Archive for September, 2011

Ahead of the Bell: Consumer Spending

Friday, September 30th, 2011 | Finance News

WASHINGTON – Consumer spending likely edged up slightly in August after posting a big jump in July that had eased fears that the United States might be flirting with another recession.

The consensus forecast is that spending rose 0.2 percent and personal incomes gained a slight 0.1 percent in August. The new report will be released at 8:30 a.m. Eastern on Friday.

In July, spending grew 0.8 percent, the most in five months, and incomes rose 0.3 percent.

The spending gain helped give the July-September quarter a strong start after the economy slowed grew at an annual rate of just 0.9 percent in the first six months of the year.

But expectations for August have been lowered because consumer confidence and retail sales have already shown weak results for the month.

Retail sales showed no growth at all as consumers spent less on autos, clothing and furniture during the month, suggesting they had become more cautious during a month that featured wild stock market fluctuations.

Economists are looking for the economy to post slightly better growth in the second half of this year, reflecting their belief that consumers will start spending at a faster rate. Consumer spending accounts for 70 percent of economic activity.

Many analysts believe the 0.9 percent increase in overall economic growth in the first half, the slowest stretch since the recession ended, will be followed by growth of around 2 percent in the second half of the year.

While a slight uptick in growth should further ease concerns about a recession, it will do little to improve Americans' confidence since growth will be too sluggish to do much to improve unemployment, which is expected to remain stuck around 9 percent for the rest of this year.

Consumer confidence remained weak in September with the Conference Board's index registering 45.4, up only slightly from a reading of 45.2 in August, which had been the lowest level since April 2009 when the country was still mired in recession. The Conference Board index remains far below readings of 90 that indicate the economy is on solid footing.

Economists attributed the poor confidence readings to a number of worries. In August, the U.S. government's long-term debt was downgraded by credit rating agency Standard & Poor's after political wrangling delayed a vote to raise the government's debt ceiling until the 11th hour.

Worries about whether the United States might default on its debt and growing concerns about a debt crisis in Europe weighed on financial markets, sending stocks on a wild rollercoaster ride during the month.

Some economic challenges have started to ease. Gasoline prices are now around $3.46 per gallon. While that is higher than last year, the price is down about 52 cents from the peak this year of $3.98 hit on May 5.

While stocks are still being buffeted by turbulent trading, investors got relief on Thursday when lawmakers in Germany, the biggest economy in Europe, approved a measure to expand the powers of a bailout fund established to bolster heavily indebted countries among the 17 nations that use the euro as a common currency.

And the Federal Reserve at a meeting last week agreed to shift $400 billion of its portfolio of Treasury securities to try to drive down long-term interest rates. It was the Fed's latest unconventional move seeking to give the economy a boost.

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12 bodies found; Romanian rescued in Nigeria delta

Friday, September 30th, 2011 | Finance News

LAGOS, Nigeria – Police say they discovered 12 corpses in a village in Nigeria's oil-rich southern delta, the same day they rescued an abducted Romanian and six others kidnapped in the restive region.

Rivers state police commissioner Suleiman Abba told The Associated Press on Friday the corpses were found in the village of Uni Ikata. Abba said police were working to determine the cause of death for 12 and had no information about communal clashes or violence in the area.

Meanwhile, Abba said a joint police, military and secret police group rescued the kidnap victims in an operation in the state. He said all were in good health.

Kidnappings for ransom remain common in Nigeria's oil-rich Niger Delta, where foreign oil workers, construction companies and middle-class Nigerians all are targets.

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Futures signal weaker open for U.S. equities

Friday, September 30th, 2011 | Finance News

(Reuters) Stock index futures pointed to a weaker open for equities on Wall Street on Friday, with futures for the S&P 500, Dow Jones and Nasdaq 100 down 0.6 to 0.8 percent.

* Swiss drugs industry supplier Lonza (LONN.VX) has extended its offer for U.S. group Arch Chemicals (ARJ.N) as it seeks to close a $1.2 billion deal that would make it the world's largest player in the microbial control market.

* At 1230 GMT, the Institute for Supply Management-New York releases September index of regional business activity. In August, the index read 537.6.

* The Institute of Supply Management Chicago releases at 1345 GMT September index of manufacturing activity. Economists predict a reading of 55.5 compared with 56.5 in August.

* McGraw-Hill Companies Inc (MHP.N) is in advanced talks to merge its S&P Indices business with CME Group Inc's (CME.O) Dow Jones Indexes, a source familiar with the situation said on Thursday.

* Thomson Reuters/University of Michigan Surveys of Consumers release final September consumer sentiment index at 1355 GMT. Economists expect a reading of 57.8, a repeat of the preliminary September figure.

* The rock-bottom price of the new Kindle Fire tablet computer is raising questions about Amazon.com Inc's (AMZN.O) ability to keep up with demand and the device's effect on the company's already razor-thin profit margins.

* The Commerce Department releases at 1230 GMT August personal income and consumption data. Economists expect a 0.1 percent rise in income and a 0.2 percent increase in spending. In July, income rose 0.3 percent and spending was up 0.8 percent.

* Economic Cycle Research Institute releases at 1430 GMT its weekly index of economic activity for September 23. In the prior week, the index read 122.2.

* China's manufacturing sector contracted for a third consecutive month in September, suggesting that the world's second-largest economy is not immune to global headwinds, while factory inflation quickened.

* Oil and gas company Apache Corp (APA.N) said its subsidiary will proceed with the development of the Balnaves oil field in offshore Western Australia, with gross peak production of about 30,000 barrels per day.

* The U.S. Justice Department is investigating accounting irregularities at Chinese companies listed on U.S. stock exchanges, said an official with the U.S. Securities and Exchange Commission, suggesting criminal charges may be brought in addition to civil proceedings.

* Japan's Toshiba Corp (6502.T), the world's No.3 chipmaker, said on Friday that it will sell its Malaysia chip assembly unit to Amkor Technology Inc (AMKR.O) as part of its push to consolidate chip operations.

* European shares (.FTEU3) fell 1.1 percent on Friday, on track to record their worst quarterly performance since late 2008, as markets grapple with slowing global growth and a long-running euro zone sovereign debt crisis.

* The Dow Jones industrial average (.DJI) gained 143.08 points, or 1.30 percent, to 11,153.98 on Thursday. The Standard & Poor's 500 Index (.SPX) gained 9.34 points, or 0.81 percent, to 1,160.40. But the Nasdaq Composite Index (.IXIC) dropped 10.82 points, or 0.43 percent, to 2,480.76.

(Reporting by Atul Prakash; Editing by Mike Nesbit)

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