The Bank of England will raise its target for asset purchases next week as the debt crisis in Europe may have already pushed Britain
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Federal Reserve Bank of St. Louis President James Bullard said monetary policy has influenced inflation and price expectations, even with the benchmark interest rate near zero since December 2008.
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Stocks are opening slightly lower as worries over the European debt crisis persist, overshadowing a strong auction of Italian government debt.
The European Central Bank said the continent’s banks parked a record $590.72 billion overnight at the bank, reflecting distrust in the European banking system.
Italy held two successful bond auctions Wednesday at a substantially lower cost than what it paid in similar auctions last month payday loan lenders. The sales raised hopes that the country would be able to roll over its enormous national debt with new bonds.
The Dow Jones industrial average is down 20 points at 12,272 in early trading. The S&P 500 is down 3 at 1,262. The Nasdaq is down 6 at 2,619.
Russia unexpectedly reduced its benchmark rate, suggesting policy makers see a global economic slump posing greater risks than inflation to the world
Asian stocks fell Wednesday after the Federal Reserve offered no new initiatives to help a slowly recovering U.S. economy.
Japan’s Nikkei 225 index fell 0.6 percent to 8,498.63. South Korea’s Kospi lost 0.5 percent at 1,854 and Hong Kong’s Hang Seng shed 0.7 percent to 18,326.98. Australia’s S&P/ASX 200 slipped 0.2 percent to 4,184.80. Benchmarks in Singapore and Taiwan fell while mainland China rose.
U.S. stocks gave up gains Tuesday after the Fed released a policy statement that made clear it was not offering any new steps to help the economy.
The Dow Jones industrial average fell 0.6 percent to close at 11,954.94. The Standard & Poor’s 500 index fell 0.9 percent to 1,225.73. The Nasdaq composite fell 1.3 percent to 2,579.27.
The Dow dropped more than 70 points in the last hour of trading and had risen as high as 126 points earlier Tuesday after two strong auctions of European debt. The Spanish government was able to sell short-term debt at much lower interest rates compared with a month ago, a signal that markets are becoming less fearful about the government’s ability to repay its debt.
And in its first sale of short-term bills, the European Financial Stability Fund raised 1.9 billion euros ($2.6 billion).
Still, investor sentiment remained fragile amid threats by Standard & Poor’s to downgrade the credit ratings of 15 countries that use the euro because of the region’s debt crisis.
“We are likely to continue seeing some cautious trading as the threat of S&P coming out to issue some downgrades at some stage this week looms,” said Stan Shamu of IG Markets in Melbourne, Australia.
“Some would argue that this is already priced in, but it will still likely rock the boat should it happen.”
Benchmark oil for January delivery was down 28 cents to $99.86 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.37 to finish at $100.14 an ounce on the Nymex on Tuesday.
In currencies, the euro fell to $1.3031 from $1.3043 late Tuesday in New York. The dollar rose to 77.99 yen from 77.97 yen.
The leaders of Germany and France called Monday for a new European Union treaty to restore confidence in the euro currency and to ensure that the region’s debt crisis never happens again.
French President Nicolas Sarkozy said after a meeting with German Chancellor Angela Merkel that they would prefer a treaty agreed by all 27 members of the European Union but would also accept a treaty among just the 17 countries that use the euro.
The new treaty should include automatic sanctions for countries that violate rules meant to keep government deficits in check.
Investors cheered the two leaders’ comments, with the euro and stocks rising and bond yields dropping.
The meeting comes at the start of a crucial week for the eurozone, as it struggles to convince markets that it is able to solve its debt crisis.
Sarkozy said a jointly issued bond by all the countries that use the euro is not the solution to the continent’s debt crisis.
Many analysts have said that only by issuing bonds backed by the whole eurozone will Europe be able to save its shared currency.
Stronger countries, like Germany and France, have resisted those calls, but some thought that as the crisis worsens they might be forced to relent. Sarkozy reiterated Monday, however, that a common bond was “in no way” the solution to the crisis.
Ralcorp Holdings is two months away from completing the spin-off of its branded cereal business, Post Holdings, yet company officials say they remain in buy mode.
In a conference call with analysts today, St. Louis-based Ralcorp’s executives said the spin-off of Post as a separate, publicly traded company will occur by the end of January 2012. Ralcorp, which has grown through acquisitions over the past decade, plans to focus on private label cereal, pasta, frozen bakery goods and other foods.
“As the leader in private brand foods, we continue to be excited about the opportunities that exist in the private brand, or store-brand market,” Kevin Hunt, Ralcorp’s co-chief executive and president said in the call.
Ralcorp completed its acquisition of Kansas City-based American Italian Pasta Co. for $1.2 billion in July 2010, which helped boost Ralcorp’s net sales to $4.7 billion in fiscal 2011, up from $4 billion in 2010.
In October, Ralcorp closed on its $545 million purchase of the North American refrigerated dough business from Sara Lee, which included Sara Lee’s private label biscuits, crescent rolls, pizza and pie crusts and toaster pastries cash advance now.
More acquisitions may be on the horizon. “When we look at the current acquisition pipeline, we’ve identified approximately $10 billion in additional annual sales representing 50 individual companies that meet our initial criteria for strategic acquisition, ranked by margins and synergies with our existing business,” Hunt said in the call.
Morningstar analyst Erin Lash wrote in a research note today that Ralcorp faces competitive pressures in the private label cereal business, however. “Branded firms like General Mills and Kellogg are prioritizing investments behind product innovation and marketing that resonate with consumers, which could further pressure Ralcorp’s cereal sales, in our view,” Lash wrote.
On the eve of landmark elections, Egypt’s military ruler warned Sunday of “extremely grave” consequences if the turbulent nation does not pull through its current crisis _ an attempt to rally the public behind his council of generals in the face of pressure from protesters to step down immediately.
Field Marshal Hussein Tantawi urged voters to turn out for the start of parliamentary elections Monday despite the chaos in the streets after nine days of protests and clashes that some have dubbed a “second revolution.” The vote will be the first since Hosni Mubarak was ousted in February in a popular uprising and it was meant to usher in democracy after decades of dictatorship. However, it has already been marred by the new wave of demonstrations.
Tantawi claimed “foreign hands” were behind the latest wave of unrest. His assertions were similar to those made by Mubarak in the final days before he was ousted. Mubarak frequently warned chaos would ensue if his regime fell, presenting his authoritarian rule as the alternative of order and security. Tantawi was Mubarak’s defense minister for 20 years.
“We will not allow troublemakers to meddle in the elections,” he said in comments carried by the nation’s official news agency. “Egypt is at a crossroads _ either we succeed politically, economically and socially or the consequences will be extremely grave and we will not allow that.”
The military took power when Mubarak stepped down. But it has come under intense criticism for most of the past nine months for its failure to restore security, stop the rapid worsening of the economy or introduce the far-reaching reforms called for by the youth groups behind Mubarak’s fall and the ongoing protest movement. Tantawi rejected calls for the ruling military council to immediately step down.
His warning came as thousands of protesters were filling Cairo’s Tahrir Square for another massive demonstration demanding the military give up power in favor of a civilian presidential council and a “national salvation” government to run the country’s affairs until a president is elected.
It was the ninth straight day of a revival of the protest movement that toppled Mubarak. At least 41 protesters have been killed in and more than 2,000 have been wounded, most of them in Cairo.
At the same time, Egyptians were preparing to vote amid the chaos. With protesters in the streets, there are fears of violence at polling stations. And the population is sharply polarized and confused over the nation’s direction.
Islamic parties are expected to dominate the election, but the political crisis casts doubt on the legitimacy of the vote and could render the parliament that emerges irrelevant.
“I am not going to vote tomorrow because everyone who is running is a thief and only cares for the seat they want to sit in,” said Abu Ahmed, a 36-year-old fruit vendor in the Mediterranean port city of Alexandria. “Many times they’ve tried to buy my vote with a bag of food or money. They know that I’m poor and they want to take advantage of me. I don’t read or write, but I know that Tantawi needs to go,” he said.
The Muslim Brotherhood, the largest and best organized political group in Egypt, is expected to dominate the elections along with its Islamist allies. The group has stayed away from the current wave of protests, careful not to do anything that would derail the vote.
However, the military has said the next parliament will have limited powers, and suggested that it will retain the right to appoint and dismiss the Cabinet. The issue promises to put the military and the Brotherhood on a collision course. A dispute between the two could destabilize the country further, adding to economic and security woes.
“The next parliament will have no power,” predicted accountant Said Younis in Tahrir. “What we want is a salvation government or even a revolutionary government.”
Heavy limitations on the next parliament undermine the very relevance of the vote. The next government will not be determined by legislators but by the head of state, which at the moment is the military, though the protesters want it to step aside. If the military clings to its status, there are likely to be stormy negotiations over the formation of a government, and the protesters will try to influence events by bringing numbers to the streets. In any case, lawmakers at best will be on the sidelines trying to make their voice heard.
The other main duty of parliament _ creating an assembly to draft the next constitution _ may also be largely out of its hands. The military has insisted on the power to name a large part of the assembly, and there is enormous pressure on all sides to form an assembly that represents all factions no matter what their proportions in the parliament.
It is not even clear how long this parliament will be in place. The multi-stage election for the two houses stretches on until March. Then, under the latest timetable put forward by the generals, the constitution must be written and approved by late June. No one has addressed the question of whether the parliament being created now could continue in place under a new constitution or whether a new election would be needed.
A high turnout in the elections, staggered over three stages scheduled to conclude in March, will likely benefit the standing of the military since the vote is a crucial part of a road map it proposed for the transfer of power.
In some ways, a high turnout could undermine the cause of the tens of thousands of anti-military protesters. A low turnout would give credence to the protesters’ claims that the vote lack relevance and legitimacy and, some contend, should wait until the military are back in the barracks.
Tantawi said the military will follow through with its somewhat vague road map for handing over power. The ruling council never set a precise date for transferring authority to an elected civilian administration, only pledging that presidential elections _ the last step in the handover process _ will be held before the end of June, 2012.
Tantawi also accused foreign powers he did not name of meddling in Egypt’s affairs.
“None of this would have happened if there were no foreign hands,” he said. “We will not allow a small minority of people who don’t understand to harm Egypt’s stability,” he said, apparently alluding to the protesters in Tahrir, epicenter of the 18-day uprising that toppled Mubarak.
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Al-Shalchi reported from Alexandria, Egypt.
Italian Premier Mario Monti urged lawmakers Friday to not “pull the plug” on his government before elections in 2013, no matter how politically painful the measures in his plan to save Italy from its debt crisis.
Monti also told the lower Chamber of Deputies ahead of a confidence vote in his new government that he would travel to Brussels next week to the European Commission and would meet with the French and German leaders to map out strategy.
“The job that I have had the honor of receiving is nearly impossible, but we will succeed,” Monti said.
On Thursday, Monti’s government won a confidence vote 281-25 in the Senate after he warned all Italians would need to make sacrifices to get the country out of its massive debt hole.
Monti is under enormous pressure to boost growth and bring down Italy’s high debt, which at 120 percent of GDP is among the highest in the eurozone. The aim is not only to save Italy from succumbing to the debt crisis but to prevent a catastrophic disintegration of the common euro currency.
Monti told lawmakers his strategy had three main pillars: Budgetary rigor, economic growth and social fairness. He pledged to reform the pension system, re-impose a tax on homes annulled by Berlusconi’s government, fight tax evasion, streamline civil court proceedings, get more women and youth into the work force and cut political costs.
On Friday, his remarks were more aimed at answering lingering doubts among those who voted against his government, have conditioned their approval on how long it lasts, or took to the streets Thursday to protest his cabinet of bankers, university professors and CEOs.
“We won’t be around for long,” Monti said. “We won’t last a minute longer than the time this parliament gives us their confidence.”
But he stressed that he never would have gathered together such a high-caliber government if the intent wasn’t to govern until the natural end of the legislative term, in spring 2013. He has said anything less than that would undermine the government’s credibility.
While acknowledging the absolute dependence of his government on parliament, he jokingly asked to avoid using terms like “pull the plug” because it implied the government was some kind of an “artificial lung” when in fact it is leading the country through a profound crisis online payday loan lenders.
“We’re not asking for blind trust, but vigilant trust,” Monti said.
But he also issued a warning of sorts, noting the sense of desperation among ordinary Italians about Italy’s economic mess: “In giving us confidence or taking it away, you must also realize the consequences for yourselves among Italians.”
It was a clear message to Berlusconi’s People of Freedom party, which has said it would only support Monti’s government for as long as needed to pass the measures demanded by the EU.
Party secretary Angelino Alfano told state television Thursday that the party hadn’t given Monti a deadline. “But what is certain is that we are making the link between the government and its program, and once the program is finished we’re heading to the polls.”
Europe has already bailed out three small countries _ Greece, Ireland and Portugal _ but the Italian economy, the third-largest in the 17-nation eurozone, is too big for Europe to rescue. Borrowing costs on 10-year Italian bonds were at 6.75 percent Friday, after spiking briefly over 7 percent Thursday, a level that forced those other countries into bailouts.
In a conference call Thursday, German Chancellor Angela Merkel, French President Nicolas Sarkozy and Monti agreed that their countries have a special responsibility to the eurozone as its three largest economies and founding members of the European Union.
Monti said his meeting with Sarkozy and Merkel would mark the start of “a permanent Italian contribution to the solution of the debt problem.”
Still, it’s not clear how many sacrifices Italians are willing or able to make. Students demonstrated across the country on Thursday under the banner: “Save the schools, not the banks.”
Monti’s ambitious plans overhaul just about every aspect of the Italian economy _ from the organization of local governments to the selection process for teachers. Monti indicated he would seek to lower taxes on labor, while raising those on consumption. And he pledged measures _ such as setting a limit on cash transactions _ to tackle tax evasion, which he estimated is worth 20 percent of GDP.
Stock indexes fell in afternoon trading Thursday as spiking bond yields in Spain brought new worries Europe’s debt crisis and overshadowed the latest signs of growth in the U.S. economy.
Technology stocks led the market lower after two companies disappointed investors with weaker earnings predictions. NetApp Inc. plunged 12 percent, the most in the S&P 500 index, after the data storage company forecast earnings that were below Wall Street’s estimates.
Applied Materials Inc. also said its earnings for the current quarter would be weaker than analysts’ forecasts. The company’s income fell 3 percent last quarter on lower demand fell for the semiconductor equipment it makes.
The Dow Jones industrial average dropped 159 points to 11,746 as of 1 p.m. Eastern time. It had wavered between gains and losses earlier in the day. Cisco Systems Inc. had the largest fall of the 30 stocks in the Dow, 2.7 percent. Intel Corp. dropped 2.4 percent.
In Spain, an auction of 10-year government bonds left the country paying interest rates of nearly 7 percent. That’s the highest rate since 1997 and a level that economists see as unsustainable. Greece and Ireland received rescue loans from the European Union after their bond yields jumped above the same level.
Spain has much more debt than either Greece or Ireland, which would make it difficult for other countries to rescue. Like Italy, whose main borrowing rate also spiked above 7 percent in the last week, the country is burdened with high debts and slow growth.
Concerns about Europe’s debt crisis contrasted with better economic reports in the U.S. The number of people seeking unemployment benefits last week fell to the lowest level in 7 months, a sign layoffs are easing.
“The economic data in the U.S. has been improving,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Conn. “If it weren’t for Europe, I think equity markets would be doing much better right now.”
The Spanish bond auction came a day after Fitch Ratings warned that major U.S. banks could be “greatly affected” if Europe’s debt crisis continues to spread beyond the financially troubled Greece, Ireland, Portugal, Italy and Spain.
Building permits jumped 10.9 percent, much higher than economists expected. That’s another sign that the U.S. may not be headed for another recession.
The Standard & Poor’s 500 index lost 21, or 1.8 percent, to 1,214. The Nasdaq composite slid 57, or 2.1 percent, to 2,582.
In corporate news:
_ Consumer review site Angie’s List soared 21 percent on the company’s first day of trading. Angie’s List Inc., which runs reviews of veterinarians, plumbers and other local services, priced its initial public offering of 8.8 million shares at $13 late Wednesday.
_ Sears Holdings Corp. fell 4.6 percent after its third-quarter results missed Wall Street’s expectations. The retailer’s sales were dragged down by declining consumer electronics sales and softer sales at its Kmart stores.
_ J.M. Smucker Co. lost 2.4 percent after reporting that rising costs for ingredients were cutting into profits.
_ Boeing Co. slipped 1 percent after the market turned lower in the afternoon. The company had traded higher after announcing its largest commercial airplane order. Lion Air, a private carrier in Indonesia, ordered a total of 230 airplanes at a list price of $21.7 billion.