For the first time since the start of 2008, bonds were the only investments to provide positive returns amid renewed concern the global economy is slowing and as widening deficits in Europe threaten contagion.
Fixed-income assets — from Australian government debt to U.S. Treasuries to global junk bonds — gained 0.7 percent last month including reinvested interest, according to Bank of America Merrill Lynch index data. The MSCI All-Country World Index of stocks lost 1.1 percent including dividends while the Standard & Poor
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A two-point gain was enough to push the Standard & Poor’s 500 index to its highest level since June 2008, three months before the collapse of Lehman Brothers and the darkest days of the financial crisis.
The S&P 500 index closed at 1,365.74, beating its 2011 closing high by two points.
For the second day this week, the Dow Jones industrial average nudged above 13,000 then pulled back. It rose 29 points in the morning but wavered in the afternoon. The Dow dropped 1.74 points to close at 12,982.95. American Express was the leading stock among the 30 that make up the average, gaining 1.2 percent.
It was a similar story on Tuesday, when the Dow flitted above 13,000 three times but ended the day lower. The average hasn’t closed above 13,000 since May 19, 2008.
What will it take for the Dow to close above 13,000 and stay there? Mark Lamkin, CEO of Lamkin Wealth Management in Louisville, Ky., said it would require a surprising news event, like a huge merger or an economic report that blows past expectations.
“It needs some type of surprise, a bombshell,” Lamkin said. “We’ve had a pretty good run over the past four months. Now it’s going to take something great to keep it above 13,000.”
The two economic reports out Friday didn’t make the cut.
A consumer sentiment index taken by the University of Michigan and Reuters edged up in February to its highest level in a year. And the Commerce Department reported that sales of new homes dipped slightly in January, but the figure still topped economists’ estimates. It also said sales in the final three months of 2011 were higher than previously reported.
“The numbers are just OK,” Lamkin said. “They weren’t bad, but they weren’t great, either.”
In other trading, the Nasdaq composite index rose 6.77 points to 2,963.75.
Oil prices hit a nine-month high of $109.77 a barrel. The price of oil has jumped 10 percent this month amid rising concerns about a conflict with Iran.
The euro added a penny against the dollar, hitting $1.346, its highest since Dec. 5. Greece made a formal offer to creditors to swap their Greek government bonds for new ones, another step toward knocking $142 billion off its debts. The swap is part of a deal to prevent Greece from defaulting on a debt payment due next month.
Stock indexes have been climbing since November as European officials redoubled their efforts to contain the region’s debt crisis and the European Central Bank extended cheap loans to troubled banks. The S&P 500 index has gained 8.6 percent to start 2012, better than its long-term annual average gain.
In contrast to the volatile trading of late last year, the market’s gains have been small but steady. To Lamkin, the lack of large swings looks ominous. The world is still full of dangers, he said. Lamkin tells his clients that the top risks are another flare-up in the European debt crisis and a war between Israel and Iran.
“When the next big thing happens, and it will, you’re going to see a pullback,” he said. “I think we’re due.”
Among stocks making big moves:
_ Sprint Nextel Corp. lost 2 percent. The country’s largest cable company, Comcast, filed a suit against Sprint Nextel, alleging that it was violating Comcast’s patents.
_ Gap fell 4 percent. The clothing retailer reported a 40 percent plunge in quarterly profit after the market closed Thursday. Gap said higher costs and deep discounts weighed on its revenue.
_ Deckers Outdoor Corp. sank 14 percent after the maker of Ugg boots and Teva footwear said higher costs will lead to lower profits for the quarter and full year.
_ Kenneth Cole Production Inc. soared 18 percent to $15.49 on news that Kenneth Cole is offering to buy the rest of the company. Cole currently holds about 47 percent of the company and has offered would give stockholders $15 per share, a 15 percent premium to the company’s Thursday closing price.
The United States Army is looking at hydrogen fuel cell vehicles, hoping that sometime in the near future they’ll play some important military roles, maybe even on the battlefield.
The military has been looking at alternative fuels like this because of the difficulty, expense and danger of securing oil and gasoline supplies.
Hydrogen fuel cells, in particular, seem promising because of their design flexibility, said Major General Roger Matthews, Deputy Commanding General of the U.S. Army Pacific.
Unlike an ordinary car’s engine and transmission, fuel cells and batteries can take various shapes and be arranged inside the vehicle in a number of different ways.
That allows for vehicles to be better designed for different roles, whether for carrying people, cargo or other duties, he said.
Gallery: Electric not the only ‘green car’ solution
For now, the U.S. is testing a fleet of 16 General Motors fuel cell vehicles in Hawaii. They run on compressed hydrogen gas. The hydrogen is combined in a fuel cell with oxygen from the air in a process that generates electricity. The only exhaust the vehicles produce is water vapor.
This new fleet includes one vehicle that can be used as a portable generator, supplying enough energy to keep the lights on in several homes. The same technology could be useful in an "tactical" vehicle, said Matthews, providing power to a command center, for instance.
"We think this might have greater application in combat vehicles," he said.
The car’s low environmental impact is a serious benefit, too, said Matthews. Particularly in Hawaii, the Army doesn’t want to be seen as a destructive force on the islands’ delicate ecology.
"We have to be good stewards of the environment," he said.
The 16 vehicles in the test fleet are distributed across various branches of the military, including the Army, Air Force and Navy. They are being used as "administrative" vehicles, performing light-duty work such as ferrying around personnel.
The military spends roughly $3.6 million a year to lease the fleet of from GM, said Major General Roger Matthews, Deputy Commanding General of the U.S. Army Pacific.
Their biggest advantage over electric cars is that it takes much less time — usually just a few minutes — to pump a tank full of hydrogen than it does to charge a large battery.
These vehicles have a range of about 200 miles on a full tank. The state of Hawaii, where the cars are being tested, has also partnered with GM to test hydrogen fuel cell cars.
Hydrogen fueled cars make sense in Hawaii because the Pacific islands produce hydrogen locally from various sources, unlike gasoline which must be imported. Plus, Hawaii has the highest gasoline prices in the nation.
Hawaii also makes an ideal test site because the islands’ small size make for relatively short and predictable drive routes, said Charles Freese, exec director of GM’s hydrogen fuel cell programs.
The environment also presents unique challenges with its high humidity, salty air and wide variety of different terrains.
For now, hydrogen fuel cell technology remains expensive. But Matthews says the only way to reduce the cost is to invest in more research projects like this.
China
Cyprus’ banks will be able to recapitalize on their own and won’t need state support thanks to fiscal measures buttressing the island’s financial system, the government said on Saturday.
Cyprus’ Finance Ministry said in a statement that the economy has “strong foundations” and added that it will soon unveil a growth-oriented package of measures that it’s preparing in partnership with the private sector.
The ministry made its remarks a day after international ratings agency Fitch downgraded the eurozone member by a notch to BBB-, a step above junk status.
Fitch said the downgrade was mainly due to the large Cypriot banking system’s heavy exposure to Greek debt and its greater capital needs in light of the higher likelihood that banks will take a hit on Greek government bonds that exceeds 50 percent.
Fitch said Cypriot banks would need to almost double the euro900 million ($1.18 billion) _ or 9.9 percent of gross domestic product _ to build an adequate buffer against losses on their Greek exposure if the “haircut” on Greek government bonds reaches 70 percent.
Standard & Poor’s became the first ratings agency to push Cyprus into junk territory with a two-notch downgrade earlier this month. Moody’s also rates the island just above junk.
Cyprus government spokesman Stefanos Stefanou on Saturday called the downgrades unfair.
“We consider that the downgrades don’t reflect the real state of the Cyprus economy, which is in better shape than many other economies, either in the eurozone or in the European Union in general,” he told reporters.
According to the European Commission, the island’s deficit is projected to shrink from 6.7 percent of gross domestic product in 2011 to 2.7 percent this year following a string of fiscal consolidation measures including a 2 percent sales tax hike and a two-year public sector wage freeze.
The island’s debt is projected to reach 68.4 percent of GDP this year, well below the eurozone average of nearly 87 percent.
But high borrowing costs have effectively locked Cyprus out of the international markets. The island is relying on a euro2.5 billion ($3.29 billion) low-interest loan to meet its financing needs for this year.
Leading finance chiefs sought to reassure anxious global business leaders on Friday that Europe is on track to solve its crippling debt crisis before it drags the world’s economies down. Europe’s top banker said investors, burned after trusting the region’s governments too much, now trust them too little.
The finance chiefs said the picture in Europe has changed over the past two months as the European Central Bank has loaned billions of euros to fragile banks, indebted countries have pushed through convincing reforms and EU leaders have come near to building a closer fiscal union that would make their common currency stronger.
Several also signaled Friday that Greece is close to clinching a crucial debt-reduction deal with private bondholders _ a key element in Europe’s efforts to stem a two-year debt crisis that is causing ripples around the globe. The crisis is a central topic at the World Economic Forum, a gathering of government and business leaders at the Swiss ski resort of Davos.
“They’re making progress on reforms, they’re changing the institutions of Europe to put better discipline on fiscal policy,” said U.S. Treasury Secretary Timothy Geithner. “You have three new governments doing some very tough things. You have an ECB doing what central banks have to do. You see them move to try to strengthen the financial sector.”
Mario Draghi, head of the European Central Bank, said a combination of actions _ including super-cheap, long-term loans to shaky banks on the continent and a couple of interest rate cuts _ have helped Europe avoid deeper financial trouble.
“We have avoided a major credit crunch, a major lending crisis,” he said.
Draghi said borrowing rates would remain high “for quite a while” because bond markets are overestimating the risk involved in holding European government debt after years of underestimating it. But he called market pressure “the most potent engine for reform in different governments.”
Geithner said the fate of the U.S. economy _ and by extension of the rest of the world _ hinges on Europe’s debt crisis, along with potential tensions with Iran. He said the main piece of unfinished business for Europe is building a bigger fund to help troubled economies survive.
But while French Finance Minister Francois Baroin said that fund needs to be increased to calm markets, his German counterpart, Wolfgang Schaeuble, indicated that his government is not prepared to do so. Germany, as Europe’s biggest economy, would face the biggest bill.
“We must not give the wrong incentives,” Schaeuble said. “You can make any figure. It will not work if the real problems will not be solved.”
Both, together with Spanish Economy Minister Luis de Guindos Jurado and European Monetary Affairs Commissioner Olli Rehn, agreed that the idea of issuing “eurobonds” backed jointly by all eurozone governments is a nonstarter for now. They didn’t rule out the possibility that such bonds could be introduced once confidence in Europe’s public finances is restored, with Guindos calling that a “final target.”
Schaeuble said eurobonds would provide bad incentives by allowing debt-ridden countries to “spend money you don’t have on the bill of others.”
Many economists have said eurobonds are needed to solve the crisis as they could reduce the borrowing costs of heavily indebted countries by pooling them with bonds of stronger economies like Germany’s.
Professor Nouriel Roubini, the renowned economist who predicted the financial crash of 2008, is one who thinks that eurobonds have to form part of a eurozone strategy to fend off the possibility of a breakup.
The eurozone “could be a slow-motion train wreck,” Roubini said.
Europe has been grappling with the crisis ever since Greece conceded at the end of 2009 that its public finances were in far worse shape than previously thought. Greece remains at the epicenter of the crisis over two years later. Its borrowing costs remain too high for it to borrow in the markets so a second European-led bailout is in the offing.
The finance chiefs signaled Friday that a deal is at hand that could help ease some of the near-term tensions.
Greece has been negotiating with the a group representing banks and other lenders in the hopes that they will forgive half of Greece’s debt in exchange for Greek assurances that it will pay back the other half without defaulting on its loans. The deal would also let Greece repay over a longer period at a lower interest rate _ negotiators have been trying to agree on what that rate will be.
Schaeuble said he is “quite optimistic” about a deal, while Rehn said he hopes a deal can be reached “if not today, maybe by the weekend.”
Agreement between Greece and its creditors is needed before Europe and the International Monetary Fund agree to a second multibillion-euro bailout package.
At the heart of the problem is that the 17 countries that use the euro use a single currency but have different fiscal policies. That changes the nature of their debt, said Adair Turner, chairman of Britain’s banking regulator the Financial Services Authority.
“That debt is more equivalent to the State of California debt than the U.S. federal debt,” he said.
That’s why all but one of the 27 EU countries _ the United Kingdom has refused to participate _ are discussing a closer fiscal union. On Monday, leaders meet in Brussels to work out the details of that new compact.
Schaeuble and Baroin noted that even the agreement in principle to forge closer ties has calmed markets since a December summit, as borrowing rates have dropped and stock markets have risen.
“It’s amazing,” Draghi said. “If you compare today with even five months ago, the euro area is another world.”
The crisis threatens more than Europe: the U.N.’s refugee chief warned Friday that it is fueling conflicts around the world. Antonio Guterres told The Associated Press that rising food prices and growing unemployment are hitting those already at the bottom hardest, sparking conflict in places like South Sudan and exacerbating hotspots including Afghanistan, Iraq and Somalia.
_____
Frank Jordans and Edith Lederer in Davos and David McHugh in Frankfurt, Germany contributed to this story.
Brooke Gray could be either of two things: an insufficiently educated opportunist, trying to pass herself off as an equine dentist, or a young woman dedicated to horses, performing an age-old practice for an honest wage.
A circuit court judge recently said the former. Her attorney, a St. Louis-based litigator with a history of challenging the government’s licensing power, says the latter — and believes the judge’s ruling could limit everyone from cattle hands to dog groomers.
A Clinton County Circuit Court judge ruled in December that Gray had to stop a practice called “teeth floating” after the Missouri Veterinary Medical Board, which oversees veterinary licenses in the state, sued Gray because she does not have a veterinary license.
Her attorney plans to appeal the ruling, saying that Gray is merely practicing something that unlicensed lay people have done for hundreds of years.
“Up until 15 years ago no one in Missouri considered these animal husbandry practices veterinary medicine,” said Gray’s attorney, David Roland, who helms the libertarian Missouri Freedom Center. “That’s how animal agriculture has always been done.”
Roland calls Gray’s case “the tip of the iceberg” and says it could have ramifications for anyone who wants to perform “basic animal husbandry” without a license.
But state law, veterinarian groups and the board say veterinary practices are regulated for a reason: to protect animals and their owners from untrained, unskilled workers. They say the practice of teeth floating, which often requires sedation, should be done either by, or under the supervision, of a licensed veterinarian.
“The public seems to think the licensing board is there to protect veterinarians,” said Bruce Whittle, chair of the equine committee for the Missouri Veterinary Medical Association, the group that represents the state’s vets. “It’s to protect the public against veterinarians that are doing harm.”
Gray, who lives north of Kansas City, grew up on an Iowa farm and always wanted to work with horses. So, about eight years ago, she got two months of training at an equine dentistry school in Idaho, then moved to Missouri and opened B & B Equine Dentistry.
She built a steady clientele floating horses teeth, which involves filing down the sharp points that emerge on the enamel. Sharp edges can make it difficult for the horse to eat. Her customers, she says, liked her work.
“I’ve never had a complaint from a client,” Gray said.
She did, however, get a complaint filed against her from a local Clay County vet, David Leighr, whose clients told him that Gray was improperly sedating horses and, in some cases, extracting teeth. Under state law, sedation by anyone other than an owner or licensed vet is illegal, while extraction is a surgical practice, which makes it a veterinary practice, and therefore also illegal for someone to perform without a license.
“One of my clients told me that Brooke had sedated an animal and hit a vein,” Leighr said. “Brooke also had them sign a piece of paper that said she was not responsible for anything that happens. A vet doesn’t do that. That raised a red flag with me.”
When asked if she had extracted teeth, Gray said: “I’ve taken some things out of horses mouths that didn’t belong there.” When asked if she had sedated horses, she said: “I’ve been informed not to say anything about the sedation issue.”
Leighr called the board, and eventually, it began to pursue the matter.
After sending two cease-and-desist letters, the board sued Gray to make her stop. She didn’t. So in September, the matter went to trial.
Roland says he believes the board pursued the case on behalf of veterinarians who felt they were in danger of losing income to untrained teeth floaters, not because they were concerned about animal welfare.
“One of the quirks of the law is that it’s not illegal to do the work on the animals,” he explained. “But if they get paid for it, it’s a criminal offense. So this is not a health issue.”
Several states, he said, have recently changed laws to allow teeth floating by nonvets, and he’ll push for Missouri to do the same.
He also points to a number of cease-and-desist letters sent by the board aimed at stopping everything from branding to pet grooming practices. These, he says, are evidence the state is trying to regulate practices that should not require licensing.
“This is an issue that’s been gaining momentum for a couple of years,” he said.
Gray believes the board is merely requiring a costly education — vet school runs an average of $150,000 — for something she specifically trained to do.
But veterinarians, including Leighr — a fourth-generation vet who said news coverage of the issue in his practice area had cost him business — maintain this issue centers on animal welfare and training.
“Her attorney is trying to convince the public that lay professionals have been doing this for years and that it’s safe,” he said. “I don’t think it’s safe. … And the fact that’s she’s using sedation and there’s no oversight makes it even less safe.”
“I went to school for eight years,” Leighr added. “I’ll put my records out there all the way back to high school, and I challenge her to do the same.”
Gray said she would continue floating teeth, only under the supervision of vets, until the appeal is resolved. That, Leighr insisted, is all he’s wanted all along.
“I said to her: ‘You can do this all day long by having a vet present,’” he said. “Missouri is full of vets retiring every day. They’d be tickled to death to get in the truck with you and go on a farm call.”
The number of Americans filing for first-time unemployment benefits took an upswing just before Christmas.
About 381,000 people filed initial jobless claims in the week ended Dec. 24, the Labor Department said Thursday. That was more than economists had expected and marked an increase of 15,000 from the prior week, when claims had fallen to their lowest level since April 2008.
The Labor Department adjusts the figures to account for seasonal trends, but still, the holidays can sometimes distort the numbers slightly. Economists look to the four-week average to smooth out volatility. In the latest report, that number decreased to 375,000, its lowest level since mid-2008.
"Around the holidays, initial claims tend to be volatile, so I think we don’t have to read too much into the small rebound today," said Aichi Amemiya, an economist with Nomura cheap pay day loans. "We believe the labor market continues to improve."
Meanwhile, continuing claims — which include Americans filing for their second week of claims or more — increased 34,000 to 3,601,000 in the week ended Dec. 17, the most recent data available.
Investors seemed to shrug off the numbers, optimistic that next week’s monthly jobs report will show employers ramped up their hiring slightly in December.
Economists surveyed by Briefing.com predict the report will show employers added 150,000 jobs in December, up from 120,000 the month before. The unemployment rate, however, is expected to rise from 8.6% to 8.7%, as discouraged workers re-enter the labor force to look for jobs again.
Olympus Corp. faces a deadline to report revised earnings Wednesday to avoid being removed from the Tokyo stock market after a whistle-blower questioned fees and acquisitions that turned out to be part of a deception to hide $1.5 billion in investment losses.
Former President and Chief Executive Michael Woodford, who has been in the limelight for first raising questions about exorbitant fees and acquisitions, is back in Tokyo to meet investors and legislators, and to try to lead a turnaround at the camera and medical equipment maker.
Woodford, a 51-year-old Briton and a rare foreigner to lead a major Japanese company, was fired in October after going public with his doubts about massive consulting fees on the acquisition of British medical equipment maker Gyrus Group in 2008 and other spending.
He was in Japan last month to meet police and other investigative authorities. He has said he wants to fix Olympus and has expressed hopes shareholders will back him.
Olympus President Shuichi Takayama has said Woodford lacks the right teamwork style to lead the company, although now acknowledges the positive side of Woodford’s whistleblowing. Olympus initially denied any wrongdoing and lambasted Woodford.
No one has been charged in the scandal. But Olympus management has said several top company men were involved in the scheme and has promised to investigate 70 officials, including former and current executives and auditors, to pursue possible criminal charges.
Meeting the Wednesday deadline for a revised earnings report is a must for Olympus to stay on the stock exchange, but it could still be delisted if seriously dubious accounting is found fast cash.
A third-party panel set up by Olympus, including a former Japanese Supreme Court judge, released the findings of an investigation earlier this month, which said top executives who were “rotten to the core” had orchestrated the accounting cover-up spanning three decades.
As of 2003, Olympus had racked up 117.7 billion yen ($1.5 billion) in investment losses dating back to the 1990s, according to the company.
The overpriced fees for financial advice and overvalued acquisitions were part of an elaborate deception utilizing overseas banks and several funds to keep the massive losses off the company’s books, Olympus says.
Japanese magazine Facta was first to report the dubious money.
Tsuyoshi Kikukawa, who was behind Woodford’s appointment as chief executive and later his firing, has since resigned as chairman. He is among several executives suspected of knowing about the scheme.
Last month, Olympus dismissed Executive Vice President Hisashi Mori, saying he was involved in the cover-up along with Kikukawa. A company auditor also resigned.
Olympus stock plunged after the scandal broke but has since recouped some of those losses on optimism it might not be booted off the Tokyo Stock Exchange.
Libya’s transitional government was sworn in Thursday before the country’s interim leader, another step in the oil-rich country’s roadmap to elections next year.
Starting with Prime Minister Prime Minister Abdurrahim el-Keib, each minister faced the transitional council’s leader, Mustafa Abdel-Jalil, placed his hand on a Quran and swore to “remain loyal to the goals” of the revolution that overthrew longtime leader Moammar Gadhafi.
Each shook Abdel-Jalil’s hand as he stood in front of two national flags, and some also embraced him.
The country faces huge challenges now, but el-Keib said he and his ministers were “upbeat” and optimistic about leading Libya toward elections by next June.
“We are looking forward to having an exciting seven months ahead of us, with lots of things to do and hopefully good results,” el-Keib said.
The lineup of relative unknowns, almost all of them older men, will confront daunting challenges, like establishing control over the fractured nation after the ousting of Gadhafi’s 42-year regime, along with building up state institutions practically from scratch.
El-Keib pledged to represent the interests of all Libyans.
“I am a son of all Libyans,” he said. “I will represent everyone and share wealth with everyone.”
The transitional Cabinet includes 24 ministers, though several, including the defense minister, were missing from Thursday’s ceremony. The prime minister explained that they were out of Tripoli, some of them attending to personal preparations in their hometowns before taking up their new posts.
Among the institutions that must be built is a justice system that will be able to put on trial two key members of the Gadhafi regime _ Seif al-Islam Gadhafi, the dictator’s recently captured son and one-time heir-apparent, and the ex-intelligence chief Abdullah al-Senoussi.
The International Criminal Court has charged them both with crimes against humanity for alleged atrocities committed during the recent civil war.
Libyan authorities insist the be tried in Libya, and not at the court in The Hague, Netherlands, a decision aimed at asserting their national authority. However, they have promised to work with the ICC and with the United Nations in investigating the alleged crimes.
ICC prosecutor Luis Moreno-Ocampo told The Associated Press on Thursday that the court received the formal pledge of cooperation in a letter from Abdul-Jalil, the NTC chairman.
Moreno-Ocampo said he was satisfied with that move, which appeared to settle a dispute between the international court and Libyan authorities over which body should try Seif al-Islam Gadhafi.
Moreno-Ocampo said the most important thing is for “face of the old regime” to face justice.
It “is very important for the world and for Libya to understand what happened here, how they attacked these people, how they killed these people,” Moreno-Ocampo said.
He said investigations are under way into the alleged crimes committed by Gadhafi’s son and that he believed it would be ready for trial “in a few months.”
Seif al-Islam was captured on Saturday and is being held by fighters from the Libyan town of Zintan, who flew him there after his arrest in the south. He appeared to be in good health despite a hand injury, according to the International Committee of the Red Cross, which visited him Tuesday.
Officials with the NTC have reported that al-Senoussi, the former intelligence chief, has also been captured. But some later cast doubt on that assertion, and his whereabouts are not known.
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