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Portugal government plans tougher austerity measures amid bailout, recession

Forex-Master — Wed, 29 Jun 2011 11:49:10 +0000

Portugals new coalition government said Tuesday it intends to impose tougher austerity measures than those demanded in return for its recent 78 billion ($111 billion) international bailout.

The government said it would scrupulously abide by the belt-tightening conditions of the financial resc…
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Published: Wed, 29 Jun 2011 13:49

Spains Pains – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:50:32 +0000

Pity Spain. While stimulus packages offered by the German and French governments quickly helped lift those nations out of recession in the past quarter, Spain had no such luck, and shrank by a more-than-expected 1% quarter-on quarter, its National Statistics Institute said Friday.It also doesn’t look like the situation will pick up any time soon. “We are likely to see a few more quarters of negative growth into late next year,” said Dominic Bryant, an economist at BNP Paribas in London. “Spain will under-perform France, Germany and even Britain.” The International Monetary Fund predicts that Germany’s economy will contract by 6.2% this year, versus Spain’s 4%, but the Germans have been helped by a combination of various stimulus measures offered by Angela Merkel’s government, such as a car scrapping scheme, and short-term state subsidies of wages.
What France – which had been forecast to shrink 3% by the IMF – has going for it is a more diversified economy – its domestic demand isn’t as weak as Germany’s is so it’s less vulnerable. Spain’s trouble is that its companies and residents are going to have be weaned off the massive lending spree they’ve been living off which will make a recovery more protracted and more painful. Household debt levels have traditionally been in the region of 90% of gross domestic product, compared to a 55% to 60% average for the euro zone excluding Spain, according BNP Paribas estimates. While the credit crisis has forced the population to move from being net borrowers to net savers, its corporate sector is still grappling with its dependence on debt. “Banks that were willing to lend to these companies during the boom years are no longer willing to lend or when it comes to renewing loans don’t extend it, or give a smaller amount or a higher rate of interest,” says Bryant.Spain’s massive corporate sector troubles have forced many companies to lay off workers – in June, the unemployment rate rose to a staggering 17.9%, triggering the government to approve a special payment program whereby 340,000 jobless would be eligible for a monthly payment.At least, things don’t seem to be getting worse: in the first quarter of the year the economy shrank by 1.9%.
One upside for Spain: unlike countries such as Britain, Switzerland, Germany and France, which have had to spend billions on supporting banks such as Royal Bank of Scotland
and UBS
, the regulatory system that Spain has had in place for many years has meant that despite the huge increase in bad loans on both the corporate and consumer side, Banco Santander
and BBVA
- the country’s two largest banks – won’t need any state support. Under Spain’s nifty system they had to put extra money aside in the good times to prepare for dark days like these.

Retailers Cant Wait For School – US-FOREX.US

Forex-Publisher — Thu, 13 Aug 2009 20:46:10 +0000

American shoppers can’t decide if they’re ready to spend again or should hold off on that new plasma screen in case they lose their job, their home or their life savings. Big retailers also can’t decide. They posted better July sales figures than some had expected but a mixed batch of second-quarter earnings. Today the Commerce Department said July retail sales fell a tenth of a percent in July when economists had been expecting a gain of 0.7%. Excluding cars and gas the numbers look even worse, a drop of 0.6% last month. .With that in mind, investors are eyeing the fall shopping season, which for many chains actually means the end of summer, to tell them whether the recession is ending. Analyst Deborah Weinswig at Citigroup
points out a few factors that could boost back-to-school sales for stores but says the season is likely to be a challenging one for many firms as shoppers cut back on more expensive “wants” in favor of cheaper “needs.”Helping out is a later Labor Day this year, the latest in ten years, which means many schools start later, too. That will extend the school shopping season a bit and many states have shifted their annual sales tax holidays to August, too, lending an added incentive for people to hit the mall. The tax holidays could add 1.5% to 2.5% to August sales, Weinswig estimates. .Also favoring your local Target
, Costco
or J.C. Penney
, is a lower price for gas than last year, adding 140 billion to consumers’ wallets, says the Citigroup analyst. Similarly, as oil plummeted from last year’s high, so have other commodities. The global downturn has taken a bite out of prices for everything from crops to metals and that is translating into lower wholesale costs for stores. With merchandise costing them 5% less than last year, some firms will have the option of passing those savings on to consumers if their sales are weak. If sales are strong, they’ll get to pocket the difference for their bottom lines.But stores can’t ignore the recession and its effects on American spending. Citigroup found that nearly half of shoppers plan to spend less this back-to-school season than they did last year. Many families will be buying only what they think they need, cutting back on discretionary items, says Weinswig. For August and September, Weinswig estimates a sales decline of between 3% and 4% compared to last year. That’s more optimistic, she notes, than colleagues at the National Retail Federation . .For her money, Weinswig likes department store J.C. Penney, although she rates it a high-risk investment. Penney is cutting back on opening new stores during the recession but has the right mix of merchandise and advertising for the long-term, even though the near-future could be painful, she says.
Also a buy, but with less risk, is CVS Caremark, the pharmacy chain that now manages prescription benefits, too. The firm has acquired rivals and invested in new ideas like drop-in clinics that should help it dominate its industry.

Auf Wiedersehen Recession – US-FOREX.US

Forex-Publisher — Thu, 13 Aug 2009 11:46:27 +0000

It seems like exceptionally good news. Germany, Europe’s biggest economy, has just confounded expectations and emerged from its recession, thanks to reporting a quarter-on-quarter growth rate of 0.3% for the second quarter, instead of the contraction of 0.2% that was expected. A margin of five basis points is quite a difference-but don’t get too excited. The real reason Germany’s economy was able to post growth was that its government has been doing everything it can to stimulate domestic demand. Germany is one of the world’s biggest exporters-think cars, chemicals and engineering services-and with the collapse of global consumer demand for goods, the state has enacted policies to keep its citizens buying things. There’s been the success of Germany’s car scrapping program, which vastly outweighs America’s “cash for clunkers” program in scale and effect-it boosted new car registrations to 3.5 million in 2008, up from 3.1 million the year before. And there’s also Germany’s short-term work program, through which the state subsidizes companies’ wages so that they don’t have to fire workers. This has cushioned German unemployment, so that at 8.3%, it trails the rate of unemployment for the euro zone, which is at 9.5%. But the German government can’t forever subsidize the labor market and car industry. Germany’s Federal Statistics said that it was only able to report growth because price-adjusted imports declined far more sharply than exports, tipping the balance in favor of exports. While this is a good start, the country needs the United States and the rest of Europe to pick up steam and start buying its cars, chemicals and engineering services, in order to keep that growth sustained. There are risks to the country’s economy if it doesn’t. Bank lending in Germany is still woefully low. Ernst & Young said earlier this week that 37% of the medium-sized German businesses it had surveyed said financing through their principal bankers had become more difficult. That’s up from 14% in January. Germany’s liquidity problem will have wider implications once the government’s stimulants run their course, which means economic growth in the next two quarters won’t be anything to cheer about either.

France Out Of Recession Into Uncertainty – US-FOREX.US

Forex-Publisher — Thu, 13 Aug 2009 10:46:28 +0000

U.S. Senator Jim Bunning famously thought he had “woken up in France” when the United States government took control of mortgage finance lenders Fannie Mae and Freddie Mac last year. On Thursday, waking up in France didn’t seem like such a bad idea: The home of fine wines and luxury goods reported a surprise exit from recession, posting 0.3% growth in the second quarter, boosted by government stimulus spending and exports.Neighboring Britain and even the United States might look on enviously, given that their recession-wracked economies shrank in the second quarter, but France shouldn’t party too hard either. Government spending and the humble consumer were the main motors of growth in the second quarter, and their future is hardly secure: President Nicolas Sarkozy’s stimulus package won’t last forever, while rising oil prices and the strength of the euro relative to other currencies may end up keeping French shoppers in check.”France must not let its guard down for the coming quarters,” said Marc Touati, a Paris-based economist with Global Equities. “Though there should be gross domestic product growth in the next quarter as well, the recovery could be limited.”The euro rose against the dollar, to 1.4248, from 1.4185, and also against the Japanese yen, to 137.325 yen, from 137.250 yen. The 16-nation euro zone shrank less than expected in the second quarter, by 0.1%.Bank of America economist Matthew Sharratt said that France’s return to growth-along with Germany’s, which also exited recession in the second quarter-was symptomatic of the wider global stabilization in demand and the inventory re-stocking process. He said that even though pressures on the consumer would still exist going forward, the financial health of euro-zone households was much better than it was in countries like Britain.”There are no big adjustments that need to be made on the household side in the euro zone, outside of Spain and Ireland,” said Sharratt. “Debt levels are around the 40%-60% of GDP threshold, while in Britain they are at 100%. And if you look at savings rates, they are much higher [in the euro zone], in the 10%-12% [of disposable household income] range.”
The French economy also saw a surprise trade surplus in the second quarter, with exports up 1%-after a first-quarter plunge of 7.1%-while imports were down 2.3%. The euro’s strength will likely put the brakes on such a trend, according to Touati, which was in itself unusual for France’s domestically-driven economy. France’s customs department said that French aerospace exports performed strongly in May, while automobile and refined petroleum exports did well in June.

U.K. Recession Triggers Social Decay – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 19:46:40 +0000

The recession is painting a bleak picture of the future of the British society. Crime, mental health problems, domestic violence and drug addiction are set to rise as unemployment reached a 14-year high on Tuesday, a leading public sector watchdog warned on Wednesday.”We are starting to see some of these things happening. We have also seen an increase in demand for debt advice, more people claiming benefits-and if unemployment keeps rising, we will see an increase in domestic violence and abuse,” said Diane Ridley, author of the report entitled “When it comes to the crunch” published by the Audit Commission. Ridley also said local authorities were not ready for what she described as the “next wave of the recession”. According to the researcher, the recession will have three phases: The first one is defined by declining gross domestic product and rising unemployment. She said Britain is about to face the second phase in which output turns around but long-term unemployment triggers a whole range of social problems. And, finally, when growth returns some areas of British society will bounce back quickly but others will be left out and inequality will eventually rise.She said changes in social behavior because of the recession will be felt in even seemingly minor ways, like pet owners abandoning their pets as they struggle to keep their animals. “With families and individuals under stress, most areas are likely to witness increasing social problems including domestic violence, alcoholism, drug addiction and young people unable to find jobs. Councils may also have to deal with more fly-tipping [illegal dumping], abandoned cars and stray dogs,” the report says.
Charities looking after the welfare of animals have reported a surge in the number of abandoned pets in the U.K. as owners struggle to pay for the costs of keeping a pet. And on Wednesday the National Center for Domestic Violence said calls related to domestic violence had increased by 30% in the last six months across the U.K.
The Audit Commission report was published on the day that unemployment rose to its highest level since 1995, climbing to 2.4 million and taking the jobless rate to 7.8%, according to the Office for National Statistics. Experts said the figures show no sign of giving the economy a much needed respite. “As unemployment creeps closer to the 3 million mark, the highest level in fourteen years, recent talk of an economic recovery may be short-lived. This is a direct result of companies cutting jobs in order to return to profitability. Until we see a turnaround in this most crucial of statistics, the end of the recession could be a long, drawn-out affair,” said Manoj Ladwa, a senior trader at ETX Capital in London.

Attention Retail Shoppers – US-FOREX.US

Forex-Publisher — Tue, 11 Aug 2009 19:46:22 +0000

Sales may be down while unemployment is up but retailers are doing well, nonetheless. Since the start of the year the sector has walloped the broad market by a wide margin. The SPDR S&P Retail ETF
gained 55% since Jan. 1 while the S&P 500 is up just over 10%. Now, with the biggest retailers reporting quarterly earnings this week and next, Deutsche Bank analyst Bill Dreher Jr., says there’s good reason to think investors will be pleasantly surprised.Like other sectors of the economy, retail chains responded to the recession, and falling sales, by slashing inventories and costs. Macy’s
, Kohl’s
, Saks
and J.C. Penney
all rushed to reduce overhead and get merchandise off the shelves in case the recession turned into a full-blown depression, notes Dreher. The result is that now, with sales no longer dropping fast, chains have far less clearance inventory that they need to discount.Stores also saw some unexpected benefits this summer. As shoppers traded down form high-end department stores, mass-market shops picked up some business while their own customers moved to in-house brands, which are more profitable. J.C. Penney gets 52% of sales from private-label merchandise, while Kohl’s gets 42% and Macy’s gets 40%. They should benefit from the trend.Tough times also mean opportunities for solid companies with cash to spend. With some regional and local chains going out of business, Dreher estimates there are 21.4 billion in sales that the biggest national chains can grab. Kohl’s recently bought dozens of stores from bankrupt Mervyn’s, for example.That’s not to say retail firms don’t face a tough environment. Unemployment has soared to over 9% so Americans are saving more, roughly twice as much as last year. Shoppers are hunting for bargains, not splurging, so don’t expect sales to accelerate, warns Dreher. Instead, look for a boost to earnings at companies that have aggressively reduced costs and done away with waste.Dreher likes Macy’s, which reports earnings Wednesday morning. He’s betting the department store will announce quarterly profit of 16 cents share, two cents better than the consensus among Wall Street analysts. A trimmed-down organization should save 400 million a year eventually and a lower dividend has improved the firm’s cash position. Weak rivals could also give it an advantage.
Another buy rating from Dreher is the big daddy of retailers: Wal-Mart
. The world’s largest store reports earnings Thursday and Dreher predicts a quarterly profit of 86 cents a share, in line with the consensus. Wal-Mart has turned its focus from opening stores to capturing more shoppers at existing ones with in-store foods brands, which are especially profitable. Wal-Mart’s rock-bottom prices also help.

All Quiet On The FOMC Front – US-FOREX.US

Forex-Publisher — Mon, 10 Aug 2009 19:46:26 +0000

Economic improvement, nonthreatening inflation and successful quantitative easing projects should make for an uneventful Federal Open Market Committee meeting on Tuesday and Wednesday.On Tuesday, the branch of the Fed that determines policy will meet for the sixth time this year to assess the effect of its initiatives and map out the future. The central bank has taken bold action to prop up the financial system, such as its purchase of U.S. Treasuries. “At this point everything seems to be working, which makes for a boring meeting, but at this point boring is good,” said Kurt Karl, chief U.S. economist at Swiss Re. In other words, the FOMC will probably maintain its “steady-as-she-goes” attitude, leaving the federal funds rate in place. Furthermore, if recent official commentary provides any indication, the FOMC will argue that the massive swelling of the central bank’s balance sheet is not inflationary, and that the economic recovery will be slow by historic standards.The meeting follows a week of positive data from the housing market, as pending home sales rose to their highest level in two years, while residential construction also moved upward. “We now expect residential investment to add to GDP growth in the third quarter for the first time since late-2005,” said Michelle Meyer, a U.S. economist at Barclays Capital.The job market also appears to be improving, though problems remain. On Friday, the Labor Department reported 247,000 Americans lost their jobs in July. Surprisingly, though, the unemployment rate fell to 9.4%, rather than jump to 9.7%, as had been expected. The news sent stocks soaring, but the declining level was spurred by a 422,000 drop in the labor force, pulling the participation rate down by 0.2%. Mike Feroli, senior economist at JPMorgan Chase, said that while the 0.4% point decline in the participation rate over the past two months helped contain the unemployment rate, it has only reversed the 0.4%increase made in March and April. The conclusion: Participation is now back to where it was at the beginning of the year. Nonetheless, Friday’s report, along with other labor data, marked a favorable shift of momentum in the labor market, and included a number of encouraging indicators that the pace of the economic decline is slowing. The labor market is a significant variable in the recovery and the unemployment rate expected to peak sometime next year. A major concern though isn’t how high unemployment figures get, but how long they will stay elevated. Extended joblessness has left many Americans without options as unemployment benefits become exhausted.
The weak labor market has already pressured credit card companies such as American Express
and Capital One Financial
, which have had to contend with late payments. Other financial institutions such as JPMorgan
, Citigroup
and Wells Fargo
have also been faced with rising delinquency levels. The Fed recently released its latest Beige Book, an anecdotal survey of its 12 regions from June through July 20, which found the recession to be less severe. Fed chairman Ben Bernanke has also taken a more confident, proactive approach in his leadership role, epitomized by his recent town-hall-style meeting, broadcast over three nights on public television.

Britains Banking Burden Grows – US-FOREX.US

Forex-Publisher — Fri, 07 Aug 2009 10:46:14 +0000

While most European banks have been celebrating a second-quarter turnaround in investment-banking profits, Royal Bank of Scotland could only look on enviously on Friday. The state-controlled bank reported a whopping 1.7 billion loss for the first six months of 2009, driven by the depressed British economy and deteriorating loan values, and said it would not see a turnaround in results until at least 2011. And with the British government’s “other” part-nationalized lender, Lloyds Banking Group
, also recovering from a six-month loss, don’t expect the state to step out of the way anytime soon. Her Majesty currently owns 70% of RBS and 43% of Lloyds, with both stakes set to rise as a result of the planned “asset protection scheme”-a government-sponsored proposal to insure risky, unwanted assets. The majority of the 13.4 billion in impairments taken by RBS in the first half of the year were on these so-called “toxic” assets. Shares of RBS
slumped 12.9%, or 6.89 pence , to 46.56 pence , during morning trading in London. The loss was worse than expected, but so was the outlook: Chief Executive Stephen Hester warned that economic uncertainty meant results might not substantially improve until 2011, while his turnaround forecasts at the bank looked ahead to 2013.”Hester’s cautious outlook on the U.K. economy is justified,” said Irfan Younus, an analyst with NCB, who rated RBS “reduce.” He said the bank’s share price relative to its net asset value-assuming the asset-insurance scheme went ahead as agreed-looked “too high,” though he recommended selling Lloyds Banking Group first.On Thursday, the Bank of England said it would pump an extra 50 billion pounds into the economy, a higher than expected sum. The expansion represented a “reality check” after hopeful data pointed to a turnaround in Britain’s economy. Although Lloyds and RBS have both suffered from souring loans from corporate and retail clients, the pressures on management are slightly different. RBC Capital Markets analyst Hank Calenti said it was a “tale of two CEOs”: Lloyds’ Eric Daniels was trying to soothe market fears and possibly save his job after leading the bank into its disastrous acquisition of rival HBOS last year, while RBS’ Hester-who only joined the bank after it was bailed out by the government-was downplaying expectations in the hope of a share-price rally later on in his career.

July Job Cuts Expected To Wane – US-FOREX.US

Forex-Publisher — Thu, 06 Aug 2009 18:46:12 +0000

Wall Street may be encouraged by the waning level of job losses on Friday, but it will mean little to Americans stuck in unemployment lines and struggling to make ends meet.On Friday, the U.S. Labor Department is expected to announce that the national unemployment rate rose to 9.7% in July, as 300,000 Americans lost their jobs. Though large, the reading would be below June’s drop of 467,000. Dean Maki, chief U.S. economist at Barclays Capital, expects nonfarm payrolls to fall by 275,000 in July, which would mark the weakest contraction since August of 2008. Maki’s view is held by fellow economist Abiel Reinhart of JPMorgan Chase, who also expects payrolls to fall by 275,000.No matter what the figure ultimately is, it will be seen only as another jobless increase by the general public. Not only is unemployment at its highest level since the early 1980s, but also Americans have been out of work for the longest amount of time since 1948, when the government began keeping track. The average length of unemployment in June was 24.5 weeks, while 29% of the unemployed had been out of a job for 27 weeks or more. In a recent interview, Christian Weller, a senior fellow at the Center for American Progress and associate professor of public policy at the University of Massachusetts, Boston, argued that the current labor market is not comparable to that of the early 1980s because of the length of time it has taken to find a new jobs. Furthermore, the unemployment rate itself does not account for those working part-time jobs who would rather have full-time work.Prolonged unemployment has become a pressing problem for Americans, and policymakers, as an increasing number of individuals and families exhaust their jobless benefits, leaving them without the means to pay their mortgages, credit card bills, and food, not to mention the normal discretionary items that spur economic growth. Stagnated unemployment is also expected stymie the current recovery effort, as the U.S. economy loses the power of its vaunted consumer. Consumer weakness was exhibited in July weak retail sales. Forced to focus on the necessities, venders reported results slightly below expectations, pressuring shares of Wal-Mart Stores
, Costco Wholesale
, and Target
. The SPDR S&P Retail
exchange-traded fund on the other hand actually rose 0.8% in midday trading.
The only measure of solace Americans can take is that the intensity of payroll cuts have shown signs of waning. On Thursday the Labor Department reported individuals applying for jobless benefits for the first time fell to 550,000 for the week ending Aug. 1, down from an upwardly revised figure of 588,000 in the previous week. Furthermore, initial jobless claims declined an average of 57,000 from June to July, though partly owing to seasonal distortions. Friday’s employment report follows one delivered Wednesday by ADP Employer Services, which found the U.S. private sector terminated 371,000 positions in July. The finding was well below June’s revised 463,000 reading, but slightly ahead of the 345,000 fall analysts had expected. The data were developed with Macroeconomic Advisers.To be sure, problems remain. Global outplacement consultancy Challenger, Gray & Christmas, said planned layoffs at U.S. firms increased in July for the first time in six months to 97,373, and more than 30% from June when it had hit a 15-month low. Meanwhile, of people continuing to claim benefits rose last week by 69,000 to 6.3 million, after dropping for three straight weeks.