.5 percent annualized contraction that experts had expected.

The U.S. GDP tumbled at a staggering 6.4 percent pace in the first quarter, the most in past three decades, a revision from an earlier estimate of a 5.5 percent rate of decline.

The pace of job losses in the United States also narrowed in July to 247,000 and the jobless rate fell unexpectedly to 9.4 percent. Since the recession began in December 2007, the U.S economy has lost a net total of 6.7 million jobs.

The recent data of the job market signed that "the worst may be behind us," said President Barack Obama. "We have pulled the financial system back from the brink."

However, Obama also warned that there were still many challenges ahead.

"We have a steep mountain to climb and we started in a very deep valley," said the president.

"We have a lot further to go. As far as I'm concerned, we will not have a true recovery as long as we're losing jobs, and we won't rest until every American that is looking for work can find a job."

On Wednesday, the Fed indicated that it keeps the door wide open to making changes if economic conditions warrant.

The Fed "will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets," said the U.S. central bank in the statement.

"The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted," it added.

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Russia's Central Bank cuts refinance rate to 10.75% p.a.

August 12, 2009
Russia's Central Bank announced on Monday it was cutting its key lending rate for the fifth time this year, by 0.25 percentage points to 10.75% per annum, following a slowdown in consumer price growth.

"The decision is conditioned by a set of macroeconomic trends, which have allowed the Bank of Russia to continue lowering interest rates on monetary policy instruments," the country's top bank said in a statement.

Analysts say the move, which came into effect on Monday, is intended to bring down interest rates on loans granted to the real sector to help domestic enterprises amid the ongoing economic crisis.

In each of the four previous interest rate cuts, the refinancing rate was lowered by 0.5 percentage points. This time, the rate was cut by 0.25%.

Russia's inflation stood at 8.1% in the first seven months of the year or 1.2% less than for the same period last year.

Russian President Dmitry Medvedev said in July that inflation in Russia could stay within 10-11% in 2009.

"Inflation has slowed amid a decline in the general volume of production. Perhaps it will be lower than we expected - not 13%, but 10-11%," Medvedev said.

Russia's Economic Development Ministry has already lowered its inflation forecast for 2009 from 13% to 12-12.5%. Last year, consumer prices grew 13.3% in Russia.

 

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Key US lending rate stays low

August 12,2009
WITH the United States economy strengthening but still fragile, Federal Reserve policy makers are expected to hold a key lending rate at a record low this week and will weigh whether to extend some programs that were created to ease the financial crisis.

Fed Chairman Ben Bernanke and his colleagues also are likely to signal that while the recession is winding down, the pain isn't over.

Though the unemployment rate dipped to 9.4 percent in July - its first drop in 15 months - economists predict it will start climbing again. Many, including people in the Obama administration and at the Fed, say it could still top 10 percent this year.

For months, consumers have pulled back on spending and borrowing. To try to stimulate economic activity, Fed policy makers are all but certain to keep the target range for its bank lending rate between 0 and 0.25 percent at the end of their two-day meeting tomorrow.

That means commercial banks' prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay around 3.25 percent, the lowest rate in decades.

Fed policy makers also will probably pledge anew to keep rates there for "an extended period," which economists interpret to mean through the rest of the year and into part of 2010.

"We're doing everything we can to support the economy," Bernanke said recently. "We will try to get through this process. It's going to take some patience."

By holding rates so low, the Fed hopes to induce consumers and businesses to boost spending, even though banks are still being stingy about extending credit.

"The Fed will be guardedly optimistic," said Brian Bethune, economist at IHS Global Insight. "We're seeing initial signs of the economy moving toward recovery - (but) the underlying fundamentals are still weak."

With numerous signs that the recession is finally ending and financial stresses easing, the Fed will consider whether some rescue programs should continue. Any such decisions, though, might not come at this week's meeting.

One such program, aimed at driving down interest rates on mortgages and other consumer debt, involves buying US Treasuries. The central bank is on track to buy US$300 billion worth of Treasury bonds by the fall; it has bought US$236 billion so far.

Another program, the Term Asset-Backed Securities Loan Facility is intended to spark lending to consumers and small businesses. It got off to a slow start in March and is slated to shut down at the end of December. Despite this program, many people are still having trouble getting loans, analysts say.

The Fed isn't expected to launch any new revival efforts or change another existing program that aims to push down mortgage rates. In that venture, the Fed is on track to buy US$1.25 trillion worth of securities issued by mortgage finance companies Fannie Mae and Freddie Mac by the end of the year. The central bank's recent purchases have averaged US$542.8 billion.

In the meantime, the economy has shown clear signs of improvement. Employers cut only 247,000 jobs in July, the fewest in a year, the government said last Friday. Wages and workers' hours also nudged up - encouraging signs that firms no longer see the need for drastic cost-cutting.

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U.S. states expands gambling business due to economic downturn

August 12, 2009
U.S. states are expanding the gambling business as a way to mitigate the effects of the economic downturn, the USA Today reported Monday.

A dozen states will take the approach this year, which could generate 2 billion U.S. dollars of extra tax revenues by 2010, according to the report.

Ohio will put 17,500 slot machines at seven racetracks, a move which could bring in 933 million dollars in extra tax revenue next year.

Pennsylvania's legislature and government are working on legalizing video poker in bars while Illinois approved adding video poker at bars.

William Thompson, a public administration professor at the University of Nevada, said officials in the states prefer expanding gambling rather than increasing tax to shore up state revenues at tough times.

Legalized gambling has grown for two decades in United States, and its growth often leaps during economic downturns, he said.

Casinos are now legal in 40 of 50 U.S. states, up from 31 in 2000.

The states are also relaxing regulations on casino locations, hours and betting limits.

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Analysts: British economic recovery at hand, but uncertainties remain

August 11, 2009
A British economic recovery may be at hand, but it would be quite fragile at least in the coming months as there are many uncertainties lying ahead, analysts said.

There have been a few "green shots" of economic recovery in the past months and more welcoming data were released last week, they said.

Britain's Chartered Institute for Purchasing and Supply (CIPS) reported last week that its index of activity in the services sector, which accounts for around two thirds of the country's total economic activity, rose to 53.2 in July from 51.6 in June, hitting the highest point since February 2008.

Readings above 50 indicate the expansion of the services sector, while those below 50 signal contraction.

An equivalent survey released earlier last week by CIPS also indicated that Britain's manufacturing sector, which accounts for around 15 percent of the economy, was also growing.

The monthly PMI (Purchasing Managers' Index) for the manufacturing sector jumped to 50.8 in July from 47.4 in June, boosted mainly by a sharp pickup in new orders.

Some Analysts said the growth in both services and manufacturing sectors is another sign that the British economy may be growing again after its deepest recession in decades.

British home prices also rose by 1.1 percent in July from June.

The U.S. Conference Board said last week that the Leading Economic Index for Britain increased by 1 percent in June, the third consecutive month of growing. The gain resulted from positive contributions from volume of expected output, consumer confidence, the yield spread and order book volume.

However, the Bank of England (BoE), Britain's central bank, has been cautious about the increasing "green shots" of economic recovery.

While keeping the short-term interest rates unchanged at its lowest level of 0.5 percent, the bank surprised the markets last Thursday by agreeing to provide an extra 50 billion pounds (83.5 billion U.S. dollars) of new money to the market even though it expected the recession to soon bottom out.

The BoE announced it would ramp up its so-called quantitative easing scheme -- whereby it buys bonds from commercial institutions -- from 125 billion pounds (208.75 billion dollars) to 175 billion pounds (292.25 billion dollars) after winning government approval. It also said in a statement that the country's recession "appears to have been deeper than previously thought."

"Business surveys suggest that the trough in output is close at hand," the BoE has said. But some analysts said the British economy is facing many uncertainties such as financial instability and loss of leverage in monetary policy.

And how to deal with the financial exit strategies is another difficulty for the British government and the central bank. If they exit too soon, the fragile economy could easily deteriorate again and lapse into another contraction. To exit too late will increase the risk of inflation and soaring government debt.

Many analysts including those at the International Monetary Fund and the Organization for Economic Cooperation and Development have predicted that the British economy would shrink more than 4 percent this year and grow at a speed under 0.5 percent in 2010.

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Wall Street retreats after four-week-rally

August 11, 2009
Wall Street retreated on Monday as investors brakes for more clue about the health of the nation's economy after four straight weeks of gains.

Newmont Mining Co. led producers of raw materials to the steepest loss among 10 industries in the S&P 500.

BlackBerry maker Research in Motion was down 4.9 percent after UBS downgraded it to "neutral" from "buy." While Best Buy Co. plunged more than 5 percent as Goldman Sachs reduced its recommendation on shares of the world's largest electronics retailer to "neutral" from "buy."

On the up side, Freddie Mac, the ailing mortgage-finance company seized by the government in September, jumped over 80 percent after reporting its first profit in two years.

McDonald's reported stronger-than-expected July sales, sending the stock up 1.9 percent on the New York Stock Exchange.

Investors are attaching attention to an upcoming Federal Reserve Board meeting. The Fed is expected to keep key interest rates at near zero on its two-day meeting begins Tuesday.

Major U.S. retailers such as Wal-Mart Stores Inc. and Macy's Inc. will release their earnings reports this week. Investors desire to see the recovery of consumer spending, which accounts for two third of the economy.

The Dow Jones industrial average was down 32.12 points, or 0.34 percent, to close at 9,337.95. The Standard &Poor's 500 index fell 3.38 points, or 0.33 percent, to 1,007.10. The Nasdaq composite index dropped 8.01 points, or 0.40 percent, to 1,992.24.

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Paul Krugman: World economic crisis needs two years to fully recover

August 11, 2009
The prevailing global financial crisis needed two years to recover genuinely, an expert said here on Monday.

Paul Krugman, economy professor from Prince University in the United States, said that even if the gross domestic product (GDP) was growing, employment might still remain low.

When addressing the participants at the World Capital Markets Symposium here, Krugman said in November 2001, the U.S. began to recover from the technology bubble crisis with growth seen in GDP and production, but the employment rate saw no improvement until third quarter of 2003.

The two-day symposium's theme is "The Global Financial Crisis: The Way Ahead" and has drawn over 500 participants from more than 30 countries and regions. It aims at deliberating on issues arising from the financial crisis and finding solutions to them.

Krugman said the efforts dedicated by governments of all countries had prevented the world from plunging into a great depression but they are still far away from full recovery.

The U.S. once underwent a V-shape recovery in the recessions taking place before the 90's but there was no sign of the said discovery at this moment, added Krugman.

When asked about the short-term measures to shun away from the crisis, Krugman stressed the importance of adopting an expanding fiscal policy.

Taking the U.S. as an example, Krugman said that an additional 500 billion U.S. dollars of government spending might result in the nation's debt rising to 60 percent of its GDP but that could possibly translate into a 2.5 percent GDP growth.

He said that as long as a nation's debt did not go up to 100 percent of its GDP, there were still room for the government to raise debt and there should be no worries.

Sometimes budget deficit could be necessary and it could be a country's best friend, especially during bad times, added Krugman.

This was because when the people tend to slash expenses due to a drop in income, government's spending had become crucial to support the economy, explained Krugman.

Fiscal policies and monetary policies are two policies that can be manipulated accordingly to stimulate economic growth.

However, Krugman said monetary policies had its limit as excessive decrease in interest rates would not help stimulate the economy.

KUALA LUMPUR, Aug. 10 (Xinhua) -- The prevailing global financial crisis needed two years to recover genuinely, an expert said here on Monday.

Paul Krugman, economy professor from Prince University in the United States, said that even if the gross domestic product (GDP) was growing, employment might still remain low.

When addressing the participants at the World Capital Markets Symposium here, Krugman said in November 2001, the U.S. began to recover from the technology bubble crisis with growth seen in GDP and production, but the employment rate saw no improvement until third quarter of 2003.

The two-day symposium's theme is "The Global Financial Crisis: The Way Ahead" and has drawn over 500 participants from more than 30 countries and regions. It aims at deliberating on issues arising from the financial crisis and finding solutions to them.

Krugman said the efforts dedicated by governments of all countries had prevented the world from plunging into a great depression but they are still far away from full recovery.

The U.S. once underwent a V-shape recovery in the recessions taking place before the 90's but there was no sign of the said discovery at this moment, added Krugman.

When asked about the short-term measures to shun away from the crisis, Krugman stressed the importance of adopting an expanding fiscal policy.

Taking the U.S. as an example, Krugman said that an additional 500 billion U.S. dollars of government spending might result in the nation's debt rising to 60 percent of its GDP but that could possibly translate into a 2.5 percent GDP growth.

He said that as long as a nation's debt did not go up to 100 percent of its GDP, there were still room for the government to raise debt and there should be no worries.

Sometimes budget deficit could be necessary and it could be a country's best friend, especially during bad times, added Krugman.

This was because when the people tend to slash expenses due to a drop in income, government's spending had become crucial to support the economy, explained Krugman.

Fiscal policies and monetary policies are two policies that can be manipulated accordingly to stimulate economic growth.

However, Krugman said monetary policies had its limit as excessive decrease in interest rates would not help stimulate the economy.

...Read more...

Bank of England injects another 50 bln pounds into economy

August 10, 2009
The Bank of England announced Thursday that it would spend another 50 billion pounds (85 billion U.S. dollars) of new money to buy bonds in an attempt to help the British economy out of recession.

Britain's central bank also said it would hold the interest rates unchanged at a historic low of 0.5 percent.

The move will raise the bank's quantitative-easing (QE) program from 125 billion pounds (212 billion dollars) to 175 billion pounds (297 billion dollars).

This is beyond the British Treasury's permission of 150 billion pounds (255 billion dollars), which means Mervyn King, Governor of the bank, will need approval from the Treasury for the expansion.

The decision is beyond expectations of economists, some of whom had forecast that the bank would halt the expansion of the QE program as "green shoots" have begun to emerge in the British economy.

The bank said in a statement that the recession "appears to have been deeper than previously thought."

The bank's monetary policy committee "expects the announced program to take another three months to complete," the statement said. It added that the "scale of the program will be kept under review."

Latest official data show the British economy shrank 5.6 percent in the second quarter of this year compared with the same quarter of last year, the biggest drop since quarterly records began in 1955.

In order to lift the economy out of the downturn at an early date, the central bank launched an unprecedented QE program in March and cut its interest rates to a record low.

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Austrian exports, imports in May respectively declined by over 20%

August 10, 2009
The Austrian foreign trade continued to decline in May, the imports and exports dropped by 21.4 percent and 22.1 percent respectively compared to the same period last year, amounting to 7.67 billion euro and 7.54 billion euro respectively.

However, according to the figure released by Statistics Austria on Thursday, the situation showed better in May than April. In April this year, Austria's exports had dropped as much as 27.9 percent.

On the other hand, the Austrian imports in May continued to decline, with 0.5 percent more decline than April (20.9 percent).

EU-countries are the main foreign trade partners to Austria, though, due to the general economic recession, the sum of Austrian exports to EU countries was only 5.39 billion euro in May, falling by 23.3 percent compared to last year. The imports also fell by 23.9 percent to 56 billion euro.

While in May, the Austrian imports and exports to non-EU countries fell respectively by 13.8 percent and 18.9 percent, amounting to 2.06 billion euro and 2.15 billion euro.

Statistics Austria admitted that the Austrian foreign trade was under the heavy pressure of the world economic crisis from January to May this year.

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Japan's imported auto sales down 16% in July

August 10, 2009
Japan's sales of imported cars shrank for the 15th consecutive month in July, down by 16.1 percent year-on-year to 13,842 units, the Japan Automobile Importers Association said Thursday.

The figure of the sales, which included those of Japanese brands manufactured abroad, hit a 21-year lower for the month of July, but the decline rate slowed for the third consecutive month, down from 18.7 percent in June, due to import dealers' discount campaigns and other sales promotion activities.

Foreign-brand vehicles sold in Japan slumped 13.8 percent to 12,307, according to the industry body.

In terms of manufacturers, Volkswagen ranked first with sales of 3,083 units, followed by BMW and Mercedes-Benz with sales of 2,019 units and 1,964 units, respectively.

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Gold falls as dollar soars after U.S. jobless rate drops

August 9, 2009
Gold futures on the COMEX Division of the New York Mercantile Exchange declined slightly for the third session on Friday as unexpected jobless data boosted dollar to rise sharply, much reducing gold's appeal of safe-haven. Silver and platinum both ended a little higher.

Gold price for December delivery fell 3.40 U.S. dollars, or 0.4percent, to finish at 959.50 dollars an ounce.

The Labor Department said that non-farm payroll employment fell by 247,000 in July following a revised decline of 443,000 in June. The unemployment rate for July unexpectedly declined to 9.4 percent from 9.5 percent in June. Analysts had expected joblessness to grow to 9.6 percent and this is the first decline in 15 months.

Analysts indicated the bullish jobless data provided a strong signal of the beginning of a faster-than-expected economic recovery.

Buoyed by the jobs report, dollar jumped sharply with the rate against euro climbing more than 2 cents to 1.4193 dollars from the intraday low of 1.4413 by the end of gold floor trading time. The dollar index, a gauge measuring the greenback's value against other six main currencies, rose 0.931 point, or 1.2 percent, to 78.876.

Encouraging prospects of the U.S. economy and a stronger dollar both put some pressure on gold as the precious metal's appeal of hedge and safe-haven were reduced.

September silver finished at 14.668 dollars per ounce, up 2.3 cents. October platinum fell 5.10 dollars to 1268.50 dollars an ounce. 　

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