Financial thoughts

U.S. retail sales probably climbed in February by the most in four months, spurred by job growth and more seasonable temperatures, economists said before a report today.

The projected 1 percent gain would follow a 0.3 percent January increase, according to the median forecast of 82 economists surveyed by Bloomberg News. Other data may show business inventories rose and consumer sentiment declined.

J.C. Penney Co. and Macy’s Inc. (M) were among retailers that topped analysts’ sales estimates, a sign household spending regained momentum after a weather-restrained January. While higher fuel costs may be concerning Americans, bigger paychecks thanks to the tax compromise reached by President Barack Obama and congressional Republicans are probably preventing demand from slipping for now.

“Growing consumer confidence combined with pent-up demand will continue to have a positive influence on industry sales going forward,” Donald R. Johnson, vice president for North American sales at Detroit-based General Motors Co. (GM), said in a March 1 teleconference. “We continue to believe that we’re going to see this slow-but-steady growth throughout the year.”

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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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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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Workers at Fiat’s historic factory in Turin have said “yes” in a referendum on the Italian company’s new flexible work rules.

Officials of the FIOM metalworkers union, which campaigned against the contract, say Saturday that votes of white-collar workers were key to the rules’ approval, 54 percent to 46 percent.

More than 94 percent of workers at the Mirafiori factory voted when they came for their shifts Thursday and Friday.

Fiat CEO Sergio Marchionne had warned if a majority of workers didn’t accept the new contract to produce vehicles in a joint venture with Chrysler, he’d take production elsewhere, possibly abroad.

Left-wing FIOM opposed the deal as weakening Italy’s system of national contracts, but other unions backed it as encouraging investment.

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India’s food inflation slowed for the first time in six weeks after Prime Minister Manmohan Singh’s government banned onion exports.

An index measuring wholesale prices of farm products including milk and lentils rose 16.91 percent in the week ended Jan. 1 from a year earlier, the commerce ministry said in a statement in New Delhi today. The gauge gained 18.32 percent the previous week.

Food-price inflation has remained above 12 percent for four straight weeks in India, threatening living standards among the 828 million people that the World Bank says live on less than $2 a day. The price gains have also exposed Singh’s government to criticism from opposition parties, which are planning nationwide protests from this month.

“Food prices are now a problem and it looks as if the government is not in control,” Prasanna Ananthasubramaniam, the Mumbai-based chief economist at ICICI Securities Primary Dealership, said before the release. “The central bank will hike rates this month.”

The yield on the benchmark nine-year government bond has gained 24 basis points to 8.15 percent this month on speculation Reserve Bank of India Governor Duvvuri Subbarao may boost rates for the seventh time in a year at the Jan. 25 announcement. The RBI’s benchmark repurchase rate is 6.25 percent.

Wage Demands

High food costs for a sustained period will lead to more wage demands, stoking inflation, Chakravarthy Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said last week as he sought “some action” from the central bank.

Singh, who is planning to import onions from Pakistan and distribute 5 million tons of rice and wheat at subsidized prices, met his top cabinet ministers and advisers on Jan. 11 to find ways to counter rising prices and protect purchasing power.

India on Dec. 21 halted exports of onions, a key ingredient in local cuisine, until further notice. The government this month also raided agriculture traders to prevent hoarding.

The United Nations Children’s Fund, or Unicef, says one in three malnourished children in the world live in India. The National Family Health Survey of 2008 showed the child malnutrition rate at 46 percent, double that in Sub-Saharan Africa.

As a result, protests over inflation have intensified,

The main opposition Bharatiya Janata Party, or BJP, will hold demonstrations and stage sit-ins in India’s major towns for a month starting Jan. 20, party spokesman Ravi Shankar Prasad said in New Delhi on Jan. 11.

Emulate China

India, the second-biggest grower of rice, wheat and sugar, should emulate China in building strategic stockpiles of staples to cool prices, Atul Chaturvedi, chief executive officer for agriculture business at Adani Enterprises Ltd., the nation’s biggest farm goods trader, said in an interview yesterday.

India, unlike China, hasn’t stockpiled cooking oils, sugar and oilseeds, leading to higher prices, Chaturvedi said cash till payday. A rise in wheat and rice costs have been capped by a ban on exports and reserves of 48 million tons at state agencies, he said.

Still, the government measures may not staunch inflation as weather disruptions to crops globally keep prices high.

“Given extreme weather patterns across the globe — floods in Australia, snowstorms in the northern hemisphere — price rises could persist in the coming months,” Rohini Malkani and Anushka Shah, economists at Citigroup Inc., wrote in a Jan. 10 report. “This poses upside risks to our inflation forecasts.”

Global Prices

World food prices reached an all-time high in December on higher sugar, grain and oilseed costs, the United Nations said, exceeding levels reached in 2008 that sparked deadly riots from Haiti to Egypt.

Palm oil, which accounts for 80 percent of India’s annual cooking oil imports worth $8.4 billion, have surged 56 percent in the past six months in Malaysia, while soybean oil climbed 43 percent in 2010, because of adverse weather in the producing nations.

The outlook for higher inflation is prompting local banks in India to join Goldman Sachs Group Inc. in predicting benchmark borrowing costs will climb 1 percentage point in 2011.

Tushar Poddar, a Mumbai-based economist at Goldman Sachs who correctly predicted that the central bank would raise the benchmark repurchase rate by 150 basis points in 2010, said in an interview Jan. 10 that the biggest risk to inflation is higher food and commodity prices. Poddar told reporters in Mumbai on Dec. 8 that he expects the central bank to lift interest rates 100 basis points in 2011.

Slower Growth

Higher borrowing costs may curtail economic expansion in South Asian nations including India, the World Bank said yesterday. India’s $1.3 trillion economy may grow 8.4 percent this year and 8.7 percent in 2012 from 9.5 percent last year, the lender said.

Indian automakers expect passenger-car sales growth to slow from the fastest pace in at least six years because of higher prices and rising rates.

Sales may increase 18 percent this year, Pawan Goenka, head of the Society of Indian Automobile Manufacturers, said in Mumbai this week. Shipments from manufacturers to dealers jumped 31 percent to 1.87 million last year, according to the group, which represents all automakers in the country.

Tata Motors Ltd. and Volkswagen AG have both raised vehicle prices this month to help offset rising prices for steel and other materials.

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The number of people who signed contracts to buy homes rose in November, the fourth increase since hitting a low in June. Even with the gains, this year is shaping up to be the worst for home sales in 13 years.

The National Association of Realtors says its index of sales agreements for previously occupied homes increased 3.5 percent last month from a downwardly revised reading in October. Contract signings were up in the West and Northeast, but down in the South and Midwest.

Signings are 22.1 percent above June’s index reading, which was the lowest level since the private group began tracking the data in 2001. But signings are 5 percent lower than November 2009 when buyers were scrambling to close purchases to qualify for the first federal tax credit.

Completed home sales _ which the Realtors group measures in a separate report _ are expected to total about 4.8 million units this year. That’s much lower than the 6 million units that analysts consider a healthy pace. The last time sales were lower was 1997 when sales totaled 4.4 million units.

A third of the pending sales likely will be foreclosures or short sales, where a homeowner sells a house for less than what is owed on it, the NAR spokesman Walter Molony said. That tracks with the average for the year. These distressed sales go for discounts of up to 50 percent in some of the hardest-hit areas and will continue to weigh down home prices.

Many economists expect home prices to drop another 5 percent to 10 percent in the next six months before stabilizing. Prices fell in 20 of America’s largest cities in October, according to the Standard & Poor’s/Case-Shiller home price index released Tuesday.

There are several challenges facing the housing market aside from foreclosures. Potential buyers are worried about their jobs or are unable to qualify for a mortgage because lenders have tightened standards. And now mortgage rates are on the rise, gaining about two-thirds of a percentage point in the last month.

This week, the average rate on 30-year home loans rose to 4.86 percent from 4.81 percent, mortgage giant Freddie Mac said Thursday. That’s the highest level in seven months. It hit its lowest level in 40 years in November at 4.17 percent. The rate on the 15-year mortgage, a popular refinance option, also is rising.

The report on contract signings from the Realtors showed that signings jumped 18.2 percent in the West and edged up 1.8 percent in the Northeast. The Midwest region saw a 4.2 percent drop in signings in October and the South posted a 1.8-percent dip.

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The U.S. trade deficit was probably little changed in October as gains in exports, reflecting a weaker dollar and growing economies overseas, kept pace with rising imports, analysts said before a report today.

The projected $43.8 billion gap would follow a $44 billion shortfall in September, according to the median estimate of 78 economists surveyed by Bloomberg News. Other reports may show consumer confidence climbed this month and the cost of imported goods rose in November.

3M Co. and General Dynamics Corp. are among companies that will probably benefit from growing demand in markets like China, Brazil and Singapore, which this year are among the top-10 buyers of American-made goods. Accelerating growth in the world’s largest economy may also lift imports, indicating the trade gap will stabilize near current levels.

“We’re looking for exports to be a big plus as our major trading partners are doing well,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. “We don’t see much improvement in the trade deficit next year” as imports also climb.

The Commerce Department trade figures are due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from deficits of $39.5 billion to $46.5 billion.

Also at 8:30 a.m., a Labor Department report may show the import-price index rose 0.8 percent last month, reflecting higher costs for crude oil and metals, according to the Bloomberg survey median. Estimates ranged from gains of 0.3 percent to 1.6 percent.

Sentiment Improving

The Thomson Reuters/University of Michigan’s preliminary household sentiment index rose to 72.5 this month, the highest level since June, according to the Bloomberg survey median. The gauge averaged 89 in the five years leading up to the recession that began in December 2007. The report is due at 9:55 a.m.

Since reaching a one-year high on June 7, the dollar has fallen 6.6 percent against a trade-weighted basket of currencies. The drop makes American goods cheaper to buyers abroad and will keep spurring manufacturing, which expanded for a 16th consecutive month in November.

Growing overseas economies are also contributing to demand for U.S. goods. China, set to become the world’s second-largest economy this year, had a 9.6 percent gain in third-quarter gross domestic product from a year ago. Singapore, in the running to be the world’s fastest-growing economy this year, expanded 10.6 percent while Brazil, South America’s biggest economy, grew 6.7 percent.

International Orders

General Dynamics, based in Falls Church, Virginia, is seeing “strong international order activity and interest, particularly in the emerging markets,” Chief Executive Officer Jay Johnson said in a Dec. 2 industry conference presentation.

St. Paul, Minnesota-based 3M, the maker of Scotch tape and films to brighten television screens, is expanding in emerging markets, which make up one-third of its sales and may climb to as much as 45 percent by 2015, according to company estimates.

“These opportunities continue to grow,” George W. Buckley, chief executive officer, said in a Dec. 7 conference call. Overseas sales will benefit from “India and Latin America, gathering momentum in sort of China-like style.”

President Barack Obama is seeking to double American exports over the next five years. The Commerce Department has asked industry groups to review its proposal to relax export controls for technology items with military uses, covering sales to 37 allies including Germany, Japan and Canada.

China’s Surplus

China’s trade surplus with the U.S. remains a thorny issue as some members of Congress accuse the Asian nation of keeping its currency too low in order to boost sales overseas. The renminbi’s advance against the dollar of 0.1 percent last month and 0.3 percent in October fell short of the 1.7 percent climb in September that Treasury Secretary Timothy F. Geithner signaled was appropriate.

Improving U.S. demand and the need to restock inventories led to gains in imports that swamped the rise in exports over the past two quarters. A widening deficit subtracted 1.76 percentage points from GDP in the third quarter as the economy expanded at a 2.5 percent annual rate.

Imports will probably grow at a slower pace as inventories are now better aligned with sales, indicating the deficit will stabilize and trade will no longer be an obstacle to GDP.

Bloomberg Survey ================================================================ Trade Import U of Mich Federal Balance Prices Conf. Budget $ Blns MOM% Index $ Blns ================================================================ Date of Release 12/10 12/10 12/10 12/10 Observation Period Oct. Nov. Dec. P Nov. —————————————————————- Median -43.8 0.8% 72.5 -138.0 Average -43.7 0.8% 72.6 -135.0 High Forecast -39.5 1.6% 76.5 -110.0 Low Forecast -46.5 0.3% 69.0 -145.0 Number of Participants 78 53 67 25 Previous -44.0 0.9% 71.6 -120.3 —————————————————————- 4CAST Ltd. -45.0 0.5% 73.5 — ABN Amro Inc. -43.0 — 73.0 — Action Economics -45.0 0.7% 71.0 -142.0 Aletti Gestielle SGR -45.4 — 71.5 — Ameriprise Financial -42.5 0.7% 73.0 — Banesto -43.9 0.8% 70.7 — Bank of Tokyo- Mitsubishi -43.4 0.7% 69.0 -142.0 Barclays Capital -44.0 0.7% 72.0 -142.0 BBVA -42.8 0.7% 72.0 -115.0 BMO Capital Markets -43.0 — — — BNP Paribas — 0.8% 75.0 -130.0 BofA Merrill Lynch Research -45.0 — 71.0 -145.0 Briefing.com -43.0 — 72.5 -142.0 Capital Economics -40.0 — 75.0 — CIBC World Markets -45.5 — — — Citi -45.0 1.0% 72.0 -125.0 ClearView Economics -45.5 0.8% 70.5 — Commerzbank AG -44.0 — 75.0 — Credit Agricole CIB -45.0 — 72.1 — Credit Suisse -42.0 1.0% 74.0 — Daiwa Securities America -45.0 — 72.0 -140.0 DekaBank -44.0 0.8% 73.0 — Deutsche Bank Securities -44.5 1.0% 72.0 — Deutsche Postbank AG -45.0 0.9% 72.5 — DZ Bank -42.0 0.7% 73.5 — Exane -43.0 — 73.0 — First Trust Advisors -43.6 1.0% 72.0 — FTN Financial -43.0 — 73.0 — Goldman, Sachs & Co. -40.5 — — — Helaba -43.5 — 74.0 — High Frequency Economics -40.0 1.5% 74.0 -110.0 Horizon Investments -45.5 1.0% 73.0 — HSBC Markets -44.0 1.2% 73.0 — Hugh Johnson Advisors -43.0 0.6% 70.0 — Ibersecurities -43.8 — — — IDEAglobal -43.5 0.7% 72.5 -135.0 IHS Global Insight -40.5 — 72.7 — Informa Global Markets -44.4 1.0% 70.4 — ING Financial Markets -43.5 0.9% 72.3 -137.0 Insight Economics -44.5 1.0% 72.5 — Intesa-SanPaulo -45.0 0.6% 72.5 — J.P. Morgan Chase -42.2 0.6% 73.0 -138.0 Janney Montgomery Scott -45.5 0.7% — — Jefferies & Co. -46.5 0.8% 73.0 -140.0 Landesbank Berlin -39.5 1.0% 73.5 — Landesbank BW -43.0 0.7% 73.5 — Maria Fiorini Ramirez — — — -142.0 MF Global -43.0 0.6% 74.0 -130.0 MFC Global Investment -44.5 1.0% 72.0 — Mizuho Securities -45.0 0.6% 72.0 — Moody’s Analytics -41.3 0.8% 74.0 — Morgan Keegan & Co. -44.8 0.6% — — Morgan Stanley & Co. -43.5 — — -137.0 National Bank Financial -43.5 — 72.5 — Natixis -43.8 0.5% 72.0 — Nomura Securities Intl. -43.1 0.8% 71.6 -130.0 Nord/LB -42.5 0.8% 71.5 — Pierian Capital -42.0 — — — Pierpont Securities LLC -44.5 — 73.0 -139.0 PineBridge Investments -42.0 1.2% 74.0 — PNC Bank -45.0 — — — Raiffeisen Zentralbank -44.0 0.8% — — Raymond James -45.3 — 72.2 — RBC Capital Markets -44.4 — 72.0 — RBS Securities Inc. -43.7 — 73.5 — Scotia Capital -43.6 — — — Societe Generale -45.7 1.6% 76.5 — Standard Chartered -43.7 0.8% 72.0 — State Street Global Markets -43.5 0.9% 72.0 -137.0 Stone & McCarthy Research -44.0 0.9% 71.0 -145.0 TD Securities -43.0 0.5% 73.0 — Thomson Reuters/IFR -45.2 0.8% 72.2 -142.0 Tullett Prebon -43.5 0.8% 72.5 -132.0 UBS -45.0 0.7% 75.0 — Union Investment -44.0 — 72.6 — University of Maryland -42.4 0.3% 71.6 -138.0 Wells Fargo & Co. -41.2 0.8% — — WestLB AG -45.0 0.8% 72.0 -120.0 Westpac Banking Co. -44.4 0.6% 72.5 — Wrightson ICAP -44.0 1.2% 71.0 — ================================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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General Motors Co. says its sales in China climbed 11 percent in November from a year earlier, on strong demand for its Buick and Chevrolet models.

GM said Thursday that the 196,990 vehicles sold by GM and its ventures in China set a monthly record, as the company’s 2010 sales in the world’s biggest vehicle market shot past the 2 million mark personal business card.

GM’s China sales rose 32.7 percent in January-November, a bit lower than the overall growth in China’s passenger car sales so far this year.

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An aviation regulator tells The Associated Press that Rolls-Royce will temporarily replace entire engines suffering from oil leaks on the world’s largest jetliner.

The official says the British engine-maker will take off faulty engines and replace them with new ones. It will then fix the leaking part and swap the engine back again.

The official, who has been briefed by Rolls-Royce and some of the affected airlines, spoke on condition of anonymity because of the sensitivity of the matter. Rolls-Royce declined to comment.

Leaking oil caught fire on Nov. 4 in one of a Qantas A380’s four engines, sending chunks of metal into vital systems in the wing before it landed safely. Qantas has said checks revealed leaks in at least three other engines.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

SYDNEY (AP) _ An electrical fault sent smoke into the cockpit of a Qantas Boeing 747 and forced pilots to turn back Monday in the latest in a string of problems for the airline since an engine explosion on a superjumbo prompted a global safety scare.

The latest incident was unrelated to the superjumbo drama, but it was the third time Qantas jetliners have aborted flights because of faults since the Nov. 4 explosion on the Airbus A380, which raised concerns about the world’s largest passenger plane.

The Airbus incident has prompted extra attention on Qantas, which prides itself on its safety record. Qantas says the three faults since Nov. 4 were far less serious than problems with the A380 and that the turnarounds were precautionary.

The airline said a Boeing 747 carrying 221 passengers and crew was an hour into a flight from Sydney for Buenos Aires, Argentina, when smoke started coming from an instrument panel in the cockpit. Pilots donned oxygen masks and turned the plane around, dumping fuel over the Pacific Ocean before making a “priority landing” in Sydney.

“This is absolutely in line with procedure to ensure that they can safely arrive, which they did,” Qantas spokeswoman Olivia Wirth told reporters.

Passengers said the pilot informed them that there had been a problem with an instrument panel in the cockpit and the plane would return to Sydney.

“We couldn’t smell or hear anything,” passenger Samantha Gash told Nine Network television. “All we noticed, because we were next to the wing, is when the fuel was let out. Everyone was very quiet and calm. It was probably when we landed back in Sydney and there were four or five fire engine trucks behind us that people began to start to feel a bit uneasy.”

Television footage showed fire trucks tailing the plane as it taxied to the terminal, though they were not put to use. Qantas said the passengers would be put on other flights, and repairing the plane was not expected to take long.

Wirth said the problem was a “minor electrical fault” that caused a “minimal” amount of smoke in the cockpit. No smoke entered the passenger cabin.

On Friday, a Qantas Boeing 767 turned back on a domestic flight in Australia after pilots detected abnormal vibrations in one of its two General Electric engines. A week earlier, a Sydney-bound Qantas Boeing 747 landed safely in Singapore after an engine caught fire minutes after takeoff.

Both 747 planes were fitted with Rolls-Royce RB211 engines.

The A380 scare is being blamed on a fault in the Rolls-Royce Trent 900 engine. Leaking oil caught fire in one of the Qantas A380’s four massive engines, heating metal parts and causing the motor’s disintegration over Indonesia before the jetliner returned safely to Singapore. Experts say chunks of flying metal damaged vital systems in the wing of the Sydney-bound plane, causing the pilots to lose control of the second engine and half of the brake flaps on the damaged wing in a situation far more serious than originally portrayed by the airline.

Qantas grounded its six A380s within hours and said four days later that checks had revealed suspicious oil leaks in three engines on three different grounded A380s. Singapore Airlines and Lufthansa, which both use A380s with Trent 900 engines, have conducted checks on their superjumbos and all but one have returned to service, the airlines say.

Qantas’ six superjumbos _ the backbone of its longest and most lucrative international routes between Australia and Los Angeles, Singapore and London _ remain grounded despite what experts say is financial pressure to fly them again.

“We are taking our normal and extremely conservative approach to safety and will not operate our A380 fleet until we are completely confident that it is safe to do so,” Simon Rushton, a Qantas spokesman, said Monday.

Qantas was still hopeful of returning the A380s to service “in days, not weeks,” Rushton said.

Britain’s Rolls-Royce Group PLC, the world’s second-largest engine maker, said Friday that it would be replacing an unspecified module, or collection of linked parts, on the Trent 900. Airbus said Rolls-Royce would also be equipping the engines with software to shut them down before an oil leak could cause an engine to disintegrate.

Rushton said three engines had been removed from Qantas A380s as part of a detailed inspection program ordered by Europe’s air safety regulator and recommendations by Rolls-Royce. He declined to comment on an unsourced newspaper report that Rolls-Royce had advised Qantas that seven more engines may have to be removed, something that would cause longer delays and potential revenue losses.

Singapore Airlines, which grounded three of its 11 A380s after checks found oil leaks in three Trent 900s, said Monday that two were back in service after engine changes and that work was continuing on the third.

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Two directors of Agoracom will pay a total of $150,000 and face trading and employment restrictions under a settlement agreement that was approved Friday by Ontario’s securities regulator.

Agoracom, which runs a website that does investor relations for public companies listed on the Toronto Stock Exchange and TSX Venture Exchange, will also post a notice about the settlement on www.Agoracom.com.

Agoracom founder George Tsiolis and dealer Apostolis (Paul) Kondakos acknowledged they required Agoracom staff to use hundreds of fake names and pose as investors in thousands of messages on the firm’s public online forums.

Kondakos, the firm’s chief compliance officer, also intercepted private messages between public users of the forum from July 2008 to February 2009 to gather information about companies in which he was invested cash advance companies.

Under the settlement agreement, the Ontario Securities Commission has suspended the two men’s registrations as investment professionals for 10 years.

They are also permanently prohibited from being a director or officer of any client of Agoracom or its affiliates and prohibited from being a director or officer of any public company, registrant or investment fund manager for five years.

They also aren’t allowed to trade or invest in any client of Agoracom.

The two men will pay a total of $25,000 towards the costs of the OSC investigation and $125,000 to a fund administered by the commission.

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