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.
U.S. government programs designed to stem the financial crisis starting in 2008 will probably break even in the long term, Treasury Department officials said.
So-called financial stability programs include excess earnings from the Federal Reserve and don
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.
The Federal Reserve said the economy grew in all 12 of its regions as manufacturing, hiring and retail sales showed signs of strength in the face of higher fuel prices.
While the stock market put up its best first-quarter performance in over a decade, the first three months of 2012 weren’t as hot for Corporate America.
Analysts are forecasting a 0.1% drop in first-quarter earnings for companies in the S&P 500 (), compared with a year earlier, according to FactSet. While that’s not exactly a major decline, it would mark the end of a nine-quarter winning streak.
And excluding Apple (, Fortune 500)’s always-impressive financial performance, the outlook is even more downbeat, with S&P 500 earnings on track for a 1.6% decline.
The materials sector is expected to post the worst performance, with earnings falling 14.5%. The sector will be in the spotlight Tuesday, when aluminum giant Alcoa (, Fortune 500) reports results, marking the unofficial start of the quarterly earnings season.
Google (, Fortune 500), JPMorgan Chase (, Fortune 500) and Wells Fargo (, Fortune 500) are also on tap to report this week.
One reason earnings growth is beginning to stagnate is sheer math.
When company balance sheets were recovering from the depths of the recession, earnings were growing by double-digits. But almost three years into the recovery, year-over-year improvements are more difficult to deliver.
Sell in April and hide under the table?
On top of that, companies are facing some tough headwinds, too.
High energy costs are the biggest factor to blame for the earnings growth slowdown, according to analysts. Oil priced rose more than 4% during the quarter, sparking a 20% spike in gas prices.
While all 10 sectors of the S&P 500 are expected to post sales growth for the first quarter, there are at least seven that may have had trouble converting that to earnings growth, analysts said, reflecting the strain of higher input costs.
In fact, the number of companies projected to deliver higher sales but a decline in profit stands at 104, the highest since the third quarter of 2009, according to FactSet. Consumer discretionary and consumer staples make up a big bulk of those companies, since higher fuel costs typically weigh significantly on those companies cash advance loan no fax.
For example, General Mills (, Fortune 500), which reported earnings for the three-month period ended Feb. 26, said the uptick in input costs is pressuring its profit margins. Cruise line operator Carnival Corp. () has also been expressing concern about higher fuel costs.
Sluggish global economic growth is also expected to have impacted earnings. Europe’s economies are struggling with massive debt and severe austerity measures, while growth out of emerging economies, particularly China, is also slowing.
For the three months ended Jan. 31, Hewlett-Packard (, Fortune 500) said sales out of Brazil, Russia, India and China dropped 13%, compared with a year earlier.
Though first-quarter earnings results are lining up to be unimpressive, investors won’t put much stock into them. Rather, they’ll be tuned more closely into what company executives have to say about future quarters.
"We want to know what executives are seeing from Europe and China, and what their expectations are going forward," said Rex Macey, chief investment officer of Wilmington Trust Investment Management.
Europe’s still a thorn, but ‘out of crisis mode’
In particular, Macey said he’ll be looking at companies like construction equipment maker Caterpillar (, Fortune 500), which has significant exposure to China, as well as multinational consumer giants like Coca-Cola (, Fortune 500).
Analysts are hopeful that earnings will improve over the course of the year, as Europe’s economy stabilizes and China’s easing efforts help spur growth.
Second-quarter earnings are expected to rise by 7%, according to FactSet, while third-quarter profits are expected to grow 4.7%. Double-digit growth is expected to return in the fourth quarter.
Australia
Ben S. Bernanke warned last month that payroll gains might slow as companies adjust their labor needs for a period of moderate growth. Today
A $34 million lawsuit by Bank of America against Michael and Steven Roberts is the latest in a string of troubles facing the brothers.
The two former St. Louis aldermen built a business encompassing TV stations, hotel properties and other real estate developments across the country.
But that enterprise is under financial stress, hurt by the downturn in commercial real estate. The broadcasting arm is in bankruptcy, several real estate developments have stalled or been sold, and Missouri has sued their businesses over unpaid sales taxes.
It’s also not clear how the lawsuit might affect St. Louis city’s support for the brothers’ redevelopment project in the area around Kingshighway and Delmar Boulevard. The Roberts brothers are hoping to get $3.8 million in tax increment financing to help fund the $12.8 million retail project.
The latest fray happened Tuesday, when Bank of America filed a lawsuit in federal court alleging that the brothers defaulted on a loan used to renovate six hotels they own in five states.
The bank says Michael and Steven Roberts signed as guarantors on the loan, which totaled $43 million when issued in 2007. The Roberts brothers are each 50-percent guarantors on the loan, according to court documents.
Bank of America claims the brothers now owe $34.28 million in principal and $376,049 in interest on the loan to renovate hotels in Atlanta, Dallas, Houston, Shreveport, La., Spartanburg, S.C. and Tampa.
Michael and Steven Roberts did not return calls for this story.
In the lawsuit, the bank also alleges the Roberts brothers owe over $300,000 in unpaid real estate taxes on the hotels in addition to mechanics’ liens that haven’t been satisfied, putting them in breach of the terms of the loan.
According to a loan modification document, the Roberts brothers agreed to new loan terms in August 2011. The modification required the brothers to pay the delinquent real estate taxes on the hotels from 2009 and 2010.
However, the bank alleges the terms were not met, which triggered the lawsuit.
“Despite having notice of the events of defaults, defendants have failed to pay Bank of America their shares of the outstanding indebtedness overdue and owing under the guaranties and other loan documents,” the lawsuit states.
A Bank of America spokeswoman declined to comment on the pending litigation.
Several of the websites belonging to Roberts’ hotels boast of recent multimillion-dollar renovations that added deluxe bedding, flat-screen TVs and new furniture no faxing pay day loans. The hotels operate under several flags, including Holiday Inn, Marriott, Clarion and Crowne Plaza.
Michael Roberts is CEO of the Roberts Cos., a group of privately held businesses based in St. Louis that include hotels, condo developments and TV stations. His younger brother, Steven Roberts, is president.
The company’s real estate holdings include a $70 million condo tower in downtown St. Louis that sits empty more than two years after construction completed.
Another business, Roberts Broadcasting, filed for bankruptcy in October. Roberts Broadcasting owns four television stations: WRBU-Channel 46 in St. Louis, WZRB in Columbia, S.C.; WRBJ in Jackson, Miss.; and WAZE in Evansville, Ind.
It is seeking to sell some of the stations to satisfy debts. In the bankruptcy filing, Roberts Broadcasting lists more than $3.1 million in liabilities and $639,623 in assets.
In addition to its out-of-state properties, the hotel arm —Roberts Hotel Group — owns two hotels locally: the Roberts Mayfair Hotel at 806 St. Charles Street in downtown St. Louis and a Comfort Inn at 4630 Lindell Boulevard in the Central West End.
A year ago, the Central West End hotel stopped operating as a Hotel Indigo and ultimately switched to a Comfort Inn. And in January, the Mayfair left the Wyndham Hotels system and now operates independently.
“The separation was mutually agreed upon,” Wyndham Hotel Group’s spokeswoman Kathryn Zambito said in an emailed response to questions about the separation.
Last month, the state of Missouri filed two lawsuits against Roberts Cos. subsidiaries in St. Louis County Circuit Court, seeking back sales taxes on both local hotels. A spokesperson for the Missouri Department of Revenue declined to comment on the cases, but said a hearing is set for April 10.
The Roberts brothers also owned another hotel property locally, the former WS hotel at 400 Washington Avenue, that they had planned to turn into an extended stay hotel property. The brothers ultimately abandoned the plan and sold the property to another developer this year, Brian Hayden, who is converting it to apartments.
The U.S. Coast Guard and a mega-yacht owned by billionaire Paul Allen are searching the Pacific for an American pilot and two Republic of Palau police officers whose plane disappeared as they tried to track down a Chinese vessel that was allegedly fishing illegally.
The search follows a deadly confrontation between Palau officers and a smaller Chinese boat that was part of the same fishing operation. One fisherman was killed Saturday after police fired on the fishing vessel as it tried to ram the officers’ boat, Fermin Meriang, a spokesman for Palau’s president, told the Pacific Daily News ( http://bit.ly/HQTKOG).
Meriang said officers had aimed for the ship’s engines. “One of the bullets must have ricocheted off the engine and struck him in the thigh,” he said, adding the fisherman bled to death before he could be taken to a hospital.
The missing men had been aboard a Cessna that was dispatched to track a larger Chinese fishing boat.
The U.S. Coast Guard has been searching for the three since the pilot reported Sunday that they were running low on fuel and having navigational problems.
Joining in the search, which spans more than 6,500 square nautical miles, is the ‘Octopus,’ a 126-meter (414-foot) yacht owned by Allen. The Microsoft co-founder visited Guam, some 1,300 kilometers (800 miles) from Palau, about a week ago, and the Coast Guard asked for the yacht’s assistance because it was in the area.
“The captain of Octopus has been in constant contact with Coast Guard officials through days of searching,” said David Postman, spokesman for Allen’s investment company, Vulcan.
The boat the plane had been looking for was ultimately found. About 20 Chinese fishermen from that vessel, and five from the smaller ship where the shooting occurred, have been charged with illegal fishing and other counts, according to court records.
The plane was believed to have gone down near the republic’s southernmost island of Peleliu, said Lt. j.g. Richard Russell, enforcement officer for Sector Guam. But since the plane’s navigational equipment was failing, the pilot wasn’t able to give an accurate report.
“Right now we’re hoping we can find some kind of debris or clue about where this plane may have gone down,” Russell said. “We’re really digging into this as deeply as we can.”
Rescuers have been poring over transcripts of the pilot’s conversation with the airport and over weather reports to try and match his description of the cloud cover.
Palau is in the mid-Pacific Ocean, some 500 miles east of the Philippines.
Palau President Johnson Toribiong on his Facebook page identified the missing pilot as American Frank Ohlinger and the officers as Earl Decherong and Willy Mays Towai.
“I ask for your prayers for the captain and these two fine young police officers,” he wrote.
A fairly rosy manufacturing survey in the U.S. helped shore up markets Monday following a volatile day when conflicting figures from around the world raised questions over the state of the global economic recovery.
At certain times of the day, the more optimistic investor found reasons to be hopeful _ while, at other times, the pessimist had the upper hand.
The conflicting signals were particularly evident in China. One manufacturing survey eased fears over the scale of the slowdown in the world’s second largest economy while another indicated that the downturn was getting worse.
An equivalent report about the state of the sector in Europe reinforced fears over a recession in the 17-country eurozone. Figures showing that unemployment in the 17 countries that use the euro rose to 10.8 percent in February, its highest level since the euro was launched in 1999, reinforced recession concerns.
However, a better-than-expected monthly Institute for Supply Management survey about the manufacturing sector in the U.S. helped lift markets into the Wall Street session. The institute’s main index for March rose to 53.4 in March, up from 52.4 in the previous month and just ahead of expectations for a more modest increase to 53.0.
“The ISM data largely fits with the global picture that is fairly flat, with some loss of any recovery momentum in the euro area,” said Alan Ruskin, an analyst at Deutsche Bank.
In Europe, the FTSE 100 index of leading British shares was up 1.85 percent at 5,874 while Germany’s DAX rose 1.5 percent to 7,056. The CAC-40 in France was 1.1 percent higher at 3,462. The euro though remained under pressure, trading 0.27 percent lower at $1.3325.
On Wall Street, the Dow Jones industrial average was up 0.5 percent at 13,279 while the broader Standard & Poor’s 500 index was 0.83 percent lower at 1,420.
In the first quarter of the year, stock markets around the world posted solid gains as Europe’s debt crisis seemingly eased following a big liquidity injection from the European Central Bank and a raft of forecast-busting U.S. economic figures.
However, Kathleen Brooks, research director at Forex.com, said stocks will face bigger headwinds in the second quarter as investors concentrate on growth and the future direction of central bank policy.
“While stocks won’t fall precipitously, expect some pretty big pullbacks especially in European markets,” said Brooks.
Economic indicators around the world will be the primary point of interest in the markets this week. The U.S. will increasingly attract attention in the run-up to Friday’s nonfarm payrolls figures for March.
Earlier in Asia, stocks generally edged higher.
Though markets in mainland China were closed for a public holiday, the main indexes elsewhere started the second quarter positively. Japan’s Nikkei 225 index gained 0.3 percent to close at 10,109.87 despite businesses remaining pessimistic in the central bank’s latest quarterly “tankan” survey. Hong Kong’s Hang Seng fell 0.2 percent to 20,522.26.
Oil prices started the day tracking European stocks lower, but the benchmark New York rate rose $1.43 later on in the day to $104.35 a barrel.
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Pamela Sampson in Bangkok contributed to this report.
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