Sales of previously owned homes rose to an 11-month high in December and the supply of properties on the market dropped to a near 7-year low, an
industry group said on Friday, pointing to a nascent recovery in the housing market.
The National Association of Realtors said existing home sales increased 5 percent month over month to an annual rate of 4.61 million units. November’s sales pace was revised down to a 4.39 million-unit pace, previously reported as a 4.42 million-unit rate.
Economists polled by Reuters had expected sales to rise to a 4.65 million-unit sales pace. Sales in December were up 3.6 percent from a year ago. A total of 4.26 million homes were sold in 2011, up 1.7 percent from the prior year.
The third straight month of gains in sales added to hopes that a tentative recovery in the housing market was starting take shape, but progress will be painfully slow given a glut of unsold properties that is weighing down on prices.
Federal Reserve Bank of St. Louis President James Bullard pointed out pitfalls in a Fed plan to forecast interest rates, highlighting a debate among officials on whether the move will provide clarity about policy.
Bullard told reporters on a conference call yesterday that
Germany will keep its AAA rating at Standard & Poor
One of Switzerland’s top priorities this year is to restore confidence in the country’s financial industry following a series of setbacks that included the resignation of its central bank chief, the Swiss leader said Thursday.
President Eveline Widmer-Schlumpf said the Cabinet was examining ways of tightening loopholes in its oversight of both the central bank and its directors’ personal business transactions.
Swiss National Bank chairman Philipp Hildebrand stepped down Monday amid a public furor over his family’s private currency deals, which he maintained were legal under the bank’s internal rules against insider trading. Hildebrand was considered a key actor in Switzerland’s efforts to resist being sucked into the European debt crisis.
Widmer-Schlumpf told reporters in Geneva that the government would await a report on personal deals conducted by the remaining five members of the central bank’s enlarged governing board before deciding who should replace Hildebrand. She declined to say whether external candidates would be considered.
The Swiss government also intends to pursue deals with other countries aimed at resolving long-standing disputes over tax evasion, said Widmer-Schlumpf, who is also the country’s finance minister instant credit report.
Switzerland has been gradually softening its banking secrecy rules in recent years amid pressure from cash-strapped governments angry that their taxpayers are hiding money in Swiss banks.
Negotiations with the United States were particularly difficult, she said. “They are not easy partners, we know that, but still they are constructive.
“I hope that we can resolve this issue in a way that respects the Swiss legal situation,” said Widmer-Schlumpf.
Swiss media have reported that U.S. authorities are demanding the names of all Swiss bankers who had contact with American clients in recent years, with a deadline set for Jan. 23. Such a move could greatly increase the pressure on Swiss banks to reach a settlement with U.S. authorities.
Widmer-Schlumpf said the government is also examining the possibility of a tax deal with Italy that could mirror accords already reached with Britain and Germany. The European Union has opposed such bilateral agreements and demanded a universal agreement for all its members.
The European Central Bank is likely to hold interest rates at its monthly meeting after two straight months of cuts, analysts believe, with some expecting Europe’s debt crisis and a deteriorating economy to push the bank soon to take its key rate below the current 1 percent level.
President Mario Draghi’s remarks at his post-decision news conference Thursday will be scrutinized for clues about how fast the bank thinks the European economy is slowing _ and what further steps it might deploy against the crisis caused by too much debt in the 17 countries that use the euro as their currency.
The bank lowered its key rate by a quarter point at the November and December meetings, the first chaired by Draghi after he replaced Jean-Claude Trichet, in a move that was seen as a signal of a more flexible approach to fighting the crisis. It also made unlimited amounts of cheap, three-year loans available to banks to steady the banking system.
Economists point to recent stabilizing economic indicators as reasons the 23-member governing council might wait before cutting again. Also, they note that Draghi indicated last month that some members of the council wanted to postpone the December rate cut.
Surprise decisions, however, cannot be ruled out, especially given recent big changes in top ECB leadership.
In addition to Draghi replacing Trichet in November, former Germany deputy finance minister Joerg Asmussen and former deputy director general of the French Treasury Benoit Coeure took seats on the six-member executive board that runs the bank day to day. Additionally, the job of supervising the ECB’s staff economists last week was assigned to Belgian executive board member Peter Praet _ the first time a non-German has held the post since the bank was founded in 1998.
Praet’s appointment is significant because German predecessors Otmar Issing and Juergen Stark represented their country’s conservative economics tradition stressing low inflation _ and were seen as strong voices to keep rates higher.
Now economists are trying to gauge whether the bank will make more cuts in the coming months. A number think the bank could take its refinancing rate as low as 0.5 percent by the end of the first quarter. That would put it in territory now occupied by the U.S. Federal Reserve, whose key rate is 0-0.15 percent, and the Bank of England, which is also to set its rates Thursday, where the benchmark rate is 0.5 percent.
Much depends on how the bank sees the economy. Many economists predict that fourth-quarter figures will show the eurozone shrank in the last three months of the year when they are published next month. Rate cuts can spur growth by making borrowing cheaper for businesses and consumers.
Analysts at Bank of America-Merrill Lynch think sagging growth will lead the ECB to cut quickly by a quarter point both Thursday and at the February meeting to “take preventive action against economic deterioration.”
Not all agree. Marco Valli, chief eurozone economist at UniCredit, sees the refinancing rate “steady at 1 percent throughout the year.” That could change, Valli cautioned, if growth slips more sharply than expected or if market turmoil from the debt crisis increases.
The bank is not expected to change its position on one of its key anti-crisis measures _ its program to buy government bonds. That helps keep down the elevated borrowing costs for indebted governments that have been a key force in worsening the debt crisis Same day payday loans. The purchases drive down interest yields on bonds in the secondary market. That means the governments face lower borrowing costs when they sell bonds to pay off older bonds that are maturing.
Fears of a default drove borrowing costs so high for Greece, Ireland and Portugal that they could no longer afford to borrow. They needed bailout loans from other eurozone governments to avoid defaulting on their bonds.
Yet the ECB has stayed with its firm line that the program is limited in size and duration, and that it remains the job of governments to reduce their budget deficits and show the investors that buy their bonds that they are creditworthy _ and should be able to continue borrowing at affordable rates. Italy’s new Prime Minister, Mario Monti, has made new cuts and promised steps to improve growth. But the interest yield on the country’s 10-year bonds remained at an elevated 7.13 percent _ the kind of levels that led Greece, Ireland and Portugal to give up and take bailouts.
The program _ which has bought some euro211 billion ($270 billion) in bonds _ has been a key backstop in the absence of more robust eurozone bailout funds. The current funds have some euro500 billion ($640 billion) in financing available. But some of that is already committed to Greece, Ireland and Portugal, and Italy _ the recent focus of the crisis _ is too big for the fund to bail out for more than a short time. Eurozone officials are also seeking another euro150 billion ($192 billion) in funding from governments for the International Monetary Fund, which could then use it to backstop indebted governments.
Some analysts think a worsening of the crisis will eventually force the ECB to use its power to create new money and buy much larger amounts of government bonds. That, the reasoning goes, could convince markets that borrowing rates will stay down and not result in government defaults.
Jennifer McKeown, senior European economist at Capital Economics, said a deteriorating economy could push the ECB to engage in what is called quantitative easing. That means buying financial assets across the eurozone as a way of pushing newly created money into the economy and promoting growth. It is an additional tool that central banks can use when interest rates are about as low as they can go. Both the U.S. Federal Reserve and the Bank of England engaged in it but there are disputes over whether the ECB’s anti-inflation mandate permits it; Lorenzo Bini Smaghi, a former top ECB official, indicated in an interview last month before he left the bank that quantitative easing would be possible to combat deflation, or a crippling fall in prices. That would be in line with the ECB’s mandate from the EU treaty to pursue price stability as its first goal.
“They might not go below 1 percent in this cycle, in fact they might choose to do more unconventional measures, even quantitative easing, rather than cutting the interest rate below 1 percent,” McKeown said.
While further rate cuts are possible, “it’s not clear how much difference a reduction from 1 percent to 0.75 percent or even 0.5 percent would make,” she said. “If the economy really needs more support and the ECB believes that is the case, I think it would need to move into quantitative easing to really help matters.”
Friday’s stronger-than-expected December U.S. jobs growth figures drew a sharp contrast with European numbers, but staffing executives who track labor demand on both sides of the Atlantic caution Europe’s impact on jobs in the United States may yet prove deeper than it has so far.
Executives in the temporary staffing and employment services field say anxiety about a likely recession in Europe keeps cropping up in conversations with clients and, in some cases, is putting hiring plans on hold.
Faced with falling sales and profits in Europe, multinational clients may look for offsetting savings in other markets, including the United States.
Randstad Holding NV (RAND.AS: Quote, Profile, Research, Stock Buzz), the world’s second-largest temporary staffing provider by revenue, offers one anecdote to illustrate how Europe weighs on U.S. jobs.
Randstad’s recruitment outsourcing business, SourceRight Solutions, which handles large-scale hiring of as many as 500 people at a time, has a banking client that tentatively plans aggressive expansion in 2012. But the client’s plans are being held hostage by Europe.
“There’s still caution around Europe and how they could impact the U.S.,” said Joanie Ruge, Randstad senior vice president and chief employment analyst. “That is (clients’) biggest concern right now, though they seem optimistic about all the economic indicators in the U.S. moving in the right direction.”
Uncertainty persists even as the U.S. economy improves by many measures. U.S. manufacturing grew at its fastest pace in six months in December - in sharp contrast to the euro zone. Pending home sales are the highest since April 2010 and U.S. consumer confidence is at an eight-month high.
Friday’s employment report improved that picture. The U.S. economy added 200,000 non-farm jobs last month, 50,000 more than expected, and the jobless rate slipped to 8.5 percent, the lowest since February 2009.
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Non-farm payrolls graphic: link.reuters.com/qyn85s
Jobless rate graphic: link.reuters.com/vyn85s
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FEWER FINANCE JOBS
Recruitment in financial services has slowed and is likely to be “lighter” this year, said Scot Melland, Chief Executive of Dice Holdings Inc (DHX.N: Quote, Profile, Research, Stock Buzz), which runs specialized jobs websites focused on professional categories.
“We’ve seen job postings for the industry as a whole decline over the last six months,” Melland said. “It’s really caused by the uncertainty that the industry is facing (from) the European debt crisis and some regulatory uncertainty here in the United States cheapest personal loan rates.”
By contrast, technology workers remain in demand and energy markets are looking at record job growth in 2012, according to Dice.
Friday’s report showed an unexpected decline in temporary help payrolls, which are historically a strong predictor of wider labor trends. But staffing industry insiders said the dip does not square with their own business and could be an anomaly that reflects seasonal factors.
Demand for temps has been steady if unspectacular, said Joel Capperella, vice president of marketing for Yoh, a Philadelphia-area staffing company that focuses on professional categories such as finance and technology and whose clients include SAP AG (SAPG.DE: Quote, Profile, Research, Stock Buzz).
“We’re hopeful the pace will pick up a little bit,” Capperella said, adding that Europe was so far not affecting specific workforce decisions, but was a factor in overall client confidence.
“Capital is still held close to the vest, but we do see it flowing a little bit more freely,” he said.
CURTAILED SPENDING
Tig Gilliam, who heads North American operations for Adecco SA (ADEN.VX: Quote, Profile, Research, Stock Buzz), the world’s leading staffing company, said Adecco is expecting “significant pressure” in Western Europe, which may already be in recession. Even strong markets, such as Germany, are expected to slow, although developing markets in Eastern Europe are likely to grow this year.
Gilliam sees a risk in underestimating the effect of Europe’s slowdown on the U.S. economy. Large employers, instead of investing to accelerate growth, may curtail spending to boost profits in markets that are holding up relatively well, he said.
“If you go to a U.S. multinational company and they look at what they’re facing in Western Europe in the next year, it automatically translates into that much more pressure on the markets that are performing,” he said. “They’ve got to find how much more they can save because they have a hole in Europe to dig out of from a profitability perspective.”
Staffing company shares were mixed on Friday. Among the largest U.S.-listed shares, ManpowerGroup (MAN.N: Quote, Profile, Research, Stock Buzz) and Robert Half International Inc (RHI.N: Quote, Profile, Research, Stock Buzz), were both modestly lower in midday trading, while Kelly Services Inc (KELYA.O: Quote, Profile, Research, Stock Buzz) rose.
In European trading, Adecco, Randstad and London-listed Michael Page International Plc (MPI.L: Quote, Profile, Research, Stock Buzz) were up slightly.
Chinese Premier Wen Jiabao said business conditions may be
President Barack Obama, saying he
Prime Minister Manmohan Singh failed to win passage of his anti-corruption bill as an uproar broke out in India
White Castle, a 90-year-old hamburger chain known for its square “slider” burgers, is sipping on the idea of offering alcoholic beverages as it tests beer and wine sales at a restaurant in Indiana.
The food famously craved by stoners in the 2004 movie “Harold & Kumar Go to White Castle” can be had with a glass of wine or a domestic or seasonal beer at a Lafayette, Ind., restaurant that fuses a conventional White Castle with a new concept for the company called Blaze Modern BBQ. Wine costs $4.50 and beers start at $3.
“This was something that customers had been suggesting,” said Jamie Richardson, a spokesman for Columbus-based White Castle System Inc. “They thought that beer and wine might go nicely with the barbecue that was available at Blaze. We’re certain that we might have some customers who might enjoy some sliders and a beer or wine as well.”
White Castle’s test with those beverages was first reported in Wednesday’s editions of The Columbus Dispatch.
Other fast-food restaurants also are dabbling with alcohol. Earlier this year, Burger King opened the Whopper Bar South Beach, a restaurant in Miami Beach offering beer, and Starbucks Corp. has been testing beer and wine at a few sites.
The companies see alcoholic beverages as a growth opportunity after years of flat sales, said David Henkes, a vice president with the Chicago-based food research firm Technomic. “Alcohol is one of those things that is extremely profitable to the operator,” he said.
White Castle’s beer and wine tryout is part of a broader experiment with three new concepts that the company has been studying for a little over a year, Richardson said Wednesday. Besides Blaze Modern BBQ, there’s also an Asian food brand, Laughing Noodle, at a White Castle in Springfield, Ohio, and a triple-decker sandwich concept, Deckers, in Lebanon, Tenn.
Customers have had a “very positive” reaction to the alcoholic beverages offered in Indiana, but for now, White Castle is considering only whether to expand them to the two other co-branded restaurants, Richardson said.
White Castle would face challenges trying to roll out beer and wine on a wider scale, Henkes said.
“What we find with fast-food places is, there’s very strict regulations around training. Typically, a lot of the employees in fast food are under 21, so you get into some service issues,” he said. “You get into some inventory issues. You get into whether distributors are willing to deliver to you because you’re generally not doing a whole lot of volume in these categories.”
Adding beer and wine to the menu sounds fine to lifelong White Castle fan Jim Kreml of Elk River, Minn. _ even though he’s a teetotaler. “I know my wife would love that because she is a wine drinker,” said Kreml, 47, the operator of a chimney-cleaning business who acknowledged he eats at the restaurants “a couple of times a week.”
Kreml, named in 2009 to White Castle’s Cravers Hall of Fame, said Wednesday that he would expect alcoholic beverage options to be popular with many slider aficionados. “If they’re of age and they drink that already, I think they’d be happy with that. As long as they’re responsible and don’t sit in there, and that’s not party time,” he said.
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