Archive for February, 2009

U.S. consumers’ mood sours in February (Reuters)

Friday, February 27th, 2009 | Finance News

NEW YORK (Reuters) –
U.S. consumer confidence fell to a three-month low in February on expectations the recession would grind on throughout this year and the jobless rate will keep rising, a survey showed on Friday.

The Reuters/University of Michigan Surveys of Consumers said its final index reading of confidence for February fell to 56.3 from 61.2 in January.

That was marginally higher than the preliminary result of 56.2 announced earlier this month but was the lowest final reading since 55.3 in November 2008.

"Confidence remained unchanged at the same low level recorded at mid-month as consumers found no reason to expect that the recession would end during 2009 and reported record declines in their personal finances and job prospects," the report said.

"Moreover nearly two-thirds of all consumers thought it would be at least five years before the full restoration of favorable economic conditions."

The index's headline number did manage to beat economists' median expectation for a reading of 56.0, which was based on 49 forecasts in a Reuters poll that ranged from 52.0 to 57.0.

Ultimately, sentiment remains severely depressed and is not far from the record low of 51.7 that it hit in May 1980. The University of Michigan confidence index dates back to 1952.

Stocks cut their losses after the report, but mainly due to technical factors after a sharp sell-off in early trade.

Government bonds, when generally benefit from weak economic conditions, cut their gains, but were more closely following stocks than the sentiment report.

"I think it tells you that consumer confidence is still extremely depressed but it was marginally better than expected," said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York.

Reflecting the grim mood, the index measuring consumers' view of the 12-month economic outlook fell to its lowest since 1980, when the economy was struggling through the stagflation period of shrinking economic activity and rising prices.

The 12-month economic outlook index fell to 31 in February from January's 47. The only consolation was that this was not as bad as the preliminary reading of 27, which would have been the lowest ever.

One-year inflation expectations fell to 1.9 percent from January's 2.2 percent. That was the lowest in two months but not as weak as the 1.6 percent recorded in the mid-month report.

However, five-year inflation expectations rose to 3.1 percent -- their highest since August 2008 -- from January's 2.9 percent.

(Reporting by Burton Frierson; Editing by Andrea Ricci)


European, US stocks plunge as economic fears weigh (AP)

Friday, February 27th, 2009 | Finance News

LONDON – European and U.S. markets plunged Friday after economic data showed the U.S. economy shrank in the fourth quarter at the fastest pace in over a quarter century.

Market sentiment was also weak as investors worried about banks' health and pharmaceutical companies' profits, which some believe may be curbed by President Obama's plan to reform America's costly health care system.

By late afternoon in mainland Europe, Britain's FTSE 100 fell 2.6 percent to 3,814.49, Germany's DAX lost 3 percent to 3,824.85, and France's CAC 40 dropped 2.6 percent to 2,674.66.

Wall Street opened lower after Citigroup Inc. said the government would take a bigger stake in the company and news that the U.S. economy shrunk at a faster-than-expected 6.2 percent pace at the end of 2008, its worst performance in a quarter-century.

In morning trading in New York, the Dow Jones industrial average slid 1.3 percent to 7,086.59. The broader Standard & Poor's 500 index tumbled 1.7 percent to 740.12, and the Nasdaq composite index slipped 0.4 percent to 1,385.92.

Analysts said the U.S. gross domestic product figures were unlikely to improve much this year.

"With the incoming economic data only getting worse, no further benefit to be had from plummeting energy prices, and the fiscal stimulus not arriving until the second quarter, the contraction in the first quarter could be equally as bad," said Paul Ashworth, of Capital Economics in London.

In Europe, shares in pharmaceuticals AstraZeneca fell 5 percent and Sanofi-Aventis lost 4.7 percent following Thursday's announcement of Obama's first budget, which aims to foster generic competition for costly biotech drugs, cutting costs for government programs, employers and patients.

"People are realizing that health care is not the great defense in a downturn that it's claimed to be," said Stephen Pope, chief global markets strategist for Cantor Fitzgerald. "With the Obama plan, it's a scheme where Medicare will no longer ask the providers 'what does that cost and yes we'll take it,' they will turn around and say 'this is what we're prepared to pay.'"

Bank stocks also plummeted, led by Lloyds Banking Group, which fell 21 percent. It reported that profits shrank to 819 million pounds in its Lloyds TSB unit in 2008, while the recently acquired Halifax/Bank of Scotland lost 7.5 billion pounds ($10.6 billion) over the year.

The expanded group said it was still negotiating with the British government on terms for insuring questionable assets — a program that enables struggling banks to access government insurance against future losses on toxic assets. Royal Bank of Scotland said Thursday it would dump 325 billion pounds of bad assets into the program, which the British government hopes will boost lending by reducing banks' uncertainty about the value of past investments.

"People are now looking across to other banks, in Germany, Switzerland and Italy, and there's a sense of will they have to go down a similar route and what cost are they going to have to bear for this fund creation and 'bad bank' creation," said Pope.

European bank stocks as a collective are down 25 percent since the beginning of the year, according to Pope. But the worst sector is autoparts, down 41 percent, which is "really beholden" to the auto-manufacturers sector, itself down 22 percent.

In Asia, stock markets were mixed. Trade was listless after a bruising, volatile month that saw the region's export-driven economies sink deeper into recession amid collapsing demand.

Figures showed Japan's industrial production plunged a record 10 percent in January from December.

Until there is evidence that government measures to support the global economy were starting to take effect, equity markets were likely to remain lackluster, traders said.

"Confidence remains really beaten up," said Miles Remington, head of Asian sales trading at BNP Paribas Securities in Hong Kong. "Internationally the picture is very negative. A lot of people are very happy to be sitting on the sidelines."

Japan's Nikkei 225 stock average rose 1.5 percent to 7,568.42, with Sony Corp. shares up 2 percent after it said its president was stepping down.

In Hong Kong, the Hang Seng pulled back 0.7 percent and South Korea's Kospi rose 0.8 percent.

Elsewhere, China's Shanghai benchmark dropped 1.8 percent, while slumping economic growth figures sent India's main index down 0.7 percent. Singapore sank, Taiwan gained.

Oil prices weakened in European trade after an overnight rally. Light, sweet crude for April delivery down $1.44 at $43.78 a barrel. On Thursday, the contract jumped $2.72, or 6.4 percent, to settle at $45.22 on the New York Mercantile Exchange.


AP business writer Jeremiah Marquez in Hong Kong contributed to this report.


Wells Fargo suspends cash bonuses for top executives (Reuters)

Friday, February 27th, 2009 | Finance News

NEW YORK (Reuters) –
Wells Fargo & Co (WFC.N) has halted its bonus program for a handful of top executives, the bank said in a regulatory filing on Friday.

Chief Executive John Stumpf, Chief Financial Officer Howard Atkins, Chairman Richard Kovacevich and senior executive vice presidents David Hoyt and Mark Oman will not receive cash bonuses, according to the filing with the U.S. Securities and Exchange Commission.

The Wells Fargo board's human resources committee made the decision to suspend the cash payouts on Tuesday, and it is applying the suspension retroactively to Jan 1, 2009, the San Francisco-based bank said.

The committee agreed, however, to pay restricted share rights to Atkins, Hoyt and Oman, equivalent to one-third of their total compensation in 2008. These shares vest in three installments between July 2012 and 2014.

The committee also raised Atkins and Hoyt's salaries to $700,000 from $600,000.

Stumpf had already said he would not receive a bonus when he spoke along with seven other bank executives called before the U.S. Congress earlier this month to answer questions on how banks have used billions of dollars in government bailout money.

Bank executives have come under fire from lawmakers over bonuses, corporate jets and other perks.

Earlier this month, Wells Fargo canceled an employee event in Las Vegas after the Associated Press said the bank had booked two of the city's more upscale hotels.

(Reporting by Elinor Comlay; Editing by Lisa Von Ahn)