U.S. retailers who come to Canada face higher rents, a tighter market, and higher real estate taxes than they do in their home market, according to industry experts.
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World stock markets rose Thursday as worries eased that the U.S. might be slipping toward recession, while the resignation of Steve Jobs _ the creative force behind Apple Inc. _ sent ripples through the technology sector.
Oil prices hovered above $85 a barrel. The dollar fell against the euro but was up against the yen.
European shares rose in early trading. Britain’s FTSE 100 was 0.4 percent higher at 5,227.99 and Germany’s DAX gained 0.9 percent to 5,732.91. France’s CAC-40 rose 1.1 percent to 3,172.51.
Wall Street was set to open higher, with Dow Jones industrial futures up 0.2 percent at 11,288. S&P 500 futures rose 0.1 percent at 1,173.80.
Asian markets got a boost from U.S. data showing a surge in demand for cars and planes in July that offered an unexpectedly upbeat sign of life in the world’s biggest economy.
Japan’s Nikkei 225 climbed 1.5 percent to close at 8,772.36. Hong Kong’s Hang Seng was 1.4 percent higher to 19,744.50 as strong half-year earnings from China National Offshore Oil Corp. and Bank of China Ltd. on Wednesday boosted sentiment.
South Korea’s Kospi rose 0.6 percent to 1,764.58 and Australia’s S&P/ASX 200 was 1.1 percent higher at 4,212.80. Benchmarks in Singapore, Indonesia and Thailand also gained, while indexes in Taiwan, India and the Philippines dropped.
Shares of Asian technology companies that are direct competitors of Apple rose though the gains weren’t dramatically out of line with broader market movements.
Samsung Electronics Co. rose 2.4 percent following a court ruling in the Netherlands involving the company’s ongoing global patent fight with Apple over smartphone and tablet technology and news of Jobs’ departure. The court ruling Wednesday was seen as largely positive for Samsung.
Lee Min-hee, an analyst at Dongbu Securities in Seoul, said that Samsung could ultimately benefit from the departure of Jobs as it may erode Apple’s competitiveness in marketing and product development.
“I think it’s a good impact on Samsung Electronics in competition,” Lee said.
Samsung is both a supplier of components to Apple as well as a competitor in smartphones and tablet computers.
The resignation of Jobs, who is widely credited with turning an ailing Apple into a phenomenally successful technology company, appears to be the result of an unspecified medical condition for which he took a leave from his post in January online cash advance.
Apple’s chief operating officer, Tim Cook, was quickly named CEO of the company Jobs co-founded in his garage 35 years ago and which nowadays is known for hit consumer gadgets such as the iPhone and iPad.
Taiwan’s FoxConn Technology Co., which makes the iPhone and iPad for Apple at a massive manufacturing campus in southern China, plummeted 7 percent.
Mainland Chinese shares saw their biggest gain in 10 months with the benchmark Shanghai Composite Index adding 2.9 percent to 2,615.26 while the Shenzhen Composite Index gained 1.9 percent to 1,166.79. Shares in financial, coal and real estate companies led the advance.
Property shares benefited from speculation that China’s central bank might raise down payment requirements on some home loans, which would reduce the risk of default.
“Real estate is still a good form of investment, so property companies gained today,” said Liu Kan, an analyst at Guoyuan Securities, based in Shanghai.
Poly Real Estate gained 5.4 percent while property industry leader China Vanke gained 3.4 percent.
In other sectors, mining shares were down as gold prices came off their recent highs amid improved economic news. Hong Kong-listed Zijin Mining Group, China’s largest gold miner, lost 2.7 percent. Australia’s Newcrest Mining Ltd. dropped 2 percent.
Stronger durable goods orders resulted in Wall Street reversing course to close with gains Wednesday.
The Dow added 1.3 percent to 11,320.71. The Standard & Poor’s 500 index rose 1.3 percent to 1,177.60. The Nasdaq rose 0.9 percent to 2,467.69.
The U.S. Commerce Department said orders for durable goods rose 4 percent in July, much better than the 2.4 percent increase economists had expected. The rise in orders was due to higher demand for autos and aircraft.
Benchmark oil for October delivery was up 45 cents to $85.62 in electronic trading on the New York Mercantile Exchange. Crude lost 28 cents to settle at $85.16 on Wednesday. In London, Brent crude for October delivery was up 71 cents to $110.86 on the ICE Futures exchange.
In currencies, the euro rose to $1.4457 from $1.4421 in late trading Wednesday in New York. The dollar was up at 77.06 yen from 77.01 yen.
Nervous Nellies on Bay and Wall Streets pulled back a bit yesterday from their panic selling of recent weeks, which has seen the S&P/TSX Composite Index drop a total of 15.5 per cent in Canada from its previous peak, in March; and the benchmark Dow Jones Industrial Average fall a similar 15.2 per cent from its most recent peak, in May.
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The stock market went back into a lull Friday as investors waited for the next signals on the economy _ and whether it’s headed for another recession.
The major indexes were fluctuating in a narrow range after Thursday’s 419-point plunge in the Dow Jones industrial average. There was little news to help investors determine their next moves _ and market analysts said many were taking the day off.
Thursday’s plunge followed a stream of disappointing economic news that added to investor concerns that the economy is stalling. The most notable economic news Friday came from JPMorgan Chase & Co. The bank joined other financial firms and cut its forecast for economic growth during the fourth quarter. It’s now predicting growth of 1 percent, down from an earlier forecast of 2.5 percent.
The Dow fell 51 points, or 0.4 percent, to 10,939 in early afternoon trading. The Standard & Poor’s 500 index fell 2, or 0.2 percent, to 1,138. The Nasdaq composite index less than a point to 2,381.
The Dow’s drop was largely due to Hewlett-Packard Co., which plunged 21 percent. The company said Thursday that it will close its mobile business, sell or spin off its PC business and pay $10 billion for a business software company.
Investors weren’t, for the moment, seeking the safety of U.S. Treasurys. The yield on the benchmark 10-year Treasury note rose to 2.10 percent from late Thursday’s 2.06 percent. It fell below 2 percent Thursday for the first time as heavy demand sent its price sharply higher.
Earlier this week, the market took a pause after the wild swings of the previous week. Economic and corporate news then was more encouraging, including a batch of merger announcements on Monday. Friday’s pause seemed to be the result of exhaustion.
“People decided to throw their hands up and go to the beach,” said Kim Caughey Forrest, senior equity analyst with Fort Pitt Capital Group in Pittsburgh.
Overseas stock markets had larger drops than in the U.S. European banking stocks fell near two-and-a-half-year lows, dragged down by rumors about banks’ potential losses on bonds issued by heavily-indebted governments. The selling in the U.S. has come in part because of fears that U.S. banks would be hurt if European countries default on their debt. Another concern: weakening European economies will hurt growth in the U installment payday loans.S.
Earlier Friday, Asian shares fell sharply, with major indexes in China and Japan losing more than 2.5 percent. However, some of those losses reflected selling in response to the drop in the U.S. Thursday.
As the selling continued overseas, gold rose as high as $1,881 an ounce. Oil prices fell as traders feared a global slowdown that would cut demand for crude.
A possible recession remains the focus of the markets. A recession is traditionally thought of as two consecutive quarters of negative economic growth, measured by a country’s gross domestic product. But with expectations of growth in the U.S. already low, investors worry that the economy can’t withstand another unexpected event like the earthquake in Japan or the string of bad weather that ravaged the South earlier this year.
JPMorgan analyst Michael Feroli said Friday that business sentiment, household wealth and global growth all look worse than just a few weeks earlier. That will keep economic growth nearly flat in the first quarter of 2012, he said.
On Thursday, economists with Morgan Stanley said that the U.S. and Europe are “dangerously close to recession,” adding, “it won’t take much in the form of additional shocks to tip the balance.”
Stocks also fell Thursday on news of another drop in home sales, weaker manufacturing in the mid-Atlantic states and a jump in inflation at the consumer level to its highest level since March. There also was bad news on the job market: an increase in the number of people who applied for unemployment benefits.
Thursday’s numbers joined a series of reports pointing to a slowing economy. The government reported on July 29 that growth in the first half was much weaker than expected _ and that the economy barely grew in the first quarter. Since then, the combination of disappointing numbers in the U.S. and worries about Europe’s debt problems have set off waves of selling.
The Dow is down 13.6 percent since stocks began falling on July 21. That has drained billions from American’s retirement savings and other investment accounts. And the stock market’s drop can itself help move the country toward recession.
Billionaire investor Warren Buffett is calling on the so-called mega-rich to pay more in taxes.
Buffett says in a New York Times opinion piece that he would immediately raise rates on households with taxable income of more than $1 million, and he would add an additional increase for those making $10 million or more.
He says he and his mega-rich friends have been coddled long enough by Congress, and says it is time for the government to get serious about shared sacrifice.
He says he has yet to see anyone shy away from investments due to potential capital gains taxes, even when capital gains rates were much higher in the mid-1970s.
Italy’s government approved euro45.5 billion ($64.84 billion) Friday in emergency austerity measures over two years to balance the budget by 2013 in response to demands by the European Central Bank.
The Cabinet approved the package of cuts and new taxes despite fierce resistance from local government officials, who denounced the measures as socially unjust and as damaging to economic growth.
“It wasn’t easy. We’re personally pained to have taken these measures, but we are satisfied,” Premier Silvio Berlusconi told a news conference after feverish talks with the opposition, regional governors and big city mayors.
The measures were whipped together in response to the ECB, which demanded a balanced budget a year earlier than anticipated as well as structural reforms to promote growth.
The Cabinet approved euro20 billion in cuts for 2012 and euro25.5 billion for 2013.
The measures include an extraordinary “solidarity” tax for high-earners. Anyone with an income over euro90,000 a year will be assessed an additional 5 percent tax in each of the next two years. The rate will be 10 percent for incomes over euro150,000.
“Our hearts are bleeding. This government had bragged that it never put its hands in the pockets of Italians but the world situation changed,” Berlusconi said, while insisting the emergency measures were “fair.”
The solidarity tax was reminiscent of another by former Premier Giulio Amato, who in July 1992 siphoned money out of every Italian bank account at a rate of 6 lire per 1,000 lire as the old Italian currency faced collapse. Just months later, Italy abandoned the European currency system and allowed the lira’s value to be dictated by market forces during a period of intense currency speculation.
Berlusconi’s “solidarity” tax could encourage greater tax evasion, as those who don’t draw a declared salary from an employer would be tempted to hide income through cash payments to avoid the levy.
Berlusconi held urgent meetings with key parties to pass the cuts before a long holiday weekend, when most of the country shuts down.
But the hasty news conference by regional, provincial and city authorities held after the meeting with Berlusconi and his finance minister, Giulio Tremonti, did not bode well for broad acceptance for new sacrifices.
The proposed cuts to such critical services as local transportation and welfare would have “a depressive … effect,” hurting most the underclasses and inhibiting the productive north of contributing to national GDP, Roberto Formigoni, the governor of the northern Lombardy state, told reporters.
Rome passed a euro70 billion ($99 billion) austerity package last month, but the government has said the financial situation has deteriorated significantly since then and is seeking new measures.
Under intense pressure from the European Central Bank and eurozone political leaders, the government agreed to bring forward its goal of balancing the budget to 2013 instead of 2014 as originally planned, and to come up with structural reforms that stimulate investment and growth.
In exchange, the ECB has been buying Italian bonds on the secondary market to hold down borrowing costs threatening to topple Italy’s notoriously high public debt.
Local administrations were being asked to cut euro6 billion ($8.55 billion) in spending next year, Formigoni said. That’s from total additional proposed cuts of euro20 billion in 2012. Austerity measures in 2103 would total euro25 billion.
Formigoni and other officials want to draft alternatives to the government cuts. Formigoni said that Lombardy, one of Italy’s most economically productive regions, would see its GDP suffer _ which in turn would hurt national growth.
“We are facing cuts, not to the political class, not to the administration, but to social services,” said Rome Mayor Gianni Alemanno.
Both Formigoni and Alemanno are conservatives and allies of Berlusconi.
The government is seeking to stimulate Italy’s stagnant economy _ which is expected to grow only by about 1 percent this year. And while Italy’s debt is among the highest in the eurozone _ at nearly 120 percent of GDP _ poor growth is a key factor hindering Italy’s ability to improve its public finances.
Italy’s Central Bank on Friday said public debt topped euro1.9 trillion for the first time in June.
Responding to increasing market nervousness, last week members of key lawmaking committees were called back from its summer recess. And the full houses of Parliament might reopen in August, ahead of schedule, because although government decrees become effectively immediately, they still need to be converted to law by Parliament within 60 days.
Tremonti’s presentation to lawmakers Thursday failed to convince some of his own allies, a sign of possible rifts within the coalition. The opposition accused Tremonti of being too vague, and insists Berlusconi must resign.
Italian borrowing costs remained way below the levels they struck last week before the European Central Bank intervened in the markets to get them down. The yield on the 10-year bond is below 5 percent compared with over 6 percent last week. The drop now makes it easy for Italy to keep up on its debt payments.
The European Central Bank has left its key interest rate unchanged at 1.5 percent as the continent’s debt crisis appears to be embroiling Spain and Italy despite efforts by political leaders to contain it.
Market participants are now awaiting ECB President Jean-Claude Trichet’s news conference later Thursday, wondering if the ECB will step in and buy Spanish and Italian government bonds to drive down rising borrowing costs that threaten those countries’ finances.
The bank has that emergency power, but has not used it for four months and does not like to be seen to support governments, even indirectly. Additionally, Trichet would not necessarily use his press conference to announce them, since the bank makes regular disclosures on any purchases every Monday.
The speculation arises with some European leaders leaving for vacation in August and the head of the European Commission urging faster action. Rising borrowing rates and default fears have already forced Greece, Ireland and Portugal to seek bailout loans and now threaten to pull in Spain and Italy.
Investors and economists will also be looking for clues about whether the bank will carry through on a quarter-point rate hike in October. The move had been widely predicted but is now in doubt because of worries about the economic recovery and the debt crisis.
Higher rates can fight inflation _ the bank’s primary mission _ but could dampen growth in struggling countries and make life harder for consumers there with adjustable-rate mortgages low fee payday advance.
The bank must juggle those concerns against an inflation rate of 2.5 percent last month, which is above its goal of just under 2 percent.
As part of a second bailout for Greece aimed at quelling market turmoil, eurozone leaders agreed last month to give Europe’s bailout fund, the European Financial Stability Facility, the power to buy bonds and recapitalize banks hit by losses on those bonds.
But the necessary changes will not go through national parliaments until the fall.
The president of the European Union’s executive called Thursday on eurozone leaders to consider further changes to the region’s bailout fund, including increasing its size.
In a letter to leaders, European Commission President Jose Manuel Barroso urged “a rapid reassessment of all elements related to” the eurozone’s bailout fund to make sure it can effectively stop the debt crisis.
Barroso said countries have to speed up the implementation of the fund’s new powers.
Many analysts have criticized the leaders’ reluctance to boost the size of the euro440 billion ($629 billion) fund, saying that it’s not big enough to use the new tools successfully.
The Bank of England also kept its main interest rate unchanged Thursday at a record low of 0.5 percent.
HSBC said Sunday it will sell 195 retail bank branches, most located in upstate New York, to First Niagara Bank in a deal worth about $1 billion.
The sale is part of HSBC’s strategy, presented to investors in May, to shift focus away from retail banking to commercial and corporate banking, and to target investment in high-growth economies.
HSBC, which is still dealing with the legacy of bad loans in the U.S. from the 2002 acquisition of consumer lender Household International Inc., said in May that it intended to trim its costs by up to $3.5 billion within three years.
The companies expect the all-cash transaction to be completed early next year. First Niagara, a unit of First Niagara Financial Group Inc. of Buffalo, N.Y., said in a statement that it expects to retain most of the 1,900 workers currently employed by the affected banks.
HSBC Bank USA, a subsidiary of British banking company HSBC Holdings PLC, operates more than 470 bank branches in the U.S., including about 370 in New York. It has total assets of $197 billion through its retail, commercial, global and private banking segments and its wealth management divisions.
The 195 banks being sold represent about $15 billion in deposits, and HSBC will receive a premium of 6.67 percent of the deposits transferred when the deal closes, the company said in a statement. Based on May 31 figures, that would be about $1 billion.
When the deal is completed, First Niagara expects to have $38 billion in assets, $30 billion in deposits and 450 branches in Pennsylvania, upstate New York and New England.
The sale involves 183 branches in upstate New York, four in Westchester County, N.Y, two in Putnam County, N.Y., and six in southern Connecticut. The retail banks will remain open during the transition. HSBC will continue to provide commercial banking services in the region.
Federal health regulators asked the country’s leading medical experts two years ago to recommend ways to improve the government’s system for approving most medical devices, ranging from pacemakers to X-ray scanners. On Friday the experts came back with a surprise answer: Scrap it because it fails to protect patients. Even more surprising, the FDA dismissed the idea.
The Institute of Medicine’s panel said in a report that the U.S. government should abandon the 35-year-old system used to clear medical devices because it provides little assurance that the implants are actually safe.
The 12-member group’s advice, commissioned by the Food and Drug Administration, is not binding. And experts questioned its real-world impact after the FDA immediately distanced itself from the advice it had requested.
The FDA has been working for more than a year to improve the so-called 510(k) process, efforts that would go to waste if the system is abandoned.
“FDA believes that the 510(k) process should not be eliminated, but we are open to additional proposals and approaches,” said the agency’s device director Jeffrey Shuren.
The agency requires that most new prescription drugs go through clinical trials to prove that patients fare better after receiving medication. But through the 510(k) system, medical devices just have to show that they are similar to devices already on the market. Only a handful of truly new devices undergo extensive testing to prove they are safe and effective.
The device industry’s chief lobbying group also dismissed the proposal, saying its conclusions “do not deserve serious consideration from the Congress or the administration,” in a statement.
The IOM panel’s chairman took the reception in stride Friday, saying it would take time to develop a new system to replace the one that has been in place for over three decades.
“This is a public discussion, and it’s going to take time,” said panel chair David Challoner, former vice president of health affairs at University of Florida. “The 510(k) process needs to be modified to make it as good as possible in the interim, but there is logic there that is fundamentally flawed and must to be fixed.”
The report arrives as the FDA fends off criticism from manufacturers who say the agency has become too slow in clearing new devices, driving up costs for companies and forcing some out of business. Despite the relative speed of the 510(k) process, they point out that some devices still get tied up in red tape, ultimately reaching the U.S. market two years after launching overseas.
Latham & Watkins attorney John Manthei, who represents device manufacturers, said even if the FDA doesn’t adopt the recommendations, they could help lawmakers and critics who favor tougher regulation of devices.
“For those who feel like the 510(k) process is inadequate, this report definitely gives those folks ammunition,” said Manthei.
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.”