Federal Reserve policy makers may find another round of Operation Twist is preferable to an outright asset-purchase program if the economy shows further signs of weakness or risks increase.
Chairman Ben S. Bernanke on April 25 said he was prepared to take further action to aid the economy if necessary, even as he signaled that he didn
Swiss food and drinks giant Nestle SA forecast Friday that 2012 will be a challenging year but reported that first-quarter sales rose a healthy 5.6 percent from a year earlier, fueled by strong growth in emerging markets and higher retail prices.
The maker of Purina One, Nescafe and Haagen Dazs and said sales amounted to 21.39 billion Swiss francs ($23.34 billion), though demand in developed markets was subdued amid global financial uncertainty in the United States — its biggest market — and Europe.
Sales in developed countries grew 3.1 percent, compared with a 13 percent rise in emerging markets.
“As anticipated, 2012 is already confirming itself to be a challenging year,” CEO Paul Bulcke said in a sales update statement.
“In many developed markets where consumer confidence is low, the trading environment is subdued whilst in most emerging markets, conditions remain dynamic and rich in growth opportunities,” he said. “Our past and present investments, and continuing innovation, have enabled us to deliver good growth in the first quarter.”
The results of the Vevey, Switzerland-based company generally met or exceeded analysts’ forecasts. No profit figures were disclosed.
Europe’s food makers have been hurt by the continent’s sovereign debt crisis, which has forced governments to cut spending, seen a spike in unemployment and made consumers wary of spending. Meanwhile, higher commodity prices have made retail food prices more expensive.
Nestle results showed it managed the tricky market situation relatively well.
Andrew Wood of the Sanford C. Bernstein research firm said he had anticipated that Nestle would have a “fairly strong top-line start to the year low interest rate personal loans.” However, he does not believe it would be enough to get its stock “moving again, particularly given current lofty valuations.”
Nestle shares were trading 0.5 percent lower at 56.90 francs ($62.10).
Bulcke said a combination of retail price hikes and a predicted drop in the cost of raw materials in the second half of the year has enabled the company to confirm the full-year outlook “of delivering 5 to 6 percent organic growth” and higher earnings for shareholders.
On Thursday, Nestle held its annual general meeting in Lausanne where shareholders approved a dividend of 1.95 francs ($2.13) per share.
Like many Swiss companies, Nestle has had to cope with the strength of the Swiss franc against other currencies, but since last summer Switzerland’s central bank has moved aggressively to weaken the franc and improve the outlook for Swiss exports.
The world’s biggest food and beverage maker said its organic sales growth was a robust 7.2 percent, while real internal growth was 2.8 percent.
Nestle said organic growth was 6.2 percent in the Americas, 2.3 percent in Europe and 11.4 percent in Asia, Oceania and Africa.
The company had posted sales of 22.34 billion francs ($24.38 billion) in the first quarter of 2010.
Nestle did not comment on its bid to buy Pfizer Inc.’s infant-nutrition business for a reported $9 billion, a deal that would help the Swiss-based company to boost growth in China and maintain its position as one of the world’s largest sellers of infant formula.
Federal regulators are softening a plan to oversee companies that trade financial derivatives, the complex investments that played a central role in the 2008 financial crisis.
The rule defines which companies trading derivatives will be subject to a stricter regime created in the 2010 overhaul of financial laws. Most companies that deal derivatives will be exempt.
The Securities and Exchange Commission and Commodity Futures Trading Commission approved the rule unanimously in separate votes Wednesday. The rule says derivatives used by companies to offset their own risk will not attract scrutiny. The higher oversight standard would apply only to companies that sell $8 billion or more of the investment products annually.
Under an earlier proposal, companies that sold $100 million of certain derivatives would have faced tougher oversight.
India cut its benchmark interest rate more than forecast and highlighted inflation risks that limit the scope for following up on the first reduction in borrowing costs since 2009.
Governor Duvvuri Subbarao lowered the repurchase rate to 8 percent from 8.5 percent, the Reserve Bank of India said in a statement in Mumbai today. The outcome was predicted by three of 25 economists in a Bloomberg News survey. Seventeen expected a 0.25 percentage-point cut and the rest predicted no change.
India joins nations from Brazil to the Philippines in lowering borrowing costs to support domestic demand as political gridlock deters investment and Europe’s debt crisis and easing Chinese expansion dim global prospects. Inflation has slowed to 6.89 percent while remaining the fastest among the biggest emerging economies. The central bank said today price pressures contribute to limiting the room for further rate cuts.
“The RBI is in an unenviable position, but needs to shift focus to supporting growth,” Rohini Malkani, an economist at Citigroup Inc. in Mumbai, said before the decision. Higher oil prices, the fiscal deficit and the rupee’s decline continue to pose the risk of faster price increases, Malkani said.
“The reduction in the repo rate is based on an assessment of growth having slowed below its post-crisis trend rate which, in turn, is contributing to a moderation in core inflation,” the Reserve Bank said. “However, it must be emphasized that the deviation of growth from its trend is modest. At the same time, upside risks to inflation persist. These considerations inherently limit the space for further reduction in policy rates.”
Growth Outlook
Gross domestic product may expand 7.3 percent in the year through March 2013, compared with the baseline projection of 7 percent for the previous 12 months, the central bank estimated today. Inflation will probably be at 6.5 percent by the end of the current financial year, it said.
Uncertainty about global commodity prices, particularly crude oil, India’s fiscal shortfall, a “very high” current- account deficit and food inflation are among risks to the outlook, the Reserve Bank said.
Growth has been hurt by declining investment and moderating consumer spending after the Reserve Bank raised rates by a record 3.75 percentage points from March 2010 to October last year to fight inflation.
Subbarao has already eased monetary conditions by reducing the amount of deposits lenders must set aside as reserves twice this year, by a combined 125 basis points, to 4.75 percent to ease cash shortages in the banking system. He left the cash reserve ratio unchanged today. Liquidity is “steadily moving towards” its comfort zone, the RBI said cheap business cards.
Diminished Trend Rate
Recent patterns of inflation and expansion signal India’s trend rate of economic growth has declined from its peak before the financial crisis, the Reserve Bank said. Significant supply bottlenecks in infrastructure, energy, minerals and labor are among the main reasons why, it said.
March’s climb in the benchmark wholesale-price index exceeded the median 6.65 percent estimate in a Bloomberg News survey of 33 economists, data showed yesterday. While Indian inflation has eased from more than 9 percent in most of 2011, it remains the fastest in the so-called BRIC group of largest emerging economies that also includes Brazil, Russia and China.
Monetary policy will continue to aim to “condition and contain perception of inflation” in the range of 4 percent to 4.5 percent, the monetary authority said.
“The RBI is faced with a very difficult situation as growth is slowing and inflation remains high,” said Rupa Rege Nitsure, an economist at state-owned Bank of Baroda in Mumbai. India needs “efforts from the government’s side to boost the capacity of the economy by accelerating reforms,” Nitsure said.
Petroleum Prices
Higher raw material costs and the rupee’s decline are leading companies including steel makers to raise prices. Steel Authority of India Ltd., the nation’s second-largest producer, increased tariffs in April for the fourth time in three months.
Prime Minister Manmohan Singh’s government, grappling with fiscal and trade gaps and depressed industrial output, faces one of the most challenging periods since taking office in 2004.
In the budget on March 16, the administration announced record borrowing needs to plug a fiscal shortfall estimated at 5.1 percent of gross domestic product in 2012-2013. The current- account deficit reached $19.6 billion in the three months through December, the worst quarterly performance on record.
“From the perspective of vulnerabilities emerging from the fiscal and current account deficits, it is imperative for macroeconomic stability that administered prices of petroleum products are increased to reflect their true cost of production,” the Reserve Bank said.
A current-account gap at 4.3 percent of gross domestic product in the fourth quarter of 2011 is unsustainable, it said.
Policy reversals have further hindered Singh’s economic agenda, including the suspension of plans in December to open India’s retail industry to foreign companies.
The price of oil slipped to near $103 per barrel following weak economic reports out of China and Europe.
Oil, a globally traded commodity, typically swings with investor expectations for economic growth, world oil supply and demand. On Friday, traders saw signs of trouble from two continents.
China, the second-largest oil consumer after the U.S., said its economy grew by just 8.1 percent from January to March. While that would be strong growth for most countries. it was the weakest in three years for China. A slowdown in China could have major implications for oil prices, since its burgeoning cities and factories have been among the primary drivers of world oil demand.
In Europe massive national debts continued to worry investors. Yields rose on government bonds issued by Italy and Spain, meaning those countries will have to pay more to borrow money from investors personal loans for bad credit.
Benchmark U.S. crude fell by 61 cents to $103.03 per barrel on Friday in New York. Brent crude lost 55 cents to $120.97 per barrel in London.
Retail U.S. gasoline prices fell for the seventh day in a row, to a national average of $3.90 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular has dropped by about 3.5 cents in the past week.
In other energy trading, natural gas stayed near 10-year lows, unchanged at $1.981 per 1,000 cubic feet. Heating oil was up less than a cent at $3.1682 per gallon and gasoline futures lost a penny to $3.3418 per gallon.
Bo Xilai
Stocks are edging higher after their biggest loss this year as reassuring reports on productivity and hiring overshadow jitters about the Greek debt crisis.
The government said early Wednesday that U.S. workers were more efficient late last year, though productivity grew more slowly than in the summer. Slower productivity growth could boost hiring.
Payroll processor ADP said employers added 216,000 jobs last month, slightly more than economists had expected.
The Dow Jones industrial average dove 203 points on Tuesday, raising doubts about the momentum behind stocks’ strong rally this year. Investors fretted about the latest deadline in Greece’s debt crisis.
The Dow is up 21 points at 12,780 in the first ten minutes of trading. The S&P 500 is up 4 at 1,347. The Nasdaq is up 14 at 2,924.
A group of ground staff at Frankfurt airport is beginning a new three-day strike in a long-running pay dispute.
The GdF union called the strike from 9 p.m. Sunday (2000 GMT; 3 p.m. EST) until 5 a.m. Thursday (0400 GMT; 11 p.m. EST Wednesday) after the latest talks collapsed. It follows a three-day strike last week at Europe’s third-busiest airport.
Airport operator Fraport says it kept more than 80 percent of flights running last week and expects to do so this time, too. Still, German news agency dapd reported that Lufthansa canceled some 140 flights for Monday.
Fraport has criticized GdF demands for double-digit wage increases for around 200 workers who oversee operations on the tarmac. The union says it just wants Frankfurt salaries brought into line with other airports.
Diplomats say Iran is poised for a major expansion of its nuclear program at a cavernous underground site.
They have told The Associated Press that Tehran has readied the site for the installation of thousands of new-generation centrifuges. These machines could greatly speed up production of material that can be turned into the core of nuclear warheads.
The diplomats say that electrical circuitry, piping and supporting equipment for the new centrifuges is in place.
They emphasize that Tehran has not started installing the more efficient machines at its Fordow facility and cannot say whether it was planning to payday loan lenders.
But the diplomats say Iran has little reason to prepare the ground for the better centrifuges unless it planned to operate them.
The diplomats asked for anonymity because their information is privileged.
Greece is gearing up for another tough week of negotiations on the country’s crucial second bailout as it tries to revive talks with private investors and has its economy scrutinized by a team of international debt inspectors.
“This is a critical time for the Greek economy … the negotiations are very difficult,” government spokesman Pantelis Kapsis said Monday.
“It is understood that there will be renewed pressure (from the debt inspectors) to speed up structural reforms.”
The mission heads of inspectors from the so-called “troika” _ the International Monetary Fund, European Central Bank and European Commission _ are expected to arrive in Athens on Friday, the Finance Ministry said. The technical teams, meanwhile, will begin work in Athens Tuesday, the same time Horst Reichenbach, the European Commission’s task force chief for Greece, is also due for a four-day visit.
Two top Greek negotiators, public debt management agency head Petros Christodoulou and chief economic adviser George Zanias, were heading to Washington Monday to attend the IMF board meeting on Wednesday, which would be dealing with Greece, the Finance Ministry said.
An integral part of the euro130 billion ($166 billion) second bailout is a bond swap deal with private creditors that is crucial to avoid a devastating default. But those talks appeared close to collapse Friday amid disagreements over the interest rates of the new bonds. The negotiations are expected to resume this week, probably Wednesday.
Known as the Private Sector Involvement, or PSI, the talks aim to reduce Greece’s debt by euro100 billion ($127.8 billion) by swapping private creditors’ bonds with new ones with a 50 percent lower face value. Without it, the country could suffer a catastrophic bankruptcy that would send shock waves through the global economy no teletrack payday loans.
“Despite the difficulties, there is optimism for the outcome” of the second bailout deal, Kapsis said.
Charles Dallara and Jean Lemierre of the Institute of International Finance, a global body representing the private bondholders, met in Athens last week with Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos, but the talks were suspended on Friday, with the IIF saying that despite Greek efforts, there had not been “a constructive consolidated response by all parties.”
People familiar with the talks said that while a deal appeared close last Thursday, a problem arose Thursday night over the interest rate the new bonds would have, with the International Monetary Fund and Germany seeking a coupon rate below 3 percent _ a very low rate for bonds that are paid off in 20 to 30 years’ time.
The people spoke on condition of anonymity to disclose details of the highly sensitive negotiations.
An interest rate that is that low is unlikely to be accepted by the banks and investment funds holding government bonds _ a crucial issue as the bond swap must be voluntary if the deal is not to be considered a “credit event” that could trigger the payment credit default swaps _ essentially insurance against a default.
Greece is running out of time to clinch a deal, as it faces a massive euro14.5 billion bond redemption on March 20 that it cannot afford to pay.
The second bailout comes on top of a first, euro110 billion rescue package that Greece has been relying on since May 2010, after years of overspending and waste left it facing an untenable public debt.
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