WASHINGTON (AP) -- The government says it will provide $5 billion to the GMAC Financial Services, the funding arm of General Motors Corp., from the $700 billion bank rescue program.
The Treasury Department also says it will lend up to $1 billion to General Motors so that it can participate in a debt for equity swap with GMAC, which is seeking to raise additional capital. The loan is in addition to the financial assistance the government announced Dec. 19 for GM and Chrysler LLC.
Last week, the Federal Reserve approved GMAC's application to become a bank-holding company, which enabled it to receive money from the financial rescue fund.
From: http://finance.yahoo.com/news/GMAC-receives-5B-in-bailout-apf-13931546.html
Monday, December 29, 2008
Wednesday, December 24, 2008
Fed grants GMAC ability to seek bailout funds
WASHINGTON – The Federal Reserve gave an early Christmas present to General Motors' finance arm, allowing the ailing provider of auto loans to qualify for the government's $700 billion rescue fund.
The Fed announced late Wednesday that it had approved GMAC Financial Services' request to become a bank holding company. That designation makes GMAC eligible to receive a portion of the bailout fund and get emergency loans directly from the Fed. The plan also significantly reduces the ownership stakes of GM and Cerberus Capital Management, LP., in GMAC.
Analysts had speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down, dealing a serious blow to GM's own chances for survival. The Fed cited "emergency conditions" in justifying its decision.
Before the Fed's decision, GMAC was facing a crucial deadline Friday to complete a deal with its bondholders that would allow it to exchange debt for equity. GMAC was struggling to convince investors to provide the capital that it desperately needed to win approval to become a bank holding company. The U.S. central bank acted before the debt deal deadline, which GMAC says still stands and will expire on Friday.
The Fed's move to provide government aid to one of the nation's biggest suppliers of auto loans was just the latest extension of the federal bailout program, initially designed to shore up ailing banks. As the credit crisis kept ballooning, the program expanded to include insurers, credit card companies, and the automakers themselves. Just last week, President George W. Bush ordered an emergency bailout of the industry, offering $17.4 billion in rescue loans, and citing imminent danger to the national economy.
"To make the auto package complete they had to do something with the financing," said David Cole, chairman of the Center for Automotive Research. "It's really tied to the whole survival of the industry."
"GMAC was basically frozen," he said. The Fed's move "has a huge impact on dealers and consumers. ... The Fed wanted to avoid a disaster in the automotive sector very, very badly for the cascading factor it would have on the overall economy."
In a statement, GMAC praised the Fed's action.
"This is a very significant positive step for the company, and it marks a key turning point in our 89-year history," said spokeswoman Gina Proia. "GMAC believes becoming a bank holding company is the best long-term solution to provide automotive and mortgage financing to consumers and business, including auto dealers."
She said the change in status would provide the company with "improved access to funding."
GMAC provides financing for both GM dealers and customers as well as home mortgage loans through its Residential Capital LLC division. If forced to file for bankruptcy, funding would have been cut off to roughly 85 percent of GM's North American dealers.
The company is 51 percent owned by Cerberus. General Motors Corp. owns the remaining 49 percent. But because those companies' businesses are mainly outside banking, they must cut their ownership so that GMAC qualifies as bank holding company.
GM has committed to reducing its ownership in GMAC to less than 10 percent. Cerberus was ordered to reduce its stake to 33 percent of total equity in the company.
The Fed's decision was announced after the close of a shortened trading day on Wall Street. GM shares closed up more than 8 percent earlier Wednesday.
The Fed said the plan will "benefit the public by strengthening GMAC's ability to fund the purchases of vehicles manufactured by GM and other companies and by helping to normalize the credit markets for such purchases."
Earlier this week, analysts suggested that the government was working behind the scenes to save GMAC, as the company struggled to get bondholders to convert 75 percent of their debt into equity of the company, a prerequisite for becoming a bank holding company.
Meanwhile, the future of Chrysler Financial, Chrysler's financing arm, is also uncertain. Earlier this month, the company that provides financing for 75 percent of Chrysler dealers said it could be forced to temporarily suspend funding for showroom inventories if dealers keep pulling large amounts of their money out of an account used to fund those loans.
Ford Motor Credit Co., which expects to report its first year of losses in 2008, has applied for an asset-backed securities loan facility administered by the Federal Reserve. It has already drawn on 25 percent, or $4 billion under the commercial paper funding facility.
Ford Motor Credit spokeswoman Brenda Hines said the company has no intentions of going through the process to become a bank holding company.
"We just don't think it's necessary from our standpoint," she said.
The decision to change the status of GMAC to a bank holding company follows the Fed's action on Monday granting the request of CIT Group to become a bank holding company so that it could qualify for federal rescue funds.
The Fed also has granted bank holding status to Goldman Sach's Group Inc., Morgan Stanley and American Express Co., all of which have changed their status in an effort to get access to more support after the financial crisis erupted with force in September.
Congress approved the bailout program on Oct. 3 with the original intent of buying up troubled mortgage assets.
That part of the program has never been implemented. Instead, Treasury Secretary Henry Paulson switched course. He began an effort to use $250 billion of the $700 billion fund to make direct purchases of bank stock, to inject more funds into financial institutions and fight the most severe financial crisis in seven decades.
But the effort has come under attack from critics who say that the Bush administration is not overseeing the program sufficiently to make sure that the banks actually increase their lending.
Many lawmakers are also upset that the program has already obligated half of the $700 billion total without making a serious effort to help troubled homeowners avoid a rising tide of mortgage foreclosures.
from: http://news.yahoo.com
The Fed announced late Wednesday that it had approved GMAC Financial Services' request to become a bank holding company. That designation makes GMAC eligible to receive a portion of the bailout fund and get emergency loans directly from the Fed. The plan also significantly reduces the ownership stakes of GM and Cerberus Capital Management, LP., in GMAC.
Analysts had speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down, dealing a serious blow to GM's own chances for survival. The Fed cited "emergency conditions" in justifying its decision.
Before the Fed's decision, GMAC was facing a crucial deadline Friday to complete a deal with its bondholders that would allow it to exchange debt for equity. GMAC was struggling to convince investors to provide the capital that it desperately needed to win approval to become a bank holding company. The U.S. central bank acted before the debt deal deadline, which GMAC says still stands and will expire on Friday.
The Fed's move to provide government aid to one of the nation's biggest suppliers of auto loans was just the latest extension of the federal bailout program, initially designed to shore up ailing banks. As the credit crisis kept ballooning, the program expanded to include insurers, credit card companies, and the automakers themselves. Just last week, President George W. Bush ordered an emergency bailout of the industry, offering $17.4 billion in rescue loans, and citing imminent danger to the national economy.
"To make the auto package complete they had to do something with the financing," said David Cole, chairman of the Center for Automotive Research. "It's really tied to the whole survival of the industry."
"GMAC was basically frozen," he said. The Fed's move "has a huge impact on dealers and consumers. ... The Fed wanted to avoid a disaster in the automotive sector very, very badly for the cascading factor it would have on the overall economy."
In a statement, GMAC praised the Fed's action.
"This is a very significant positive step for the company, and it marks a key turning point in our 89-year history," said spokeswoman Gina Proia. "GMAC believes becoming a bank holding company is the best long-term solution to provide automotive and mortgage financing to consumers and business, including auto dealers."
She said the change in status would provide the company with "improved access to funding."
GMAC provides financing for both GM dealers and customers as well as home mortgage loans through its Residential Capital LLC division. If forced to file for bankruptcy, funding would have been cut off to roughly 85 percent of GM's North American dealers.
The company is 51 percent owned by Cerberus. General Motors Corp. owns the remaining 49 percent. But because those companies' businesses are mainly outside banking, they must cut their ownership so that GMAC qualifies as bank holding company.
GM has committed to reducing its ownership in GMAC to less than 10 percent. Cerberus was ordered to reduce its stake to 33 percent of total equity in the company.
The Fed's decision was announced after the close of a shortened trading day on Wall Street. GM shares closed up more than 8 percent earlier Wednesday.
The Fed said the plan will "benefit the public by strengthening GMAC's ability to fund the purchases of vehicles manufactured by GM and other companies and by helping to normalize the credit markets for such purchases."
Earlier this week, analysts suggested that the government was working behind the scenes to save GMAC, as the company struggled to get bondholders to convert 75 percent of their debt into equity of the company, a prerequisite for becoming a bank holding company.
Meanwhile, the future of Chrysler Financial, Chrysler's financing arm, is also uncertain. Earlier this month, the company that provides financing for 75 percent of Chrysler dealers said it could be forced to temporarily suspend funding for showroom inventories if dealers keep pulling large amounts of their money out of an account used to fund those loans.
Ford Motor Credit Co., which expects to report its first year of losses in 2008, has applied for an asset-backed securities loan facility administered by the Federal Reserve. It has already drawn on 25 percent, or $4 billion under the commercial paper funding facility.
Ford Motor Credit spokeswoman Brenda Hines said the company has no intentions of going through the process to become a bank holding company.
"We just don't think it's necessary from our standpoint," she said.
The decision to change the status of GMAC to a bank holding company follows the Fed's action on Monday granting the request of CIT Group to become a bank holding company so that it could qualify for federal rescue funds.
The Fed also has granted bank holding status to Goldman Sach's Group Inc., Morgan Stanley and American Express Co., all of which have changed their status in an effort to get access to more support after the financial crisis erupted with force in September.
Congress approved the bailout program on Oct. 3 with the original intent of buying up troubled mortgage assets.
That part of the program has never been implemented. Instead, Treasury Secretary Henry Paulson switched course. He began an effort to use $250 billion of the $700 billion fund to make direct purchases of bank stock, to inject more funds into financial institutions and fight the most severe financial crisis in seven decades.
But the effort has come under attack from critics who say that the Bush administration is not overseeing the program sufficiently to make sure that the banks actually increase their lending.
Many lawmakers are also upset that the program has already obligated half of the $700 billion total without making a serious effort to help troubled homeowners avoid a rising tide of mortgage foreclosures.
from: http://news.yahoo.com
Thursday, December 11, 2008
Wall Street expects jobless claims to rise
WASHINGTON – Wall Street expects the government to report that new claims for unemployment benefits increased last week as companies ramped-up layoffs amid the recession.
The jobless claims report comes a day after the federal government said the monthly budget deficit reached a record in November, in part because of increased spending on programs such as unemployment insurance and food stamps.
The number of new claims for jobless benefits is projected to increase to a seasonally adjusted 525,000, up from 509,000 the previous week, according to Wall Street economists surveyed by Thomson Reuters.
Claims late last month reached 543,000, their highest level in 16 years. Economists said the drop to 509,000 was partly due to volatility from the Thanksgiving holiday week.
Last week's report showed the number of people continuing to claim unemployment benefits reached nearly 4.09 million, the highest level since December 1982. Economists expect that number rose to 4.1 million.
Even when the larger work force is factored in, the proportion of workers who are continuing to receive jobless benefits matches a level last reached in September 1992, when the economy was recovering from a recession.
"The underlying trend in claims is still strongly upwards," Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a research note.
A number of large U.S. employers announced layoffs this week, including Dow Chemical Co., 3M Co., Anheuser-Busch InBev, National Public Radio and the National Football League.
The layoffs come as the federal budget deficit continues to spiral.
In just the first two months of the budget year that started Oct. 1, the deficit totaled $401.6 billion, nearly matching the record gap of $455 billion posted for all of last year, according to Treasury Department data released Wednesday. If the deficit does top $1 trillion for the current budget year, it also would be a post-World War II high when measured as a percentage of the economy.
The increased red ink stems from both lower tax revenue and increased spending that is a result of the recessionary economy. The government is receiving less in business and personal income taxes while spending more on programs such as unemployment insurance and food stamps.
Then there's the $700 billion bank rescue program. The Treasury report showed that the government spent $76.5 billion from the program in November and $191.5 billion over the past two months.
The department said the gap between the government's revenue collections and what it paid out last month totaled $164.4 billion, the largest deficit ever recorded for the month of November. The deficit was $98.2 billion in November 2007.
An annual deficit of $1 trillion would equal 6.7 percent of the gross domestic product, the economy's total output in a single year. That would surpass the previous postwar record in GDP terms of 6 percent sent in 1983 when Ronald Reagan was president.
And some economists think the annual deficit will be even higher. David Rosenberg, North American economist at Merrill Lynch, projected that it could reach $1.5 trillion, depending on how large an economic stimulus package is approved next year.
The Treasury Department plans to use $250 billion of the $700 billion program to make direct purchases of bank stock, providing the nation's financial institutions with an infusion of cash in the hopes that they will resume more normal lending practices.
Some analysts argue that the deficit is effectively lower than Treasury's figures because the government has received stakes in the banks in return for the capital. The government could get some or all of the money back when it sells those ownership stakes in the future.
The Congressional Budget Office said last week that accounting for the value of those stakes would reduce the combined deficit for October and November to $267 billion, rather than the $401.6 billion reported by Treasury.
from: http://news.yahoo.com
The jobless claims report comes a day after the federal government said the monthly budget deficit reached a record in November, in part because of increased spending on programs such as unemployment insurance and food stamps.
The number of new claims for jobless benefits is projected to increase to a seasonally adjusted 525,000, up from 509,000 the previous week, according to Wall Street economists surveyed by Thomson Reuters.
Claims late last month reached 543,000, their highest level in 16 years. Economists said the drop to 509,000 was partly due to volatility from the Thanksgiving holiday week.
Last week's report showed the number of people continuing to claim unemployment benefits reached nearly 4.09 million, the highest level since December 1982. Economists expect that number rose to 4.1 million.
Even when the larger work force is factored in, the proportion of workers who are continuing to receive jobless benefits matches a level last reached in September 1992, when the economy was recovering from a recession.
"The underlying trend in claims is still strongly upwards," Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a research note.
A number of large U.S. employers announced layoffs this week, including Dow Chemical Co., 3M Co., Anheuser-Busch InBev, National Public Radio and the National Football League.
The layoffs come as the federal budget deficit continues to spiral.
In just the first two months of the budget year that started Oct. 1, the deficit totaled $401.6 billion, nearly matching the record gap of $455 billion posted for all of last year, according to Treasury Department data released Wednesday. If the deficit does top $1 trillion for the current budget year, it also would be a post-World War II high when measured as a percentage of the economy.
The increased red ink stems from both lower tax revenue and increased spending that is a result of the recessionary economy. The government is receiving less in business and personal income taxes while spending more on programs such as unemployment insurance and food stamps.
Then there's the $700 billion bank rescue program. The Treasury report showed that the government spent $76.5 billion from the program in November and $191.5 billion over the past two months.
The department said the gap between the government's revenue collections and what it paid out last month totaled $164.4 billion, the largest deficit ever recorded for the month of November. The deficit was $98.2 billion in November 2007.
An annual deficit of $1 trillion would equal 6.7 percent of the gross domestic product, the economy's total output in a single year. That would surpass the previous postwar record in GDP terms of 6 percent sent in 1983 when Ronald Reagan was president.
And some economists think the annual deficit will be even higher. David Rosenberg, North American economist at Merrill Lynch, projected that it could reach $1.5 trillion, depending on how large an economic stimulus package is approved next year.
The Treasury Department plans to use $250 billion of the $700 billion program to make direct purchases of bank stock, providing the nation's financial institutions with an infusion of cash in the hopes that they will resume more normal lending practices.
Some analysts argue that the deficit is effectively lower than Treasury's figures because the government has received stakes in the banks in return for the capital. The government could get some or all of the money back when it sells those ownership stakes in the future.
The Congressional Budget Office said last week that accounting for the value of those stakes would reduce the combined deficit for October and November to $267 billion, rather than the $401.6 billion reported by Treasury.
from: http://news.yahoo.com
World markets mostly down as dismal data weighed
SHANGHAI, China – World markets were mostly lower in choppy trading Thursday, as investors mulled dismal economic data from China and a hefty, recession-fighting interest rate cut by South Korea's central bank.
Highlighting signs that the world's fourth biggest economy is weakening much faster than expected, China said Wednesday that its exports fell in November for the first time in seven years, prompting some investors to cash in on recent gains.
"This signals that China's economic growth is going to slow down noticeably," said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.
Japan's benchmark Nikkei 225 stock average closed up 0.7 percent, or 60.31 points, at 8,720.55 and Hong Kong's Hang Seng edged up 0.2 percent to 15,613.90. South Korea's Kospi gained 0.8 percent to 1,154.43.
But markets in Australia, China, Singapore and India fell while major European bourses opened lower. Britain's FTSE-100 was down 1 percent at 4,325.92, Germany's DAX slipped 1.8 percent to 4,718.05 and France's CAC-40 fell 1.5 percent to 3,270.14.
The Nikkei rebounded in afternoon trading on renewed optimism over the approval late Wednesday by the U.S. House of Representatives of a $14 billion bailout plan for ailing automakers.
A collapse of the U.S. auto industry would be catastrophic for exporting countries like Japan that rely heavily on American consumer spending, and investors were reassured despite the certainty of strong opposition from Republican senators.
Japanese automakers extended gains, with Honda Motor Co. jumping 7.9 percent and Toyota Motor Corp. advancing 4.8 percent.
South Korean stocks rose after the central bank carried out its biggest interest rate cut ever, slashing a key rate by a full percentage point to a record low of 3 percent.
But gains overnight on Wall Street, where the Dow Jones industrial average rose 0.8 percent to 8,761.42, failed to lift regional sentiment overall.
Stock futures pointed to a weaker session in the U.S. on Thursday. Dow futures fell 49 points, or 0.6 percent, to 8,712 and S&P 500 futures were down 1.8 points, or 0.2 percent, to 894.
In China, the benchmark Shanghai Composite Index fell 2.3 percent, or 47.44 points, to 2,031.68 after Chinese leaders ended a top level economic policy meeting without announcing any fresh initiatives to spur growth.
Banks and steelmakers were lower, as was Shanghai market heavyweight PetroChina, which slipped 1.5 percent to 11.42 yuan.
"Everyone knows that 2009 is likely to be the most difficult year ever for developing China," said Peng Yunliang of Shanghai Securities. "People are truly worried."
Major carriers China Southern Airlines and China Eastern Airlines jumped 9.9 percent to 3.66 yuan and 4.28 yuan, respectively, after the airlines announced details of plans for government cash infusions.
Oil prices edged higher on hope for a significant OPEC production cut next week. Light, sweet crude for January delivery was up 59 cents to $44.11 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.
In currencies, the dollar was trading at 92.45 yen from 92.85 yen. The euro stood at $1.3151 from $1.3008.
from: http://news.yahoo.com
Highlighting signs that the world's fourth biggest economy is weakening much faster than expected, China said Wednesday that its exports fell in November for the first time in seven years, prompting some investors to cash in on recent gains.
"This signals that China's economic growth is going to slow down noticeably," said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.
Japan's benchmark Nikkei 225 stock average closed up 0.7 percent, or 60.31 points, at 8,720.55 and Hong Kong's Hang Seng edged up 0.2 percent to 15,613.90. South Korea's Kospi gained 0.8 percent to 1,154.43.
But markets in Australia, China, Singapore and India fell while major European bourses opened lower. Britain's FTSE-100 was down 1 percent at 4,325.92, Germany's DAX slipped 1.8 percent to 4,718.05 and France's CAC-40 fell 1.5 percent to 3,270.14.
The Nikkei rebounded in afternoon trading on renewed optimism over the approval late Wednesday by the U.S. House of Representatives of a $14 billion bailout plan for ailing automakers.
A collapse of the U.S. auto industry would be catastrophic for exporting countries like Japan that rely heavily on American consumer spending, and investors were reassured despite the certainty of strong opposition from Republican senators.
Japanese automakers extended gains, with Honda Motor Co. jumping 7.9 percent and Toyota Motor Corp. advancing 4.8 percent.
South Korean stocks rose after the central bank carried out its biggest interest rate cut ever, slashing a key rate by a full percentage point to a record low of 3 percent.
But gains overnight on Wall Street, where the Dow Jones industrial average rose 0.8 percent to 8,761.42, failed to lift regional sentiment overall.
Stock futures pointed to a weaker session in the U.S. on Thursday. Dow futures fell 49 points, or 0.6 percent, to 8,712 and S&P 500 futures were down 1.8 points, or 0.2 percent, to 894.
In China, the benchmark Shanghai Composite Index fell 2.3 percent, or 47.44 points, to 2,031.68 after Chinese leaders ended a top level economic policy meeting without announcing any fresh initiatives to spur growth.
Banks and steelmakers were lower, as was Shanghai market heavyweight PetroChina, which slipped 1.5 percent to 11.42 yuan.
"Everyone knows that 2009 is likely to be the most difficult year ever for developing China," said Peng Yunliang of Shanghai Securities. "People are truly worried."
Major carriers China Southern Airlines and China Eastern Airlines jumped 9.9 percent to 3.66 yuan and 4.28 yuan, respectively, after the airlines announced details of plans for government cash infusions.
Oil prices edged higher on hope for a significant OPEC production cut next week. Light, sweet crude for January delivery was up 59 cents to $44.11 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.
In currencies, the dollar was trading at 92.45 yen from 92.85 yen. The euro stood at $1.3151 from $1.3008.
from: http://news.yahoo.com
Retail sales post big drop in November
NEW YORK (Reuters) – U.S. retail sales excluding autos posted their biggest monthly drop in five years November, as consumers, spooked by a deepening recession, pared spending for a third straight month, a private report released on Thursday showed.
The decline accelerated in November despite a sales spurt over the crucial "Black Friday" weekend -- the three days after the Thanksgiving holiday in late November -- according to SpendingPulse, the retail data service of MasterCard Advisors, a subsidiary of MasterCard Inc.
Consumer spending excluding autos fell 3.8 percent last month on a seasonally adjusted basis, steeper than the 1.5 percent decline in October, SpendingPulse said.
The November figure was the largest one-month drop in SpendingPulse history, which began in 2003, surpassing the prior record fall of 2.4 percent set two months ago.
The report was the latest evidence that U.S. retailers are facing one of the worst holiday retail seasons in recent memory. The year-end shopping period accounts for the bulk of the annual business of many retailers.
"We are talking about a consumer who is wary of spending," said Kamalesh Rao, SpendingPulse's director of economic research.
Consumers, who account for more than two-thirds of the U.S. economy, have been battered by worsening job conditions, dwindling 401(k) retirement funds and a persistent credit crunch.
The spending decline was again led by a drop in gasoline sales, as pump prices have fallen well below $2 a gallon since rising above $4 in July, according to Rao.
Retail sales excluding cars and gasoline fell 1.3 percent in November compared with a 0.9 percent drop in October.
Once red-hot categories like electronics, furniture and luxury goods have turned cold, registering double-digit sales drops from year ago, Rao said.
"People are a lot more price sensitive. When they buy, they buy less expensive things," Rao said.
SpendingPulse's "core" measure on consumer spending, which strips out cars, gasoline and building materials, declined 1.3 percent compared with a 1.6 percent fall in October.
While it is too early to predict when spending will pick up, the worst of the downturn may have occurred, Rao said.
"Spending may have bottomed out in October. We are not seeing more a pullback," he said.
The SpendingPulse data is derived from the aggregate sales in the MasterCard U.S. payment network, coupled with estimates on all other payment methods including cash and check.
(Reporting by Richard Leong; Editing by Leslie Adler)
http://news.yahoo.com
The decline accelerated in November despite a sales spurt over the crucial "Black Friday" weekend -- the three days after the Thanksgiving holiday in late November -- according to SpendingPulse, the retail data service of MasterCard Advisors, a subsidiary of MasterCard Inc.
Consumer spending excluding autos fell 3.8 percent last month on a seasonally adjusted basis, steeper than the 1.5 percent decline in October, SpendingPulse said.
The November figure was the largest one-month drop in SpendingPulse history, which began in 2003, surpassing the prior record fall of 2.4 percent set two months ago.
The report was the latest evidence that U.S. retailers are facing one of the worst holiday retail seasons in recent memory. The year-end shopping period accounts for the bulk of the annual business of many retailers.
"We are talking about a consumer who is wary of spending," said Kamalesh Rao, SpendingPulse's director of economic research.
Consumers, who account for more than two-thirds of the U.S. economy, have been battered by worsening job conditions, dwindling 401(k) retirement funds and a persistent credit crunch.
The spending decline was again led by a drop in gasoline sales, as pump prices have fallen well below $2 a gallon since rising above $4 in July, according to Rao.
Retail sales excluding cars and gasoline fell 1.3 percent in November compared with a 0.9 percent drop in October.
Once red-hot categories like electronics, furniture and luxury goods have turned cold, registering double-digit sales drops from year ago, Rao said.
"People are a lot more price sensitive. When they buy, they buy less expensive things," Rao said.
SpendingPulse's "core" measure on consumer spending, which strips out cars, gasoline and building materials, declined 1.3 percent compared with a 1.6 percent fall in October.
While it is too early to predict when spending will pick up, the worst of the downturn may have occurred, Rao said.
"Spending may have bottomed out in October. We are not seeing more a pullback," he said.
The SpendingPulse data is derived from the aggregate sales in the MasterCard U.S. payment network, coupled with estimates on all other payment methods including cash and check.
(Reporting by Richard Leong; Editing by Leslie Adler)
http://news.yahoo.com
Friday, December 5, 2008
World markets mostly down ahead of US jobs report
SHANGHAI, China (AP) -- World markets were mostly lower Friday as caution ahead of a key reading on the U.S. jobs market overshadowed big rate cuts by central banks in Europe. Oil traded near four-year lows.
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Japan's Nikkei 225 average ended the week with a whimper, closing down 6.73 points, or 0.1 percent, at 7,917.51 as investors wavered between hunting for bargains and staying cautious ahead of the U.S. employment report later Friday.
Major European bourses opened lower with Britain's FTSE-100 down 1.5 percent at 4,103.15, Germany's DAX off 2.6 percent at 4,445.32 and France's CAC-40 down 2.7 percent at 3,078.74.
Elsewhere in Asia, Hong Kong's Hang Seng index advanced 2.5 percent to 13,846.09 and South Korea's Kospi climbed 2.1 percent to 1,028.13 but markets in Australia, Taiwan, Indonesia, New Zealand, the Philippines and Malaysia retreated.
Big interest-rate cuts by the European Central Bank and Bank of England failed to give much of a lift to sentiment and investors also contended with a raft of weak data on the world's largest economy.
"There is no major funding going into the market, so it is losing momentum," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong, where turnover was light. "Major investors are still staying on the sidelines," he said.
On Wall Street Thursday, the Dow Jones industrial average slid 215.45 points, or 2.5 percent, to 8,376.24.
The number of Americans claiming unemployment benefits last week reached its highest level in 26 years, while factory orders plunged a bigger-than-expected 5.1 percent in October. The U.S. Labor Department unemployment report due Friday was expected to show the jobless rate rose to 6.8 percent in November as companies slashed 320,000 jobs.
Wall Street futures pointed to falls in the U.S. on Friday with Dow futures down 10 points, or 0.1 percent, at 8391 and S&P500 futures down 2.5 points, or 0.3 percent, at 845.
Japan's benchmark index ended down 7 percent for the week, dogged by uncertainty over prospects for U.S. automakers to win an expanded $34 billion rescue package, analysts said.
Toyota Motor Corp. lost 1.9 percent and Honda Motor Corp. shed 1.9 percent following news it was pulling out of Formula One to save costs.
"Investors will be keeping a particularly close eye on what happens in the U.S. housing and auto sectors," said Tsuyoshi Segawa, a strategist at Shinko Securities in Tokyo.
Chinese shares rebounded from early weakness, with the benchmark Shanghai Composite Index rising 0.9 percent to to 2,018.66. The Shenzhen Composite Index rose 2.3 percent.
Property developers were among the biggest gainers, as China Vanke jumped 5.5 percent and Poly Real Estate climbed 4.9 percent.
Investors are looking to a top-level planning meeting next week for fresh policies to help boost China's economy, analysts said. Although the Shanghai benchmark is up 6.7 percent for the week, it is still 60 percent below the peak it hit in October 2007.
"Buying sentiment is gradually recovering, because we know some funds and insitutional investors are taking an active part in trading," said Zhang Xiuqi, an analyst for Guotai Junan Securities, in Shanghai.
"It's a good sign. As you know, the new year is on its way," Zhang said.
Australia's All Ordinaries index slipped 1.2 percent as resource shares fell on expectations of falling demand. Mining giant BHP Biliton tumbled 4.9 percent and Woodside Petroleum was down 2.1 percent.
Light, sweet crude for January delivery was up 27 cents at $43.94 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell overnight $3.12 to settle at $43.67, the lowest since January 2005.
Associated Press business writer Tomoko Hosaka in Tokyo contributed to this report.
From: http://biz.yahoo.com
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Japan's Nikkei 225 average ended the week with a whimper, closing down 6.73 points, or 0.1 percent, at 7,917.51 as investors wavered between hunting for bargains and staying cautious ahead of the U.S. employment report later Friday.
Major European bourses opened lower with Britain's FTSE-100 down 1.5 percent at 4,103.15, Germany's DAX off 2.6 percent at 4,445.32 and France's CAC-40 down 2.7 percent at 3,078.74.
Elsewhere in Asia, Hong Kong's Hang Seng index advanced 2.5 percent to 13,846.09 and South Korea's Kospi climbed 2.1 percent to 1,028.13 but markets in Australia, Taiwan, Indonesia, New Zealand, the Philippines and Malaysia retreated.
Big interest-rate cuts by the European Central Bank and Bank of England failed to give much of a lift to sentiment and investors also contended with a raft of weak data on the world's largest economy.
"There is no major funding going into the market, so it is losing momentum," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong, where turnover was light. "Major investors are still staying on the sidelines," he said.
On Wall Street Thursday, the Dow Jones industrial average slid 215.45 points, or 2.5 percent, to 8,376.24.
The number of Americans claiming unemployment benefits last week reached its highest level in 26 years, while factory orders plunged a bigger-than-expected 5.1 percent in October. The U.S. Labor Department unemployment report due Friday was expected to show the jobless rate rose to 6.8 percent in November as companies slashed 320,000 jobs.
Wall Street futures pointed to falls in the U.S. on Friday with Dow futures down 10 points, or 0.1 percent, at 8391 and S&P500 futures down 2.5 points, or 0.3 percent, at 845.
Japan's benchmark index ended down 7 percent for the week, dogged by uncertainty over prospects for U.S. automakers to win an expanded $34 billion rescue package, analysts said.
Toyota Motor Corp. lost 1.9 percent and Honda Motor Corp. shed 1.9 percent following news it was pulling out of Formula One to save costs.
"Investors will be keeping a particularly close eye on what happens in the U.S. housing and auto sectors," said Tsuyoshi Segawa, a strategist at Shinko Securities in Tokyo.
Chinese shares rebounded from early weakness, with the benchmark Shanghai Composite Index rising 0.9 percent to to 2,018.66. The Shenzhen Composite Index rose 2.3 percent.
Property developers were among the biggest gainers, as China Vanke jumped 5.5 percent and Poly Real Estate climbed 4.9 percent.
Investors are looking to a top-level planning meeting next week for fresh policies to help boost China's economy, analysts said. Although the Shanghai benchmark is up 6.7 percent for the week, it is still 60 percent below the peak it hit in October 2007.
"Buying sentiment is gradually recovering, because we know some funds and insitutional investors are taking an active part in trading," said Zhang Xiuqi, an analyst for Guotai Junan Securities, in Shanghai.
"It's a good sign. As you know, the new year is on its way," Zhang said.
Australia's All Ordinaries index slipped 1.2 percent as resource shares fell on expectations of falling demand. Mining giant BHP Biliton tumbled 4.9 percent and Woodside Petroleum was down 2.1 percent.
Light, sweet crude for January delivery was up 27 cents at $43.94 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell overnight $3.12 to settle at $43.67, the lowest since January 2005.
Associated Press business writer Tomoko Hosaka in Tokyo contributed to this report.
From: http://biz.yahoo.com
Oil at 4-year lows below $44 on dire economic news
SINGAPORE – Oil prices were steady near four-year lows below $44 a barrel Friday in Asia as more bad U.S. economic news soured the outlook for global growth and demand for crude.
Light, sweet crude for January delivery was up 26 cents to $43.93 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell overnight $3.12 to settle at $43.67, the lowest since January 2005.
"The damage to the economy by the financial turmoil is much bigger than the market initially thought," said Tetsu Emori, commodity markets fund manager at ASTMAZ Futures Co. in Tokyo. "The economic data now is much worse than what we expected a few months ago."
Oil prices have fallen about 70 percent since peaking at $147.27 in July.
Dismal economic data continued Thursday in the U.S., pointing toward a sharp contraction of gross domestic product in the fourth quarter and weakening demand for crude products, such as gasoline.
The government said the number of people continuing to claim unemployment benefits last week reached 4.09 million, the highest level since December 1982, while the proportion of workers receiving benefits matched a level reached 16 years ago, in September 1992.
Factory orders plunged a bigger-than-expected 5.1 percent in October caused by big cutbacks in demand for steel, autos, computers and heavy machinery. It was the largest decrease since an 8.5 percent fall in July 2000.
On Thursday, AT&T said it was slashing 12,000 jobs, or about 4 percent of its work force. Chemicals company DuPont said it will cut 2,500 jobs and media conglomerate Viacom Inc. said it will eliminate about 850 jobs.
Investors will be eyeing the Labor Department's November unemployment report on Friday, which economists expect will show that the jobless rate rose to 6.8 percent and that companies cut another 320,000 jobs.
"It could take a while before the economy and oil prices really hit bottom," Emori said. "Oil seems headed below $40."
In other Nymex trading, gasoline futures rose 1.05 cent to 98 cents. Heating oil was steady at $1.51 a gallon while natural gas for January delivery slid 8.8 cents to 5.93 per 1,000 cubic feet.
In London, January Brent crude rose 10 cents to $42.38 on the ICE Futures exchange.
From: http://news.yahoo.com
Light, sweet crude for January delivery was up 26 cents to $43.93 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell overnight $3.12 to settle at $43.67, the lowest since January 2005.
"The damage to the economy by the financial turmoil is much bigger than the market initially thought," said Tetsu Emori, commodity markets fund manager at ASTMAZ Futures Co. in Tokyo. "The economic data now is much worse than what we expected a few months ago."
Oil prices have fallen about 70 percent since peaking at $147.27 in July.
Dismal economic data continued Thursday in the U.S., pointing toward a sharp contraction of gross domestic product in the fourth quarter and weakening demand for crude products, such as gasoline.
The government said the number of people continuing to claim unemployment benefits last week reached 4.09 million, the highest level since December 1982, while the proportion of workers receiving benefits matched a level reached 16 years ago, in September 1992.
Factory orders plunged a bigger-than-expected 5.1 percent in October caused by big cutbacks in demand for steel, autos, computers and heavy machinery. It was the largest decrease since an 8.5 percent fall in July 2000.
On Thursday, AT&T said it was slashing 12,000 jobs, or about 4 percent of its work force. Chemicals company DuPont said it will cut 2,500 jobs and media conglomerate Viacom Inc. said it will eliminate about 850 jobs.
Investors will be eyeing the Labor Department's November unemployment report on Friday, which economists expect will show that the jobless rate rose to 6.8 percent and that companies cut another 320,000 jobs.
"It could take a while before the economy and oil prices really hit bottom," Emori said. "Oil seems headed below $40."
In other Nymex trading, gasoline futures rose 1.05 cent to 98 cents. Heating oil was steady at $1.51 a gallon while natural gas for January delivery slid 8.8 cents to 5.93 per 1,000 cubic feet.
In London, January Brent crude rose 10 cents to $42.38 on the ICE Futures exchange.
From: http://news.yahoo.com
US, China promise $20 billion to finance trade
BEIJING – The United States and China will provide $20 billion in loans to finance trade by developing countries amid a global crisis that has battered credit markets, U.S. Treasury Secretary Henry Paulson announced Friday as the two sides wrapped up high-level economic talks.
Leaders of major economies who met in Washington last month to discuss a response to the global financial crisis, pledged to make sure developing economies got access to the financing needed to keep trade flowing.
The U.S. and Chinese government import-export banks will provide the $20 billion in financing to creditworthy importers in developing economies, Paulson said. He gave no other details.
from: http://news.yahoo.com
Leaders of major economies who met in Washington last month to discuss a response to the global financial crisis, pledged to make sure developing economies got access to the financing needed to keep trade flowing.
The U.S. and Chinese government import-export banks will provide the $20 billion in financing to creditworthy importers in developing economies, Paulson said. He gave no other details.
from: http://news.yahoo.com
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