Financial thoughts

WINNIPEG - One of Canada’s largest mutual fund companies says it will reduce the management fees charged on many of its products, starting in July. Investors Group, which is part of IGM Financial (TSX: IGM) and the Power group of companies, says the reductions will affect about two-thirds of its funds.

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St. Louis should expect little improvement in the local job market or housing prices this year, according to a dismal new forecast from economists at PNC Bank.

Some excerpts:

St. Louis has not been able to accelerate its economic growth beyond stall speed thus far since the end of the recession. Employment growth is barely positive, and the market area’s labor force is declining in the absence of new job opportunities. What had appeared to be another manufacturing-centric turnaround story alongside so many other Midwest regional economies in early 2011 has sputtered entering 2012. The labor force has either been flat or seen outright declines in three of the past five quarters, indicating that would-be workers are falling out of the labor force count for lack of significant job opportunities. St. Louis looks set for sub par job creation through the next several quarters. Price declines (for homes) show little sign of bottoming out in the very near term, leading to expectations that even minimal price growth will be delayed until 2013. With employment gains temporarily stalled, housing demand will offer little price support in the coming year. St. Louis has traditionally posted a median household income level slightly greater than the Midwest and U.S. averages. This standing is under threat over the next few years, however, as the market area struggles to steady its labor market, and therefore its earnings potential.

The report expands on remarks made by an economist for the large Pittsburgh bank on a visit to St. Louis last week.

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Germany and the European Commission on Tuesday called on EU nations to stick to their agreed budget cuts despite mounting voter discontent, but promised some new efforts to boost growth to alleviate economic hardship.

In elections on Sunday, voters in France and Greece gave strong support to parties who want to roll back or slow down the spending cuts and tax increases that have defined Europe’s response to its debt crisis.

That added to cries from labor unions and some governments for more measures to boost economic growth to offset the devastating impact on jobs that austerity measures are having.

Officials in Berlin and Brussels said there was some room for more reforms to help growth, but insisted that any new growth policies must not detract from Europe’s drive to lower its deficits.

European Commission President Jose Manuel Barroso said there could be no fundamental change in direction.

“What member states have to do is be consistent, implementing the policies that they have agreed,” Barroso told reporters on the eve of Europe Day, which celebrates the ever closer cooperation between the nations of the Continent. “Now, the key is implementation.”

On Sunday night, however, the calls from some European capitals were different, with French socialist president-elect Francois Hollande vowing that “austerity can no longer be inevitable.”

In Greece, parties that rejected belt-tightening made big gains and there were fears that the new leadership would renege on commitments made to secure the country’s massive rescue loans. An outright rejection of the bailout could eventually see Greece leave the euro currency bloc, a possibility that was unnerving financial markets.

As the debate over austerity intensified, EU President Herman Van Rompuy called for an informal summit of the 27 EU government leaders on May 23 to discuss economic growth and to prepare for a summit in June focused on job creation short term personal loans.

Barroso discounted the notion that Europe was going to revise its fiscal policy commitments.

“It would be completely demagogical and not serious to propose to some of our member states to relax now the efforts of fiscal consolidation,” he said.

He insisted that sustained debt reduction was essential to convince markets, build confidence and cut borrowing costs. “Every euro spent on interest payments is a euro less for jobs and investment,” he said.

Germany largely backed the Commission’s stance of staying rigid on fiscal restraint while seeking concerted measures for growth.

“The end of the debt policy has been agreed in Europe. It has to stay that way,” said German Foreign Minister Guido Westerwelle in Berlin.

Like Barroso, he suggested that economic growth could be enhanced, but through structural reforms _ not through increased government spending.

“It’s right that we are simultaneously creating new growth impulses. That’s why we have to add to the fiscal pact for less debt a growth pact for more competitiveness.

“I’m very confident that we will be able to overcome the crisis this way with less debt and more growth. Both belong together,” he said.

The debate on the policies should come up at the May 23 summit, the first for newly elected President Hollande.

Outgoing president Nicolas Sarkozy and German Chancellor Angela Merkel worked closely together to set the EU course out of the financial crisis. Now, Hollande comes in with his own agenda.

He said his first act as president will be to write a letter to other European leaders calling for a renegotiation of a budget-trimming treaty aimed at bringing the continent’s economies closer together _ a stance that puts him at odds with Merkel.

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India deferred a plan to clamp down on tax avoidance by a year after the proposals stoked concern that foreign investment will decline and hurt growth in Asia

European finance ministers are unlikely to reach an agreement Wednesday over how the region’s banks should shore up their defenses against future financial shocks, Germany’s finance chief said.

The European Union is in the process to writing an international agreement on capital buffers for banks into European law. This would determine the level of risk Europe’s banks can take and what regulators can do to ensure that financial crises like the one that brought down U.S. investment bank Lehman Brothers in 2008 do not happen again.

The so-called Basel III deal would force banks gradually to increase their highest-quality capital _ such as equity and reserves _ from 2 percent to 7 percent of risky assets they hold by 2019. An additional 2.5 percent would have to be built up during good times.

Basel III was agreed by the world’s leading economies after the 2008 financial crisis demonstrated that many banks did not have enough of a capital cushion to absorb sudden losses on loans and other risky activities. Once agreed, the new rules would apply to more than 8,300 banks in Europe, forcing them to build up billions in extra capital by selling shares or assets or reining in bonuses and dividends.

The 2008 financial panic brought on by the Lehmans collapse hit Europe hard. Between 2008 and 2010, governments across the 27-country-bloc spent (EURO)4.6 trillion ($6.1 trillion) propping up struggling banks.

What complicated efforts even more was that the open borders in the EU allow banks to operate freely across the bloc, but when lenders ran into trouble it was national governments _ and taxpayers _ who had to foot the bill. While the EU is now striving for a single set of banking rules, there is no pan-European bank resolution fund that could relieve national governments.

The U.K., which had to save three major banks, has seen its debt load almost double since 2007, while much smaller Ireland had to seek an international bailout to help stem the losses of its domestic lenders. And many economists fear that the economic recession in Spain may soon reveal massive bank losses there guaranteed payday loans.

Now, the U.K. is leading a group of countries that want to be able to force their own banks to have bigger cushions than the ones prescribed by the pan-European rules without first getting approval from the European Commission in Brussels.

“We should make it clear that the crisis did not originate exclusively from weak fiscal policy. It originated also from insufficiently strong banks,” said Polish Finance Minister Jacek Rostowski. “So therefore a group of countries including Poland, the Czech Republic, Sweden and the United Kingdom are very determined to see that banking systems in the future should be as healthy as we expect the fiscal side, the budgetary side, to be kept.”

That demand is opposed by France and the Commission, which fear that jacking up capital requirements in one country could force banks based there to cut down lending by their foreign subsidiaries. That, they argue, could hurt small states that don’t have a big domestic banking system.

To bridge the divide between the two camps, Denmark, which currently holds the EU presidency, has proposed a compromise that would allow national regulators to require an extra capital buffer of 3 percent. Anything beyond that would have to be approved by the Commission in Brussels, which would examine not only the level of risk in the home state but also the potential impact in neighboring countries.

Getting full approval for that compromise, however, may not be possible on Wednesday, officials said, partly because France is unlikely to budge from its position ahead of the second round of presidential elections this Sunday.

But German Finance Minister Wolfgang Schaeuble said that he expects an agreement before the end of June.

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Don Melvin contributed to this story.

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Japan

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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Retail sales in the U.S. probably rose in March and housing demand stabilized, bolstering the world

Ontario is taking aim at

President Barack Obama said Tuesday the choice facing voters this November will be as stark as in the milestone 1964 contest between Lyndon Johnson and Barry Goldwater _ one that ended up with one of the biggest Democratic landslides in history.

The president made his comments during a fundraising blitz in Florida, and right before his general election foe was essentially decided. Republican Rick Santorum dropped out of the presidential contest, making it clear that Obama would face off against Mitt Romney, the former Massachusetts governor.

Obama used a daylong trip to Florida to call again for Congress to raise taxes on millionaires, a populist pitch on an issue that he hopes will help define the differences with nominee-to-be Romney.

“This election will probably have the biggest contrast that we’ve seen maybe since the Johnson-Goldwater election, maybe before that,” Obama told donors at the first of three campaign events in this battleground state. The events were expected to raise at least $1.7 million.

In his 1964 race against Goldwater, Johnson carried 44 of 50 states and won 61 percent of the popular vote, the largest share of any candidate since 1820.

Running on a record that included the Great Society, Johnson portrayed Goldwater as a dangerous extremist. He was aided by Goldwater’s GOP convention speech, in which the candidate proclaimed, “Extremism in the defense of liberty is no vice.”

Republicans said Obama’s tax proposal was aimed at dividing Americans along class lines and gave him an excuse to raise more money for his re-election campaign.

“He can’t run on his record so he is coming down here to raise money using taxpayers’ funds to do so,” said Rep cash advance loans. Mario Diaz-Balart, R-Fla.

In a reception at a gated community in Palm Beach Gardens, Obama said Democrats would ensure the rich pay their fair share, while focusing on investments in education, science and research and caring for the most vulnerable.

By contrast, he said, Republicans would dismantle education and clean energy programs so they can give still more tax breaks to the rich.

Obama did not mention Romney by name, but the economic fairness message was the theme of his day _ and aimed squarely at the wealthy former Massachusetts governor.

Obama later outlined his support for the so-called Buffett rule at a speech at Florida Atlantic University in Boca Raton, Fla., arguing that wealthy investors should not pay taxes at a lower rate than middle-class wage earners.

The push for the Buffett rule, named after billionaire investor Warren Buffett, comes ahead of a Senate vote next week and as millions of Americans prepare to file their income tax returns. The plan has little chance of passing Congress, but Senate Democrats say the issue underscores the need for economic fairness.

Obama was capping his day at a large rally-style event in Hollywood, Fla., that was to include a musical performance by singer John Legend, and a fundraising dinner in nearby Golden Beach, Fla.

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