Ailing telecom equipment maker Nokia Siemens Networks NSN.UL has changed its business focus to increasing its market share, the new chief executive of the venture was quoted as saying on Sunday.
“In early 2008 we made a strategic decision to focus more on cash flow and profitability than on the market share. Now it’s to give it up and to focus solely on the market share,” Rajeev Suri told Finnish daily Helsingin Sanomat.
Nokia Siemens Networks NSN.UL, a 50-50 venture of Nokia and Siemens, has struggled to make a profit since its start in 2007 as it has faced fierce competition from rivals Ericsson and Huawei HWT.UL.
As Nokia Siemens has focused on profits and avoided the deals most heavily competed for, its market share has dropped since last year, and in the last quarter it lost its second spot in the wireless equipment market to Huawei, according to research firm Dell’Oro.
(Reporting by Tarmo Virki; Editing by Clarence Fernandez)
OTTAWA–Canadians are becoming more pessimistic over the strength of the economic recovery and what it will mean for their finances and job security, a new consumer confidence survey shows.
The monthly Conference Board of Canada survey shows even as economists say they think the recession has ended, many Canadians are not so sure.
Consumer confidence normally bubbles during good times, but the November survey of 2,000 people finds that confidence dropped 5.7 points to 79, well below the readings of about 100 observed before the recession struck a year ago.
The biggest worry is over job security, not a surprising finding given that more than 400,000 workers have lost jobs in the past year, including 43,000 in October, the last month for which data is available.
The November survey found only 19.7 per cent of the respondents expected to find more jobs available over the next six months, down 3.2 points from October. As well, 25 per cent said they believe fewer jobs will be on offer, up 1.2 points.
"The outlook for future job creation remains a significant detractor to consumer confidence," the Ottawa-based think-tank said.
"This month’s results highlight just how fragile the perception of an economic recovery is at this time."
Economists are divided on the importance of consumer confidence surveys as an accurate predictor of future economic performance, with some saying the results merely serve to reflect current sentiments. But the board and some economists argue deteriorating confidence can cause individuals to hold off purchases, thereby depressing overall economic activity easy payday loans.
The latest survey does suggest that the euphoria over the end of the recession observed during the spring and summer months is giving way to a belief that true recovery, as many analysts have warned, may take years rather than months.
Gloom was spread throughout the country, with Ontario, British Columbia and Atlantic Canada registering declines in consumer confidence. B.C.’s decline was 13 points.
There were no corresponding bright spots. The other two regions – Quebec and the Prairies – registered no relevant change from the rather weak optimism of the previous month.
The survey also found more pessimism about personal finances.
Just 13.9 per cent of respondents answered positively about their current finances, down one point from October.
Asked if they thought their family’s finances would improve in the coming six months, only 27.1 per cent agreed, down 0.6 of a point.
And 25.6 per cent described their finances as worse than six months ago. Not surprisingly, their views on whether this was a good time for a major purchase fell – not a good sign for retailers during the year’s busiest shopping season.
The Canadian Press
Shares in banks, builders and companies part-owned in the Middle East fell around the world on Thursday and investors sought safety in government bonds on worries about Dubai’s ability to pay its debts.
Sterling fell as exposure focused on UK banks, and euro zone government bond futures hit their highest level since late April, breaking out of the trading range that has been in place since June as risk aversion prompted by the crisis kicked in.
“The Dubai story is weighing heavily on stock markets and people are looking to safe-havens so there’s some flight to quality again,” said Charles Berry, a trader at LBBW.
The euro broke above 91 pence for the first time in a month to hit a high of 91.29 pence.
“There are concerns regarding the extent of the exposure of the UK banks to Dubai, hence sterling is coming under pressure,” said Ian Stannard, currency strategist at BNP Paribas.
European bank shares fell over 3 percent on concern about potential exposure. Dubai said on Wednesday that two of its key firms, Nakheel and Dubai World, plan to delay repayment on billions of dollars of debt.
Companies where Middle Eastern investors own big stakes, such as the London Stock Exchange were also hit by concern the holdings could be cut to meet obligations at home.
By 1020 GMT the DJ Stoxx European bank index .SX7P was down 3.5 percent at 221.7 points.
The fall was led by HSBC, Standard Chartered, Barclays, Deutsche Bank and Royal Bank of Scotland, whose shares all fell over 4 percent.
In Seoul, shares in construction issues fell, with Samsung C&T leading losses as investor concerns focused on Dubai’s once booming construction sector.
A Samsung C&T spokesman said that the company was currently working on a $350 million project awarded by Nakheel in 2007.
“So far, we have not had any problems with the project,” he said.
Shares in Hyundai Engineering & Construction were down 4.41 percent and Samsung Engineering fell 2.16 percent as of 0458 GMT.
Nakheel’s NAKHD.UL Islamic bond prices extended losses, falling 12 points to 72, their lowest since February, according to Reuters data.
DEBT DELAY
The number of people shopping on Black Friday is expected to pick up more than 16% this year, according to a survey released Tuesday.
A staggering 57 million people said they would "definitely" head to stores on the day after Thanksgiving, up from 49 million in 2008, according to a survey by the National Retail Federation.
An additional 77 million said they would wait to decide after seeing the weekend deals.
And they could be persuaded, according to NRF president Tracy Mullin.
"Regardless of what we’ve already seen these last few weeks in terms of promotions, retailers still have a few tricks up their sleeves to excite Black Friday shoppers," Mullin said in a statement. "Americans can expect huge sales on popular items like toys, electronics and apparel."
Overall, up to 134 million people said they will shop on the Friday, Saturday or Sunday following Thanksgiving, up 6% from 128 million people the previous year.
The survey said 66.3% of consumers said they will head to department stores and 62.4% to big box stores on the day that kicks off the holiday shopping season cash advance loan. About 41.0% will shop at electronic stores, 36.3% at clothing stores, and 28.8% at grocery stores. With increased cyber deals from retailers, 27.6% said they would shop online.
A modest 10.3% said they would get to stores to scour for deals as early as midnight, according to the survey, while 28.8% said they would arrive around dawn, between 4 a.m. and 6 a.m. Another 28.2% said they would shop between 7 a.m. and 9 a.m.
Some stores are extending hours on Black Friday so consumers have more time to shop for their "doorbuster" deals.
Toys R Us announced last week it will open at midnight on Thanksgiving and offer deals 70 deals then and 50 more "doorbuster" deals at 5 a.m.
Wal-Mart (WMT, Fortune 500) also said its 810 stores that are not already open 24-hours will pull all-nighters for Black Friday.
Technology has been a driving force in this year’s initial public offerings.
Consider ChangYou.com Ltd., a Chinese online game developer whose stock price jumped 25 percent at its offering day in April on the NASDAQ. It is now up more than 100 percent from its IPO price.
The company recently had the U.S. launch of its Dragon Oath martial-arts online game, a hit in Asia for the past three years. It has three more online games scheduled for release here and is opening a subsidiary in Santa Clara, Calif.
Among the 16 other tech IPOs in 2009, price gains of better than 30 percent since their offering have been produced by SolarWinds Inc., a management and monitoring software firm; A123Systems Inc., a manufacturer of rechargeable lithium-ion batteries; and Opentable Inc., an online reservation site.
In a year of other IPO gains by familiar names such as Hyatt Hotels and Vitamin Shoppe, the average first-day IPO price "pop" has been 7 percent, and the average overall return 10 percent, according to RenaissanceCapital.com.
But don’t get the impression we’ve returned to the wild-and-crazy IPO markets of the past. Some planned IPOs haven’t even hatched and others have quickly laid an egg because investor caution rules the roost.
"Demand for IPO money continues to run off the scale, as the need for companies to access the capital markets increases," observed David Menlow, president of IPOfinancial.com in Millburn, N.J. "However, the tug of war is between the comfort level of potential investors and the need for capital for these companies."
Investors are wary of debt-laden companies put on the IPO block by private-equity firms. An example is the Dole Food Co. IPO that was priced at the low end of its expected range, closed lower on its offering day in October and has since declined.
Rather than focus on one market sector, an investor should examine each IPO carefully to see if it makes sense, Menlow advised. Years ago, investors couldn’t care less what an IPO did because they just wanted in on the deal, resulting in "a lot of dogs with fleas" among those IPOs, he said.
"We’re in the last stage of a double-dip recession and starting to see some rays of sunshine in the IPO market," said Linda Killian, portfolio manager of IPO Plus Aftermarket Fund in Greenwich, Conn., up 16 percent over the past 12 months. "The IPOs that have come to market have been priced to sell."
Getting the 2009 IPO market off on the right foot was Mead Johnson Nutrition Co., a quality spin-off from Bristol-Myers Squibb Co. whose IPO was priced right, Killian noted. When that success was followed by Rosetta Stone Inc instant payday loan., another viable growth company, other firms were enticed to come to market, too.
IPO Plus Aftermarket Fund, which requires a $5,000 initial investment, buys a portfolio of IPO stocks at the time of the offering and in their subsequent aftermarket trading. The largest of the fund’s 23 holdings were recently Visa Inc., Constant Contact Inc., Athena Health Inc., Mead Johnson and Rackspace Hosting Inc.
"Individual investors can look for good IPOs that have traded down since they were offered," said Killian. "For instance, RailAmerica Inc. is below its IPO price and, although leveraged, is a well-run regional freight railroad operating in 27 states and part of Canada that has fared well in the economic downturn."
Institutional investors still drive the overall IPO market, since only select investors at full-service brokers typically get the opportunity to invest in IPOs. Most average investors invest in IPOs on the secondary market after their initial price pop. IPO Plus Aftermarket Fund is another way of doing that.
"The overall stock market is driving the IPO market, which is playing catch-up," explained John Fitzgibbon, founder of IPOScoop.com in Edison, N.J. "The IPO market is a follower, not a leader, and you must have a good stock market in order to get a good IPO market."
Among financial IPOs, Cypress Sharpridge Investments Inc. and Invesco Mortgage Capital Inc. have made gains, pointed out Fitzgibbon, but "the rest are underwater." Some real estate investment trusts also attempted to sweep up toxic assets into IPOs to get rid of them, but those IPOs have stumbled, he said.
"I always keep an eye on the initial IPO filing versus the final filing, since an increase indicates excessive demand and therefore likely good aftermarket performance," he said.
Rue21 Inc., a fast-growing specialty retailer for young women and men whose recent IPO was priced above its expected range and ended its offering day up 28 percent, is "a barn-burner," believes Fitzgibbon. It has had rapid growth and rising profits while displaying ability to predict fads, he said.
He is less enthusiastic about Dollar General Corp., the largest retail-store IPO in more than a dozen years, because it was loaded with debt by Kolberg Kravis Roberts and "pushed out the door as an IPO." But even though that IPO was priced at the low end of its expected range, it has since risen in price based on current investor confidence in discount retailer prospects.
The Toronto stock market closed slightly lower Friday, pressured by falling energy stocks as demand concerns and a rising U.S. dollar pushed crude prices down.
The S&P/TSX composite index shed 20.97 points to 11,579.33, down for a second day on another rising tide of concern about whether the market has advanced too quickly relative to the strength of the economic rebound.
"Investors seem to need a constant reassurance with where we are in the economic recovery," said Brett D'Arcy, chief investment officer at CBIZ Wealth Management Group in San Diego.
"We just haven't gotten it in the past few days."
But the market advanced 171.65 points or 1.5 per cent this week on the way to a solid gain for November after a short-lived spell of pessimism sent the TSX down about four per cent for October.
"We're going to get periods of consolidation and the markets aren't going to go straight up," said Colin Cieszynski, market analyst at CMC Markets Canada.
"To have consolidations from time to time are not unheard of and, to be honest, they're healthy for the markets. You don't want to see the markets going straight up all the time."
The Canadian dollar was down 0.56 of a cent to 93.47 cents US as Federal Finance Minister Jim Flaherty said the Conservative government doesn't plan to undertake major new spending initiatives in next year's budget. Rather, it will continue with the $61 billion in stimulus spending announced in January.
There was also disappointment surrounding the latest earnings report from computer maker Dell Inc. The company said Thursday that its net income dropped 54 per cent to US$337 million in the latest quarter amid signs the company isn't fully benefiting from the computer industry's fledgling recovery.
Dell's numbers missed Wall Street's forecasts. However, it said it is seeing improvement in some areas even as it repeated an earlier prediction that a meaningful rebound in technology spending by businesses won't come until next year. Its stock was down $1.58 or 9.96 per cent to US$14.29.
The Toronto energy sector was down 0.67 per cent as oil moved lower for a second day. The December crude contract on the New York Mercantile Exchange dropped 74 cents to US$76.72 a barrel. Canadian Oil Sands Trust (TSX: COS.UN) declined 64 cents to $29.55.
The gold sector was off 0.54 per cent even as the December contract on the Nymex closed up $4.90 to a record US$1,146.80 an ounce. Kinross Gold (TSX: K) faded 32 cents to $20.39.
The base metals sector was down 0.37 per cent as the December copper contract rose 2.7 cents to US$3.108 a pound. HudBay Minerals (TSX: HBM) lost 46 cents to C$15.23.
The TSX tech sector was the biggest gainer, up 0.72 per cent with Research In Motion Ltd. (TSX: RIM) advancing 95 cents to $63.66.
The TSX Venture Exchange added 7.12 points to 1,408.06.
New York markers were also weak as demand for safe havens rose following Dell's report and as European Central Bank president Jean-Claude Trichet said the ECB plans to start reining in some of its stimulus programs. Hiking borrowing rates could help keep inflation in check but could also slow improvement in the economy.
Investors seeking safety pushed into the U.S. dollar. A strengthening dollar curtails foreign demand for commodities, which are traded in dollars. It also can depress U.S. exports, which become more expensive as the dollar rises.
The Dow Jones industrial average closed down 14.28 points to 10,318.16 but gained a slight 47.69 points for the week.
The Nasdaq composite index lost 10.78 points to 2,146.04 and the S&P 500 was off 3.52 points to 1,091.38.
American homebuilder D.R. Horton Inc. also was a letdown as it reported that its fiscal fourth-quarter loss narrowed as it took smaller writedowns on its inventory. Even as its losses shrank, revenue fell 42 per cent as the housing market remained unsteady and its shares dropped $1.88 or 15.35 per cent to US$10.37.
In other corporate news, Agrium Inc.'s (TSX: AGU) reluctant U.S. takeover target, CF Industries Holdings Inc. (NYSE: CF), made headway in a hostile bid of its own Friday, installing its nominees on the board of Terra Industries Inc. (NYSE: TRA). CF's efforts to buy out its U.S. rival for US$4.1-billion have been met with resistance from Terra's board and management since January.
Agrium, the Calgary-based fertilizer giant, has been doggedly trying to buy CF since February, making its nearly US$5-billion offer conditional on CF dropping its pursuit of Terra. Agrium shares were up 37 cents at $61.13.
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said Chinese growth is likely to be hurt by an absence of consumer demand from trading partners such as the U.S.
“The Chinese, I suspect, will have a bubble of their own to confront,” Gross said in a Bloomberg Television interview yesterday from Pimco’s headquarters in Newport Beach, California. “It’s gearing up for export that doesn’t find an end consumer, that’s the real problem in China.”
The “systemic risk” of new asset bubbles in global economies and markets is rising with the Federal Reserve keeping interest rates at record lows, Gross wrote in his December investment outlook posted on Pimco’s Web site yesterday. Under what Pimco has termed the “new normal,” investors should be prepared for lower-than-average historical returns with heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy.
“With unemployment in the double digits and likely to stay close to that for the next six months despite job creation ahead, the Fed has nowhere to go,” Gross, co-founder and co- chief investment officer of Pimco, said on Bloomberg Television.
Fed Chairman Ben S. Bernanke said after a Nov. 16 speech in New York that it’s “not obvious” that asset prices in the U.S. are out of line with underlying values after a 64 percent jump in the Standard & Poor’s 500 Index from its March low.
Negative Rates
Treasury three-month bill rates turned negative yesterday for the first time since financial markets froze last year on concern that the rally in higher-yielding assets has outpaced the prospects for economic growth. The two-year note yield touched 0.68 percent, the least since Dec. 19.
The Fed cut its target rate for overnight lending between banks to a range of zero to 0.25 percent in December. Policy makers reiterated on Nov. 4 that they intended to keep the rate at the record low for an extended period.
The “heavy lifting” will likely be done first by other central banks such as those in Australia and Norway that have already begun to increase interest rates, Gross wrote cashadvance.
“China may abandon its dollar peg within six months’ time and with it, its own easy monetary policy that has fostered more significant mini-bubbles of lending and asset appreciation on the Chinese mainland,” he added.
China’s Currency
China has kept its currency at about 6.83 per dollar since July 2008 to help sustain exports amid a global economic slump.
China’s trade surplus in October almost doubled from the previous month, to $24 billion. The nation, with the world’s largest foreign-exchange reserves of $2.3 trillion, is the biggest creditor to the U.S., holding $798.9 billion of Treasuries as of September.
“With renewed upward appreciation of the yuan may come potentially volatile global asset price reactions to the downside — higher Treasury yields, and lower stock prices — which the Fed must surely be leery of before making any upward move, of its own,” Gross wrote.
The U.S. economy grew in the third quarter for the first time in more than a year as gross domestic product increased 3.5 percent from July through September after shrinking the previous four quarters, a Commerce Department report showed on Oct. 29.
Gross advised following the lead of billionaire investor Warren Buffett on buying utilities because their earnings growth will mimic U.S. economic growth and provide steady dividend income. Buffett’s Berkshire Hathaway Inc. agreed this month to take over Burlington Northern Santa Fe Corp., the No. 1 U.S. railroad, for $26 billion.
Fund Returns
The Total Return Fund managed by Gross boosted its investment in Treasuries, so-called agency debt and other government-linked bonds to 48 percent of assets in September from 44 percent in August, according to Pimco’s Web site. The holdings were the most since August 2004.
The $192.56 billion Total Return Fund returned 18.29 percent in the past year, beating 54 percent of its peers, according to data compiled by Bloomberg. The one-month return is 1.11 percent, outpacing 59 percent of its competitors. Pimco is a unit of Munich-based insurer Allianz SE.
Stocks recovered from early losses Tuesday, closing at 13-month highs for the second day in a row, as strength in commodity-linked shares offset weakness in the retail sector.
The Dow Jones industrial average (INDU) rose about 30 points, or 0.3%, to close at 10,437.42. The S&P 500 (SPX) gained 1 point to close above the key 1,100 level. The Nasdaq composite (COMP) advanced 0.3% to end at 2,203.78.
All three indexes are at their highest levels since October 2008.
Stocks opened lower and struggled for most of the day as the dollar regained ground against rival currencies, reflecting a decreased appetite for risky assets.
The tone improved in the last few hours of trading as oil and gold prices reversed direction. Oil closed above $79 a barrel, while gold edged up to settle at a fresh all-time high.
The rebound in commodity prices boosted shares of energy and materials companies. But gains were limited by weakness in the retail sector after Home Depot and Target offered cautious earnings outlooks.
Tuesday’s economic news was mixed. Government data showed inflation at the wholesale level remains subdued, while industrial production was weaker than expected in October.
Ryan Larson, senior equity trader at Voyager Asset Management, said the stock market continues to look to the dollar for direction.
"The main story has been the dollar trade," he said. "When the dollar is weak, investors take on more risk. If it’s strong, they take the risk off."
The dollar has wallowed near a 15-month low against rival currencies in recent weeks as investors take advantage of U.S. interest rates near zero percent to fund bets in more risky stock and commodities markets.
However, after pushing the major indexes up some 30% from the lows of early March, investors have become wary of placing big bets as the economic outlook remains cloudy.
"The economy is growing, but shows a loss of momentum given the recent round of economic and corporate data," said Nick Kalivas, vice president of financial research at MF Global.
Investors will digest reports on consumer prices and initial construction of new homes Wednesday morning. Later in the week, the government will report on the number of Americans filing first-time claims for unemployment benefits.
Stocks rallied Monday as investors bet on the weak dollar and Federal Reserve Chairman Ben Bernanke said interest rates will remain low amid a slow recovery.
Economy: The government reported that the Producer Price Index, the key measure of inflation for manufacturers, edged up 0 cash till payday.3% in October. Core PPI, which excludes volatile food and energy prices, fell 0.6%.
The PPI was expected to have risen 0.5% for the month, according to a consensus of economist opinion from Briefing.com. The core was expected to have edged up 0.1% in October.
Before the start of market trading, the government also reported that industrial production rose 0.1% last month versus a forecasted 0.4% increase. In September, production rose 0.7%. Capacity utilization rose by 0.2 percentage point to 70.7%, a rate slightly below economists’ expectations for 70.8%.
Companies: Home Depot (HD, Fortune 500) reported a decline in third-quarter earnings to 41 cents per share from 45 cents in the year-ago quarter. While the results were better than 36 cent per share profit that analysts had expected, the company said it expects earnings for the full year to be down 13%.
Discount retailer Target (TGT, Fortune 500) reported an 18% increase in third-quarter profit, helped by gains in the company’s credit card portfolio. But Target, which had suffered declining profits for the last eight quarters, remained cautious about the outlook for holiday spending.
TJX (TJX, Fortune 500), which owns the T.J. Maxx and Marshalls chains, reported a larger-than-expected quarterly profit on increased consumer demand for discount products. The company said it expects profit from continuing operations of 65 cents to 71 cents per share in the fourth quarter. Analysts surveyed by Thomson Reuters are forecasting a profit of 71 cents per share in the fourth-quarter.
On the higher end, Saks (SKS) reported a quarterly profit, surprising analysts who were expecting the company to report a loss. However, the results were driven mostly by cost-cutting, and the company offered a cautious outlook.
International markets: The Nikkei and the Hang Seng each closed lower by a fraction of a percent. European markets ended with losses of less than 1%.
Other markets: Treasury prices rose, with the yield on the 10-year note falling to 3.33%.
The weak dollar recovered a little Tuesday. The dollar index, which measures the U.S. currency against a basket of rivals, was up 0.7% to 75.38 from 74.92.
Oil prices rose 24 cents to settle at $79.14 barrel in New York.
The price of gold closed at an all-time high of $1,139.40 an ounce, up 20 cents from Monday’s record close of $1,139.80.
Federal Reserve Bank of San Francisco President Janet Yellen said it’s “far from clear” whether the Fed should use interest rates to stem a surge in financial leverage, and urged further research into the issue.
“Higher rates than called for based on purely macroeconomic conditions may help forestall a potentially damaging buildup of leverage and an asset-price boom,” Yellen said in the text of a speech today in Hong Kong. At the same time, “use of monetary policy for these ends necessarily compromises the attainment of other macroeconomic goals,” she said.
Yellen’s remarks come just as debate rises over whether the Fed’s current commitment to keep rates low for an “extended” period may be fueling rising asset prices in Asia. While officials from China, Hong Kong and Japan said in the past week that the stance is spurring speculative capital, Fed Chairman Ben S. Bernanke said yesterday it’s “not obvious” there’s a bubble in the U.S.
“Further research into the connections among monetary policy, the banking and financial sectors, and systemic risk is needed to help answer this question,” Yellen, a voting member of the rate-setting Federal Open Market Committee this year, said in her remarks, referring to whether to use rates to influence asset prices.
The San Francisco Fed chief also endorsed the idea of making banks hold more capital than otherwise during economic expansions, for use when recessions hit. She said that “one promising strategy is to implement a system that would require banking organizations to build capital buffers in good times that could be run down under stressful conditions.”
Bernanke on Economy
Yellen didn’t comment on the outlook for economic growth or rate policy in her remarks at the event organized by The Institute of Regulation & Risk. Bernanke said yesterday that reduced bank lending and “high” unemployment are likely to restrain the recovery, warranting continued low borrowing costs one hour payday loans.
The FOMC pledged after a Nov. 3-4 meeting to keep the benchmark interest rate near zero for an “extended period.”
The central bank’s injection of more than $1 trillion in liquidity has helped end the U.S. economy’s contraction, pushing up stock prices. The effort has narrowed the Libor-OIS spread, which measures banks’ reluctance to lend, to levels not seen since 2007. The Standard & Poor’s 500 Index is up 64 percent from its low for the year on March 9.
China’s Liu
Liu Mingkang, chairman of the China Banking Regulatory Commission, said in Beijing Nov. 15 that the American rate stance and falling dollar has led to “massive” speculation. Donald Tsang, the chief executive of Hong Kong, said Nov. 13 in Singapore “I’m scared and leaders should look out.”
Emerging economies “might overheat and experience financial turmoil,” Bank of Japan Governor Masaaki Shirakawa said in Tokyo yesterday.
Bernanke, by contrast, said in response to audience questions after a speech in New York that “it’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system.”
Fed Vice Chairman Donald Kohn, speaking yesterday at Northwestern University in Evanston, Illinois, also said low rates don’t appear to be fueling another bubble in U.S. financial markets.
Yellen, 63, previously served as a Fed governor and was White House Council of Economic Advisers chief in the Clinton administration. Yellen has led the San Francisco Fed since 2004.
The financial crisis, which began with the collapse of the U.S. subprime-lending market in 2007, has resulted in more than $1.6 trillion in writedowns and losses by banks and other financial institutions worldwide.
U.S. President Barack Obama said on Sunday the world economy was on a path to recovery but warned that failure to re-balance the global economic system would lead to further crises.
Obama was addressing Asia Pacific leaders in Singapore, where officials removed any reference to market-oriented exchange rates in a communique after disagreement between Washington and Beijing over the most sensitive topic between the two giants.
The statement from the Asia Pacific Economic Cooperation (APEC) forum endorsed stimulus measures to keep the global economy from sliding back into recession and urged a successful conclusion to the Doha Round of trade talks in 2010.
An earlier draft pledged APEC’s 21 members to maintain “market-oriented exchange rates that reflect underlying economic fundamentals.”
That statement had been agreed at a meeting of APEC finance ministers on Thursday, including China, although it made no reference to the Chinese yuan currency.
An APEC delegation official who declined to be identified said debate between China and the United States over exchange rates had held up the statement at the end of two days of talks.
That underscored strains likely to feature when Obama flies to China later on Sunday after Washington for the first time slapped duties on Chinese-made tires.
Beijing fears that could set a precedent for more duties on Chinese goods that are gaining market share in the United States.
Obama told APEC leaders the world could not return to the same cycles of boom and bust that sparked the global recession.
“We cannot follow the same policies that led to such imbalanced growth. If we do, we will continue to drift from crisis to crisis, a failed path that has already had devastating consequences for our citizens, our businesses, and our governments,” Obama said.
“We have reached one of those rare inflection points in history where we have the opportunity to take a different path — to pursue a new strategy for jobs and growth. Growth that is balanced. Growth that is sustainable.”
Obama’s strategy calls for America to save more, spend less, reform its financial system and cut its deficits and borrowing. Washington also wants key exporters such as China to boost domestic demand.
YUAN ON THE AGENDA Chinese President Hu Jintao has been under pressure to let the yuan appreciate, but in several speeches at APEC he ignored the issue and focused instead on what he called “unreasonable” trade restrictions on developing countries.
One of the key themes when Obama visits China for three days will be the yuan, which has effectively been pegged against the dollar since mid-2008 to cushion its economy from the downturn.
Washington says an undervalued yuan is contributing to imbalances between the United States and the world’s third-biggest economy. China is pushing for U.S. recognition as a market economy and concessions on trade cases that would make it harder for Washington to take action against Chinese products.
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