The U.K. government should aim to balance its budget two years earlier than currently planned to calm investor concerns the country could lose its top-notch credit rating, the Confederation for British Industry said.
The budget deficit should be eradicated by March 2016, the London-based employers’ group said in proposals submitted to Chancellor of the Exchequer Alistair Darling before his budget this month. This should be achieved through spending cuts and reforms to public services rather than tax increases, it said.
“There is a need to restore macro-economic stability and that depends on getting current levels of government borrowing down,” CBI Director General Richard Lambert told a press conference in London on March 4. “The government is not ambitious enough on that front. It hasn’t set out its spending plans in enough detail. The 2017 date is too far away.”
With an election due by June, the debate over how to tame a deficit equal to Greece’s has taken center stage as some investors and the opposition Conservatives warn Britain’s credit rating is at risk.
Prime Minister Gordon Brown has pledged to halve the gap, set to exceed 12 percent of economic output this year, by March 2014 and says Conservative plans to begin spending cuts this year risk plunging the economy into a “double-dip recession.”
“The economy is still in a very fragile shape,” Lambert said. While the CBI is not proposing “any silver bullets in the short-term,” the process of cutting the deficit “should get under way seriously in 2011.”
Poll Outlook
Polls suggest Britain may be heading for its first minority government since 1974, sparking concern that efforts to cut the deficit may be compromised.
“The scale of our budget deficit and the likely tightening we are going to need does look a lot more serious than in any other G-7 country,” Lambert says. “We are confident that the U.K.’s credit rating is sustainable. The big picture is to get credibility.”
A survey showed that 86 percent of U.K. business leaders said that current levels of public spending needed to be reduced, while 72 percent said cuts should start this year, the Institute of Directors said in a separate e-mailed report today. The lobby group, which questioned 1,500 people between Feb. 26 and March 4, also found that 71 percent said the deficit was a top priority of a new government in its first 100 days.
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Stocks ended with modest losses Thursday, fighting off a bigger decline that surrounded the latest worries about Greece’s debt crisis and weaker-than-expected reports on the economy.
The Dow Jones industrial average (INDU) lost 53 points or 0.5%. The S&P 500 index (SPX) fell 2 points, or 0.2%. The Nasdaq composite (COMP) lost 2 points or 0.1%.
Stocks tumbled out of the gate after both Standard & Poor’s and Moody’s said they may have to cut Greece’s debt rating if the country doesn’t implement its so-called austerity measures, meant to rein in its deficit.
But after a bigger selloff through the early afternoon, stocks cut losses heading into the final hour of the session.
Greece has said it will raise the retirement age and have civil servants take bonus cuts, among other measures. A workers’ strike Wednesday added to questions about the nation’s ability to cut its debt. Investors are concerned about the broader implications for other euro zone countries, and the euro, should Greece default.
"It seems like the market doesn’t know how worried it should be about Greece, which is why we’re rallying off the lows of the day," said Ryan Atkinson, market analyst at Balestra Capital.
While the Greek debt situation is a serious one for the market, it’s probably going to come in waves over the next six to nine months, Atkinson said. "Maybe they’ll cut a deal initially [with officials], but longer term there are going to be more issues."
He said that investors were likely just as concerned about the day’s economic news, including worse-than-expected reports on jobless claims and factory orders.
Market breadth was mixed. On the New York Stock Exchange, losers and winners were roughly even on volume of 1.15 billion shares. On the Nasdaq, decliners topped advancers five to four on volume of 2.1 billion shares.
Greece: The threat of a Greek default rattled global markets earlier in the month, pushing U.S. stocks to three-month lows and causing the S&P 500 to lose over 9%, just shy of the technical definition of a correction.
Investors worried that Greece’s problems could reflect a broader euro zone debt crisis that could impact Portugal, Spain, Ireland, Italy and other debt-challenged European nations.
But European officials said earlier this month that they were ready to step in and help Greece if need be, and that seemed to calm investors for a few weeks. S&P and Moody’s downgrade talk revived the worries.
In addition, stocks have been rising for the last two weeks, setting the market up for a little pullback, particularly in the aftermath of last year’s big rally.
Bernanke: Federal Reserve Chairman Ben Bernanke told Senators Thursday that the central bank is looking into whether Goldman Sachs and other big banks worsened Greece’s debt crisis.
News reports have said that Goldman and other banks helped arrange deals that may have disguised the extent of Greece’s debt problems. In addition, the banks have made bets that Greece will default on loans it took from U.S. financial institutions, according to a New York Times article.
Bernanke spoke before the Senate Banking Committee Thursday in his second day of Congressional testimony on the economy payday loans.
On Wednesday he told a House committee that while the economic recovery is chugging along, the job market remains weak. Against that backdrop, interest rates will stay low for the foreseeable future. That seemed to reassure investors worried about the outlook for the economy and stocks rallied Wednesday.
Jobs: The number of Americans filing new claims for unemployment jumped last week to 496,000 from a revised 474,000 the previous week. Economists surveyed by Briefing.com expected 460,000 new claims.
Claims have jumped 12% over the past two weeks, due in part to the impact from the severe winter storms on the east coast.
Durable goods orders: Orders for big-ticket items meant to last three years or more jumped in January, with aircraft demand fueling the rise.
Durable goods orders rose 3% in January, the biggest increase since last summer and better than the 1.5% jump forecast by economists. Orders rose 1.9% in the previous month.
Orders excluding transportation fell 0.6% after rising 2% in December. Economists expected a rise of 1%.
Coke: Coca-Cola (KO, Fortune 500) said it will buy the North American operations of its biggest bottler, Coca-Cola Enterprises (CCE, Fortune 500) (CCE) in a deal that would cut costs and give it more control of its distribution.
The multi-layered deal has Coca-Cola giving up its 34 percent stake in CCE, worth about $3.4 billion, and taking on $8.88 billion in debt.
Additionally, the companies agreed that CCE will buy Coke’s bottling operations in Norway and Sweden for $822 million and that it has the right to buy Coke’s 83% stake in its German bottling operations.
The deal comes as rival PepsiCo (PEP, Fortune 500) is about to close a $7.8 billion deal to buy Pepsi Bottling Group and PepsiAmericas, its largest bottlers.
Coke shares plunged 4% and CCE shares rallied 33%.
Palm: Palm (PALM) said it expects revenue to fall far below current forecasts due to worse-than-expected sales of its new smartphones. Shares plunged 19% on the forecast.
Health care: The Obama administration’s health care summit was underway Thursday, with Republican and Democratic leaders from both houses of Congress debating ways to reform the system.
The president said that both sides agree that costs need to be contained, but they remain bitterly divided over whether to press through with the current bill or start over.
World Markets: In overseas trading, major European and Asian markets ended lower.
The dollar and commodities: The dollar gained versus the euro after seesawing versus the European currency throughout the session. The greenback fell versus the yen.
U.S. light crude oil for April delivery fell $1.83 to settle at $78.17 a barrel on the New York Mercantile Exchange.
COMEX gold for April delivery rose $11.30 to settle at $1,108.50 per ounce.
Bonds: Treasury prices rallied, lowering the yield on the 10-year note to 3.63% from 3.69% late Wednesday. Treasury prices and yields move in opposite directions.
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Hot or iced, with whipped topping or not — Seattle’s Best Coffee fans can soon have it their way.
Burger King (BKC) will start serving up the Starbucks (SBUX, Fortune 500)-owned brand at 7,250 of its restaurants across the United States by September, for $1 to $2.79 a cup, the company announced today.
"The addition of Seattle’s Best Coffee expands on our ‘Have it Your Way’ brand promise by offering our guests even more beverage options and strengthens our ability to remain competitive in a continuously changing industry," the restaurant chain’s senior marketing VP, John Schaufelberger, said in a statement.
The news comes amid a weak economy in which consumers seem to be pinching pennies and avoiding burgers, soda and beer.
Last week McDonald’s posted same-store sales were down 0.7% in January in its U.S. restaurants. Burger King competes with McDonalds’ McCafe to attract morning customers. Burger King doesn’t post monthly figures, but showed same-store sales in the U.S. and Canada were down 3.3% in the second quarter of 2010.
Seattle’s Best Coffee will replace Burger King’s BK Joe coffee menu, launched in 2005.
The sandwich chain Subway also signed a deal with Seattle’s Best back in November and now sells its coffee in 8,500 stores.
OTTAWA–Prime Minister Stephen Harper will test drive his priorities for the G8 and G20 summits this week at an elite conference in Davos, Switzerland, and he’s expected to highlight the environment, development and global economic growth.
While Canada’s official agenda for the end-of-June summits is not yet finalized, climate change will figure prominently at both meetings, a senior government official said.
Economic recovery, banking regulations, aid for mothers and children in poor countries and global security are also top of mind for the prime minister as he leaves Tuesday night for a quick three-day trip.
His speech on Thursday will be the first public unveiling of how Harper sees the two summits unfolding – starting with the Group of Eight industrialized countries meeting in Huntsville, Ont., at the end of June, and followed immediately by the larger Group of 20 summit in Toronto.
While Canada has been widely pilloried for its lack of plans to reduce greenhouse gas emissions, Ottawa wants the two summits to push the world closer to a binding international treaty on emissions reduction, based on the agreement-in-principle reached in Copenhagen last month.
"We want to see a long-term agreement on climate change," said the Canadian official, speaking on background. He stressed that final decisions will need to be made through the United Nations.
The summits, he said, "can play a supportive role online payday loans."
For the G8 summit, Harper plans to make child and maternal health a central theme, several sources said, although it was unclear whether Harper was ready to focus on that topic in his Davos speech.
Ottawa wants to foster collaboration among the richest countries to improve hospitals and health care for mothers and newborns in poor countries.
The federal government also wants to set an example by increasing its own spending on maternal and child health in developing countries – although money has not yet been allocated for this effort.
Stopping the spread of nuclear weapons and other security concerns will also be on the G8 discussion list.
For the G20, Harper will use his Davos speech to signal that the Toronto summit in June will focus on entrenching the global economic recovery.
Specifically, Harper is expected to stress that the rebound is fragile, and that the world won’t really feel like recovery has taken hold until employment rises.
He is expected to signal that he wants all G20 countries to demonstrate that they are living up to their unprecedented commitments to stimulate their economies.
French business confidence rose more than economists forecast in January on signs that the recovery is gaining pace after the worst recession in six decades.
The index of sentiment among factory executives jumped to 92 from a revised 88 in December, Paris-based statistics office Insee said today. Economists expected a reading of 90, according to the median of 18 forecasts gathered by Bloomberg News.
France’s economy emerged from the slump last year, growing 0.3 percent in the second and third quarters. The Finance Ministry said this week that growth accelerated in the three months through December and raised its 2010 forecast, predicting that Europe’s second-largest economy will expand 1.4 percent.
“French industry is benefiting from the pickup in world trade,” said Joost Beaumont, an economist at Fortis Bank Nederland in Amsterdam. “Growth should mainly come from foreign demand.”
French bonds gained after the report, pushing the yield on the benchmark 10-year bond due in 2019 down 2 basis points to 3.43 percent. A basis point is 0.01 percentage point.
French 10-year debt yielded an average 37 fast cash online.18 basis points more than 10-year German securities in 2009, according to data compiled by Bloomberg. The spread today was 23.5 basis points.
“Manufacturers see business significantly improving,” Insee said. “Inventories of finished products are judged to be small and order books, overall and from abroad, are filling up, even if they are still considered much less than full.”
The level of orders from foreign clients now shows a reading of minus 48, up from minus 58 in December, Insee said.
Domestic demand may be restrained by rising unemployment. The Finance Ministry expects France to lose 71,000 jobs this year, mostly in the first half, after shedding 373,000 in 2009.
“We have a recovery and the only question is how strong it will be,” said Pierre-Olivier Beffy, chief economist at Exane BNP Paribas in Paris. “In the U.S. inventories are being re- built and in Europe we are positive on the prospects for France and Germany.”
Tena Mayberry, the president of Brentwood-based Century II Inc., has been named as CEO of Century’s parent company, Indianapolis-based Fortune Industries Inc.
Mayberry, who was recently named one of Nashville Business Journal’s Women of Influence for 2010, will also continue to serve as president of Century II, and will remain in Brentwood.
She was named Fortune Industries’ president since last year, after the formerly diversified company decided to focus solely on providing professional employer organization services, such as payroll and human resources, to small and mid-sized businesses.
“I am excited to have the opportunity to lead the company through all the strategic plans we put in place,” she told Nashville Business Journal Monday.
She said she expects FFI to grow as the economy recovers, thanks in part to a continued emphasis on sales even while the company was cutting back on other costs.
“I think 2009 is the worst. We can’t have another 2009,” she said. “Everybody I speak with seems to be ready to start talking positively.”
Departing CEO John Fisbeck offered glowing words.
“Tena Mayberry is a proven top executive and one of the most knowledgeable senior managers in the PEO (professional employer organization) industry,” departing CEO John Fisbeck said in a statement. “Under her direction, FFI is one of the few PEO companies that has been profitable for the last year during this difficult economic environment. … She is an inspirational leader with boundless energy and will lead Fortune as it continues to expand in the U.S.”
Mayberry has more than 20 years of management experience, including time with Contract Sales Managers, Kroger Co., and Norrell Temporary Services. She holds a bachelor’s degree in marketing and business management from Tennessee Technological University.
Fortune Industries (AMEX: FFI) is the nation’s fifth-largest publicly traded PEO, representing 14,000 employees in 47 states.
Production in the U.S. rose for a sixth consecutive month, consumers gained confidence and price increases slowed, indicating the economic recovery is being sustained into 2010 without generating inflation.
Output climbed 0.6 percent in December for a second month, according to figures from the Federal Reserve issued today in Washington. The cost of living increased 0.1 percent last month, less than the median forecast of economists surveyed by Bloomberg News, and sentiment reached a four-month high in January, other reports showed.
Manufacturers may ramp up assembly lines in coming months to replenish stockpiles and meet rising global demand that’s lifting profits at companies including Intel Corp. The rebound so far has soaked up a quarter of the excess capacity created by the worst recession since the 1930s, giving the Fed scope to keep interest rates close to zero through the first half of the year.
“The economy is on a pretty good track on the recovery side and inflation is not a problem,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts, who correctly forecast the increase in consumer prices. “The Fed can be pretty relaxed, at least for the moment, and focus on making sure this recovery is sustainable.”
Stocks Drop
The Standard & Poor’s 500 Index dropped from a 15-month high after JPMorgan Chase & Co. reported a loss in its retail banking division and a stronger dollar pulled down commodity prices. The S&P 500 was down 1.2 percent to 1,134.75 at 12 p.m. in New York.
The increase in production matched the median forecast of 76 economists surveyed by Bloomberg. Estimates ranged from no change to a gain of 1.1 percent. The stretch of increases at the end of 2009 was the longest in a decade.
Production was propelled by a jump in utility use as temperatures turned colder. Utility demand climbed 5.9 percent, the biggest jump in two decades. December was colder than average, according to the National Oceanic and Atmospheric Administration, prompting Americans to turn up the heat.
Manufacturing dropped 0.1 percent as losses in auto and mineral production offset a 0.9 percent gain in business equipment. Demand for computers, communications gear and semiconductors improved, signaling investment may be picking up.
Another report today showed manufacturing accelerated in the New York Fed region this month. The Fed Bank of New York’s general economic index rose to 15.9 from 4.5 in December. Readings above zero in the so-called Empire State Index signal manufacturing expansion in the state and parts of New Jersey and Connecticut.
‘Solid’ Quarter
“We’re turning up,” said Joseph LaVorgna, chief U small personal loans.S. economist at Deutsche Bank Securities Inc. in New York. “Inventories are the spark of the recovery,” he said, and growth “looks pretty solid for the fourth quarter.”
Intel, the world’s largest chipmaker, yesterday projected bigger first-quarter sales than analysts had estimated, a sign the computer industry has shaken off the effects of the recession. The Santa Clara, California-based company, which supplies chips to more than 80 percent of the world’s computers, expects its profit margin to hit a 10-year high this year as consumers snap up laptops and businesses loosen the purse strings on technology budgets.
“My expectation for 2010 is that we’re going to see robust unit growth,” Chief Financial Officer Stacy Smith said in an interview. “The consumer segments of the market will stay pretty strong, and I do believe we are going to see a resurgence in PC client sales.”
Spare Capacity
Capacity utilization, which measures the proportion of plants in use, increased to 72 percent in December, the highest level in a year, from 71.5 the prior month, the Fed’s production report also showed. It was forecast to rise to 71.8 percent, according to the survey median.
The plant-use rate averaged 80 percent over the past two decades and reached a record low 68.3 percent in June. Excess capacity is one reason economists project inflation will remain low.
The increase in the consumer-price index last month followed a 0.4 percent gain in November, the Labor Department reported. The median forecast of economists surveyed projected a 0.2 percent advance.
Excluding food and energy costs, the so-called core index also increased 0.1 percent. Companies may have little success raising prices with unemployment projected to average 10 percent this year, the highest annual rate in seven decades.
“Consumer pricing pressures remain very subdued,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, who accurately forecast the rise in the core rate. “It gives the Fed further leeway to continue keeping rates where they are well through 2010.”
The Reuters/University of Michigan preliminary index of consumer sentiment for January increased to 72.8, less than anticipated, from 72.5 in December. The gauge averaged 66.3 last year after reaching a record 28-year low of 55.3 in November 2008.
The St. Louis Council of Construction Consumers gave a Best Practice Award for the renovation of the historic Woolworth Building in midtown St. Louis.
The $8 million renovation project was completed last year. Involved in the project were McCormack Baron Salazar, S.M. Wilson, Trivers Associates, Christner, Fox Architects, Big Brothers Big Sisters, Craft Alliance and Grand Center.
In addition, the council gave the following Best Practice Awards for:
— Design effectiveness for the Ameren Training Center in St. Louis. Recipients were AmerenUE, Burns & McDonnell, and Kozeny-Wagner.
— Pre-project planning for BJC St. Peters Hospital. BJC, BJC St. Peters, Pratt Design, Tarlton, Murphy, Sachs, KJWW, and LEAN Project Consulting payday loans for people with bad credit.
— Partnering for the SSM St. Clare Health Center at Fenton. SSM, Alberici, and HGA.
The council also presented the Construction Industry Safety Excellence Award to Nooter Construction.
Finally, the council presented the following Diversity awards:
— Organization of the Year to Metropolitan Sewer District.
— Minority/Woman Business to BAM Contracting.
— Diversity Champions. Deborah Henry of St. Louis Community College, and Scott Wilson of S.M. Wilson.
Greece sold 2 billion euros ($2.9 billion) of floating-rate notes privately to banks, eight days after Fitch Ratings downgraded the nation’s debt as the government struggles to cut the European Union’s largest budget deficit, two bankers familiar with the transaction said.
The securities, which mature in February 2015, will yield 250 basis points, or 2.5 percentage points, more than the six- month euro interbank offered rate, or Euribor, they said. That’s 30 basis points higher than a similar-maturity Greek fixed-rate bond when converted into a floating rate of interest, according to data compiled by Bloomberg.
Greek bonds have fallen in the past week, with two-year note yields rising by the most in more than a decade on Dec. 8, when Fitch cut the nation’s credit rating to BBB+, the lowest in the euro region, citing the “vulnerability” of the nation’s finances. Prime Minister George Papandreou has been unable to convince investors he can reduce a deficit the government says will rise to 12.7 percent of gross domestic product this year, after the economy shrank 1.7 percent in the third quarter.
“Selling bonds via a private placement can be a double- edged sword at this point,” said Luca Cazzulani, a fixed-income strategist in Milan at UniCredit Markets & Investment Banking. “On the one hand, it shows that Greece can always find buyers for their bonds. But the market might take it as a sign that they only have this channel left.”
Widening Spread
Greek bonds rose snapped two days of declines today, with the yield on the 10-year note dropping 11 basis points to 5.62 percent as of 10:26 a.m. in London. It rose as much as 29 basis points yesterday to 5.76 percent, the highest since April 3.
Concern some countries may struggle to pay their debt was reignited after Dubai’s state-owned Dubai World said on Dec. 1 it wanted to restructure $26 billion of debt. The premium, or spread, investors demand to hold Greek 10-year bonds instead of German bunds, Europe’s benchmark government securities, rose as high as 250 basis points yesterday, the highest closing level since April 2. It narrowed to 239 basis points today guaranteed payday loans.
The participating banks in yesterday’s private placement were National Bank of Greece SA, Alpha Bank AE, EFG Eurobank Ergasias SA, Piraeus Bank SA and Banca IMI SpA, the bankers familiar with the transaction said. Italy’s Banca IMI was the only foreign-based in the group.
Worst Performers
The government paid “generous” terms, said Wilson Chin, a fixed-income strategist in Amsterdam at ING Groep NV.
“I guess you have to pay some liquidity premium, given the sale was done at the end of the year,” he said. “I would be very surprised if they continue to use this method into the first quarter of next year. That would probably be taken as a sign the market isn’t working for them.”
Greek bonds are the worst performers after Ireland among the debt of so-called peripheral euro-region countries this year, handing investors a 3.5 percent return, according to Bloomberg/EFFAS indexes.
In a private placement, issuers offer securities directly to chosen private investors as opposed to selling them through an auction or via a group of banks.
Papandreou pledged in a speech two days ago to begin reducing the nation’s debt, set to exceed 100 percent of GDP this year, from 2012. The European Commission estimates the ratio at 112.6 percent of GDP this year, second only to Italy.
‘Painful Decisions’
“In the next three months we will take those decisions which weren’t taken for decades,” Papandreou said in Athens. He said many choices will be “painful,” though he promised to protect poorer and middle-income Greeks.
Credit-default swaps on Greece rose 1 basis point to 238.5, according to CMA DataVision, after surging 25.5 basis points yesterday. Such swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should an issuer fail to adhere to its debt agreements. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Retail sales jumped 1.3% in November, according to the Commerce Department, well more than the expected increase.
Economists had expected retail sales to rise 0.6% from October, according to a consensus of forecasts compiled by Briefing.com.
The seasonally adjusted November increase represents $352.1 billion worth of monthly sales. This is slightly less than the October increase, when retail sales jumped 1.4% month-to-month.
Automobile sales had little to do with November’s gains. Without including autos, retail sales rose 1.2% last month.
A consensus of economists had projected ex-auto sales to rise 0.4% in November, compared to October, when ex-auto sales notched up 0.2%.
The year-to-year increase was more dramatic No teletrak payday loan. November retail sales jumped 1.9%, compared to the same month in 2008.
November sales included Black Friday, the post-Thanksgiving shopping spree that is generally one of the hottest days of the year for retail. But this year’s Black Friday disappointed retailers, with sales rising an anemic 0.5%, falling short of Thomson Reuters’ forecast of a 2.1% rise.
Also today, at 9:55 a.m. ET, the University of Michigan will release its preliminary consumer sentiment index for November. The November index is expected to rise to 68.8, according to a Briefing.com consensus, from the prior month’s index of 67.4.
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