The U.S. Treasury supports allowing the International Monetary Fund to sell some of its $98 billion in gold reserves to help cover a revenue shortfall, the department's top international official said.
“We have a very credible plan for cost reduction that's in the process of being implemented'' at the IMF, David McCormick, Treasury's undersecretary for international affairs, told reporters in Washington. “For that reason, Treasury supports limited gold sales.''
The Treasury endorsed IMF sales of as much as 12.9 million ounces recommended by Andrew Crockett, former head of the Bank of International Settlements, to set up an investment fund to cover the IMF's budget shortfall, McCormick said.
The Treasury, which until now has opposed letting the fund sell bullion, reversed its stance to endorse elements of cost- cutting plans of IMF Managing Director Dominique Strauss-Kahn, McCormick said. Strauss-Kahn has proposed eliminating as much as 15 percent of its 2,600 staff and saving $100 million of its $922.3 billion budget to offset dwindling revenue from lending.
“In the managing director, there is a leader there that is really building momentum and pushing in all the right directions,'' McCormick said.
The IMF holds 103.4 million ounces of gold, trailing only the U.S. and Germany, according to the World Gold Council. Gold futures for April delivery fell $10.20, or 1.1 percent, to $937.60 an ounce at 9:57 a.m. on the Comex division of the New York Mercantile Exchange.
Congressional Support
The U.S. Congress can block any sale of the reserves, since approval requires an 85 percent majority from the 185 countries that are members of the IMF and the U.S. has a 17 percent voting stake. Congress blocked IMF attempts to sell gold in 2005 and 1999.
Treasury has had “a number of quiet discussions on the Hill, and I think have some confidence that there will be some support for this,'' McCormick said.
Strauss-Kahn is seeking approval from the U.S. and other major IMF shareholders for plans to cut costs and shore up revenue. Without the changes, the IMF may post annual losses of $400 million by 2010, the lender said in a Dec. 7 statement.
The IMF's finances have come under pressure as economic growth and government revenue accelerated in emerging markets, reducing their need for emergency loans.
Japan's government lowered its assessment of the economy for the first time in 15 months, saying growth will moderate as exports and production cool.
“The economy is recovering at a moderate pace recently,'' the Cabinet Office said today in its monthly economic report for February. In January, the government said “the economy is recovering, while some weaknesses are seen.''
Reports in the past month have showed the nation's longest postwar expansion is cooling after growth accelerated in the fourth quarter. Industrial production rose less than economists estimated in December, and exports to the U.S., Japan's largest market, fell for a fifth month in January.
“We need to consider the possibility that Japan may enter a lull in the economy,'' though it's unlikely for now, Economic and Fiscal Policy Minister Hiroko Ota said at a press conference in Tokyo today. “We need to watch developments in the U.S. economy,'' the epicenter of turmoil in the world's financial markets, which is leading a global slowdown.
The Cabinet Office lowered its assessment of output for the first time in eight months, saying it's “growing at a slower pace,'' after describing it as “increasing moderately.''
Production rose 1.4 percent in December, less than the 2 percent increase forecast by economists. Manufacturers surveyed said they plan to cut spending in January and February.
The government also cut its evaluation of exports for the first time since September 2006, saying they're increasing “moderately'' even after a report yesterday showed growth in shipments accelerated in January.
Exports to the U.S. declined 3.2 percent in January, while overall shipments grew 7.7 percent, supported by demand in Asia and Europe, a government report showed yesterday.
Waning U.S. Demand
Waning demand in the U.S., the world's biggest economy, will eventually take its toll on the emerging markets where Japan ships about half its goods, Ota said last week.
The government also lowered its assessment of the global economy, including the U.S. and the euro region.
“Attention should be paid to downside risks'' resulting from the slowing U.S. economy, turmoil in financial markets and rising oil prices, the government said.
The Bank of Japan said last week in its monthly report that growth is slowing temporarily and lowered its assessment of the global economy. It cut its evaluation of Japan's economy in December, the first reduction in three years.
The last time the government became more pessimistic about the economy was in November 2006, when it said there was “some weakness in consumption.'' Household spending fell every month that year.
Retail behemoth Wal-Mart reported a rise in quarterly profit Tuesday, but offered a cautious outlook for the coming year amid a struggling U.S. economy.
"No one has a crystal ball to look into the economic future, but we know the economy will be a critical factor this year," Wal-Mart CEO Lee Scott said in a recorded call discussing the retailer’s results.
The world’s largest retailer said that net income from continuing operations rose 4% to $4.1 billion, or $1.02 a share, in the fourth quarter. Excluding one-time charges and benefits, the company earned $1.04 per share, beating analysts’ expectations by 2 cents a share.
But the retailer gave a weak outlook for the current period and coming year. Wal-Mart is closely watched as a barometer for the economy since consumer spending fuels two-thirds of economic growth.
The Bentonville, Ark.-based company said it expects first-quarter earnings to come in between 70 to 74 cents a share. That range is mostly below the consensus estimate of 74 cents a share that analysts are expecting for the period.
The retailer expects earnings for the year ending in early 2009 to be between $3.30 and $3.43 a share. Wall Street is forecasting full-year earnings of $3.30 to $3.55 a share.
"This isn’t really a surprise," said Ed Weller, analyst at ThinkEquity Partners, who believes that the economic conditions warranted Wal-Mart’s soft guidance.
"This is the primary reason why the government passed the stimulus package - so that Americans will have more money to spend."
Still, investors were pleased that Wal-Mart’s profit margins held up in the quarter, despite the retailer chopping prices on its holiday merchandise, including 15,000 toys.
Wal-Mart (WMT, Fortune 500) shares edged higher in early trading.
The retailer’s fourth-quarter net sales rose 8.3% to $106.3 billion, up from $98.1 billion in the same period last year, marking the first time a retailer’s sales have ever topped $100 billion in a single quarter. Total revenue, including membership and other fees, totaled $107.4 billion.
Wal-Mart’s strong quarter, which included the critical holiday season, was boosted by global sales but felt the impact of the slumping U.S. economy.
"We knew our customers would be stretched during the holidays," Scott said.
International sales rose nearly 19% in the quarter. By comparison, U.S. sales rose only 5%. Wal-Mart’s warehouse operator Sam’s Club posted a 6.3% gain in sales.
U.S. sales at stores open at least a year - a key indicator of a retailer’s overall health also known as same-store sales - were sluggish, posting a 1.6% rise over the year-ago period. Excluding fuel costs, sales edged higher just 1.4%.
Despite outperforming its rivals, Wal-Mart has struggled alongside other retailers, as consumers have snapped shut their wallets.
"It’s not just Wal-Mart," said Weller. "Every retailer has been posting weak same-store sales for months now."
Wal-Mart posted a weaker-than-expected 0.5% gain in January same-store sales while arch rival Target (TGT, Fortune 500) reported a 1.1% decline.
"Some customers were a little more cautious about their spending in January," Scott said. "That is why we will continue to be diligent in improving our business in every way."
Other major retailers also are slated to report earnings soon, including J.C. Penney (JCP, Fortune 500) on Thursday, followed by Target and Sears (SHLD, Fortune 500) next week.
The Bank of France said U.S. Federal Reserve interest-rate cuts this year were deeper than they otherwise would have been because of market declines amplified by new financial products.
An unsigned article in the Paris-based bank's monthly bulletin, published today, said novel products, such as credit- default swaps, exaggerated market moves that can produce “stronger monetary reactions than what would otherwise be necessary, as shown by the recent decision of the Federal Reserve.''
The Bank of France said in a subsequent statement it didn't intend to criticize the Fed reductions and that it was making an “observation'' because the Fed “has recently implemented a strong change in monetary policy.''
By highlighting the Fed's cuts, the article may have underscored the European Central Bank's reluctance to follow its U.S. and U.K. counterparts in cutting rates to cushion against an economic slowdown. The ECB left its benchmark rate at 4 percent this month even as growth prospects deteriorated.
“The Bank of France is simply going along with the ECB line, trying to manage expectations away from any response similar to the Fed,'' said Gareth Claase, an economist at Royal Bank of Scotland Plc in London. “The Fed moved quickly and far. The ECB is likely to move slowly and little.''
Bank of France Governor Christian Noyer, who's also an ECB policy maker, sounded a similar note today. He said there was cause for “some optimism'' about growth in the 15 euro nations.
European Growth
While the impact of a U.S. slump is unavoidable among “interdependent'' economies, Noyer said in a Paris speech that “dynamic'' employment, manageable consumer debt and a more solid real-estate market helped make Europe's economy more resilient.
The International Monetary Fund sees U.S. growth this year at 1.5 percent and the euro region expanding by 1.6 percent, trailing a global expansion of 4.1 percent.
The Fed has lowered its benchmark rate by 2.25 percentage points since September to 3 percent — including a three-quarter point emergency cut on Jan. 22 — and traders expect another reduction next month.
“Some clients wonder what the point is of the aggressive Fed cuts,'' said Maryse Pogodzinski, a Paris-based economist at JPMorgan Chase & Co. “Banks continue not to lend'' as they “keep having significant liquidity and credit problems.''
German Finance Minister Peer Steinbrueck said Feb. 12 he didn't see ECB Bank President Jean-Claude Trichet preparing markets for a rate cut. At a Feb. 7 press conference, Trichet said uncertainty about growth prospects is “unusually high,'' prompting traders to raise bets on a reduction.
“Pressure on the ECB increased after the massive Fed rate cuts,'' said Michael Schubert, an economist at Commerzbank AG in Frankfurt. “The ECB has said that it won't act anytime soon. It doesn't want to be driven by the Fed.''
The importer of a Valentine’s Day lollipop said it was voluntarily recalling the treats after metal fragments were found in at least two lollipops sold at central Florida stores.
Sherwood Brands of Maryland, which imports the candy from China, said it was recalling all of its Pokemon Valentine Cards and Pops, which have been pulled from the shelves of thousands of stores across the country.
Roughly 20 lollipops were seized at Kathleen Elementary School in Lakeland. X-rays determined that only one piece definitely had metal - what appeared to be a staple - baked inside, Polk County Sheriff Grady Judd said.
On Wednesday, a woman in nearby Mulberry told authorities she found a lollipop with a piece of metal in it in a bag of the same product. The metal appeared to be part of a razor blade, authorities said.
The sheriff’s office issued a safety advisory and the Dollar General chain removed the product from its more than 8,000 stores nationwide. The Food and Drug Administration is investigating.
Judd said the two tainted lollipops were purchased from different Dollar General stores near Lakeland. He said the lollipops did not appear to have been tampered with and it appeared the metal was baked into the candy in China, where it was produced.
"Our children were put at risk of physical injury because of this," Judd said.
No injuries were reported and it was unclear whether the metal was intentionally placed in the candy.
The sheriff’s office said Sherwood Brands was cooperating. "They are as concerned as we are," Judd said.
Sherwood Brands did not return calls seeking comment Thursday but announced the recall in a statement. The company said it was recalling the cards and treats, which were sold in packages of 10 and 30.
"Sherwood Brands is advising its distribution network to remove the Pokemon branded Valentine cards and lollipops from the shelves immediately. The product was sold at retailers nationwide," the company said in the statement.
Dollar General, headquartered in Goodlettsville, Tenn., also pulled another Sherwood Brands product, Dog Artlist Collection Valentine Cards and Pops, from shelves. Tawn Earnest, a spokeswoman for the chain, said no other pieces of metal have been found in the manufacturer’s products.
China’s reputation as an exporter has taken a beating in the past year following the discovery of dangerous chemicals in products from toothpaste to toys. Last year it announced a series of measures to boost product supervision.
The U.S. trade deficit narrowed more than forecast in December as exports reached record levels and Americans spent less on imported autos and goods from China.
The gap between imports and exports shrank 6.9 percent, the biggest decrease in more than a year, to $58.8 billion from $63.1 billion in November, the Commerce Department said today in Washington. The deficit for all of 2007 decreased for the first time in six years.
A weaker dollar and expansion of emerging economies are feeding overseas sales for U.S.-made goods and may forestall a deeper slump at U.S. manufacturers. The narrowing deficit is one of the few remaining bright spots for the economy and will probably lead the government to increase its estimate of fourth- quarter gross domestic product later this month.
“The trade balance is going to continue to be a support for the economy,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. “The drop in imports is probably consistent with the view the domestic economy is turning quite soft.''
Economists had forecast the gap would narrow to $61.5 billion, according to the median of 76 projections in a Bloomberg News survey. Estimates of the deficit ranged from $57 billion to $66.5 billion.
The dollar, which had fallen against the euro earlier today, stayed lower after the report. It traded at $1.4609 per euro at 8:37 a.m. in New York, from $1.4573 late yesterday. The U.S. currency was little changed versus the yen, at 108.30 yen per dollar.
2007 Deficit Shrinks
For all of last year, the deficit shrank 6.2 percent to $711.6 billion, the biggest decrease since 1991. Last year was the first time the trade gap narrowed since 2001.
Exports rose 1.5 percent to $144.3 billion in December, setting a record for a 10th straight month and reflecting more demand for U.S. made capital equipment and industrial supplies. For the year, exports rose 12 percent to a record $1.622 trillion.
Imports in December declined 1.1 percent to $203.1 billion, reflecting lower demand for foreign-made autos, consumer goods, food and capital equipment.
Also contributing to the drop in imports was a 14 percent decline in purchases from China, which helped shrink the month's trade gap with the Asian nation 22 percent to $18.8 billion. Petroleum imports rose 4.2 percent to a record $36 billion as the average price rose to $82.76 a barrel, also the highest monthly average ever. Prices increased in late December and early January and may push up the value of imports for the January report. They have since declined.
Fourth-Quarter Growth
Today's report may cause the Commerce Department to revise its estimate of fourth-quarter economic growth higher. The government projected last month that the trade gap narrowed to a $521 billion annual pace in the last three months of 2007. For all of last year, trade contributed 0.55 percentage point to growth, the most since 1991.
The government will release a revised estimate of the expansion for the last three months of 2007 on Feb. 28.
Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson are scheduled to testify to the Senate Banking Committee later today on the state of the U.S. expansion. Central bank policy makers have forecast the economy will avoid a recession.
“The Fed's policy actions should help to promote a pickup in growth over time,'' Fed Bank of San Francisco President Janet Yellen said in a speech on Feb. 12. “I consider it most probable that the U.S. economy will experience slow growth, and not outright recession, in coming quarters.''
Fed's Rate Cuts
The Fed's Open Market Committee is scheduled to next vote on interest-rate policy on March 18. Policy makers lowered the benchmark rate by three-quarters of a percentage point in an emergency decision announced Jan. 22 and followed that with a half-point cut at the scheduled Jan. 29-30 meeting.
After eliminating the influence of prices, the trade deficit decreased to $49.3 billion from $53.6 billion. This is the figure the government uses in calculating GDP.
For the year, the trade deficit with China, the second- largest U.S. trading partner after Canada, increased 10 percent to a record $256.3 billion.
The gap with China is a political sticking point for the U.S. and other countries.
Group of Seven policy makers, meeting in Tokyo last weekend, said China should do more to defuse global trade tensions by allowing the yuan to climb against the dollar and other currencies. The G-7 also forecast the U.S. economy may slow further, eroding global growth.
Canada, Mexico
The December trade gap with Canada was little changed at $4.7 billion and the deficit with Mexico decreased 14 percent to $6.5 billion. For the year, the deficit with Mexico was a record $74.3 billion.
Growth in Asia and Latin America is helping to keep demand for U.S. exports strong even as parts of Europe show signs of slowing.
Procter & Gamble Co., the largest U.S. consumer-goods company, said Jan. 31 that second-quarter profit beat analysts' estimates because of higher prices and exports. It also boosted its full-year earnings forecast.
“We're seeing some slowdown in the U.S. and maybe a little bit in Western Europe but certainly not in the emerging markets,'' P&G Chief Financial Officer Clayton Daley said in a Bloomberg Television interview.
The weaker U.S. dollar also is helping exports by making U.S.-made goods cheaper. The dollar declined 7 percent last year against a trade-weighted basket of currencies from the U.S.'s biggest trading partners.
The Bank of Japan's next governor may have to reverse the policy pursued by Toshihiko Fukui and reduce interest rates.
The government will nominate a successor to Fukui, whose term ends next month, by mid-February, according to Chief Cabinet Secretary Nobutaka Machimura. Deputy Governor Toshiro Muto, 64, is the most likely heir, three surveys of economists by Bloomberg News since June have shown.
The bank will keep its benchmark rate at 0.5 percent on Feb. 15, analysts forecast, though some anticipate a cut later this year as higher energy and raw-material costs erode profits and slow growth. Fukui has contended since 2006 that the longest economic expansion in 60 years is spurring wages and spending, pushing prices higher and justifying gradual rate increases.
“We can't completely rule out the possibility of a rate reduction under a Muto-led central bank,'' said Ryutaro Kono, chief economist at BNP Paribas SA in Tokyo, one of 13 analysts out of 15 who predicted in December that Muto would get the job.
Prime Minister Yasuo Fukuda's government may propose Muto this week, the Yomiuri newspaper reported on Feb. 9. Officials in Machimura's office declined to comment, as did Yasuhiro Sugimoto, a spokesman for the central bank.
Since the beginning of the year, reports show the outlook for Japan's economy has worsened.
Declining Wages, Sentiment
Wages fell at the fastest pace in more than three years in December and consumer sentiment sank to a four-year low in January as food and energy costs climbed. Companies plan to cut production in January and February, the first back-to-back drops since 2005.
The government, burdened by the world's largest debt, is reluctant to increase spending to spur growth. Investors see a 49 percent chance the Bank of Japan will lower rates by December, according to calculations by JPMorgan Chase & Co. using overnight index swaps.
“Given that there's little room left for Japan to extend fiscal measures, the only possible step to help the economy would be a rate cut,'' said Kono.
Muto, who has voted in line with Fukui since they assumed their posts at the bank in 2003, said on Jan. 10 that the world's second-largest economy will slow “for the time being.''
The central bank will probably halve its key rate to 0.25 percent between April and June, said Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo.
Perception Gap
“There is a huge gap in perception between the bank and financial markets'' on the state of the economy, Sato said.
Even Fukui, 72, has indicated the bank may hold off on rate increases for now. Though he told finance ministers and central bankers from the Group of Seven nations meeting in Tokyo Feb. 9 that the cycle of higher profits feeding into wages and consumer spending is intact, he said the bank needs to examine how much higher prices are hurting economic growth.
The bank will keep its overnight lending rate unchanged at 0.5 percent, the lowest among industrialized nations, on Feb. 15, according to all 30 economists in a Bloomberg News survey.
Bank of Japan governors serve a five-year non-renewable term. Fukui is the second chief since the central bank became independent from the finance ministry a decade ago.
Most of that time has been spent fighting deflation and recovering from the three recessions following the bursting of the stock- and property-market bubbles in the early 1990s. In 2006, Fukui ended the so-called zero interest-rate policy. The bank last increased its benchmark rate in February 2007.
Consumer Prices
Core consumer prices excluding fresh food, the bank's main inflation measure, doubled to 0.8 percent in December from a year earlier, the fastest increase in more than nine years.
Should Muto, a former top finance ministry official, be nominated, he will need approval by the opposition Democratic Party of Japan, which controls the Upper House. Some DPJ lawmakers have said they are opposed to appointing former ministry officials to top government jobs.
The government will also nominate candidates for the deputy governor positions to be vacated on March 19 by Muto and Kazumasa Iwata.
Finance ministers from the Group of Seven nations agreed to promote efforts by banks to improve their disclosure rules and pledged to swiftly act on regulators' recommendations on enhancing financial stability.
Issues the G-7 governments plan to address include getting banks to disclose valuations of structured products in a timely fashion, advance the management of liquidity risks arising from their inability to meet obligations and improve information on their exposure to off-balance sheet vehicles, according to a statement in Tokyo today.
Governments will also scrutinize potential conflicts of interest at credit-rating companies and vowed to implement the so-called Basel II accord on capital adequacy in lending, which countries such as the U.S. haven't adopted yet.
“We stand ready to take any further action necessary to enhance stability in the financial market and to ensure that international integration of financial markets and financial innovation continue to bring about benefits to the world economy,'' the G-7 statement said.
The comments put the spotlight on ways to prevent a repeat of the U.S. subprime mortgage crisis, rather than fixing its damping effects on economies. In the U.S., the Securities and Exchange Commission may propose new rules for credit-rating companies and has created a “subprime task force'' to review banks' risk and liquidity management.
Banks and securities firms have marked down about $146 billion of losses since the beginning of 2007, partly due to their exposure to structured investments such as collateralized debt obligations backed by mortgages.
Market Rout
The statement reflects the preliminary findings of the Financial Stability Forum of international regulators, led by Italian central bank governor Mario Draghi, who participated in today's meeting. Draghi was asked by the G-7 to examine the causes of the market rout and will present his full report to the group in April.
German Finance Minister Peer Steinbrueck said yesterday he may impose tighter national regulation should the G-7 and the European Union fail to take action. Banks should set aside more of their own money for the riskiest loans they grant and market transparency should be increased, he said.
While U.K. Chancellor of the Exchequer Alistair Darling said yesterday G-7 nations must agree “quickly'' on ways to make markets more stable, U.S. Treasury Undersecretary David McCormick said Feb. 5 “the issues are complex and require careful analysis so that we can effectively target the real problems and not rush to judgement.''
The G-7 consists of the U.S., the U.K., Japan, Canada, France, Germany and Italy.
Australia's central bank raised its benchmark interest rate by a quarter point to an 11-year high, saying a “significant slowing in demand'' is needed to cool the fastest inflation since 1991.
Governor Glenn Stevens and his board increased the overnight cash rate target to 7 percent in Sydney today, as forecast by all 27 economists surveyed by Bloomberg News. Stevens said annual inflation, which has overshot the bank's target, may accelerate further before moderating in 2009.
Australia becomes the first developed nation to raise borrowing costs after Federal Reserve Chairman Ben S. Bernanke cut the U.S. rate last week in the fastest easing of monetary policy since 1990. Central banks across Asia and Europe face challenges balancing the threat of a global economic slowdown against signs of quickening inflation as commodity prices soar.
“The economy is still seeing plenty of momentum to justify the Reserve Bank of Australia's caution,'' said Hans Kunnen, who helps manage the equivalent of $128 billion at Colonial First State Asset Management in Sydney. “They can still cut rates if need be down the track.''
The Australian dollar traded at 90.66 U.S. cents at 4:30 p.m. in Sydney from 90.65 cents before the decision. The yield on the two-year bond fell 4 basis points to 6.72 percent.
Slowdown Needed
“A significant slowing in demand from its recent pace is likely to be necessary to reduce inflation over time,'' Stevens said in a statement. At the same time, “the world economy is slowing and it now appears likely that global growth will be below trend in 2008.''
This marks the bank's 11th increase since May 2002, which has lifted the rate from 4.25 percent.
The gap between the Australian and U.S. benchmark rates widened to 4 percentage points today, the largest in more than three years. That may drive demand for Australia's currency, which has climbed 17 percent against the U.S. dollar in the past year as investors flocked to the nation's higher-yielding assets.
Core inflation has breached the Reserve Bank's 2-to-3 percent target for two consecutive quarters, forcing Stevens to make his third rate increase in six months even after global equity markets plunged. Underlying inflation accelerated to 3.8 percent in the fourth quarter from a year earlier, a Jan. 23 report showed.
“The real sting in the tail is the bank's statement that domestic spending has to fall substantially'' to ease inflation, said Brian Redican, an economist at Macquarie Research in Sydney. “It could still take further aggressive tightening to get that demand down.''
Interest-Rate Forecasts
Macquarie expects another rate increase in the second quarter of 2008. Nineteen of 27 economists surveyed last week forecast the central bank won't move again this year.
Price pressures have intensified in the A$1 trillion ($910 billion) economy as Chinese demand for mineral resources prompts Rio Tinto Group and other miners to hire workers. Jobs growth has worsened a skills shortage that is boosting wages. Fuel, food and housing costs are also rising.
“As a government, we believe the fight against inflation must come first,'' Prime Minister Kevin Rudd said in Canberra today. “Inflation pressures have been building a long time.''
Rudd said last month he would cut government spending to help damp inflation. He led the Labor Party to a victory in November's election, ending 11 years in opposition.
The economy grew 4.3 percent in the third quarter from a year earlier, the fastest pace in more than three years. Fourth- quarter figures are due on March 5.
Construction, Spending
Reports released today signal that higher borrowing costs may be starting to damp the economy's 16-year expansion.
Home-building approvals slumped 16 percent in December from the previous month, the statistics bureau said. Retail-sales growth cooled to 0.5 percent in December from 0.8 percent in November.
Consumer confidence fell in January by the most in 14 months, according to a survey published by Westpac Banking Corp. last month. Business sentiment dropped to the lowest in two years in December, National Australia Bank reported.
“There is a danger here that the Reserve Bank will end up going just too far, and might have to reverse the increase later this year or early next year,'' said Shane Oliver, chief economist at AMP Capital Investors in Sydney.
The All Ordinaries Index of stocks suffered its worst monthly decline in more than 20 years in January.
The European Central Bank may keep its rate at a six-year high of 4 percent this week as it deems quickening inflation a greater concern than slowing growth, a survey of economists showed. Indonesia may leave rates unchanged tomorrow after consumer prices rose the most in 16 months, economists said.
By contrast, the Bank of England may lower its rate to 5.25 percent on Feb. 7, a separate survey showed. The Fed slashed its rate by 125 basis points in January.
Credit card processor MasterCard Inc. said Thursday that strong spending abroad and its sale of stock in a Brazilian company boosted profit in the fourth quarter by about seven-fold.
Its shares rose about 3 percent in premarket trading.
The Purchase, N.Y.-based company said profit in the October to December period rose to $304 million, or $2.26 a share from $40.9 million, or 30 cents a share, a year ago.
The latest results include an after-tax gain of $185 million from sales of the company’s stake in Redecard SA, a company that signs up merchants in Brazil. Excluding that gain, profit came to 89 cents per share.
Revenue rose nearly 28% to $1.07 billion from $839.2 million a year ago.
The results beat estimates. Analysts polled by Thomson Financial predicted earnings of 72 cents per share on revenue of $984.8 million. Those estimates typically exclude one-time gains or losses.
MasterCard’s full-year profit was $1.09 billion, or $8.00 a share, on revenue of $4.07 billion.
MasterCard (MA) shares rose $5.75 to $194.75 in premarket trading. They are still well below their Dec. 11 all-time high of $227.18.
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