Financial thoughts

The yen and Swiss franc advanced against a majority of their most-traded peers on concern unrest spreading through the Middle East and North Africa will derail a global economic recovery.

The euro touched its lowest level in almost three weeks against the yen on speculation a new Irish government will seek to share the burden of rescuing the country’s financial system with senior bank bondholders. Australia’s dollar fell, snapping a three-day gain versus the greenback, after China’s Premier Wen Jiabao lowered the Asian nation’s economic-growth forecasts.

“There’s still some spreading of political unrest in the Middle East, with Oman starting to get involved as well,” said Darryl Conroy, financial markets analyst at Suncorp-Metway Ltd. in Brisbane. “The yen and the franc are likely to be supported in this uncertain environment.”

The franc traded at 92.73 centimes per dollar at 1:40 p.m. in Tokyo, from 92.82 on Feb. 25, when it touched 92.28, the strongest since at least 1971, when Bloomberg records began. The franc has risen 1.8 percent versus the dollar since Jan. 31, headed for a monthly gain versus 12 of its 16 major counterparts. The yen bought 81.67 per dollar from 81.68, after trading as strong as 81.62, the highest level since Feb. 4.

The euro was at 112.32 yen from 112.35 last week, after touching 111.96 yen, the least since Feb. 8. The common currency was unchanged at $1.3754 from last week, when it reached $1.3838, the most since Feb. 2.

Middle East

The unrest that swept the Middle East in the past month, ousting President Zine El Abidine Ben Ali from Tunisia and Egyptian leader Hosni Mubarak, spread to Oman, where protesters clashed with security forces in the province of Sohar yesterday. In Libya, Muammar Qaddafi, in power since 1969, is facing a rebellion that has taken over the eastern part of the nation.

U.S. officials will meet foreign counterparts in Geneva today to discuss Libya, including measures to pressure Qaddafi out of power while building ties to opposition leaders. U.S. Secretary of State Hillary Clinton said for the first time yesterday that the U.S. has begun “reaching out” to Libyans organizing for a post-Qaddafi era.

The Swiss and Japanese currencies tend to strengthen in times of political unrest because their export-reliant economies don’t need foreign capital to balance current accounts, which are the broadest measure of trade.

Political Shift

The euro retreated from a more than three-week high against the dollar after Enda Kenny, leader of Ireland’s Fine Gael party, said he’ll push for the quick formation of government and the re-negotiation of an international bailout.

“Ireland’s election outcome suggests there may be renegotiations over the bailout, which are unlikely to go well,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “It’s negative for the euro.”

Kenny may lead a new coalition Irish government after the collapse of the banking system and an external bailout pushed the Fianna Fail party to a record defeat. Kenny will fly to Helsinki on March 4 to meet leaders including German Chancellor Angela Merkel at a gathering of the European People’s Party.

The leader of Ireland’s Fine Gael party that won the most seats in a Feb. 25 election said on broadcaster RTE that he will start the process of reopening the terms of the bailout from the European Union and the International Monetary Fund last year. He’s seeking to lower the 5.8 percent interest rate on the bailout loans and end the protection of senior bank bondholders.

The result follows a defeat earlier this month for Merkel’s party in the first of seven state elections which threaten to limit her scope to tackle the region’s debt crisis.

China’s Growth

“We’ve got a political shift in Ireland and Germany and a banking system that’s hooked on European Central Bank cash,” said Robert Rennie, Sydney-based chief currency strategist at Westpac Banking Corp., Australia’s second-largest lender. “The euro is looking expensive.”

China’s government set an annual economic expansion target of 7 percent for the 12th 5-year plan period, which covers 2011 through 2015, Wen said in response to questions yesterday on the website of the official Xinhua News Agency. Wen also pledged to punish abuse of power by officials and narrow the growing wealth gap as police blanketed Beijing and Shanghai to head off planned protests inspired by revolts in the Middle East.

China’s plan “should be seen as negative for the Aussie in the near term,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington.

Australia’s dollar declined to $1.0162 from $1.0177 last week. The currency slipped 0.1 percent to 83.00 yen.

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In another sign that the job market is slowly recovering, the number of Americans filing first-time claims for unemployment benefits fell last week.

There were 391,000 initial jobless claims filed in the week ended Feb. 19, the Labor Department said Thursday. That was down 22,000 from the week before, and better than the 410,000 claims economists surveyed by Briefing.com had expected.

The numbers point to the same trend economists have been speaking about for months: The job market is improving, but at a snails pace.

"It’s clear that layoffs are trending down," said Mark Vitner, senior economist with Wells Fargo. "But there’s been little evidence of hiring."

The weekly figure has hovered close to the 400,000 level since December, but is gradually heading lower overall. Economists look to the 4-week moving average to smooth out the volatility of week-to-week bumps.

The 4-week moving average fell to 402,000 from the previous week’s revised average of 418,500.

While that’s a sign of improvement, uprisings in the Middle East could halt the job market’s progress, Vitner said.

"The situation in the Middle East is still intensifying," he said. "It affects the overall psychology of business, because we know higher energy prices lead to less economic growth, lower consumer spending and ultimately, cut into corporate earnings and hiring decisions."

Meanwhile, continuing claims — which include people filing for the second week of benefits or more — fell by 54,750 to 3,790,000 in the week ended Feb. 12, the most recent week available. 

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Stocks fell for a third day Thursday as concerns continued over how violent clashes in Libya would affect the global oil market. Major indexes pared steeper losses in the afternoon after oil prices fell for the first time in nine days.

Oil fell to $97.28 a barrel after the International Energy Agency said fighting between forces loyal to Moammar Gadhafi and anti-government protesters in Libya were not affecting oil inventories as much as analysts had feared. Libya is the world’s 15th largest exporter of crude, accounting for 2 percent of global daily output. Oil had traded as high as $103.41 earlier in the day.

Traders are worried that fighting could threaten Libya’s oil production and spread to other countries in the region, such as oil-rich Saudi Arabia. Higher oil prices can also slow the U.S. economy by increasing transportation costs.

Reports of ample oil inventories “calmed some of the short-term fears in the market,” said Bruce McCain, chief investment strategist at Key Private Bank. “But the fact that there is very little real information coming out the country is worrying.”

The Dow Jones industrial average fell 37.28 points, or 0.3 percent, to 12,068.50. It had been down as many as 122 points earlier in the day.

The Standard & Poor’s 500 index fell 1.30, or 0.1 percent, to 1,306.10. The Nasdaq composite gained 14.91 points, or 0 saving account pay day loan.5 percent, to 2,737.90.

The mixed stock performance came the same day the Labor Department reported that fewer people applied for unemployment benefits last week, a sign that the job market is recovering. The four-week average for applications, a figure closely watched by financial analysts, fell to its lowest level in more than two and a half years.

The housing market, however, continued to lag. The Commerce Department said sales of new homes fell significantly in January.

Several companies rose after announcing better than expected earnings.

Priceline.com11 Inc. jumped 8.5 percent after the online travel service reported a 73 percent surge in fourth-quarter earnings and raised its income forecast for the current quarter. Target Corp. rose 3.5 percent after the retailer reported an 11 percent gain in profit. H&R Block Inc. rose 5 percent after the tax preparation company said it expected to report near break-even earnings in its fiscal third quarter.

Bond prices rose, pushing their yields lower. The yield on the 10-year Treasury note fell to 3.46 percent from 3.49 percent late Wednesday.

Rising and falling shares were about even on the New York Stock Exchange. Volume came to 1.2 billion shares.

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Asian shares extended losses Wednesday as the unrest in Libya pushed oil prices higher and sent Wall Street sharply lower.

Oil prices rose to fresh two-year highs near $96 a barrel in Asia amid trader concern a violent power struggle in Libya could disrupt crude supplies. In currencies, the dollar fell against the yen and the euro.

Sentiment in the region remained fragile after a defiant Moammar Gadhafi vowed in a televised speech Tuesday to fight to his “last drop of blood” and roared at supporters to strike back against Libyan protesters to defend his embattled North African regime.

Japan’s Nikkei 225 stock average shed 0.8 percent to 10,574.62. A stronger yen hurt exporters, with Nissan Motor Co. losing 2.3 percent, Toyota Motor Corp. down 1.3 percent and Canon Inc. dropping 1.3 percent.

South Korea’s Kospi dropped 0.4 percent to 1,962.02, dragged down by high-tech giants. Samsung Electronics Co. lost 0.6 percent, Hynix Semiconductor slumped 3.8 percent and LG Electronics Inc. was down 1.3 percent.

Hong Kong’s Hang Seng index lost 0.4 percent to 22,906.91, Australia’s S&P/ASX 200 slipped 0.3 percent to 4,842.60. Benchmarks in Taiwan and Singapore also retreated.

New Zealand’s main stock index rose 0.4 percent to 3,372.07 a day after a powerful earthquake devastated the city of Christchurch. Prime Minister John Key declared a state of national emergency and said at a news conference that 75 people were confirmed to have been killed, with 55 of them identified.

Benchmarks in Shanghai and Bangkok also rose.

Political turmoil in the Arab world, rising oil prices and increasing costs of food combined to send traders out of equities in search of safer investments.

Strategists at Nomura International Ltd. in Hong Kong said that the unpredictability of events and the potential for the unrest to spread “mean that equity markets settling back into equilibrium is still some way off.”

“The biggest worry would be if social tensions appeared in Saudi Arabia,” the strategists said.

Rising food prices due to unseasonal weather also heightened risk, Nomura said. Although the exact causes of rising food prices are up for debate, one common factor is extreme weather.

Floods in Australia, Pakistan and India have forced up food prices, as have droughts in Argentina and Eastern Europe. Meanwhile, China’s worst drought in six decades is pushing up global wheat prices _ already up a third since mid-November.

In New York on Tuesday, the Dow Jones industrial average sank 178.46 points, or 1.4 percent, to close at 12,212.79. Bond prices rose as investors sought safety.

Oil prices soared to the highest level in more than two years. The fight between protesters and forces loyal to Gadhafi threatens oil production from the world’s 15th largest oil exporter, accounting for 2 percent of global daily output. Libya also sits atop the largest oil reserves in Africa.

The broader Standard & Poor’s 500 index fell 27.57, or 2 percent, to 1,315.44. The tech-heavy Nasdaq fell 77.53, or 2.7 percent, to 2,756.42.

Meanwhile, U.S. investors are awaiting a report from the National Association of Realtors on January sales of previously owned homes later Wednesday.

In currencies, the dollar fell to 82.55 yen from 82.71 yen late Tuesday. The euro was up $1.3691 from $1.3662.

Benchmark crude for March delivery was up 30 cents at $95.72 a barrel, the highest since October 2008, in electronic trading on the New York Mercantile Exchange. The contract jumped $5.71, or 6.4 percent, to settle at $95.42 on Tuesday.

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Bundesbank President Axel Weber said debt-burdened nations may yet have to face the “most painful passage” while calling on governments to include private state- debt holders in any future bailouts.

“Compared with a marathon, problem countries have maybe managed the first 15 kilometers,” Weber, who is also a European Central Bank council member, said at an event in Dusseldorf today. “Given my experience on this track, I can tell you that the most painful passage will come at a later point.”

European finance ministers agreed on Feb. 14 to double the lending capacity of the rescue fund for debt-hit states in 2013 and German ChancellorAngela Merkel has said that any future bailout should include private bondholders. Ireland last year became the second country to ask for external aid after investor concerns about the health of the country’s banking sector pushed up borrowing costs and eroded confidence in the euro region.

“One can’t dispute the fact that financial-market participants are sometimes tending to exaggerate their risk tolerance — sometimes on the upside, sometimes on the downside,” Weber said. “But at the end of the day, investors’ assessment reflects fundamental economic developments and in this case policy mistakes made by governments.”

Germany, the biggest contributor to Greece’s 110 billion- euro ($150 billion) rescue and Ireland’s 67 easy payday loans.5 billion-euro injection, is under domestic pressure to oppose generous bailout terms or using the fund to enable distressed countries to retire debt at a discount. Weber said “risk premia” on financial markets have a “considerable disciplinary effect” on nations.

Fiscal Stabilization

“This effect needs to happen sooner and not as abruptly as experienced during the crisis,” he said. “The condition that creditors of countries not running sound policies need to expect is that they would need to share costs of any fiscal stabilization if needed.”

Weber, who will step down at the end of April, also said that any future external aid should be tied to “tough conditions” and that it’s “desirable” to have more automated sanctions for breaches of the region’s budget rules. He also opposed so-called Eurobonds or “too favorable credit conditions,” saying they would undermine “market discipline.”

While the euro is facing a “serious test,” the region’s fiscal crisis doesn’t threaten the future of the currency bloc, Weber said. The euro is a “stable currency,” he said.

The permanent rescue mechanism will replace the region’s European Financial Stability Facility in mid-2013.

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Group of 20 countries have agreed to an accord on the measurement of global imbalances that includes private sector finances, public sector finances and the components of the current account, an official with knowledge of the talks said.

The accord will break out the current account into its separate parts: a trade account of goods and services, a “factor” account that includes income from interest and dividends, and a transfer payments account like foreign aid proceeds, said the official. The person declined to be identified because the full agreement hasn’t yet been announced.

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Twitter has 200 million users, but doesn’t yet have a business model for turning a profit on them. Can an outsider do better?

Enter UberMedia. Last spring, entrepreneur Bill Gross decided to create a company that would sift through the Twitter ecosystem and spotlight the most important tweeters and tweets. The startup, originally called TweetUp, was cooked up inside Idealab — one of the last surviving incubator/investment firms from the dot-com boom in the 90’s.

Venture capitalists liked the idea. TweetUp quickly landed $3.5 million in funding from a number of backers, including New York-based Betaworks, First Round Capital, and AOL founder/angel investor Steve Case.

One year later, TweetUp has morphed beyond its original vision and became a parent company for an expanding portfolio of Twitter add-ons. Now called UberMedia, the company burst into the headlines this week with news that it had acquired TweetDeck, one of the most popular Twitter clients.

Those reports turned out to be premature — sources say it’s not yet a done deal — but the move puts a spotlight on UberMedia’s expanding ambition to be the epicenter of All Things Twitter.

Investors liked that idea even better. UberMedia closed another financing round this week, led by Accel Ventures. UberMedia and its investors declined to disclose the size, but an AllThingsD report put it at $17.5 million. The company’s app collection now includes mobile clients UberTwitter and Twidroyd, plus tweet syncher Echofon.

"Our goals have evolved over the last year," says UberMedia COO Jon Kraft said. "Our number-one goal is to be the best partner for Twitter in their ecosystem, and help them grow and enhance their ecosystem cheapest personal loan rates."

With more than 110 million tweets per day now flying through its platform, Twitter is a fertile ground for outside developers to invent tools for enhancing and optimizing the tweetstream. As Kraft puts it: "The innovations that we bring to the table can continue [Twitter’s] growth and accelerate that growth."

But there’s one big catch. Twitter has been known to downplay third-party apps — or acquire them, or internally build its own version. The company scooped up popular Twitter iPhone app Tweetie, and partnered up with photo add-on TwitPic as it launched its new interface. Those that don’t get bought run the risk of getting bulldozed.

As UberMedia continues to build on Twitter’s ecosystem, the company is adamant that it compliments, rather than competes, with the microblogging service.

"We’re not in any way a competitive — we do have a good relationship with Twitter," Kraft insists.

But the news that UberMedia is close to buying TweetDeck, one of Twitter’s biggest clients, has been raising eyebrows.

"UberMedia says it wants to be Zynga to Twitter’s Facebook, but that seems unlikely. Facebook tolerates Zynga because it makes money for Facebook and does something Facebook can’t or won’t do," AllThingsD writer Peter Kafka told CNNMoney.

"UberMedia seems much more like a Twitter competitor — and by all accounts that’s how Twitter views the company," he said. 

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CLAYTON  The Ritz-Carlton in Clayton has agreed to pay a fine of $300 and court costs of $26.50 after being charged with violating Clayton’s smoking ban ordinance, Clayton officials said today.

The Ritz  has also agreed to comply with the city’s ordinance in the future, Clayton officials said in a news release.

The hotel was cited after holding its annual Cigar Club party on Jan. 22.

The hotel had an exemption from Clayton’s ordinance for its Cigar Club lounge, but the ball was held in the hotel’s ballroom to fit the large crowd. The ballroom is not exempt from the ban, Clayton officials said.

To prevent future misunderstandings, Clayton’s Board of Aldermen will review and consider amending the language in the smoking ban, the city said.

For more on this story, see Thursday’s Post-Dispatch or return to STLtoday.com.

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Shoppers looking to update their wardrobes may find their money won’t stretch as far.

As the world economy recovers and demand for goods rises, a surge in raw material and labor costs is squeezing retailers and manufacturers who have run out of ways to pare expenses.

Clothing prices had dropped for a decade as tame inflation and cheap overseas labor helped hold down manufacturers’ costs. During the recession, retailers and clothing makers cut frills and experimented with fabric blends to keep prices in check.

But cotton has more than doubled in price over the past year, hitting all-time highs. The price of synthetic fabrics has jumped roughly 50 percent as demand for alternatives has risen.

Clothing prices are expected to rise about 10 percent in coming months, with the biggest increases in the second half of the year, said Burt Flickinger III, president of Strategic Resource Group.

“All of our brands, every single brand, will take some price increases,” said Eric Wiseman, chairman and CEO of VF Corp., which makes clothes for The North Face, Nautica, Wrangler and Lee brands. Cotton accounts for half the production cost of jeans, which make up about one-third of VF’s sales, Wiseman told investors in November.

Higher costs also will affect how clothes are made. Clothing makers are using more synthetics such as rayon and designing jeans with fewer beads and other embellishments. Shoppers also will have fewer color choices.

Retailers are trying to figure out whether the consumer demand that gave them strong holiday sales will last. The fear is that higher prices will nip it in the bud. Stores that cater to low- and middle-income shoppers will have the hardest time passing along price increases.

“We have been so used to deflation for years and years,” said David Bassuk, managing director in the retail practice of AlixPartners. “Customers are going to be surprised.”

Mom-and-pop stores are most vulnerable because they don’t have as much power to negotiate better prices with suppliers as, say, Wal-Mart Stores Inc. But even the world’s largest retailer is feeling the pressure.

“There’s no doubt there may be some price increases that come up, but we don’t want to ever let that be the first answer … that just because cotton prices are up, that we’re automatically going to pass that on to consumers,” Mike Duke, Wal-Mart’s CEO and president, said in a recent interview.

Mary Hutchens, owner of Full of Beans, a 25-year-old children’s clothing store in Chevy Chase, Md., worries that price increases could be a death blow. She said she had to discount heavily to stay in business and wasn’t sure she’d be able to pass along the costs.

“Everybody has changed their habits since the recession,” she said. “I’m just trying to hold on.”

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Despite the Tea Party rebellion, and a great wailing in Washington over the deficit and unemployment, Congress actually did little to change tax laws last year.

“The good news is that there’s not a lot of news,” said Kathy Pickering, director of H&R Block’s Tax Institute.

So, Americans will have a Groundhog Day tax season this spring - a tedious slog, pretty much the same as last year. A few differences worth noting: