Japan sank into recession in the third quarter, even before it felt the full force of the financial crisis, and world leaders at a weekend summit gave investors little hope they could rescue the global economy.
With the euro zone also in recession, the U.S. economy shrinking in the third quarter and China slowing sharply, markets shrugged off pledges to stimulate growth from leaders of the Group of 20 nations.
The yen and U.S. dollar pressed higher as investors pulled cash away from emerging markets and riskier assets. Oil fell more than $1 to below $56 a barrel and stock markets slid in early Asian trading.
While the Japanese economy was weakening, the pace of the decline was unexpected. Analysts polled by Reuters had predicted the economy would expand 0.1 percent. Instead it shrank by 0.1 percent as exports crumbled faster than they had thought.
The third-quarter data did not capture the full impact of the crisis that exploded in September, destroying Wall Street banks and threatening to rupture the global financial system.
Japan had largely escaped the first shockwaves of the crisis triggered last year by U.S. mortgage defaults. It felt the first major tremors in October when the Tokyo stock market crashed forcing banks to try to replenish capital and the yen surged, sideswiping exporters facing their toughest markets in decades.
“I think that it is possible for the negative growth to continue in the second half of the fiscal year,” said Tatsushi Shikano, a senior economist at Tokyo’s Mitsubishi UFJ Securities creditscore.com.
“The economy abroad, especially the United States, is slowing down and it is likely that exports will remain weak,” he said.
FISCAL AND MONETARY STEPS
The euro zone is in its first recession and the U.S. economy only avoided one earlier this year because of a stimulus plan. Most economists say the United States is probably already in recession, although official data confirming that will not come until January.
Leaders of the world’s 20 largest economies, meeting in Washington over the weekend to address the worst financial crisis in 80 years, agreed on a host of fiscal and monetary steps to rescue the global economy.
But they left it to individual governments to tailor their response to their own circumstances and troubled industries.
“Taken as a whole, it does not appear that the outcome of the summit will be sufficient to stem the financial crisis. This was a high bar from the start,” said Marc Chandler, global head of currency strategy with Brown Brothers Harriman in New York.
MADE THINGS WORSE
The post-meeting statement from the group of major industrialized and developing countries contained a laundry list of reform pledges aimed at soothing volatile markets and calming consumers’ worries.
Canada’s economy added 9,500 net new jobs in October, showing surprising resilience as fallout from the global financial crisis pushed the U.S. unemployment rate above ours for the first month since 1981.
Despite the better-than-expected numbers, Canada’s jobless rate crept up slightly to 6.2 per cent, from 6.1 per cent in September, as more people looked for work.
Economists were quick to point out that at least some of the strength in the job market could be chalked up to temporary hiring related to last month’s federal election, which drove an increase in public administration jobs of 40,000 positions.
"This wasn’t a great month, after you strip out the jobs associated with the election," said Avery Shenfeld, senior economist at CIBC World Markets. "But Canada really hasn’t had the steady downtrend in employment that the American economy has suffered. We may be entering a period like that in the coming months, but we have the advantage of having gotten off to a better start to 2008."
Despite that glimmer of optimism, yesterday’s dismal U.S. job report had some economists predicting tougher times ahead for Canadians.
"We have to more fully reflect the weakness in the United States, and I would think fairly soon," said TD Bank chief economist Don Drummond, who called the U.S. numbers "bleak beyond belief."
The U.S. labour department reported yesterday that 240,000 jobs had been slashed in October. The heavy losses pushed the U.S. jobless rate to a 14-year high of 6.5 per cent, a sharp rise from 6.1 per cent in September. The U.S. also revealed that job losses in August and September were much deeper than previously reported, saying 1.2 million jobs have evaporated since 2008 began.
"The U.S. numbers, I think, are consistent with a full-blown recession, and there’s just really no two ways about that," said Douglas Porter, deputy chief economist at BMO Capital Markets.
So far, at least, Canada is faring better than its southern neighbour. Statistics Canada reported that employment has increased by 203,000 jobs since the beginning of the year, although that was still a sharp decline from the 338,000 jobs added over the same period in 2007 cash advance no faxing. In another positive sign, the economy added 47,500 full-time jobs in October, compared with a loss of about 38,000 part-time jobs.
But some sectors are showing signs of strain. Last month, manufacturing, which has been hit hard by the U.S. slowdown, lost 8,600 jobs, while construction shrank by 8,800 workers. Some 27,000 jobs were lost in accommodation and food services – in other words, hotels and restaurants.
Despite mounting layoffs at Ontario’s manufacturers, particularly the auto sector, the province’s unemployment rate edged up only one-tenth of a percentage point in October, to 6.5 per cent. "So we’re scraping by, but there’s a sense that some deeper job cuts are coming just around the corner," Shenfeld said. He warned that "Ontario has really thrived on manufacturing, construction and financial services, and all three look vulnerable."
Yesterday, General Motors said it is laying off 3,600 workers in early 2009, including 500 at its Oshawa plant, after reporting a $2.5 billion (U.S.) third-quarter loss. Ford, which lost $129 million in the quarter, said it will cut about 2,260 more white-collar employees in North America.
In the U.S., huge job losses mean the consumer outlook heading into the all-important Christmas season "is probably going to dismal," said Adrienne Warren, a senior economist at Scotiabank. "That spills over to Canada to the extent that they buy some of those goods from us," she added.
But, with Canada still largely dodging the worst effects of the financial crisis, she said, "we can probably have a little cheerier Christmas."
With files from Star wire services
The price of oil fell on Monday as fresh signs of economic weakness stoked concerns about waning energy demand worldwide.
Light, sweet crude for December delivery fell $3.90 to settle at $63.91 a barrel on the New York Mercantile Exchange.
The oil market was pressured by a report showing that U.S. manufacturing activity sank to a 26-year low last month and fell below the level consistent with recession.
The Institute for Supply Management’s manufacturing index tumbled to a reading of 38.9 in October from 43.5 in September. It was the lowest reading since September 1982. A reading of 41 is considered a sign of recession.
"The ISM report was very disappointing," said Phil Flynn, senior market analyst at Alaron Trading in Chicago.
Flynn said weakness in manufacturing is particularly alarming for oil traders because "as goes the manufacturing industry, so to goes oil demand."
At the same time, a grim outlook for economic growth in Europe also weighed on oil prices.
The European Commission is forecasting that the economies of the 15 countries that use the euro will barely grow next year as the financial crisis takes its toll on Europe.
The December oil contract had gained $1.85 to settle at $67.81 a barrel Friday.
But Friday’s advance did little to offset record losses in October. Crude oil prices fell 32.6% last month, the largest percentage since Nymex trading began in 1983, according to the U.S. Energy Information Administration.
Dollar and stocks: In addition to the dour economic data, oil was pushed lower by a resurgent dollar.
The U.S. currency was higher against major currencies, adding to its 9% rise in October against both the euro and the British pound.
Many investors buy crude futures when the dollar weakens to hedge against inflation and sell those futures when the dollar rebounds. And a more robust buck makes crude a less attractive investment for overseas buyers.
Monday’s retreat in the oil market came despite a rally in Asian stock markets and moderately higher stock prices in Europe and the United States.
Oil investors have been using global stock markets as a gauge for the overall health of the economy and future energy demand emergency cash loans.
But the weak U.S. manufacturing report coupled with the EU’s grim assessment of future economic growth appeared to outweigh gains in the stock market.
The market is also awaiting the results of Tuesday’s U.S. presidential election.
Analysts say that market participants will be glad to have the election over, eliminating one source of uncertainty, regardless of whether Republican John McCain or Democrat Barack Obama wins the election.
"It would take a surprise upset for the market to rally," Flynn said.
Gasoline: Retail gas prices fell 2 cents overnight, marking the 47th consecutive day of declines.
The national average price for a gallon of regular gasoline dropped to $2.415 from the previous day’s price of $2.436, according to a daily survey by the American Automobile Association.
Over the last 47 days, gas prices have decreased by $1.44, or 37.4%. Prices are down more than 41% since the summer’s spike above $4 a gallon.
Auto sales: The beleaguered auto industry is reporting October sales numbers that are on track to be the worst in 16 years.
Ford’s (F, Fortune 500) October sales were down 30% from year earlier when its Volvo unit was included in the sales total. The results were up slightly from September, which was the weakest month for the company since January 1982.
Rival automaker General Motors (GM, Fortune 500) said sales were down 45% in October from a year ago.
But the sales declines were not limited to Detroit. Toyota Motor (TM), which is now the No. 2 automaker in terms of U.S. sales, posted a 23% decline from year-earlier levels. That was far worse than the 16% drop forecast by Edmunds.
Auto sales suffered despite significantly lower gas prices in October. A lack of available credit and plunging consumer confidence kept potential buyers out of dealer showrooms.
The Huntsman chemicals company says two banks providing funding for its disputed takeover by Hexion Specialty Chemicals have backed out of the deal.
Huntsman Corp. sued the banks in September, charging they had interfered with the buyout. Huntsman said early Tuesday, the day the buyout was expected to close, that it had been informed by Hexion that Credit Suisse and Deutsche Bank won’t close on the buyout.
Hexion tried to walk away from the $6 one hour cash.5 billion takeover agreed to last summer, citing Huntsman’s deteriorating finances. Huntsman took them to court and won.
Hexion has now been told by the banks that an appraisal suggesting the combined company would be solvent does not meet the conditions of a commitment letter on the deal.
Citigroup Inc said it won a court order late on Saturday blocking Wells Fargo & Co. from buying hobbled U.S. bank Wachovia Corp until the court rules otherwise.
Citigroup, which planned to buy Wachovia’s banking assets for $2.2 billion, said New York State Supreme Court Justice Charles Ramos granted an injunction extending Wachovia’s agreement to negotiate exclusively with Citigroup.
Citigroup and Wells Fargo are battling for control of sixth-largest U.S. bank Wachovia, which has been hit hard by bad mortgages amid turmoil in global credit markets, but has a large network of branches.
Citigroup, the largest U.S. bank, announced on Monday it had agreed to buy Wachovia’s banking operations in a deal backed by the U.S. government. That deal did not include a signed merger agreement, but Wachovia did sign an agreement to only negotiate with Citigroup through Monday October 6 (quick payday loans).
On Friday, however, Wells Fargo said it had signed an agreement to buy the whole of Wachovia, including its asset management unit and retail brokerage, for about $15 billion, roughly seven times more.
Wachovia said early on Sunday morning that it believes its agreement with Wells Fargo is valid and proper, and is best for shareholders, employees and U.S. taxpayers.
“Citigroup is always free to make a superior offer to Wachovia,” spokeswoman Christy Phillips-Brown said.
Citigroup said in its statement that it is prepared to continue negotiating with Wachovia, but that Wachovia may not speak to others.
Missouri’s Department of Economic Development is providing $1.8 million in remediation tax credits for the redevelopment of Building 9 of the former Cupples Warehouse complex in downtown St. Louis, the department said Wednesday.
St. Louis-based Blue Urban LLC is spending $43 million to renovate the building, said Kevin McGowan, chief executive of the firm. The tax credit will be used for
remediation of lead-based paints and asbestos in the
113-year-old building.
Vacant for 30 years, the seven-story, 160,000-square-foot building will feature 54 condos and 66,000 square feet of retail and office space paydayloan no fax payday advances faxless payday loans. –>. The majority of space in the building already has been sold or pre-leased. The renovation is scheduled to be completed in September next year. — Christopher Boyce
While the stock market was choking on news that two Wall Street titans had buckled in the credit crunch, Larry Swedroe, research director at Buckingham Asset Management LLC in Clayton, went for a walk before lunch on Monday.
By contrast, Joe Terril, president of Terril & Co. in Des Peres, said the government’s refusal to help out struggling investment banks left him questioning the stability of the entire financial system.
Swedroe’s nonchalance and Terril’s despair marked the extremes of reaction among St. Louis-area investment advisers Monday as markets staged a dramatic retreat. The 504.48-point drop in the Dow, which closed at 10,917.51, was the worst one-day drop since the market reopened after the terrorist attacks of Sept. 11, 2001.
Swedroe said he was confident in his strategy of buying and holding passively managed investment funds. Bear markets happen, he said, and every investment plan should allow for them. "Investing is simple," he said. "It’s just not easy because emotions get in the way."
The government’s refusal to prop up Lehman Brothers, the purchase of Merrill Lynch by Bank of America and the precarious position of insurance giant American International Group shocked many investment advisers, including Terril.
"That’s real scary," said Terril, who is known for his bearish opinions check cash advance no fax payday loans. "It’s almost like saying, ‘There’s no way we can bail this situation out. We’re going to have to take our chances.’"
Terril said he was more concerned about troubles in the bond market than those in the stock market. "No one wants anybody’s credit," Terril said. "You can’t trade it. If people can’t borrow money, they won’t be able to roll over their debt."
Ken Crawford, senior portfolio manager at Argent Capital Management LLC in Clayton, said he was surprised the government didn’t make more of an effort to salvage Lehman, but saw no need for investors to abandon their financial plans.
"The last thing you want to do in a time of distress, or even in a time of euphoria, is to throw the baby out with the bath water," Crawford said. "People should be worried, certainly, but they shouldn’t be frightened. Eventually the stress the financial world is feeling will be alleviated."
Scott Wren, senior equity strategist at Wachovia Securities LLC in St. Louis, said that while many investors are feeling some pain, there are some reasons for optimism. He said he expects companies to begin reporting earnings growth soon, and the threat of inflation may be ebbing along with oil and other commodity prices.
Peter Schick, chairman of
A measure of U.S. employment expectations fell to its lowest level since 2003, amid signs the U.S. job market slowdown is spreading to economies around the globe, according to a quarterly survey by Manpower Inc (MAN.N: Quote, Profile, Research, Stock Buzz) released on Tuesday.
The staffing services company said its seasonally adjusted net employment outlook fell for the fourth consecutive quarter, reaching a level of 9, down from 12 last quarter and 18 a year ago. The index measures the difference between employers who plan to add jobs and those who expect to cut them.
“We are clearly in a softening period in the labor market that may be at recessionary levels,” Manpower Chief Executive Jeff Joerres said.
If the index were to fall to a level of 4 or 5, he added, it would be more similar to past recessions.
Of the 10 U.S. sectors tracked by Manpower, only mining has an improved outlook for job seekers compared with the previous quarter paydayloans no fax payday loans. Prospects have weakened in six other sectors and are stable in three.
POOR RETAIL OUTLOOK
Employers in the U.S. wholesale and retail trade sector report their weakest hiring intentions since the third quarter of 1991, and the lowest fourth-quarter reading ever.
U.S. retailers have faced hard times before. But now the many negative factors — weak housing markets and construction activity, high energy costs and a slowing world economy — are coming together in the fourth quarter, suggesting a bleak outlook for the key U.S. holiday shopping season. Employers in the western United States are especially cautious.
The parent of the Hardee’s dining chain has sold 23 restaurants in Ohio and Indiana to a franchisee that says it will build more of the fast-food outlets in the states over the next several years.
Carpinteria, Calif.-based CKE Restaurants Inc. sold the 23 restaurants to Midwest First Star Inc., a franchisee new to the chain. One of the company’s principals, Carri Simon, has been a Hardee’s restaurant operator for nearly a decade.
Through the deal, financial terms of which weren’t disclosed, Midwest First Star pledged to build at least seven Hardee’s restaurants in neighboring states over the next several years.
A CKE Restaurants spokesman wasn’t immediately available Tuesday to comment further on the transaction.
Ohio is home to 20 Hardee’s restaurants, four of which are in and around Central Ohio, and Indiana has 73 of them.
The sale is part of a refranchising program unveiled in 2007 that targets more than 200 company-owned restaurants in the Midwest and Southeast cash advance usa. CKE Restaurants, which has sold 224 restaurants and locked in commitments for 105 new eateries since then, said the shake-up is aimed at accelerating development and allowing the company to focus on other core markets.
CKE Restaurants (NYSE:CKR) recorded profit of $31.1 million on $1.53 billion in revenue last year. The company has more than 3,000 company-owned and franchised Hardee’s and Carl’s Jr. restaurants worldwide.
U.S. Treasury Secretary Henry Paulson, battling the deepest credit crisis in decades, will lose another domestic finance aide this week as the Bush administration approaches the end of its term.
Matthew Abbott, the deputy assistant secretary for federal finance, will serve his last day on Aug. 20, Treasury spokeswoman Jennifer Zuccarelli told Bloomberg News today. Abbott is leaving for a job in the private sector, she said, without being more specific.
Abbott oversaw the Office of Federal Finance, which develops, analyzes and coordinates policies on debt management and financial-market regulation. He “recused himself and followed ethics guidelines'' when pursuing the post outside government, Zuccarelli said.
His departure will create another gap in Treasury's domestic finance team as it tries to cushion the economy from the collapse of the mortgage market and $503 billion in losses at major financial institutions since the beginning of 2007. Paulson lost his senior domestic finance adviser last month, when Robert Steel stepped down to become chief executive officer of Wachovia Corp.
Steel, a former undersecretary, was vice chairman of Goldman Sachs Group Inc. from 2002 until 2004. Assistant secretary Anthony Ryan now holds Steel's Treasury post in an acting capacity.
Even after the departures, Zuccarelli said the Treasury isn't concerned about a staffing shortage before January 2009, when the next administration will take office faxless cash advance.
`Until the End'
“Secretary Paulson has built a strong team of professionals at Treasury who plan to stay with him until the end,'' she said.
This month Paulson, former chief executive officer at Goldman Sachs, recruited as a Treasury adviser Kendrick Wilson, a former Goldman Sachs executive who spent more than two decades counseling U.S. banks. He is serving as a Treasury contractor.
Abbott has held his current position since November 2006. He previously served as a senior adviser to the undersecretary for domestic finance. He worked in the fixed income division of Credit Suisse First Boston from 1999 to 2004, according to his official Treasury biography.
Abbott earned his undergraduate degree from the College of the Holy Cross in 1993, followed by a master's in business administration from Northwestern University's Kellogg School of Management in 1999. Before entering graduate school, he served in the airborne 10th Special Forces Group, Treasury said.
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