Reserve Bank of Australia policy makers said they raised interest rates this month to counter an expected rise in inflation as strengthening mining investment, employment and trade propel the nation’s economy.
“The board judged that the balance of risks had shifted to the point where a modest tightening of monetary policy was prudent,” the RBA said in minutes of its Nov. 2 meeting released in Sydney today. The RBA increased its benchmark interest rate at that meeting to 4.75 percent after a five-month pause.
Surging shipments of iron ore, coal and energy to China are boosting Australia’s growth, prompting companies such as BG Group Plc to increase investment and hiring. A report last week showed the nation’s employers added workers in October for an eighth consecutive month and the participation rate in the labor force surged to a record.
“A gradual upward trend in inflation remained likely over the medium term,” policy makers said in the minutes. “If monetary policy was to be conducted in a forward-looking way, these developments meant there was a case for increasing interest rates at the current meeting.”
Governor Glenn Stevens has raised the RBA’s overnight cash rate target seven times since October 2009, in contrast with the U.S. Federal Reserve’s policy of a benchmark rate near zero since December 2008. That divergence has contributed to a 9.7 percent increase in the local dollar versus the U.S. currency this year, the second-best performer among the 16 major currencies.
The Australian dollar surged this month to the highest level since exchange controls were removed in 1983, reaching $1.0183 on Nov. 5.
Currency Effects
Policy makers said that while the stronger currency was affecting industries including tourism, surveys indicated that conditions for the nation’s manufacturers were “around average.” That partly reflected the benefits of cheaper imported capital equipment and components, according to the minutes.
In the minutes, the central bank said that while this month’s decision to increase rates was also “finely balanced,” some of the uncertainties that were a reason to keep borrowing costs steady, including risks to the global economy, “had lessened recently.”
Policy makers noted the possibility that the nation’s banks would boost rates on loans by more than the move in the benchmark rate, while saying that “this tendency would not be lessened by delaying a change in the cash rate,” the minutes showed.
Banks’ Increases
Westpac Banking Corp. and National Australia Bank Ltd. last week announced increases to their standard variable home-loan rates, following Australia & New Zealand Banking Group Ltd. and Commonwealth Bank of Australia. All boosted borrowing costs by more than the quarter percentage-point rise in the RBA cash rate.
RBA policy makers aim to keep inflation within a target range of 2 percent to 3 percent. While the rate slowed to 2.8 percent in the third quarter, a monthly gauge compiled by TD Securities Ltd. and released Nov. 1 showed an annual jump in consumer prices of 3.8 percent for October.
“While inflation had moderated, it was likely that the decline was now largely complete,” the minutes said today. “Inflation was expected to remain around the current level for several quarters, but was likely to move higher thereafter.”
The RBA, in a quarterly report on Nov. 5, reiterated its forecast that economic growth will strengthen to 3.75 percent by the end of 2011, climbing to 4 percent by the end of 2012. Consumer prices will rise 2.75 percent through June 2012; previously, the RBA had estimated inflation of 3.25 percent through mid-2011.
Job Growth
A report last week showed Australian employers added 29,700 workers from September, almost 50 percent more than the median forecast for a 20,000 increase in a Bloomberg News survey of 24 economists. The unemployment rate rose to 5.4 percent in October, a six-month high as the participation rate in the labor force surged to a record.
BG Group, a U.K.-based energy company, said last month it will begin work on a $15 billion liquefied natural gas venture in Queensland, generating 5,000 construction jobs.
Even so, policy makers said in the minutes that Australian consumers, whose spending accounts for more than half of gross domestic product, remained cautious.
Home-building approvals and retail sales were weaker than economists forecast in September, and house-price gains decelerated in the third quarter, reports published this month showed. Consumer confidence declined in November to a five-month low, according to a survey released last week.
Traders in futures contracts are betting on a 6 percent chance the RBA will boost its key rate by a quarter point to 5 percent next month, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange before the minutes were released.
A longtime hot spot that helped set the stage for the development of the Seventh Avenue retail corridor has closed its doors.
My Florist Cafe, at 530 W. McDowell Road, was closed as of Friday. Its phone number was disconnected.
The Ventura, Calif., location remains open. An employee there said each location operated independently, and he didn't know what had happened to the Phoenix restaurant.
The Phoenix restaurant, which sits on the corner of Seventh Avenue and McDowell, was one of the first independent shops to locate along the Seventh Avenue curve. Pei Wei, Starbucks, Zoe’s, a number of antique shops, Flo’s on Seventh, the Wag N’ Wash and Copper Star coffee are among the retailers that conduct business there.
According to the National Restaurant Association, the industry has been hit especially hard by the recession as consumers cut back on discretionary spending. Consumers also are opting for cheaper alternatives when they go out to eat, an industry practice known as “trading down.”
Independents aren’t the only ones being hit. Other restaurants that have recently announced closures include two national chains, Lone Star Steakhouse and Jack in the Box.
NRA figures show 44 percent of restaurant operators reported negative same-store sales for the fourth consecutive month in July, and 46 percent reported a decline in traffic — up from 43 percent in June.
An index used by NRA, compiled through a confidential monthly survey of its members, reflected a decline in the outlook of restaurateurs, who expect the economy to remain challenging.
Restaurant sales are expected to hit $580 billion nationwide and $8.6 billion in Arizona this year. There are almost 9,000 eating establishments in this state, employing more than 250,000 people.
The 3PAR bidding war finally came to its conclusion Thursday after Dell conceded victory to Hewlett-Packard.
The winning bid was HP’s offer of $33 a share, or $2.1 billion — a stunning 242% premium over the value of 3PAR’s stock before the bidding war between Dell and HP began on Aug. 16.
That was too rich for Dell’s blood, the company said.
"We took a measured approach throughout the process and have decided to end these discussions," Dave Johnson, Dell’s senior vice president of corporate strategy, said in a prepared statement.
3PAR had previously notified Dell that it would go with HP’s offer of $30 a share, made Aug. 27, but Dell came back with a revised offer of $32 a share. HP then topped that offer with a bid of $33 a share, or $2.1 billion, 3PAR said Thursday.
Dell had three days to match or improve upon HP’s bid, but it opted instead to end its pursuit. 3PAR now owes Dell a $72 million breakup fee to terminate its earlier agreement with Dell.
Dell attempted to negotiate a higher termination fee of $92 million in its latest bid, but 3PAR actually never accepted that offer, calling some of its terms "unacceptable."
The latest offers represented the eighth and ninth bids for 3PAR between the two tech giants. Dell’s first bid, for $18, came three weeks ago, kicking off a fierce bidding war.
Dell and HP had both sought out 3PAR for its portfolio of high-end data storage technology, which is a necessary component of the high-growth cloud computing business. Cloud computing enables companies to remotely access applications stored and managed in off-site data centers. The process is cheaper and more efficient than traditional models.
Both Dell and HP license others’ technology for their cloud computing offerings. They saw 3PAR as a relatively cheap acquisition and the easiest way into a high-growth business. But the company quickly grew much more expensive.
Shares of HP (HPQ, Fortune 500) rose 1%, and Dell’s (DELL, Fortune 500) stock also rose 1% after falling earlier in the day. Shares of 3PAR (PAR) rose 2% to $32.83 after rising as high as $33.84 Thursday morning.
More children are crowding into classrooms in Modesto, Calif. Parents are paying extra to send their kids to full-day kindergarten in Queen Creek, Ariz. And the school buses stopped rolling in one St. Louis area school district.
These are but a few of the unwelcome changes greeting children as they start the school year. Tight fiscal times are forcing school districts to lay off teachers, enlarge class sizes, cut programs and charge for services that were once free.
"School districts are going to be stripped down from what there were a few years ago," said Jack Jennings, head of the Center on Education Policy, an advocacy group. "They are really feeling the economic squeeze."
The national economic downturn has sucked state coffers dry, forcing cuts to school districts and municipalities. The Obama administration’s stimulus package softened the impact, but many districts still found themselves having to downsize.
"Every student is being affected in some way or another," said Dan Domenech, executive director of the America Association of School Administrators.
Teachers are experiencing the brunt of the budget cuts this year, even though Congress last week gave states an additional $10 billion to keep an estimated 140,000 educators and support staff employed.
Still, the number of teachers who won’t have a job this school year could be as high as 135,000, experts said.
While grateful for the federal funds, school officials are not sure they will be able to use it to bring back many teachers this year. Many states have yet to say how they will distribute the money and many districts have already started or set up their class schedules.
Some plan to use it to hire tutors, counselors and non-core classroom educators such as art and music teachers. But others say they may hold onto the money until the next school year, when the last of the stimulus money is set to disappear.
"We’re all looking ahead over the next couple of years and not seeing any respite," said Chris Nicastro, Missouri’s commissioner of education.
More kindergarteners per class
The great wave of layoffs means students will have to share their classrooms — and their teachers’ attention — with more of their peers.
In California, for instance, state education officials have approved 23 requests from local districts to increase their average class sizes beyond the maximum allowed. At least 33 more are scheduled to be reviewed in coming months.
This is quite a change from the previous decade, when the state received no requests.
"It’s rising exponentially," said Judy Pinegar, manager of the waiver office at the California Department of Education.
Facing a $25 million budget gap for this year, Modesto City Schools district officials decided to raise the average class size in kindergarten through third grade to 25 kids, up from 20.
The school district was initially looking to lay off one-third of its teachers, or 500 people personal loan for poor credit. But after educators agreed to give up their raises and some retired, only 50 teachers were not rehired for this school year.
Still, the larger class sizes will have an impact, said Megan Gowans, executive director of the Modesto Teachers Association.
"Students are going to feel that they are getting less one-on-one attention," she said.
Neighboring Sylvan Union School District now has elementary school classes with up to 34 students in them. That’s 12 more than the average size last year. The elementary schools now only have one librarian and no dedicated art teachers, when there used to be four of each. In all, there are 19 fewer educators on staff, said Superintendent John Halverson.
The district has gone so far to combine several grades, teaching kindergarten and first graders and first and second graders together for the first time in recent memory.
These moves allow school officials to keep some classrooms dark, helping close a $5 million gap in its $60 million budget. But the changes won’t go unnoticed.
"I can’t say it won’t have an impact because I think it will," said Halverson, who has been in the California school system for 33 years.
Paying for programs
Elsewhere in the nation, school districts have cut back on programs and services or are charging for them.
Take Queen Creek, a small town 38 miles southeast of Phoenix. When the state cut funding for full-day kindergarten programs, Queen Creek took a $900,000 hit, but decided to continue offering it…at a price. Parents have to pay $200 a month to enroll their 5-year-olds.
"Our community was used to having it," said Shari Zara, the district’s chief financial officer. "We thought we’d still offer it for those who could pay."
Some 122 kids signed up for the extended program, while another 216 are in the free half-day class. Charging tuition spared the district from having to cut teachers or programs, Zara said.
Busing is another area that has taken a hit in scores of districts.
In the Bayless school district in the St. Louis area, for example, the board and administrators decided to eliminate bus service instead of laying off staff and raising class sizes beyond the current 25 to 30 per room. The decision affects about 650 of the district’s 1,650 students and saves $240,000 a year, said John Stewart, chief financial officer.
Getting rid of transportation helped close the roughly $650,000 gap in the district’s $14 million budget. Employees also agreed to pay more toward their health insurance.
"We wanted to impact the classroom and educational process as little as possible," Stewart said.
The global economy grew at a stronger-than-expected pace in the first six months of the year, but the risks to recovery have greatly increased, according to the International Monetary Fund.
In an update of its World Economic Outlook, released Wednesday, the IMF raised its growth forecast for 2010 to 4.6% from the 4.2% estimate it made in April.
However, the international organization warned that the risks to recovery have "risen sharply" due to renewed financial turbulence.
It left its 2011 forecast for world growth unchanged at 4.3%.
The IMF said world economic growth exceeded forecasts in the first half of the year, largely driven by expansion in Asia.
But looking ahead, it offered a more dour view no fax payday advance.
It cautioned that "recent turbulence in financial markets - reflecting a drop in confidence about fiscal sustainability, policy response, and future growth prospects - has cast a cloud over the outlook."
For 2011, the IMF sees cooling growth in China to 9.6% from 10.5% this year.
In the United States, it predicts growth will slow to 2.9% next year from 3.3% in 2010.
It forecasts a slight improvement, though, in Europe. The IMF expects the euro area economy to grow 1.3% next year after expanding a mere 1% this year.
Moody’s Investors Service cut BP’s long-term rating by three notches Friday, marking the second downgrade in a month, citing the worsening impact of the oil disaster.
Moody’s cut BP’s senior unsecured ratings and long-term debt securities to A2 from Aa2 and said there could be further downgrades as it continues to review BP’s ratings.
"Moody’s update assessment is that the spill will have a sustained negative impact on the group’s free cash flow generation and overall financial profile for a number of years," said the rating agency in a statement.
Also on Friday, Moody’s downgraded the senior unsecured issuer rating of BP Finance by three notches to A3 from Aa3 and the senior unsecured issuer rating of BP Corporation North America by four notches to Baa1 from Aa3.
The rating agency had downgraded BP once before, on June 3. On that same day, Fitch Ratings also announced a downgrade of the oil giant. Since then, Fitch announced a second downgrade to just above junk status.
Moody’s referred to the BP’s agreement to set up a $20 billion escrow to cover damages and liabilities related to the spill as a "mildly positive development."
"Establishing a clear funding mechanism to make payments to injured parties may moderate pressure for the government to pursue more punitive actions," said Moody’s.
BP (BP) owns 65% of the well that is spilling up to 60,000 barrels per day in the Gulf, according to government estimates. The problem has been ongoing since April 20, when the Deepwater Horizon offshore rig, which is owned by Transocean (RIG) and leased by BP, exploded and sank, killing 11 workers.
Since then, BP has been unable to plug the leak. The company’s chief executive, Tony Hayward, was subjected to blistering Congressional testimony on Capitol Hill Thursday, where he was accused of "stonewalling."
BP’s stock has plunged 47% since the accident by Thursday’s close. The company was not immediately available for comment. Under pressure from the government, BP has canceled its dividend for the rest of the year.
The company was not immediately available for comment.
US Airways Group Inc. said Thursday it ended merger talks with United Airlines, the biggest carrier at San Francisco’s airport.
A union of the two companies would have would have created a carrier nearly as big as Delta Air Lines Inc., the nation’s biggest airline.
“It remains our belief that consolidation makes sense in an industry as fragmented as ours,” said Chairman and CEO Doug Parker. “Whether we participate or not, consolidation that leads to a more efficient industry better able to withstand economic volatility, global competition and the cyclical nature of our industry is a positive outcome.”
Parker, in his prepared statement, did not discuss why talks ended. But media reports indicate UAL Corp., United Airline’s parent, is considering a merger with Continental Airlines.
United Airlines accounts for one-third of the flights at San Francisco International Airport.
U.S. foreclosure filings rose 15 percent in January from a year earlier and exceeded 300,000 for the 11th consecutive month as modification programs failed to keep delinquent borrowers in their homes, RealtyTrac Inc. said.
A total of 315,716 properties received a notice of default, auction or bank seizure last month, or one in 409 households, the Irvine, California-based seller of default data said today in a statement. Filings fell 10 percent from December.
Bank seizures, also known as real-estate-owned or REOs, may rise to a record 3 million this year, RealtyTrac said last month. About 66,000 delinquent loans out of a targeted 4 million by 2012 were permanently modified as of Dec. 31 under the Obama administration’s Home Affordable Modification Program, according to the Treasury Department. About 787,000 mortgages are in trial programs that change loan terms, the Treasury said Jan. 19.
“It’s almost inevitable that modifications will fail,” Michelle Meyer, New York-based U.S. economist for Barclays Capital Inc., said in an interview. “Over the next several months, we should see REOs increase at an accelerated pace.”
Foreclosure filings also fell in January of last year from December, only to rise in subsequent months, RealtyTrac said.
“If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works,” James J. Saccacio, RealtyTrac’s chief executive officer, said in the statement.
Negative Equity
Unemployment and negative equity, where homeowners owe more than their properties are worth, are adding to the foreclosure total, said Stan Humphries, chief economist at Zillow.com. More than a fifth of U.S. homeowners had negative equity in the fourth quarter, the Seattle-based real estate data provider said yesterday in a report.
“It’s tough to come up with a program that works for unemployment-related foreclosures where the owner can’t pay, or for rate resets where the owner is way underwater,” Rick Sharga, RealtyTrac’s executive vice president for marketing, said in an interview yesterday.
The jobless rate unexpectedly fell to 9.7 percent in January, and payrolls dropped by 20,000, the Labor Department said Feb. 5 in separate reports. About 8.4 million jobs have been lost since the recession began in December 2007, with more than 4 million cut since Obama took office in January 2009.
Home Sales
Sales of existing U payday loans.S. homes rose 14 percent in the fourth quarter from the third while the median price fell 4.1 percent from a year earlier, the Chicago-based National Association of Realtors said today. The sales gain may not last when government support for housing, including the Federal Reserve’s $1.25 trillion purchase of mortgage bonds and a first-time buyer tax credit, ends as scheduled in the spring, Humphries said.
January’s total filings were down 12 percent from the July peak, according to RealtyTrac. Bank seizures climbed 31 percent from a year earlier, default notices rose 4 percent and scheduled auctions increased 15 percent.
Nevada had the highest foreclosure rate for the 37th straight month, with one in 95 households receiving a filing in January. Total filings in the state fell 18 percent from a year earlier to 11,854.
Arizona ranked second, with filings for one in 129 households. The rate for both California and Florida was one in 187 households, RealtyTrac said.
Utah, Idaho, Michigan, Illinois, Oregon and Georgia rounded out the 10 highest foreclosure rates.
California Filings
California had the most filings with 71,817, down 6.4 percent from a year earlier. Florida followed with 47,069, up 15 percent, and Arizona was third at 21,048, up 43 percent. The three states accounted for 44 percent of the U.S. total.
Illinois was fourth with 18,120 filings, up 25 percent from January 2009. Michigan ranked fifth with 17,574, up 54 percent. Texas, Nevada, Georgia, Ohio and New Jersey completed the 10 states with the most filings, RealtyTrac said.
Filings increased 23 percent from a year earlier to 6,146 in New Jersey. They rose 34 percent to 2,218 in Connecticut, and jumped 31 percent to 4,569 in New York.
Las Vegas had the highest foreclosure rate for cities with a population of more than 200,000. One in 82 households there got a filing, a 21 percent decrease from a year earlier.
Phoenix was second among the biggest cities at one in 102 households. Six California cities ranked third through eighth: Modesto, Stockton, Riverside-San Bernardino, Merced, Vallejo- Fairfield and Bakersfield, according to RealtyTrac.
Cape Coral-Fort Myers and Orlando-Kissimmee in Florida were ninth and 10th respectively, said RealtyTrac, which sells default data collected from more than 2,200 counties representing 90 percent of the U.S. population.
Missouri may have given birth to “Mad Men” star Jon Hamm and Grammy-winning singer Sheryl Crow but the state ranks 44th on a list of the best-looking states.
In light of Miss Virginia winning the Miss America crown Saturday, The Daily Beast ranked the states based on the hometowns of the winners of the Miss America and Miss USA pageants for the past decade, more than 300 male and female fashion models and the 125 men mentioned in 10 years’ worth of People’s “Sexiest Man Alive” issues. The list also factored in health and fitness data for each state from 2006-2008, ranked by the Trust for America’s Health.
Illinois, home of supermodel Cindy Crawford, comes in at No. 11.
Washington, D.C., ranked No. 1 for its beautiful people, and North Dakota came in last.
European exports declined for a second month in November as the euro’s strength made goods from the region more expensive abroad.
Exports from the euro area dropped a seasonally adjusted 0.4 percent from October, when they decreased 0.1 percent, the European Union’s statistics office in Luxembourg said today. The trade surplus narrowed to 3.9 billion euros ($5.6 billion) in November as imports rose 0.3 percent from October, when they fell 1 percent. European inflation accelerated to 0.9 percent in December, a separate report showed.
The euro’s 10 percent advance against the dollar in the past year is threatening to undermine the region’s recovery by making exports less competitive. While European services and manufacturing industries expanded at the fastest pace in more than two years in December, the economy still faces a “bumpy road” ahead, European Central Bank President Jean-Claude Trichet said yesterday.
“The exports-driven recovery of the preceding two quarters is fading,” said Dominique Barbet, an economist at BNP Paribas SA in Paris. “Imports’ lack of dynamism suggests lackluster domestic demand.”
December inflation was the fastest since February 2009, with energy prices rising 1.8 percent from a year earlier, the statistics office said. Core inflation, excluding volatile costs such as tobacco, food and energy, accelerated to 1.1 percent in December from 1 percent in the previous month.
Greece’s Struggles
The euro fell the most in almost a month against the dollar today as Greece’s struggles to cut its budget deficit dented investor confidence in European assets. The 16-nation currency traded at $1.4366 at 3:43 p.m. in London, down 0.9 percent on the day.
The ECB yesterday left its benchmark interest rate at a record low of 1 percent and signaled that officials will wait for more signs of recovery before withdrawing emergency measures further, with Trichet citing “a great level of uncertainty” surrounding the economic outlook short term personal loans. The central bank forecasts growth of about 0.8 percent this year and around 1.2 percent in 2011.
European Aeronautic, Defence & Space & Co., the parent of Airbus SAS, on Jan. 12 reported its steepest annual revenue drop since the company went public a decade ago, partly because of a weaker dollar. Eckhard Cordes, chief executive officer of Metro AG, Germany’s biggest retailer, said on Jan. 12 that he anticipates economic conditions will remain “challenging” in 2010 after currency swings eroded fourth-quarter revenue.
Biggest Economy
Economies around the globe are emerging from the worst recession in six decades, led by China, where exports gained for the first time in 14 months in December. The Asian nation overtook Germany as the largest exporter of goods in 2009. Industrial output in the U.S., the world’s biggest economy, rose in December for a sixth month, data showed today.
Euro-area exports to the U.S., the region’s second-biggest trading partner, dropped 20 percent in the first 10 months of 2009 from a year earlier, today’s report showed. Shipments to the U.K., the largest market for euro-area goods, declined 24 percent, while exports to China rose 1 percent. The detailed country data are published with a one-month lag.
To help shore up earnings, companies have been cutting costs and paring wages. European unemployment rose to 10 percent in November. That’s the highest in more than 11 years. Koenig & Bauer AG, the world’s third-biggest printing-press maker, said last month that it plans to eliminate more jobs.
“China and other emerging countries bring in volume but not necessarily profit,” Koenig & Bauer CEO Helge Hansen said on Dec. 4 in Wuerzburg, Germany. “They help retain jobs, but they don’t help in terms of a positive balance.”
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