June 18, 2024

A Low-Growth World Can Also Mean High Profits

The economy barely budged in the fourth quarter of 2012, expanding at an annual rate of 0.4 percent, and then only after the initial reading was revised upward. Unemployment was 7.6 percent in March , and home prices, though off their lows, were about where they were a decade ago.

As mediocre as those numbers are, they were achieved with huge Federal Reserve assistance and government spending. Another sobering consideration is that the situation is not so great elsewhere, either. Europe, which is getting central bank help of its own, has sunk into another recession. And while Asia is expanding much faster than the West, it is doing so-so or worse by the standards of its own recent history.

While the first quarter of this year was expected to be better than the fourth quarter of last year, at least in the United States, many economists and investment advisers find themselves resigned to living in a world with persistently low growth. Populations are aging in the developed world, economists point out, while resources are scarcer, and the huge debts run up to finance government stimulus will have to be repaid eventually, diverting money from other uses.

“Hopefully it won’t be slow forever, but over the short to medium term it’s something you need to prepare yourself for, for sure,” said Russell Croft, a co-manager of the Croft Value fund.

The Congressional Budget Office, in a report on the domestic economy issued in February, forecast “real potential gross domestic product” growth of 1.8 percent to 2.5 percent a year through 2023.

Farther afield, the International Monetary Fund expects global growth of 3.8 percent this year and 4 percent in 2014. That is a modest upturn from its estimate of 3.2 percent for 2012, but according to United Nations data, lower than in 9 of the 10 years before the financial crisis.

As somber as the outlook is, slow growth has not been much of a hindrance to stock and bond markets in the last four years, when corporate profit margins reached record highs. That is proof that investment portfolios need not suffer along with the economy, something that hardly surprises Jeremy Grantham, chief investment strategist of the fund management company GMO.

In a recent letter to shareholders, Mr. Grantham said he found little connection between strong profits and strong economic growth. If anything, rapid expansion can hurt bottom lines, he said, because companies tend to pay too high a price trying to exploit it.

“The problem with growth companies and growth countries is that they so often outrun the capital with which to grow and must raise more capital,” diluting earnings per share, he said.

That doesn’t make it safe to ignore the economic environment. Those who foresee continued lethargy point out that investors have already had several years to adjust to slow growth and have put their money to work accordingly. That means that they can expect returns to be lower, and to come from fewer market niches, and not necessarily the ones that conventional wisdom suggests would do better.

“The attitude is that slow growth equals a bad investment environment, so you want to buy bonds,” said Nathan J. Rowader, director of investments at the Forward Funds. “But interest rates are very depressed, so you can’t get decent returns in bonds. You need to think about it from a secular standpoint. Low growth and low rates is a good environment for stocks.”

Mr. Rowader favors businesses that return cash to shareholders rather than investing it in a heroic effort to wring growth out of an economy that has little of it.

“It’s important in this scenario to buy dividend-paying stocks, because the ways that companies can grow earnings are limited,” he said. “It means something to show that they can pay dividends and grow them over time instead of hoping that the economy gets better.”

Suitable companies tend to have strong balance sheets and credit ratings, Mr. Rowader said. They do not have much debt, but can borrow cheaply anytime they choose. He prefers European examples over American ones because they have similar business mixes, but are often cheaper.

“They can grow their dividends over time, but they’re being punished because they’re European,” he said. “You can also get a bump up when that undervaluation starts to correct itself.”

Three such companies in Forward’s portfolios are Lottomatica, an Italian provider of gambling technology; Danone, the French food giant; and Ensco, a British enterprise engaged in deepwater oil drilling.

CHUCK AKRE, manager of the Akre Focus fund, says he likes to look for stocks of companies that can expand despite the poor economy.

“We continue to be focused on trying to find compounders,” Mr. Akre said, meaning companies that generate comparatively high returns on capital and have a record of plowing earnings back into their businesses in wise, profitable ways. The sorts of returns that they can produce are lower in a sluggish economy, he added, but their valuations are lower, too, so shareholders can still do well.

Two of his holdings are MasterCard and Visa. Even though “in a slower-growth economy people spend a little less on cards,” he said, these companies can still flourish from the broad global trend toward increasing card use and less reliance on cash and checks.

Mr. Akre also owns shares of American Tower, which rents space on cellphone towers through contracts that call for annual price increases. “It’s a great business model regardless of the environment,” he said. “It’s vertical real estate.”

Mr. Croft shares Mr. Rowader’s appreciation of big dividend payouts, but Mr. Croft prefers to obtain them from American companies that do business in places with “pockets of growth that are faster than the U.S.,” he said.

His selections include Mondelez International, a snack food manufacturer spun off from Kraft that derives 45 percent of sales from emerging markets; the tobacco producer Philip Morris International and “solid blue-chip companies that may not be as expensive as they used to be,” like Johnson Johnson and Pfizer.

Mr. Croft also likes companies that are improving productivity or resolving issues that have limited profits, including three makers of big-ticket items of various sorts, Whirlpool, Ford Motor and Honeywell. The idea is to own businesses that are fixing themselves when the economy is struggling to manage the same feat.

“Everyone talks about how margins are at their peaks, and they wonder how long it can keep going,” he said. “You’ve got to find companies that are hitting new peaks and are going to keep getting better.”

Article source: http://www.nytimes.com/2013/04/07/business/mutfund/a-low-growth-world-can-also-mean-high-profits.html?partner=rss&emc=rss

Wall Street Edges Lower in Thin Trading

The SP 500 index declined 0.9 percent on Friday, its biggest drop in more than a month, as a Republican plan to avoid the cliff – $600 billion in tax hikes and spending cuts that could tip the U.S. economy into recession – failed to gain any traction on Thursday night.

Sharp moves like that highlight how headlines from Washington can whipsaw markets, especially during the thinly traded period over the Christmas holidays.

Still, with the SP 500 up 0.8 percent in December and on course for its strongest month since September, some analysts are predicting that stocks will find their footing during a market seasonality known as the “Santa rally.”

“Right now we’ve seen some very constructive action in the market so I think that bodes well for this being a positive seasonal ‘Santa’ period over the coming seven days,” said Ari Wald, a technical analyst at The PrinceRidge Group.

Wald points to an all-time high in the NYSE advance-decline line, which compares the advancing and declining stocks, as indication of strong participation in the rally off November lows that is setting stocks up for their best year since 2009. A large number of advancers to decliners shows there is broad participation across the equity market.

“Pull backs are buying opportunities,” said Wald. “There has been really great participation on this move, a lot of small- and mid-cap stocks behaving well, pushing out to the upside; we’re seeing some good leadership from offensive sectors of the market as well.”

The Santa seasonality covers the last five trading days of the year and the first two of the new year. Since 1928, The SP 500 has averaged a gain of 1.8 percent during this period and risen 79 percent of the time, according to data from PrinceRidge.

The Dow Jones industrial average dropped 35.78 points, or 0.27 percent, to 13,155.06. The Standard Poor’s 500 Index fell 3.69 points, or 0.26 percent, to 1,426.46. The Nasdaq Composite Index lost 10.68 points, or 0.35 percent, to 3,010.33.

The SP 500 remains up more than 13 percent for the year, having recovered nearly all the losses suffered in the wake of the U.S. elections. The yearly gain would be the best since 2009.

Some U.S. lawmakers expressed concern on Sunday the country would go over the cliff, as some Republicans charged that was President Barack Obama’s goal. Talks are stalled with Obama and House of Representatives Speaker John Boehner out of Washington for the holidays.

“It does seem like we are continuing through the same drift of the same thing we’ve had the past couple of weeks – cliff talk,” said Nick Scheumann, wealth partner at Hefty Wealth Partners in Auburn, Indiana.

“You can’t trade on what you don’t know and we truly don’t know what they are going to do,” he said.

Congress is expected to return to Washington next Thursday as Obama returns from a trip to Hawaii. As the deadline draws closer, a ‘stop-gap’ deal appears to be the most likely outcome of any talks.

Trading volumes are expected to be muted, with U.S. equity markets scheduled to close at 1 p.m. (1800 GMT) ahead of the Christmas holiday on Tuesday.

In addition, a number of European markets will operate on a shortened session, with other markets closed entirely.

U.S. retailers may not see a sales surge this weekend as ho-hum discounts and fears about imminent tax hikes and cuts in government spending give Americans fewer reasons to open their wallets in the last few days before Christmas.

Aegerion Pharmaceuticals Inc said the U.S. Food and Drug Administration approved Juxtapid capsules in patients with homozygous familial hypercholesterolemia, but will conduct a post-approval study to test long-term safety and efficacy. Shares fell 4.7 percent to $24.50.

Herbalife Ltd dipped 5.8 percent to $25.68 in premarket after the company said it expects to exceed its previously announced repurchase authorization guidance and has retained Moelis Company as its strategic advisor. The declines put the stock on track for a ninth straight decline.

Yum Brands Inc advanced 1.7 percent to $64.98 after Shanghai’s food safety authority said the level of antibiotics and steroids in the company’s KFC chicken was within official limits.

(Reporting By Edward Krudy; Editing by Chizu Nomiyama)

Article source: http://www.nytimes.com/reuters/2012/12/24/business/24reuters-markets-stocks.html?partner=rss&emc=rss

Fiscal Cliff Casts Big Shadow on Sunnier 2013 Economic Forecasts

The American economy could finally have a pretty good year next year — assuming Washington does its part.

Economists see a number of sources of underlying strength in the economy, but for the growth to gain traction, they say, political leaders need to avoid the broad tax increases and spending cuts now being debated.

The nascent housing rebound, the natural gas boom, record profit margins, a friendlier credit market for small businesses, along with pent-up demand for autos and other big purchases, could in combination unleash growth and hiring that the economy needs.

“Underneath all the shenanigans in Washington, there’s a lot of strengthening,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

More robust growth next year — perhaps higher than 3 percent later in the year, according to some of the more optimistic forecasts — would certainly be a stark reversal from the current sluggish path.

There is a range of opinion among economists, though, and some warn of continued sluggishness, especially in the beginning of the year.

Estimates for the last quarter of 2012 are hovering around an unusually weak 1 percent annualized rate.

That dismal pace is driven partly by drags from Europe’s recession and China’s slowdown; partly by companies readjusting after potentially overstocking their back-room shelves in the third quarter; and largely by worries about the so-called fiscal cliff of spending cuts and tax increases set for early 2013.

Surveys of consumer and business confidence in recent weeks have plummeted to recession-era lows. With such uncertainty, businesses have also recently curtailed spending on capital investments like computers, delivery trucks and other equipment, apparently in anticipation of higher tax rates and the destructive side effects of government cutbacks. Given that capital expenditures have been weak recently, some economists believe businesses will start spending more if Congress ends or at least delays the risk of severe fiscal tightening.

“You would think there must be for most businesses a list of projects they’d like to do which they’ve just been pushing a little bit into the future because they haven’t been able to justify taking the risk because they don’t know what’s around the corner,” said Nigel Gault, chief United States economist for IHS Global Insight. “When they know more about the future, and what tax rates they’ll be paying, they will be able to dust off those plans and finally execute them.”

Improving access to credit helps these capital expenditures become not only more attractive, but also more accessible. Commercial and industrial loans have been rising in recent months, according to the Federal Reserve. The National Federation of Independent Business has also reported that the share of small business owners who say their credit needs are not being met has been falling.

Additionally, corporate profits reached a high, even adjusting for inflation, in the third quarter. Companies have amassed a lot of cash that they can use to buy equipment or hire people if they feel secure enough about the recovery.

Consumers, on the other hand, are still not exactly cash-rich, particularly since their disposable income has been flat to falling in recent months. But in the last few years they have deleveraged greatly — either by paying down debt or having it written off through default — and, more important, they are feeling a little wealthier because the housing market appears to have bottomed out. The country has finally worked its way through the excess housing inventory from the bubble years, and now housing prices and housing construction are rising.

Household formation is picking up: young people are finally moving into their own homes, as are other Americans who had lived with family or friends.

“We’re slowly but steadily improving, with more job opportunities in particular for younger households,” said Mark Zandi, chief economist at Moody’s Analytics. “They can only live with their parents for so long. There are powerful centrifugal forces in those households, on both sides. As soon as they have a chance to get out, many will take it.”

Demographic data suggests that there should be about a million more households headed by younger Americans today than there actually are. That bodes well for continued formation of households next year, and new household formation is typically accompanied by other spending like furniture and kitchenware. Under normal circumstances, each new household adds about $145,000 to output that year as the spending ripples through the economy, Mr. Zandi says.

As is the case with businesses, economists see consumers unleashing some of their pent-up demand for cars. The average age of all vehicles in operation in America is at a record high of 11.2 years, according to the research firm R. L. Polk, which tracks vehicle sales and registrations. Vehicle sales have already been posting large gains this year.

The major caveat to all these relatively upbeat indicators, of course, is that Congress might override all this strength with deep austerity measures.

Even without all of the federal tax increases and spending cuts scheduled for 2013, the government sector will slow growth because state and local governments are still shrinking, said Michael Feroli, chief United States economist for JPMorgan Chase. The sharp fiscal tightening at the federal level under current law would not only drag on growth but throw the entire economy back into recession, according to numerous private and government forecasters.

The nonpartisan Congressional Budget Office has estimated that the entirety of the so-called fiscal cliff would shave about three percentage points off gross domestic product growth next year.

A more modest tightening along the lines of what President Obama wants — which would include extending most existing tax rates and spending programs — would still substantially reduce growth, analysts say. Charles Dumas, the chairman of Lombard Street Research, forecasts about a two percentage point subtraction from output growth next year under a situation where most of the Bush tax cuts are kept, the payroll tax holiday is phased out and most of the scheduled spending cuts are eliminated.

“The full drag posed by the cliff is sufficient to erase roughly two and a half years’ worth of economic gains,” said Joseph A. LaVorgna, chief United States economist at Deutsche Bank.

Article source: http://www.nytimes.com/2012/12/17/business/economy/fiscal-cliff-casts-big-shadow-on-sunnier-2013-economic-forecasts.html?partner=rss&emc=rss

DealBook: Lehman Sells Property Firm in a Deal Worth $6.5 Billion

Equity Residential, a company run by Sam Zell, and AvalonBay Communities agreed to buy Archstone from the Lehman estate.Robert Caplin for The New York TimesEquity Residential, a company run by Sam Zell, and AvalonBay Communities agreed to buy Archstone from the Lehman estate.

It was the deal that helped sink Lehman Brothers. Now, it will play an important role in paying off the failed investment bank’s creditors.

The Lehman estate agreed on Monday to sell Archstone, a sprawling apartment complex company, to its two biggest real estate rivals — Equity Residential, a company run by the investor Samuel Zell, and AvalonBay Communities — for about $6.5 billion in cash and stock.

The sale will dispose of the Lehman estate’s single biggest asset as it continues efforts to wind itself down and pay off the firm’s legions of creditors. And it will end the estate’s plans to take Archstone public, which had been expected to raise $3.45 billion in an offering on the New York Stock Exchange.

While the acquisition of Archstone by Lehman came just as the housing market was slipping from its lofty peak, its sale follows a recovery from the market’s lows. Residential apartment values have surpassed their 2007 peak, and occupancy rates are strong. Still, the market for rental apartments has taken a breather.

Even with the collapse of its Wall Street parent, Archstone has been held in high regard among investors and analysts for the high quality of its properties and the abilities of its management team. The company, based in Englewood, Colo., owns or has a stake in 181 developments with 57,948 apartment units, as of Sept. 30. Its apartments are largely in metropolitan areas in the Northeast, California and southeast Florida.

The 265-unit Archstone Chelsea in New York.The 265-unit Archstone Chelsea in New York.

“Archstone is a highly sophisticated and very well thought-of manager of apartment assets,” said Craig Leupold, the president of Green Street Advisors, a research firm. “If it’s not the highest-quality portfolio around, it’s certainly up there.”

More than four years ago, it was a millstone around the neck of a foundering Lehman. In 2007, the Wall Street firm teamed up with Tishman Speyer to buy Archstone for more than $23 billion, having triumphed in a contest for one of the nation’s premier apartment landlords. The deal was led by Mark Walsh, then Lehman’s head of real estate and considered one of the smartest investors on Wall Street, fond of complex transactions that yielded big profits.

But it meant taking on huge amounts of debt as the housing boom was showing signs of deflating, leaving Lehman significantly weakened as the market turmoil was escalating in 2008. Lehman filed for bankruptcy on Sept. 15 of that year.

During the bankruptcy and as Lehman emerged with a liquidation plan earlier this year, Archstone was identified as an asset that could yield a significant payday for creditors. Even as the Lehman estate sold off other high-quality holdings, including the asset manager Neuberger Berman, it held onto Archstone. It also sold off about $3.6 billion worth of lower-quality assets from the Archstone business.

The stock component of the transaction announced on Monday will give make the Lehman estate the single biggest investor in Equity Residential, with a 9.8 percent stake, and in AvalonBay, with a 13.2 percent stake.

The business attracted suitors, and one of the most persistent was Equity Residential, which had long followed the path set by Mr. Zell: serial deal-making that made it one of the biggest apartment investors in the country.

Another was AvalonBay, an apartment company known for developing properties rather than buying them.

Both companies began talking to the Lehman estate as far back as the summer of 2011, though the talks were in fits and starts, according to people with direct knowledge of the process.

Among the primary concerns within the Lehman real estate team was fetching the highest possible value for Archstone. And that meant buying out the other partners in Archstone: Bank of America and Barclays.

Lehman spent about $2.88 billion to acquire their stakes earlier this year to simplify matters for any new owner.

Yet at the same time, the estate also began an initial offering process for Archstone in case the sales talks broke down. An I.P.O. would have been one of the biggest staged this year, trailing only the likes of Facebook.

In recent weeks, talks between Lehman and the real estate investors picked up steam, these people said. The partnering of Equity Residential and AvalonBay proved especially reassuring, as it reduced the risks that either company would have taken on.

So while Lehman periodically updated Archstone’s offering documents — the most recent update was filed with regulators just last week — teams worked around the clock to secure a transaction.

The Lehman team finally breathed a sigh of relief when most of the major legal paperwork was signed around 1:30 a.m. on Monday.

Under the terms of the deal, Equity Residential and AvalonBay will pay $2.685 billion in cash and about $3.8 billion in stock. That represents a roughly 17 percent premium to what Lehman had valued the company earlier this year. The two companies will also assume Archstone’s roughly $9.5 billion in debt.

Equity Residential, which is run by Mr. Zell, will own about 60 percent of Archstone’s assets and liabilities. AvalonBay will own the remainder.

In return, the Lehman estate will become the single biggest shareholder in each company, holding a 9.8 percent stake in Equity Residential and a 13.2 percent stake in AvalonBay.

“The sale of Archstone to Equity Residential and Avalon Bay is a very positive outcome for our creditors,” Owen Thomas, the chairman of Lehman’s board of directors, said in a statement.

But the Lehman real estate team’s work is not finished: the estate still owns several major properties in New York City and on the West Coast that must be sold.

A version of this article appeared in print on 11/27/2012, on page B1 of the NewYork edition with the headline: Lehman Sells Property Firm In a Deal Worth $6.5 Billion.

Article source: http://dealbook.nytimes.com/2012/11/26/lehman-estate-to-sell-archstone-for-6-5-billion/?partner=rss&emc=rss

Factory Production Is Fueling Increased Growth in U.S.

WASHINGTON (AP) — Factory production in the United States has surged 15 percent above its lows of two and a half years ago and is helping drive the economy’s recovery.

A jump in manufacturing output last month coincided with other data suggesting that the economy began 2012 with renewed vigor, and another report shows that wholesale prices are tame.

There appear to be signs “that manufacturing in the U.S. is gaining global market share,” said John Ryding of RDQ Economics, “and this could be an important dynamic supporting growth in 2012.”

Manufacturing rose 0.9 percent from November to December, the Federal Reserve said Wednesday. It was the biggest monthly gain since December 2010.

Overall output at the nation’s factories, mines and utilities increased 0.4 percent. Warm weather reduced demand for energy produced by utilities.

Over the last year, factory output has risen 3.7 percent. Factories benefited in particular in the second half of 2011 from several trends. People bought more cars. Businesses spent more on industrial machinery and computers before a tax incentive expired. And companies restocked their supplies after cutting them last summer.

The growth has also fueled more hiring. Factories added 23,000 jobs in December, the most since July. That helped reduce the unemployment rate to 8.5 percent, the lowest level in nearly three years.

Still, Europe’s debt crisis has begun to dampen demand for American exports. That trend, should it continue, could slow manufacturing and threaten growth this year.

December’s gains suggest the industry “is still resistant to the apparent slowdown in growth elsewhere, particularly in Europe,” said Paul Ashworth, chief United States economist with Capital Economics.

Businesses are starting to see some relief from high prices for energy and food, and that should benefit consumers later this year.

The Producer Price Index declined 0.1 percent in December, the Labor Department said Wednesday. The index measures price changes before they reach consumers.

Core wholesale prices, which exclude costs for food and energy, rose more sharply in December — 0.3 percent. But economists played down the increase. They cited temporary factors that had pushed auto prices down in October and November.

Over all, wholesale prices are trending lower. They increased 4.8 percent in December compared with the same month a year ago, reflecting in part the effect of higher oil and other commodity prices. Even so, it is the slowest annual increase since January and down from 7.1 percent in July.

Falling prices for oil and agricultural commodities have lowered the cost of food and gas.

Gas prices have turned upward in recent months, but economists do not expect that to worsen inflation this year because prices will most likely be lower than last winter and spring, when political turmoil in North Africa and the Middle East sent prices up.

Lower wholesale costs mean manufacturers and retailers face less pressure to raise prices for consumers to maintain profits. That could keep consumer price inflation in check.

Lower inflation also gives the Federal Reserve leeway to keep short-term interest rates low and take other steps, if necessary, to bolster the economy.

Article source: http://feeds.nytimes.com/click.phdo?i=b499efd1e042169ed24d2cb8f7895547

Another Decline in New-Home Sales

A stagnant job market and a big overhang of unsold existing homes have combined to keep new-home sales low even as mortgage rates returned to lows not seen since at least the early 1970s.

New-home sales slipped 2.3 percent last month to a 295,000 annual rate, a six-month low, the Commerce Department said on Monday. That was in line with analysts’ forecasts and did little to allay fears that the United States could slip back into recession.

The median sales price also moved lower from the previous month and was 7.7 percent below year-ago levels.

“There’s no sign yet that low mortgage rates are helping the housing sector,” said Gary Thayer, a strategist at Wells Fargo Advisors in St. Louis.

The Federal Reserve last week announced new measures to ease credit further for home buyers, but analysts cautioned that the level of mortgage rates was not the main hurdle to buying.

Heavy debts taken on during the housing boom in the previous decade are also making consumers cautious to spend.

In its monthly report on single-family home sales, the government raised its estimate for July’s sales pace slightly to 302,000 units. Also, the supply of homes available on the market in August dropped to a record low.

Data last week showed new construction of homes fell in August, dragging on economic growth.

“The housing sector can’t get any worse,” said Michael Englund, an economist at Action Economics in Boulder, Colo.

Article source: http://feeds.nytimes.com/click.phdo?i=99940ef2acff4659c3bc52ab62742f0a

Another Sharp Swing, This Time Up, for U.S. Markets

“It’s just a yo-yo,” said Myles Zyblock, the chief institutional strategist and managing director for Capital Markets Research at RBC Capital Markets. “I think the primary structure is still in place, and that is a structure of concern.”

Even as new economic data was released on Thursday, showing, for example, that weekly jobless claims were lower at 395,000, there was hesitation to read too much into one scrap of information embedded in the bigger economic picture.

Some corporate results bolstered the broader market as well, such as those of Cisco Systems, which helped raise the technology sector more than 3 percent as its share rose more than 15 percent around noon.

But the financial markets this week have been held hostage to concerns about the global economy, financial troubles in Europe and the implications of a ratings agency’s unprecedented downgrade of the United States’s credit rating. Benchmark United States bond yields have hit lows and stocks have ricocheted between steep gains and losses to an extent that has not been seen since March 2009.

They finished sharply lower on Wednesday, but on Thursday the Standard Poor’s 500-stock index and the Dow Jones industrial average were up nearly 3 percent, and the Nasdaq composite topped that mark.

“People are trying to bottom pick today, and it might be the bottom,” said Mr. Zyblock.

“I would like to see the collective message start to stabilize to give me confidence there is a hardened floor underneath this market,” he said.

Financial stocks also rose more than 3 percent.

Investors have been burned by the market volatility in the past few days, and many are bracing for any possible outcome.

“We have seen it go back and forth between risk-on and risk-off very quickly,” said Paul G. Christopher, chief international investment strategist for Wells Fargo Advisors.

Speaking about the early rise in stocks, he said: “It has been risk-off, but we might be getting near the end of that. You can only run emotionally for so long.”

The announcement that the leaders of Germany and France would meet on Thursday might be helping stocks to firm, Mr. Christopher said.

“The markets need to have reassurance from governments that they are going to take care of their budget deficits and going to backstop their banks,” he said.

The yield on the United States 10-year Treasury was at 2.23 percent around noon compared with 2.1 percent on Wednesday.

European indexes had been mixed but rallied after the market opened in the United States.

The FTSE 100 was up 3.22 percent. The CAC 40 in Paris was up 2.89 percent and the Dax in Germany was up 3.42 percent. Earlier in the day, Société Générale shares jumped nearly 8 percent after earlier declines. On Tuesday the stock gave up almost 15 percent of its value amid worries about the debt and economic woes of Europe and the United States.

Frédéric Oudéa, the bank’s chief executive, told Le Figaro in an interview published Thursday that the bank had “suffered a series of attacks in the market,” on the basis of rumors about its financial condition that he denied “most vigorously.”

A report on Thursday from Reuters, which did not identify its sources, ratcheted up fears after it said at least one bank in Asia had cuts its credit lines to the major French banks and that others were reviewing their lines because of perceived risks. If confirmed, that would represent a worrying escalation of the crisis, since interbank lending is the lifeblood of the global financial system.

Société Générale called Thursday on French market regulators to “investigate the origin of these rumors that have gravely impacted the interest of its shareholders.”

Christian Noyer, the governor of the Bank of France and a member of the European Central Bank’s governing council, addressed the market concerns in a statement, saying the first-half results of French banks had “confirmed their solidity in a difficult economic environment, thanks to rigorous risk management and a universal banking model based on diversified businesses.”

The banks’ capital levels are adequate, Mr. Noyer said, noting that they had recently passed stress tests.

In Asia, the Hang Seng index in Hong Kong fell almost 1 percent, while the Nikkei 225 in Japan closed down 0.6 percent.

Gold futures briefly topped $1,817.60 an ounce, its highest ever in nominal terms, before receding to about $1,794.20. Adjusted for inflation, the record gold price would be closer to $2,400 an ounce, according to Capital Economics.

Crude oil futures in the United States were down 1 percent at $82.07 a barrel.

The euro rose to $1.4137 from $1.4178 late Tuesday in New York, while the British pound rose to $1.6140 from $1.6134.

German 10-year bunds were trading at 2.18 percent, down 1 basis point, while bonds of Italy were down 6 basis points to 5.01 percent and Spain was down 5 basis points at 4.93 percent.

Article source: http://www.nytimes.com/2011/08/12/business/daily-stock-market-activity.html?partner=rss&emc=rss

Off the Charts: Adding to Jobless Woes, Little Turnover in the Workplace

The Bureau of Labor Statistics reported this week that the rate of discharges and layoffs rose a little in May, to 1.27 percent of the work force. But the rate, which reached a record low of 1.11 percent in January, remains lower than it was for most of the last decade.

Unfortunately, hiring also remains very slow, although it has improved a little in recent months from the lows reached during the depths of the recession and credit squeeze.

In normal times the American labor market is characterized by a strong level of turnover; more than 4 percent of all jobs change hands each month. But that turnover rate plunged during the recession and has barely started to recover, as can be seen from the accompanying charts.

The low turnover rate is probably one reason long-term unemployment has become a major problem. Most job openings occur because employees resign, presumably because they find a better job or believe they will be able to do so. The vacated jobs are available to be filled, perhaps by people who had been unemployed.

Presumably the number of employees unhappy with their current jobs has not declined, but over the most recent 12 months, 13 million fewer people quit jobs than did so during the year before the recession began at the end of 2007. Many of those who did not resign may be unhappy and frustrated that they are not able to change jobs.

The decline in the number of people switching jobs may be partly a result of the collapse in housing prices. There are no doubt some workers who would like to change jobs and who could get better ones if they were willing to move. But with many homes no longer worth the amount owed on them, a move could be much more difficult than it would have been when real estate prices were higher.

The figures are gathered by the Labor Department through the Job Openings and Labor Turnover Survey, known as Jolts. That survey began in 2000, so there is a limited amount of history. The survey comes out more than five weeks after the overall jobs numbers are released, so it normally gets little attention.

It is possible that the slow level of turnover in the labor market has distorted the normal jobs report. In June, the government reported that total employment rose by 376,000, but that after the seasonal adjustment the increase was a disappointing 18,000. This year, much as in 2010, the job market has appeared to strengthen early in the year and then fade in the spring and summer.

But if reduced turnover means there is less hiring during the months when employers are usually adding temporary help, and fewer job losses in months that are seasonally weak, that could mean the seasonal adjustments are currently overstated. The seasonal adjustments add the most jobs during the winter months of January, February and March and subtract the most during the summer months of June, July and August.

If that is true, then the job picture was neither as good as it appeared in the winter nor as bad as it has looked over the last two months.

Floyd Norris comments on finance and the economy in his blog at nytimes.com/norris.

Article source: http://feeds.nytimes.com/click.phdo?i=cc680319a19488457cec9193b4159786

Economix: Four Workers for Every Job Opening

The job market still isn’t good, but at least it’s on its way back.

There were just 4.3 unemployed workers for every available job in March, the best ratio in over two years, according to a new Labor Department report. When conditions were worst, there were nearly seven workers per opening.

DESCRIPTIONSource: Bureau of Labor Statistics, via Haver Analytics

March’s jobless-to-jobs figure was still well below its level before the recession, however.

On the other side of the ledger, the raw number of layoffs and discharges continue to be near lows:

DESCRIPTIONSource: Bureau of Labor Statistics, via Haver Analytics

The moral is that the  source of problems in the job market isn’t that people are still being laid off, but that those laid off during the Great Recession have nowhere to go. And as we’ve noted before, the longer these workers take to find companies that will hire them, the less employable they become.

Article source: http://feeds.nytimes.com/click.phdo?i=06925fcb1a29b4afd671b6c0d0119da1