Money world

Americans are inking a lot of deals to buy homes.

In October the National Association of Realtors recorded an unprecedented ninth consecutive month of increases in the number of signed contracts.

Although these are not closed sales, and some deals can fall through, signed contracts are a good indicator of where the housing market is headed.

Between September and October NAR’s Pending Home Sales Index rose 3.7% to 114.1 from 110 in October. But the index is 31.8% higher than a year ago, when it was 86.6. That’s the biggest year-over-year gain in the history of the index.

The PHSI is also at its highest level since March 2006, and the rise confounded expert expectations. A panel of industry analysts put together by Briefing.com had forecast a 1% drop in new contracts.

NAR’s chief economist, Lawrence Yun, gives much of the credit for increased sales to the homebuyer’s tax credit, which first-time homebuyers could claim to reduce their taxes by up to $8,000.

"The tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future," Yun said in a prepared statement.

The credit had been due to lapse on Dec. 1, so many October buyers may have acted to get in under the wire.

However, the credit has been extended through the middle of 2010 and expanded to include many move-up buyers. The housing industry hopes that will keep sales perking until the economy picks up and markets return to a more normal condition.

In a related story, the Census Bureau reported that private residential construction spending surged 3.9% during October.

Yun cautioned, however, that housing market indicators, such as pending sales, may weaken over the next few months.

"The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months," he said.

"Given the lag time, we could see a temporary decline in closed existing home sales from December until early spring when we get another surge," he added. "But the weak job market remains a major concern and could slow the recovery process."

The good news is that number of homes on the market has declined, removing some of the bloat that has depressed prices. There is now a seven month supply of homes on the market at the current rate of sale. which is down from 10.2 months a year ago. Yun predicted that housing conditions could return to near normal and home prices firm up by mid-2010.

"That would mean broad wealth stabilization for the vast number of middle-class families," he said. 

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White House economic adviser Lawrence Summers disputed the idea of a “new normal” of slower growth and higher unemployment popularized by Pacific Investment Management Co.

“It will take time, it will take step-by-step a lot of different elements creating jobs,” Summers said at a forum in Washington last night. “But I see no reason why there should be some new normal idea of the potential growth of the country.”

Summers, director of the White House’s National Economic Council, spoke at a conference on innovation and economic growth co-sponsored by Intel Corp. and the Aspen Institute, a non- partisan policy research organization. He was asked about the “new normal” investment analysis in an interview by Judy Woodruff, host of a Bloomberg Television news show and a senior correspondent for PBS’s “The NewsHour with Jim Lehrer.”

Newport Beach, California-based Pimco, which runs the world’s largest bond fund, has forecast what it termed a “new normal” for the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking role for the U.S. economy.

Summers said that while he anticipates it taking some time for the U.S. economy to recover from the recession, he sees no erosion of the growth potential once an expansion matures amid the right mix of government policies.

“It will take assuring that there are adequate flows of finance, that there is adequate work on the infrastructure of the country, making sure that businesses have the right kind of incentives,” said Summers, who turned 55 yesterday. “There are a lot of things that need to be done. So it will take time to have this expansion mature.”

‘Rebalancing’

Summers also called for a “rebalancing” of the world economy in which U.S. consumers play a less significant role.

“There is no way our import-led growth is going to be the driving force for the rest of the world’s export-led growth going forward,” Summers said.

President Barack Obama and the Democratic congressional majorities in Congress currently face conflicting pressures to stimulate jobs growth and reduce the federal budget deficit. Obama is to host a “jobs summit” with economists, business leaders and union officials on Dec. 3 to discuss ideas for spurring employment.

Summers said attacking unemployment is an essential element in reducing the deficit.

“Putting people back to work, bringing employment back to normal levels, that’s also going to be the single largest factor in bringing down the federal budget deficit,” Summers said.

The unemployment rate rose to 10.2 percent in October, the highest level since 1983.

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Some positive American economic data and higher commodity prices pushed the Toronto stock market higher Wednesday.

The S&P/TSX composite index was up 52.8 points to 11,592.4 after across the board weakness pushed the main index down 84 points on Tuesday.

The U.S. Commerce Department reported that consumer spending rose a brisk 0.7 per cent last month, following a 0.6 per cent pullback in September.

Incomes, the fuel for future spending, rose 0.2 per cent for the second straight month.

The Canadian dollar was up 0.98 of a cent to 95.5 cents US. Currency analysts at Scotiabank said the rise was due to news that the Russian central bank is preparing to invest some of its foreign exchange reserves in the loonie. No amount has been confirmed.

The gold sector was the best TSX performer, up almost one per cent as the December bullion contract on the Nymex continued to head higher into record territory, up $13.50 to US$1,179.30 an ounce. Barrick Gold Corp. (TSX: ABX) rose 72 cents to C$46.29.

The base metals sector rose 0.73 per cent amid a three-cent rise in December copper to US$3.14 a pound. Teck Resources (TSX: TCK.B) advanced 38 cents to $36.67.

The financials sector also lent support, up 0.5 per cent. Bank of Montreal (TSX: BMO) rose 41 cents to $53.55 after handing in an earnings report Tuesday that beat expectations.

The energy sector was little changed with the January crude contract on the New York Mercantile Exchange off two cents to US$76 a barrel after losing ground Tuesday in the wake of soft U.S. economic growth and consumer sentiment data.

The TSX Venture Exchange moved up 19.55 points to 1,427.96.

New York indexes were little changed as investors took in other economic data ahead of the U.S. Thanksgiving holiday.

The Dow Jones industrial average climbed five points to 10,438.7 after drifting 17 points lower.

The Nasdaq composite index moved 5.4 points higher to 2,174.58 while the S&P index added 0.7 of a point to 1,106.35 as orders for big-ticket factory goods fell unexpectedly by 0.6 per cent in October. But much of the weakness came from an 18.4 per cent drop in orders for goods related to defence. Excluding those, orders for other types of manufactured goods rose 0.4 per cent in October.

Still, the performance was weaker than economists expected. They were forecasting orders for durable goods to grow 0.5 per cent.

Also, the Labour Department said new claims for unemployment insurance fell by 35,000 to 466,000. That's the fewest claims since the week ending Sept. 13, 2008, and was far better than the 500,000 that economists had expected cash advance loans.

Later in the day, the University of Michigan's final report on consumer sentiment for November in expected to be revised up to 67 from a preliminary reading of 66, but will still be below the October reading of 70.6.

Comments from the U.S. Federal Reserve Tuesday also drove investor sentiment as the central bank said the economy's contraction for all of this year won't be as deep as it thought in a forecast released in the summer. Growth next year should turn out slightly better than the Fed previously projected and it also expects slightly lower unemployment.

On the corporate front, farm equipment maker Deere and Co. says big charges and lower sales of farm and construction equipment amid the economic downturn left it with a US$223 million loss for the fourth quarter. Deere says worldwide revenue dropped 28 per cent to US$5.33 billion. Its shares lost 62 cents to US$51.67.

Cossette Inc. (TSX: KOS) is recommending that shareholders reject the latest hostile takeover offer from Cosmos Capital Inc. The Quebec City-based advertising agency says it's not in company's best interests. The amended bid offers $7.87 per Cossette share and is subject to a due diligence condition which Cossette says cannot be satisfied. Its shares were unchanged at $8.02.

QLT Inc. (TSX: QLT) has agreed to pay US$20 million to settle a legal dispute with Massachusetts General Hospital, which had been seeking higher royalty payments from the sale of the Visudyne treatment for age-related blindness. In return for QLT's payment, the Boston-based hospital has agreed to dismiss its claims against the Vancouver-based drug developer. QLT shares ran up 25 cents to $4.23.

Fairfax Financial Holdings Limited (TSX: FFH) said Tuesday that it has received preliminary regulatory approval to establish of a new property and casualty insurance company in Brazil. The company plans to carry out its operations across Brazil, in all lines of commercial business, with a primary focus on property, energy, casualty, surety, marine, financial lines, special risks, hull and aviation. Fairfax shares dipped $1.23 to $373.77.

Overseas, Japan's Nikkei 225 stock average advanced 0.4 per cent, Hong Kong's Hang Seng index advanced 0.8 per cent, and China's Shanghai benchmark rebounded from a big retreat the day before, closing up 2.1 per cent.

London's FTSE 100 index gained 0.74 per cent, Frankfurt's DAX was up 0.73 per cent and the Paris CAC 40 rose one per cent.

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The country's third-largest supermarket chain said sales and profit both grew in its latest three-month period.

Metro Inc., which operates the former Dominion and A&P stores in Ontario, as well as Metro stores in Quebec, said profit rose 16.4 per cent to $84.4 million while sales grew 2.3 per cent to $2.5 billion.

Both profit and sales beat analysts' forecasts.

The quarter, which is also Metro's year-end, was the fourth in which the company posted record net earnings, president and chief executive officer Eric La Fleche noted in a statement.

“I congratulate all our employees and retailers for their great work,” La Fleche said. “Despite the challenging economic environment, we are confident that we will continue to grow in the coming year.”

For the quarter, Metro said same-store sales grew 2 per cent. The key retail performance measure excludes the impact of new stores.

Sales for the year, which ended Sept. 26, rose 4.4 per cent to $11.2 billion, the company said. Profit grew 21.3 per cent to $354.4 million.

Both the quarter and the year were negatively affected by the non-renewal of a convenience store supply chain contract, the company said bad credit cash loans.

However, the company's profits benefited from its stake in Quebec-based convenience store operator, Alimentation Couche-Tarde. Metro said its share of the profits more than doubled to $11.7 million in the quarter and to $37.4 million for the year.

The grocery retailer also announced the creation of dunnhumby Canada, an exclusive joint venture with dunnhumby, an international consulting and marketing service organization known for converting customer data into business strategies.

The joint venture's mission is to better satisfy customers' needs and improve customer loyalty, Metro said.

Metro's results come a day after the country's leading supermarket operator, Loblaw Cos. Ltd., reported higher profit on flat sales, citing lower inflation as a factor.

Metro's share price closed up 4.5 per cent at $31.60 on the Toronto Stock Exchange on Tuesday a day ahead of the news.

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Wal-Mart Stores Inc on Monday announced its second round of price cuts on toys as the world’s biggest retailer backs up its intention to be the “price leader” this holiday shopping season.

U.S. Walmart stores are cutting prices on 100 toys, like the Buzz Lightyear talking action figure and Star Wars light sabers, by roughly 20 percent to 30 percent.

The cuts are in addition to ones the retailer implemented at the end of September, when it began selling 100 toys for $10 each.

The new prices will be available through December 25 or while supplies last.

Wal-Mart has vowed to be the “price leader” this holiday season, and announced plans on October 21 to cut prices every week until Christmas to fend off rivals and win over shoppers easy online payday loans.

After it reduced toy prices at the end of September, Target Corp responded with price cuts of as much as 50 percent on toys like Barbie and G.I. Joe.

Analysts said many of these holiday price cuts are planned in advanced, allowing retailers to protect their margins.

But such cuts can be damaging to manufacturers, because they train shoppers to expect lower prices for their goods. They can also hurt retailers’ profits if they must slash prices lower than expected to match competitors’ prices, or they can not sell enough goods to offset the lower prices.

(Reporting by Nicole Maestri, editing by Leslie Gevirtz)

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JPMorgan Chase & Co is moving to boost its market share in credit cards for wealthy customers and small businesses, threatening American Express Co’s longtime dominance of those clients.

American Express — the largest U.S. credit card company by purchases — has long enjoyed a leading position among affluent and corporate customers.

It widened its lead as the credit card industry was busy targeting subprime borrowers, which at the time seemed like a profitable niche given the chance of charging fees or increasing interest rates when customers fell behind in their payments.

That strategy backfired when credit card losses spiked to record highs.

A law to limit the ability to increase fees and interest rates will make subprime borrowers even less attractive, forcing card issuers to seek other customers to make money.

American Express also grew in recent years thanks to subprime customers, but that always remained a smaller part of its business compared with those of its rivals.

JPMorgan, the third-largest U.S. credit card issuer by purchases, is likely to emerge as a winner from the overhaul of the card industry, given its conservative expansion strategy and low default rates.

That could be threaten American Express’s dominance among wealthy customers and companies faxless pay day loans.

Other rivals pose less of a threat to American Express, as they are either smaller — like Discover Financial Services — or struggling with losses and government bailouts — like Citigroup Inc or Bank of America Corp BAC.N>.

“Chase is trying to identify attractive customers including the more affluent and small businesses, where there is potentially less credit risk, but still potentially attractive economics,” said Brad Ball, an analyst at Ladenburg Thalmann. “The Chase franchise could pose a competitive threat to the leadership of American Express.”

American Express executives downplayed the risk.

“They are trying to fish where the fish are, and we have been fishing in those waters for 50 years,” said Ralph Andretta, general manager of Membership Rewards at American Express. “We’ve got a lot of hooks in those waters.

“We are not afraid of competition,” said Andretta, adding that the company has eliminated some fees and increased rewards promotions to court customers.

STRENGTH OR LOYALTY

Earlier this year, AmEx said its growth strategy would focus on wealthy and corporate customers. 

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Gold consumers across Asia greeted bullion’s run to a record high cautiously on Wednesday, with a few moving to cash in gains but the majority opting to wait for the rest of a rally they believe has only just begun.

In contrast to a second day of busy trade on global gold markets, the scene at shops and jewelry merchants from Sydney to Hong Kong to Mumbai was marked by a distinct lack of occasion, suggesting that the wave of retail scrap selling that greeted gold’s record run in March 2008 may not be quick to recur.

“Today’s been like any other day,” said David Carr, of KJC Coins Australia in Sydney, which deals in precious metal coins and bars. “No one’s coming in to sell gold because the price jumped overnight, it’s more wait and see, business as usual.”

The Australian outback gold mining town of Kalgoorlie, home to a nearly Times Square-sized electronic ticker tape broadcasting up-to-the-minute bullion prices, also was quiet.

“There’s nothing going on that’s out of the ordinary,” said John Horner, editor of the Kalgoorlie Miner newspaper.

Profit taking — read selling — replaced gold purchases that in New York and across Europe on Tuesday had swept spot bullion more than $10 above its previous March 2008 peak, and carried through on Wednesday to a record $1,048.20 an ounce.

The issue of scrap supply in the gold market — generated largely from the resale of jewelry to merchants — has taken on greater importance in recent years, as the advent of physically backed Exchange Traded Funds (ETFs) attracts new investors.

The biggest such fund now holds more than 1,000 tons of gold, equivalent to the world’s fifth-largest central bank, and analysts had said that only the flow of scrap material into the market had prevented gold from soaring much sooner, much higher.

While there was some evidence of retail sales, it wasn’t overwhelming.

“It is simple, buy low and sell high — I am making a 10 percent profit already so I am selling,” said Nguyen Duc Hung while waiting to sell five taels of gold at a shop on Hanoi’s Ha Trung street. Vietnam is Asia’s second-biggest gold buyer.

To date, there have been no reports of gold hoarders burying stashes in secret spots as was the case in 1980, when gold zoomed above $800 an ounce for the first time, or about double today’s level when adjusted for inflation.

“Both buyers and sellers are coming to the shop today, they are more or less evenly balanced,” said Osamu Ikeda, general manager at Tanaka Kikinzoku Kogyo, Japan’s top bullion retailer.

Rival Tokuriki Honten Co. Ltd. saw a similar scene.

“There are no queues outside our shops,” said general manager Fumio Yamamoto. “For the Japanese, the (yen-based) price is too high to buy, but too low to sell.”

DOLLAR EFFECT 

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Last month, Missouri gambling regulators essentially put the President Casino’s license up for grabs.

Now the company that owns the casino is crying foul.

Pinnacle Entertainment has asked a state appeals court in Kansas City to overturn a ruling by the Missouri Gaming Commission that said Pinnacle must reapply for a license if it hopes to move the President or replace or repair the aging Admiral Riverboat on which it sits.

That ruling, Pinnacle argues in an appeal filed Thursday, essentially revokes the President’s license — one of just 13 allowed in the state — because it ties the casino to the Admiral, which is widely expected to fail its next Coast Guard inspection in July. Pinnacle would like the court to overturn the decision and give it time to fix the President.

It is the latest step in a long discussion over what to do with the casino, which Las Vegas-based Pinnacle bought for $45 million in 2006 as part of its development of Lumi

OTTAWA–Canadian banks may be required to defer some executive bonuses, Finance Minister Jim Flaherty said on Friday, as he outlined new rules aimed at discouraging excessive risk-taking and preventing future financial crises.

Flaherty told reporters that Canadian regulators were in the process of implementing guidelines laid out earlier this year by the Financial Stability Board (FSB) – made up of G20 central bankers, regulators and finance ministry officials.

“One of the major things is to spread out bonuses so that bonuses are not paid for short-term profit, which was one of the issues that led to the crisis in the past year,” he said.

“That's our position.”

It was not immediately clear whether Canada would make the bonus deferrals obligatory or voluntary.

Next week's G20 summit in Pittsburgh is set to focus on tougher financial regulations. European Union leaders agreed on Thursday to seek curbs on bankers' bonuses at the meeting. Canada has been opposed to an absolute cap on bankers' pay.

Flaherty said Ottawa was looking forward to another report by the FSB due in coming days, and would study its recommendations on financial regulation.

Even though Canadian banks have been famously solid throughout the financial crisis – and bonuses are not a contentious issue domestically because banks have not had bailouts – Flaherty said he was committed to fulfilling whatever new global standards emerge.

“There's always a risk of being complacent. I can tell you we're not complacent. I deal with the regulators very often, including this morning, and I know where we are in terms of our institutions in Canada and it's a good story,” he said.

Flaherty will attend the Pittsburgh summit along with Prime Minister Stephen Harper.

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Canada has the potential to attract billions of dollars in investment from Chinese companies who are still taking baby steps abroad, according to a report released as business executives from the two countries met Tuesday to discuss bilateral trade.

The report by the Asia Pacific Foundation of Canada concludes that the outward investment of Chinese companies is "still in its infancy" and its scale, while relatively small, is growing.

"Chinese companies perceive Canada as one of the most open economies in the world," the report states.

In recent years, Chinese companies have sought to buy into Canada's resources sector, especially mining and energy, in a bid to lock in future supplies of oil and key metals for its booming economy.

At a downtown Toronto hotel, more than 200 Canadian and another 159 Chinese executives mingled and listened to presentations about Sino-Canadian trade at the third Canada-China business forum.

"We need to get to know one another better," said former international trade minister Pierre Pettigrew, now an adviser with consulting firm Deloitte.

Pettigrew noted that China pays a lot of attention to the United States, less so to Canada, so it's important the Chinese understand how well its financial institutions have withstood the economic crisis.

At the same time, despite making some progress, the Chinese government has to do more to live up to the country's international trade commitments, Pettigrew said.

Jerome Darder, who is in strategy and business development with Montreal-based aircraft and train maker Bombardier Inc. (TSX: BBD.B), said doing business in China has improved since the Asian country joined the World Trade Organization but ever-changing regulatory obstacles remain in place.

"It's becoming easier, that doesn't mean it's easy, but it's easier," he said.

Darder stressed the importance of intergovernmental ties between Canada and China, saying Ottawa has to be engaged to foster a positive trade and business climate.

"We can build all the relationships we want with our partners in China, but if there is nothing strong at the political level that would be a problem," Darder said.

The foundation's report echoed those sentiments.

"The policy environment is as important, if not more so, than the business environment in encouraging investment from China," the report states.

Solomon Cai, the Shanghai-based CEO of Globelink China Logistics Ltd., said he believed the two governments have a good understanding.

Canada's relative resilience to the economic slump has not escaped the attention of Chinese businesses, who normally pay more heed to the much larger markets of Europe and the U.S., Cai said at the business forum.

"This is still a very strong and big market as an individual country," he said.

The report by the Asia Pacific Foundation says the $1.7-billion deal between China Investment Corp. and Vancouver-based zinc, copper and coal miner Teck Resources (TSX: TCK.B) in July likely marked the beginning of a new Chinese "investment wave" in Canada.

More recently, Athabasca Oil Sands Corp. announced a joint-venture agreement with PetroChina that would see the Chinese company acquire a 60 per cent interest in two oilsands properties in northern Alberta for $1.9 billion.

However, the Investment Canada Act requires a review any time a Canadian company with assets of more than $312 million is purchased. The legislation was amended this spring to include a national security test as well.

Prime Minister Stephen Harper recently said Ottawa would not throw up further barriers given the importance of restoring private investment in light of the global recession.

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