Financial thoughts

Malaysian Prime Minister Najib Razak

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Asian stock markets struggled for direction Thursday as investors remained wary following more unsettling news from economically fragile Spain and a record trade deficit in Japan.

Tokyo’s Nikkei 225 stock average slipped after the country _ which for decades has blanketed the world with its exports _ posted its biggest annual trade deficit ever.

The benchmark index fell 0.6 percent to 9,609.89 after the Finance Ministry said exports for the fiscal year that ended March 31 dropped 3.7 percent from the previous year, while imports climbed 11.6 percent.

The trade deficit for the year was 4.41 trillion yen ($54 billion). With all but one of Japan’s 54 nuclear power reactors offline in the aftermath of last year’s nuclear disaster, the country has been forced to rely on imported oil and gas to generate electricity.

South Korea’s Kospi index opened higher then slipped into negative territory, falling 0.2 percent to 2,002.75.

But Hong Kong’s Hang Seng index held onto its gains, rising 0.4 percent to 20,865.11 while Australia’s S&P/ASX 200 added 0.4 percent to 4,365.90.

Benchmarks in mainland China, Indonesia, New Zealand and the Philippines fell, while Singapore and Taiwan rose.

The Bank of Spain said the amount of bad loans held by Spanish banks rose to an 18-year high in February. If those banks falter, it would put pressure on Spain’s already troubled government to prop them up.

The next key indicator for Spain will occur Thursday when the country holds a 10-year bond auction.

Spain’s problems have added to ongoing worries about global economic growth because China’s economy also is slowing.

Wall Street fell Wednesday on concerns about Europe’s debt crisis. The Dow Jones industrial average fell 0.6 percent to 13,032.75. The Standard & Poor’s 500 fell 0.4 percent to 1,385.14. The Nasdaq composite index fell 0.4 percent to 3,031.45.

Benchmark oil for May delivery was up 10 cents to $102.77 per barrel in electronic trading on the New York Mercantile Exchange. The contract declined $1.53 to finish at $102.67 per barrel on Wednesday.

In currency trading, the euro fell to $1.3120 from $1.3133 late Wednesday in New York. The dollar rose to 81.46 yen from 81.24 yen.

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Dallas Federal Reserve Bank President Richard Fisher said on Thursday U.S. economic conditions were improving and repeated his view that further easing from the U.S. central bank was not needed.

“The tone is a lot better. It’s not brilliant; we don’t have enough new hiring taking place, (but we’re) definitely moving in the right direction,” Fisher told CNBC television.

“Given the improvement in the data that we’ve seen, things are getting better, not worse. I don’t see any need personally for QE3 here,” he said, referring to the possibility of a third round of central bond buying, or quantitative easing.

The Fed has held overnight interest rates near zero since December 2008 and has bought $2.3 trillion in government and mortgage-related bonds.

After the central bank’s last policy meeting on January 24-25, Chairman Ben Bernanke said policymakers were still debating whether further bond purchases might be warranted.

At that meeting the Fed also said it expected to keep rates “exceptionally low” at least through late 2014, a statement that Fisher cautioned against viewing as an iron-clad promise.

“The intention, as I view it, of the committee is to make sure that we adjust to the real economy, and as new data comes in, more anecdotal evidence on top of that is confirming what the data says, then we will adjust. The question is when,” he said,

“I happen to be a little more optimistic about economic movement here” than some others on the Fed’s policy-setting panel, said Fisher, who is not currently a voter on the committee.

The Dallas Fed chief said he had told his colleagues at the January meeting that the central bank’s post-meeting statement might be unduly dour, given what he was hearing from corporate executives around the nation.

“At the last meeting … I warned that I thought the statement was talking down the economy,” he said.

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Iraq’s prime minister says all intelligence or tips about weapons smuggling and insurgent travel from Iraq to Syria must be investigated _ no matter how weak the information may be.

Nouri al-Maliki on Saturday ordered a review of Iraq’s 363 miles (605 kilometers) of border with Syria to clamp down on illegal traffic between the two counties.

Last week, U.S. intelligence chief James Clapper said a series of bombings against the Syrian regime in recent months in Damascus and Aleppo bear the hallmarks of al-Qaida instant payday loan lenders. Iraqi and U.S. officials believe some of the terror fighters may be coming to Syria from Iraq.

In a statement, al-Maliki identified weapons smuggling as a top problem.

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World stock markets were mixed Wednesday, as a modest improvement in manufacturing data from China offered reassurance over its economic slowdown, though Asian markets fell back from early gains.

Benchmark oil hovered below $99 per barrel while the dollar rose against the euro but fell against the yen.

In early European trading, Britain’s FTSE 100 advanced 0.8 percent to 5,724.91 and Germany’s DAX both rose 1.1 percent at 6,525.76. France’s CAC-40 jumped 1.3 percent to 3,340.45. Wall Street was set to open higher, with Dow Jones industrial futures rising 0.2 percent at 12,607 and S&P 500 futures gaining 0.2 percent at 1,310.40.

A better-than-expected Chinese manufacturing index for January, issued by a government federation, fueled an early rally in most markets across Asia. But that evaporated after the release later in the morning of a competing, seasonally adjusted survey by HSBC suggesting conditions were still deteriorating.

Tokyo’s Nikkei 225 edged up less than 0.1 percent to close at 8,809.79. Hong Kong’s Hang Seng was down 0.3 percent to 20,333.37 while Seoul’s Kospi added 0.2 percent to 1,959.24.

By afternoon, shares in mainland China had retreated back into negative territory, with the benchmark Shanghai Composite Index shedding 1.2 percent to 2,268.08.

“Rumors that pension funds will not be invested in shares have raised worries over inadequate liquidity,” said Cai Dagui, an analyst at Ping’an Securities, based in Shenzhen.

Shares will likely remain unstable as investors await annual earnings reports, he said.

The mixed signals from China compounded uncertainties over its outlook, showing that despite resilient consumer demand exports remain sluggish payday loans with no fax.

Such concerns are especially acute for Australia, whose economy has thrived on exports of coal, iron ore and other commodities to China.

Australia’s S&P/ASX 200 fell 0.9 percent to 4,225.70, while India’s Sensex edged 0.1 percent higher to 17,208.68.

Taiwan, Indonesia and New Zealand gained ground, though Singapore declined.

Overnight Tuesday, an unexpected drop in U.S. consumer confidence dragged shares down on Wall Street, where the Dow Jones industrial average lost 20.81 points, or 0.2 percent, to 12,632.91. The S&P slipped 0.60 point to 1,312.41 while the Nasdaq composite index rose 1.90 points to close at 2,813.84.

Overall, though, U.S. shares had their best start in 15 years, thanks to a modest improvement in the economy. Sentiment was further buoyed by hopes of progress in Europe after leaders there agreed on the broad outlines of a deal to tie the countries that use the euro closer together and on hopes that Greece is close to a debt-reduction deal with private creditors.

Benchmark oil for March delivery gained 38 cents to $98.85 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 30 cents to end at $98.48 per barrel in New York on Tuesday.

In currencies, the euro fell to $1.3070 from $1.3084 late Tuesday in New York. The dollar fell to 76.16 yen from 76.20 yen.

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Yemen’s opposition on Sunday accused outgoing President Ali Abdullah Saleh of trying to torpedo a power transfer deal by sparking a new crisis, as troops loyal to him clashed with opposition forces, killing three.

The violence was evidence that the president’s signature on a power transfer deal has not ended months of turmoil that have benefited al-Qaida-linked militants.

Sunday’s clashes followed Saleh’s decision not to leave the country, a move likely to embolden his relatives, who control key security posts.

His opponents demand the removal of all of Saleh’s relatives from top security positions. Huge crowds of protesters have called for Saleh himself to be put on trial for the killing of hundreds of protesters, though the power transfer deal gives him immunity from prosecution.

Vice President Abed Rabbo Mansour Hadi told his new national unity government on Sunday, in their first official session, that the power transfer agreement, engineered by Yemen’s powerful Gulf Arab neighbors, must be implemented soon.

“We need to move vigorously and effectively to implement the Gulf initiative and its mechanisms,” he said.

The new government’s first task is to push through the law shielding Saleh from prosecution for alleged corruption and for violence against protesters. Saleh made that a condition for signing the deal to relinquish power after 33 years of rule over the Arab world’s poorest nation.

Yet more than a month after Saleh signed, and after the possibility of his flying to the U.S. was raised, Saleh is still in Yemen, still wielding significant power and showing few, if any, signs of giving in.

Ten months of mass protests and armed clashes between forces loyal to Saleh and his opponents, including army units that followed powerful tribal leaders siding with the opposition, have left a power vacuum. The Yemen branch of al-Qaida, considered one of the world’s most dangerous, has taken advantage of that to dig in to positions in the country’s south, taking over towns and villages.

Yemen’s military fights frequent battles with the Islamist militants but has failed to dislodge them no checking account payday advance.

In the latest skirmish between Saleh backers and opponents, anti-government tribesmen in el-Fardha Nehem region, about 50 miles (80 kilometers) northeast of the capital Sanaa, said two people were killed and two others wounded when Saleh’s Republican Guards, led by his son, shelled their homes.

Opposition spokesman Mohamed Sabri accused Saleh of undercutting security as a way of arguing that he must stay in power.

“This man does not respect his commitments with others,” Sabri said. “Saleh is creating a new crisis.”

In the capital, a civilian bystander was killed when Republican Guard troops clashed with supporters of tribal chief Sadeq al-Ahmar, who was once a regime ally, but defected to the opposition in March, activists said.

Supporters of al-Ahmar and Saleh’s troops exchanged fire in Sanaa’s northern district of Hassaba, according to a security official and witnesses, resulting in the death of the bystander. The official spoke on condition of anonymity because he was not authorized to release the information.

The fighting Sunday ended after the vice president held talks with both sides. He was also able to quell violence in el-Fardha Nehem region.

Large crowds of Yemenis rallied in major cities Sunday, demanding the outgoing president be put on trial for the deaths of protesters.

The U.N. estimates that hundreds of protesters have been killed and thousands wounded since last February, when anti-government protests erupted across major cities.

Tens of thousands marched in the streets of Sanaa, chanting that Saleh “must stand before a judge.” Another large crowd of marchers echoed the chant in Taiz, Yemen’s second largest city.

Activist Fathi al-Hamadi said the “only place for Saleh to go to is the court dock.”

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Going to the coffee shop? Forget your wallet. Just take your mobile phone.

Bank of Montreal customers can now make payments simply by waving their mobile phone in front of a PayPass reader, the bank announced Tuesday.

The bank, which already has 7 million PayPass credit card holders, says the same service is available by simply attaching a PayPass sticker to your mobile phone.

BMO is the first major Canadian bank to offer what amounts to an interim step on the road to fully fledged mobile payment technology.

Since more than 25 million Canadians — or 70 per cent of the population — own mobile phones, the bank said the tag makes purchases easier, especially in fast-food outlets, gas stations and convenience stores.

“Say I’m in line at Tim Hortons. The phone is in my hand. I don’t have to pull my card out of my wallet. There’s a significant convenience factor,” David Heatherly, vice-president, payment products, BMO Bank of Montreal, said in an interview.

The same terms and conditions apply to the phone tag as to the regular PayPass card. For purchases under $50, no PIN, swipe or signature is required.

New with this product, however, is the option of having the details of the transaction recorded in an email.

The tags are a “bridge technology,” Heatherly said, noting that eventually the capability to swipe and pay will be embedded in all mobile phones.

They will work at the 19,000 locations across Canada that have PayPass readers.

PayPass accounts for 10 per cent of all MasterCard transactions in Canada, the credit card company said.

PayPass tag users have the same zero-liability purchase protection and anti-fraud capabilities available on all BMO MasterCard products, the bank also said. And they can collect the same rewards that they earn on their BMO MasterCard credit card.

The service is free, the bank said. Also read: 5 things you should never do with a credit card

5 things your credit card company won’t tell you

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CLAYTON

Stock prices hurtled lower Monday as anxiety overtook investors on the first trading day since Standard & Poor’s downgraded American debt. The Dow Jones industrials were briefly down more than 600 points.

The Dow fell below 11,000 for the first time since November. The sharp drop extended Wall Street’s almost uninterrupted decline since late July, when the Dow was flirting with 13,000.

Investors worried about the slowing U.S. economy, escalating debt problems threatening Europe and the prospect that fear in the markets would reinforce itself, as it did during the financial crisis in the fall of 2008.

They desperately looked for safe places to put their money and settled on U.S. government debt _ even though those were the targets of the downgrade Friday, when S&P removed the United States from its list of the lowest-risk countries.

The price of Treasurys rose, and yields, which move in the opposite direction from price, fell. The yield on the 10-year Treasury note fell to 2.33 percent from 2.57 percent Friday.

“This is largely a flight to safety,” said Thomas Simons, money market economist with Jefferies & Co. “The bond market is really trading off of what’s going on in the stock market.”

Gold set a new record, trading for more than $1,700 an ounce.

The stock market plunged at the opening bell, with the Dow down 250 points in minutes. Stocks steadily fell for most of the rest of the morning and early afternoon, and the Dow was briefly down 600 at about 2:30 p.m.

In afternoon trading, the Dow was down 400 points, or 3.4 percent to 11,079. The S&P 500 was down 51 points, or 4.2 percent, to 1,149. The Nasdaq was down 114 points, or 4.5 percent, to 2,417.

Stock markets in Asia began Monday’s global rout. The main stock index fell almost 4 percent in South Korea and more than 2 percent in Japan. European markets opened later and fell, too, with Germany down 5 percent and France 4.7 percent.

In the U.S., stocks fell even though Moody’s, another major credit rating angecy, stood by its top rating of Aaa for the United States. It said it could downgrade the U.S. if it cut its deficit, “but it is early to conclude that such measures will not be forthcoming.”

Financial markets also did not appear comforted by an afternoon statement by President Barack Obama, who said Washington needs more “common sense and compromise” to tame its debt.

“Markets will rise and fall,” he said. “But this is the United States of America. No matter what some agency may say, we’ve always been and always will be a triple-A country.”

S&P, in its downgrade, criticized dysfunction in the American political system. The downgrade wasn’t a total surprise but came when investors were already feeling nervous about the U.S. economy and European debt, among other problems.

Last week, the Dow Jones industrial average fell almost 700 points. That was its biggest point loss since October 2008, during the financial crisis. Counting Monday, the Dow has dropped in 10 of the last 12 trading days.

Crude oil, natural gas and other commodities fell on worries that a weaker global economy will mean less demand. Oil fell $3.47 to $83.41 per barrel.

S&P on Monday downgraded mortgage lenders Fannie Mae, Freddie Mac and other agencies linked to long-term U.S. debt. Fannie and Freddie own or guarantee about half of all U.S. mortgages. Their downgrade could mean higher mortgage rates.

Worries about weaker profits that could result from a slowing economy have slammed the financial industry since late July. As a group, financial stocks in the S&P 500 index fell 4.9 percent on Monday to their lowest level since July 2009.

Bank of America fell 13.7 percent after AIG filed suit against the bank same day payday loans. The insurer alleged Bank of America sold it overvalued mortgage-backed securities. The bank denied the allegations. Its stock has dropped by nearly 50 percent this year.

Stocks in other industries whose profits are closely tied to the strength of the economy also fell sharply. Energy stocks in the S&P 500 fell 4 percent, for example.

The smallest losses came in safer industries such as consumer staples whose profits tend to be steadier, regardless of the economy. Even in a bad economy people will still buy things like toothpaste and bread.

The Vix index, a measure of fear among investors, shot up 26 percent to its highest level since May 2010. The index shows how worried investors are that the S&P 500 will drop over the next 30 days. It does this by measuring prices for stock options that investors can buy to help protect their portfolios.

Investors are worried that Spain or Italy could become the next European country to be unable to pay its debt. The European Central Bank said it will buy Italian and Spanish bonds in hopes of helping the countries avert a possible default.

Seeking to avert panic spreading across financial markets, the finance ministers and central bankers of the Group of 20 industrial and developing nations issued a joint statement Monday saying they were committed to taking all necessary measures to support financial stability and growth.

“We will remain in close contact throughout the coming weeks and cooperate as appropriate, ready to take action to ensure financial stability and liquidity in financial markets,” they said.

Worries about the U.S. economic recovery have been building since the government said that economic growth was far weaker in the first half of 2011 than economists expected.

The economy grew at a 1.3 percent annual rate from April through June, below economists’ expectations. It expanded at just a 0.4 percent rate in the first quarter. The first half of 2011 was the slowest since the end of the recession.

Then reports showed that the manufacturing and services industries barely grew in July. Job growth was better than economists expected last month. But the 117,000 jobs created in July were still well below the 215,000 that employers added between February and April, on average.

The Federal Reserve will meet on Tuesday, but economists don’t expect much to come out of the meeting. The central bank’s key interest rate is already at a record of nearly zero, where it has been since 2008.

The Fed has also already said that it plans to keep rates low for “an extended period.” Chairman Ben Bernanke said last month that the Fed could step in to help the economy if it further weakened.

Fears about a weaker U.S. economy have overshadowed profit growth that companies have reported for the second quarter. For the 441 companies in the S&P 500 that have already reported, earnings rose 12 percent in the second quarter from a year earlier. Revenue growth has also topped 10 percent for the first time in a year.

Tyson Foods rose 0.8 percent after it reported stronger profit than analysts expected. The largest U.S. meat company said its net income fell 21 percent because of higher grain costs, but analysts expected a steeper drop.

Tyson was one of just five stocks in the S&P 500 to rise on Monday. The biggest gain came from Newmont Mining Corp., which benefited from higher prices for the gold that it produces.

Verizon Communications Inc. fell 3.9 percent after it was unable to come to terms with 45,000 workers on health care costs, pensions and other issues.

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Union members broke off negotiations Tuesday at the world’s most productive copper mine, threatening to extend their five-day strike indefinitely and warning that thousands of other Chilean copper workers may soon walk off the job as well.

Union leader Marcelo Tapia told The Associated Press that the Escondida mine’s 2,300 striking workers will be joined Wednesday by 7,000 contractors, and that union workers at Chile’s state-owned Codelco mining company are in consultations about whether to join them on Thursday.

The main issue is a monthly production bonus: The company, majority-owned by Australian mining company BHP Billiton Ltd., is prepared to pay bonuses that would total $6,000 per worker by year’s end, and declined on Tuesday to discuss an increase. The union is holding out for $10,800 per worker, Tapia said.

Shares in BHP Billiton Ltd were trading up about 1 percent at $94.83 after dropping earlier Tuesday on the strike news. Globally, prices for copper and other metals have been buoyed by fears that the dollar and euro will fall due to the U.S. debt crisis and European economic woes. Prices of copper for September delivery rose 1.6 percent Tuesday to $4.48 a pound.

Already, the strike has cost the company 15,000 tons of lost production, at an estimated cost of $150 million, the company has said.

Escondida represents the biggest single foreign investment in Chile, with BHP owning a 57 percent share. Other major investors include Rio Tinto, Mitsubishi Corp. and International Finance Corp. Each day, the mine has produced about 3,000 tons of copper, worth about $30 million. In all, the mine produces 1.1 million tons of refined copper annually. At one point, its production totaled about 8 percent of the world’s copper supply, although that has declined slightly.

The amount the union wants in bonuses represents less than a penny of each dollar in annual earnings, 0.58 percent.

The situation deteriorated Tuesday when 7,000 subcontractors announced they will join the strike, adding their own demands, including a bonus equivalent to 30 percent of the amount regular employees will get, said Jorge Marin, president of Escondida’s Contract Worker Federation.

The union plans to go to court Wednesday, alleging anti-union actions by the company, Tapia said.

The union also wants protections for workers who contract serious illnesses on the job, only to lose their private health care on retirement. They say company surveillance cameras violate their privacy rights, but they want to punch clocks that better control their 12-hour work days. Miners are frequently working up to 14 hours a day but don’t get their overtime, Tapia alleged.

Tapia challenged company claims that bonuses are down due to lowered production, saying that it costs Escondida 90 cents a pound to produce the metal now selling at about $4.40 globally.

Escondida’s last major strike, in 2009, turned out well for the workers, who got bonuses and easy credit worth $37,000 each.

As with other mines in Chile, Escondida’s production has been falling as the best veins in established operations get tapped out. But BHP Billiton recently announced a major new find of 19 million tons of copper reserves. The discovery, which took four years of exploration at a cost of $381 million, means the company will be able to challenge Codelco’s status as the world’s biggest copper producer.

Chile’s copper strikes are helping to keep prices for the commodity near all-time highs, although other factors such as the falling U.S. dollar have done more recently to drive up short-term prices, metals analyst Shayne Heffernan of Heffernan Capital Management. He said this could change should strikes expand in Chile as well as South Africa and Indonesia.

“Given the number of strikes and the speed at which they are spreading, the loss of global production is now starting to mount. Should we see another month of this activity it may raise the annual shortfall this year to over 850,000 tons and copper trading at over $6 a pound,” Heffernan said. “Demand for copper is making it a more attractive inflation hedge than gold.”

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