October 16, 2019

European Markets Slump on Political Crises

PARIS — Global stocks fell and oil rose above $100 a barrel on Wednesday, as concern about the political crises in Egypt and Portugal added to traders’ growing grab-bag of anxieties.

Egypt was at the center of geopolitical concern after President Mohamed Morsi on Tuesday night defied an army ultimatum that he resign, raising the risk that the country would descend into bloodshed and chaos.

“Egypt’s not a major oil producer compared with Libya next door,” said Damian Kennaby, director of research for oil market services at IHS Cambridge Energy Research Associates in London. “But there’s a whole lot of ‘what if’ going on right now, and that’s being built into the oil price.” Egypt produced 728,000 barrels of oil a day on average last year, while Libya produced about 1.5 million, according to figures from BP.

In afternoon trading, American crude oil for August delivery was trading at $100.93 a barrel in Europe, up 1.3 percent, its first time above $100 in nine months.

The Euro Stoxx 50 of euro zone blue chips was down 1.8 percent. In London, the FTSE 100 index fell 1.6 percent. On Wall Street, the Standard Poor’s 500-stock index was down 0.3 percent at the start of trading.

In a worrying reminder that the euro zone crisis is not over, Portuguese stocks slumped 5 percent, and the price of Portuguese 10-year government bonds also fell, pushing the yield past 8 percent, its first time at that level since last November, before easing.

In Lisbon, Prime Minister Passos Coelho was struggling to overcome the turmoil in his government that has led both his finance minister and foreign minister to resign within a matter of days amid opposition to crushing austerity policies.

Portugal’s tottering coalition government could collapse amid calls for new elections, potentially ushering in a long period of uncertainty about economic policy in a country that is still under the tutelage of the International Monetary Fund and European Union following its bailout in 2011.

“The situation in Portugal is worrying,” Reuters quoted Jeroen Dijsselbloem, the Dutch finance minister and leader of the Eurogroup of euro zone finance ministers, as saying Wednesday. “I assume the political situation in Portugal will stabilize and that Portugal will stay committed to the undertakings that are part of its program.”

European banking stocks fell after Standard Poor’s cut credit ratings on some of the biggest lenders in the sector. Barclays, which was cut to A from A+, fell 2.9 percent. Deutsche Bank, also cut to A from A+, fell 2.8 percent. Credit Suisse, cut to A- from A, fell 3.8 percent.

Market volatility has returned after a period of calm amid signs of slowing in the Chinese economy, an engine of global growth. A government survey of purchasing managers Wednesday showed activity in the services sector slipping to a 53.9 in June from 54.3 in May, the lowest in nine months. A separate report from Markit Economics and HSBC showed activity firming slightly in June at 51.3, up from 51.2 in May.

Indications from the Federal Reserve in Washington that it might soon begin tapering down its quantitative easing policy has also unsettled investors, setting off a rout in bonds that has erased tens of billions of dollars of value.

Earlier on Wednesday, Asian stock markets closed down moderately.

Stanley Reed contributed reporting from London.

Article source: http://www.nytimes.com/2013/07/04/business/global/daily-market-activity.html?partner=rss&emc=rss

Report Sees U.S. as Top Oil Producer, Overtaking Saudi Arabia, in 5 Years

That increased oil production, combined with new American policies to improve energy efficiency, means that the United States will become “all but self-sufficient” in meeting its energy needs in about two decades — a “dramatic reversal of the trend” in most developed countries, a new report released by the agency says.

“The foundations of the global energy systems are shifting,” Fatih Birol, chief economist at the Paris-based organization, which produces the annual World Energy Outlook, said in an interview before the release. The agency, which advises industrialized nations on energy issues, had previously predicted that Saudi Arabia would be the leading producer until 2035.

The report also predicted that global energy demand would grow between 35 and 46 percent from 2010 to 2035, depending on whether policies that have been proposed are put in place. Most of that growth will come from China, India and the Middle East, where the consuming class is growing rapidly. The consequences are “potentially far-reaching” for global energy markets and trade, the report said.

Dr. Birol noted, for example, that Middle Eastern oil once bound for the United States would probably be rerouted to China. American-mined coal, facing declining demand in its home market, is already heading to Europe and China instead.

There are several components of the sudden shift in the world’s energy supply, but the prime mover is a resurgence of oil and gas production in the United States, particularly the unlocking of new reserves of oil and gas found in shale rock. The widespread adoption of techniques like hydraulic fracturing and horizontal drilling has made those reserves much more accessible, and in the case of natural gas, resulted in a vast glut that has sent prices plunging.

The report predicted that the United States would overtake Russia as the leading producer of natural gas in 2015.

The strong statements and specific predictions by the energy agency lend new weight to trends that have become increasingly apparent in the last year.

“This striking conclusion confirms a lot of recent projections,” said Michael A. Levi, senior fellow for energy and environment at the Council on Foreign Relations.

Formed in 1974 after the oil crisis by a group of oil-importing nations, including the United States, the International Energy Agency monitors and analyzes global energy trends to ensure a safe and sustainable supply.

Mr. Levi said that the agency’s report was generally “good news” for the United States because it highlighted the nation’s new sources of energy. But he cautioned that being self-sufficient did not mean that the country would be insulated from seesawing energy prices, since those oil prices are set by global markets.

“You may be somewhat less vulnerable to price shocks and the U.S. may be slightly more protected, but it doesn’t give you the energy independence some people claim,” he said.

Also, he noted, the agency’s projection of United States self-sufficiency assumed that the country would improve gas mileage in cars and energy efficiency in homes and appliances. “It’s supply and demand together that adds up to this striking conclusion,” Mr. Levi said.

Dr. Birol said the agency’s prediction of increasing American self-sufficiency was 55 percent a reflection of more oil production and 45 percent a reflection of improving energy efficiency in the United States, primarily from the Obama administration’s new fuel economy standards for cars. He added that even stronger policies to promote energy efficiency were needed in the United States and many other countries.

The report said that several other factors could also have a large impact on world energy markets over the next few years. These include the recovery of the Iraqi oil industry, which would lead to new supply, and the decision by some countries, notably Germany and Japan, to move away from nuclear energy after the Fukushima disaster.

The new energy sources will help the United States economy, Dr. Birol said, providing continued cheap energy relative to the rest of the world. The energy agency estimates that electricity prices will be about 50 percent cheaper in the United States than in Europe, largely because of a rise in the number of power plants fueled by cheap natural gas, which would help American industries and consumers.

But the message is more sobering for the planet, in terms of climate change. Although natural gas is frequently promoted for being relatively low in carbon emissions compared to oil or coal, the new global energy market could make it harder to prevent dangerous levels of warming.

The United States’ reduced reliance on coal will just mean that coal moves to other places, the report says. And the use of coal, now the dirtiest fuel, continues to rise elsewhere. China’s coal demand will peak around 2020 and then stay steady until 2035, the report predicted, and in 2025, India will overtake the United States as the world’s second-largest coal user.

The report warns that no more than one-third of the proved reserves of fossil fuels should be used by 2050 to limit global warming to 2 degrees Celsius, as many scientists recommend.

Such restraint is unlikely without a binding international treaty by 2017 that requires countries to limit the growth of their emissions, Dr. Birol said. He added that pushing ahead with technologies that could capture and store carbon dioxide was also crucial.

“The report confirms that, given the current policies, we will blow past every safe target for emissions,” Mr. Levi said. “This should put to rest the idea that the boom in natural gas will save us from that.”

This article has been revised to reflect the following correction:

Correction: November 12, 2012

An earlier version of this article misstated the International Energy Agency’s prediction of American self-sufficiency in energy production. The agency said 55 percent of the improvement would come from more oil production and 45 percent from improvements in energy efficiency. It did not say that domestic oil production would rise 55 percent. Also, an earlier version of a photo caption with this article misidentified the equipment shown in use in an oil field in Greensburg, Kan. It is a pump jack, not an oil rig.

Article source: http://www.nytimes.com/2012/11/13/business/energy-environment/report-sees-us-as-top-oil-producer-in-5-years.html?partner=rss&emc=rss

Today’s Economist: Bruce Bartlett: Some Big Corporations Don’t Pay Taxes, Either


Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take.”

On Sept. 13, Harold Hamm, chairman and chief executive of Continental Resources, testified before the House Committee on Energy and Commerce about achieving energy independence. He said his company, an oil producer, could produce much more if federal policies didn’t hold it back. Among them is the tax system. Mr. Hamm said his company paid an effective tax rate of 38 percent.

Today’s Economist

Perspectives from expert contributors.

One often hears corporate executives make such assertions. Republicans always accept them at face value, because to them there is no public policy problem that isn’t caused by high taxes. Tax cuts are their solution to just about every problem. Cutting the corporate tax rate is among the key measures that all Republicans favor to stimulate growth.

One problem with the Republican theory is that many big corporations actually pay little, if any, federal income tax. For example, The New York Times has reported that General Electric, the sixth-largest corporation in the United States, earned $14.2 billion in 2010, but disclosed in federal filings that it had no federal tax liability.

This disparity between the high taxes that many people say they believe American corporations pay and the low rate they actually pay applies to Mr. Hamm’s business as well. Citizens for Tax Justice, a labor-backed group, looked at Continental Resources’ financial reports, where it must disclose tax payments, and found that in 2011 it paid a federal tax rate of 1.9 percent on profits of close to $700 million. Its average federal tax rate over the last five years was 2.2 percent.

According to Citizens for Tax Justice, G.E. paid a federal tax rate about the same as Continental Resources’ over the last 10 years – an average of 2.3 percent, including four years in which it received a net tax refund.

When poor people pay no federal income taxes and get a government refund because of such programs as the earned-income tax credit, Republicans are incensed, implying that if only the poor paid their fair share that the deficit would disappear. They never suggest that corporations like G.E. pay their fair share, even though the G.E. example is far from unique, according to Citizens for Tax Justice.

The complexity of the corporate income tax makes it easy to evade and avoid American taxes. Edward D. Kleinbard, a professor of tax law at the University of Southern California, points to the easy availability of tax havens, where corporations artificially book their profits and avoid taxation on them.

I had a personal experience with such tax havens recently. I needed a copy of Microsoft Word for a new computer and went to Microsoft.com to buy and download it. But my credit card company refused the charge. When I checked to see what the problem was, I was told that the credit card company was suspicious because the charge went to a company based in Luxembourg.

Luxembourg is, of course, a notorious tax haven. Arranging to realize its profits in such places has long been a tax-avoidance policy practiced by Microsoft and other big corporations. According to a July 22 report by the London-based Tax Justice Network, as much as $32 trillion of global financial wealth may be parked in the world’s tax havens.

Even without taking account of offshore tax havens and other aggressive tax avoidance activities, corporate taxes are grossly overrated as a cost of doing business in the United States. According to the Office of Management and Budget, the corporate income tax raised just 1.2 percent of the gross domestic product last year. Even in 2007, before the economic crisis, it raised only 2.7 percent of G.D.P. This is well down from the 1950s, when the corporate tax raised twice as much revenue as a share of G.D.P.

Republicans often point to the statutory corporate tax rate in the United States as evidence that American companies are overtaxed. Indeed, it is true that the United States has the highest statutory central government tax rate among members of the Organization for Economic Cooperation and Development. The combined statutory rate in the United States is 39.2 percent, including state taxes, compared with an average of 29.6 percent in the O.E.C.D.

However, as a Sept. 13 report from the Congressional Research Service explains, looking only at the statutory rate is highly misleading as an indication of the burden of the corporate tax. That is because it does not take account of the many tax expenditures that reduce the effective tax rate paid by American corporations. In 2011, they reduced corporate tax revenues by $159 billion.

As a consequence, the weighted effective tax rate – taxes as a share of profits – is 27.1 percent in the United States, which is below the 27.7 percent average rate of O.E.C.D. nations. The weighted average marginal tax rate on corporations – the tax on each additional dollar earned – is 20.2 percent in the United States, compared with 18.3 percent in the O.E.C.D.

For these reasons, the investor Warren Buffett says it’s “a myth that American corporations are paying 35 percent or anything like it.”

The Congressional Research Service report also notes that in the United States corporate taxes as a share of G.D.P. were the third lowest among all O.E.C.D. countries in 2009 – 1.7 percent of G.D.P. (including state taxes), compared with an O.E.C.D. average of 2.8 percent of G.D.P. Even Ireland, which conservatives often point to has having an exemplary corporate tax system, raised corporate taxes equal to 2.4 percent of G.D.P.

One continuing confusion in the corporate tax debate is who, exactly, pays it. Corporations, after all, are not entities separate from their owners (shareholders), employees and customers. They are the ones who pay the tax, but economists have been debating about who and to what degree for a century.

A Treasury Department report in May concluded that 82 percent of the corporate tax is borne by capital, with 18 percent borne by labor. Contrary to popular belief, none of the tax is shifted to consumers, which stands to reason because prices are set by producers that pay different tax rates or may even be tax-exempt.

The private Tax Policy Center published a study on Sept. 13 with similar conclusions. It estimates that 20 percent of the corporate tax is paid by labor, 20 percent is borne by the “normal” return to capital – roughly, the risk-free interest rate – and 60 percent by the “supernormal” return to capital. The latter is the extent to which the return to corporate stock has historically exceeded the risk-free interest rate.

One driving force for tax reform is a widespread belief, on both sides of the aisle, that the statutory corporate tax rate should be reduced. That is fine as long as the tax base is broadened by eliminating loopholes. But the idea that cutting the tax rate is a magic bullet to jump-start growth is nonsense, because corporate taxes are, in fact, quite low.

Article source: http://economix.blogs.nytimes.com/2012/09/18/are-corporations-overtaxed/?partner=rss&emc=rss

Stocks Retreat After Doubts on Stimulus

In a second day of testimony to Congress, Mr. Bernanke told lawmakers that the Fed was not taking more action to stimulate the economy.

That cut short a morning rally. The markets had started the day higher after JPMorgan Chase announced strong earnings and the government reported that fewer people sought unemployment benefits last week. The Dow Jones industrial average rose as much as 90 points.

Stocks had rallied for much of Wednesday after Mr. Bernanke left the door open to new economic stimulus measures, but only if the economy worsened. Investors took those earlier remarks to mean that the Fed chairman had all but guaranteed new action to stimulate the economy, said Jeffrey Cleveland, senior economist at money manager Payden Rygel.

“They realize that’s not the case now,” Mr. Cleveland said.

The Standard Poor’s 500-stock index fell 8.91 points, or 0.68 percent, to 1,308.81 in afternoon trading. The Dow fell 56.12 points, or 0.45 percent, to 12,435.49. The Nasdaq composite fell 36.22 points, or 1.29 percent, to 2,760.70.

JPMorgan Chase rose 3 percent after the bank reported that higher investment banking fees raised its net income above analysts’ expectations.

ConocoPhillips rose 4 percent after the country’s third-largest oil company said it would split in two. One company will be an oil producer and the other a refinery.

New applications for unemployment benefits fell to a three-month low last week, a sign that companies were laying off fewer workers. At 405,000, the figure is still above the benchmark that signals healthy job growth.

In a separate report, the government also said an increase in car sales and a drop in gas prices pushed up retail sales slightly in June.

Stocks were also affected by a warning on the United States debt rating as a stalemate continued in Washington over raising the government’s borrowing limit. Moody’s threatened late Wednesday to lower the American credit rating below the highest grade of triple-A, citing the risk that the government might fail to make its debt payments if an agreement were not reached by an Aug. 2 deadline.

In Europe, a threat resurfaced that Italy’s government could lose control of the country’s debt crisis. Yields on Italy’s debt jumped to their highest level since the introduction of the euro, following a bond sale. A debt default for an economy as large as Italy’s would hurt lending across the globe.

Marriott International fell 8 percent after the hotel chain said it would earn less in the full year than previously expected.

Yum Brands rose 1.2 percent after the company, which owns the Pizza Hut, Taco Bell and KFC fast-food chains, said its earnings rose on strong international sales.

Google was scheduled to release its earnings after the closing bell.

Article source: http://feeds.nytimes.com/click.phdo?i=410a732301a981c3346d66baf6507198