Finance news

Stocks ended Wednesday on a positive note after a batch of economic reports offered hope that the U.S. economy was improving.

Incomes rose last month and consumer spending climbed for a fifth month. That raised hopes that shoppers will hit the malls in droves the day after Thanksgiving, the start of the holiday shopping season.

At the same time, fewer people claimed unemployment benefits last week, a sign that the labor market is recovering.

“There are fundamental signs that the economy is turning a corner,” said John O’Donoghue, co-head of equities at Cowen & Co.

The Dow Jones industrial average surged 150.91, or 1.4 percent, to 11,187.28.

The Standard & Poor’s 500 index gained 17.62, or 1.5 percent, to 1,198.35. The Nasdaq composite index rose 48.17, or 1.9 percent, to 2,543.12.

The upturn marked an abrupt reversal from Tuesday, when an exchange of artillery fire between North and South Korea led nervous investors to sell stocks and dash into gold, Treasurys and other assets often used as hiding spots. Investors also shrugged off a steep fall in new home sales and manufacturing orders.

Tim Speiss, chair of the wealth advisory group at EisnerAmper, said investors were right to focus on the improved signs in employment and consmer spending, which are far more important to an economic resurgence than home sales or manufacturing orders.

“If we don’t have strong consumer spending in this economy, we’re in trouble,” said Speiss. “When there’s spending, manufacturing will increase to meet that demand.”

The government said first-time claims for unemployment benefits fell 34,000 to 407,000 last week. That was much better than the 435,000 new claims economists had expected.

A separate report showed that Americans’ incomes rose 0.5 percent last month, slightly better than expected. Their spending rose 0.4 percent, up slightly from September.

Safety assets moved lower as investors became more willing to take on risk. Treasury prices edged lower, pushing their yields higher. The yield on the 10-year note rose to 2.92 percent from 2.77 percent Tuesday. Gold fell to $1,375 an ounce, down from $1379.

Investors largely dismissed downbeat reports that showed declines in sales of manufactured goods and new home sales. Orders for durable goods fell 3.3 percent, while new home sales and median home prices both fell last month. Sales of single-family houses slid 8.1 percent, the fourth time the rate has dropped in the past six months.

In corporate news, Tiffany & Co. also reported a rise in profit, fueled by strong sales of jewelry in the U.S. and overseas. Tiffany shares rose 5.3 percent to $61.33. Shares of fellow high-end retailer Coach Inc. also rose 3.7 percent to $56.63.

U.S. stock and bond markets will be closed Thursday for the Thanksgiving holiday. They will reopen for half-day sessions on Friday.

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Portuguese Prime Minister Jose Socrates is bracing for the country’s biggest strike in 22 years as fallout from Europe’s debt crisis spreads from bond markets to the streets.

Workers are walking off the job today to protest government austerity measures as concern about Socrates’s ability to tame the euro-region’s fourth-biggest budget deficit pushed the cost of insuring Portugal’s debt against default to a record high. Credit default swaps climbed 23 basis points yesterday to 482.2, while the yield premium demanded to hold the country’s 10-year bonds over German bunds rose 28 basis points to 435.

The backlash against wage cuts and tax increases to trim euro-region deficits is fueling political turmoil and undermining investor confidence. Irish Prime Minister Brian Cowen said Nov. 22 he will seek early elections after a key ally abandoned his ruling coalition over his decision to seek an EU bailout. Italian Prime Minister Silvio Berlusconi faces a December confidence vote and Greek Prime Minister George Papandreou also threatened this month to hold elections.

“The strike arises in a context of a set of measures that are quite significant and have social impact,” said Carlos Firme, a director at Lisbon-based Banif Banco de Investimento SA. “It’s natural that there are demonstrations of discontent.”

Labor Unrest

The Portuguese strike follows protests in Greece, Spain and Ireland over budget cuts that may cripple their economic recoveries and deepen workers’ pain. The International Monetary Fund forecasts Portugal’s economy may shrink 1.4 percent next year because of fiscal tightening.

Portugal’s biggest unions are reacting now because the government was slower to push through spending cuts and, as a result, made less progress to lower the budget deficit, fueling investor speculation that the country may be next to seek aid from the European Union. State workers held a strike in March.

Portugal said in September it would cut the wage bill by 5 percent for public workers earning more than 1,500 euros ($2005) a month, freeze hiring and raise value-added taxes by 2 percentage points to 23 percent to help reduce a deficit that amounted to 9.3 percent of gross domestic product last year. The measures are included in the government’s 2011 spending plan, which faces a final vote in parliament on Nov. 26.

Ireland, Spain and Greece have implemented similar measures to cut their deficit levels. Portugal’s central government budget gap widened 1.8 percent in the first 10 months. That compared with a decline of 47 percent in Spain and more than 30 percent in Greece.

Portugal ‘Paralyzed’

Today’s walkout will disrupt travel, hobble the country’s airports and may shut schools. “The country will be paralyzed,” said Manuel Carvalho da Silva, the CGTP’s secretary-general, on the labor group’s website. The last general strike by the country’s largest labor organizations was in 1988 fast cash advance loan.

Support for Socrates’s minority government has slipped as discontent over the economic situation deepens. Backing for the Socialists fell 8 percentage points to 26 percent in a poll published in Diario de Noticias on Oct. 29. The Social Democrats, the biggest opposition party, led the Socialists with 40 percent, up 3 points from the previous poll in June.

Announcing the deepest deficit reductions in more than 30 years has done little to reassure investors. The yield premium on Portugal’s 10-year debt reached a euro-era record of 483 basis points on Nov. 11 as Ireland moved toward seeking a bailout.

‘Shouted Down’

“One of the risks that Ireland has faced and Portugal faces is that as a very small economy, even if fundamentals are better than many people give it credit for, it’s easy to be shouted down by the markets,” Kevin Daly, an economist at Goldman Sachs Group Inc., said yesterday on Bloomberg Television’s “The Pulse” with Andrea Catherwood.

Portugal’s deficit isn’t as bloated as the other so-called peripheral euro countries and the budget measures may leave it with one of the lowest shortfalls in the region next year. Unlike Spain and Ireland, Portugal also didn’t suffer a real estate bubble. The country doesn’t have a bond redemption until April and has completed this year’s bond sales, limiting the real impact of rising borrowing costs.

“Portugal is going to have a 4.6 percent deficit next year, which is lower than Germany, lower than France, lower than Spain,” Angel Gurria, secretary general of the Organization for Economic Cooperation and Development, said in a Nov. 21 interview. “Portugal has done its homework. Portugal has made its effort. They have addressed the issues and taken the bull by the horns.”

Recovery Falters

Portugal’s economic problems are “very different” than Ireland’s, and the government has made “bold decisions” to cut the deficit, European Union Economic and Monetary Commissioner Olli Rehn said Nov. 22.

Achieving that deficit reduction will become more difficult as the austerity measures bite and the recovery falters. The OECD forecast on Nov. 18 that economic growth of 1.5 percent this year will give way to a contraction of 0.2 percent in 2011 as the measures kick in. Economic growth has averaged less than 1 percent a year in the past decade.

“The problem of Portugal is growth, or more accurately the lack of it,,” Luigi Speranza, an economist at BNP Paribas SA in London, wrote in a note to investors. “Structural weaknesses and associated low potential growth are frustrating any attempt at correcting fiscal imbalances.”

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A quarter of Indian microfinance companies may fail after a clampdown last month in their biggest market pared debt payments and curtailed bank financing, said N. Srinivasan, who consults on the industry for the World Bank.

As many as 60 to 70 of the nation’s 260 microfinance institutions are likely to collapse in coming months as banks halt lending to them to curb risks, Srinivasan said in an interview Nov. 19 in New Delhi. That would have a “devastating effect” on the poorest borrowers in remote regions, he said.

Lending and collections by micro-lenders have ground to a near halt in southern Andhra Pradesh state after the local government introduced new rules in mid-October aimed at protecting borrowers. A slump in microfinance loans may trigger a chain reaction of defaults by borrowers with multiple debts, Srinivasan said.

“Multiple loans help people manage money, like juggling balls,” he said, adding that every poor household in Andhra Pradesh has 9.6 microfinance-loan accounts on average. “What’s happening is that right in the middle of it, you remove a ball. Suddenly there is no ball to throw.”

Andhra Pradesh, the largest market for most micro-lenders, on Oct. 15 capped interest rates that companies can charge and ordered them to collect payments monthly rather than weekly. It also barred them from using coercive measures to force borrowers to repay debt.

Straining Capital

The move led to a slump in micro-lenders’ cash flows, strained capital levels and spooked banks, which account for most of their funding needs. Microfinance companies are seeking 10 billion rupees ($221 million) from banks for a liquidity fund, Vijay Mahajan, head of a lobbying group that represents about 44 micro-lenders, said Nov. 16 in New Delhi.

The new rules sent shares of SKS Microfinance Ltd., the largest such lender in the nation, plummeting 47 percent before Chairman Vikram Akula said on Nov. 19 that the firm had received bank funding and didn’t have a cash shortage. The comments helped shares of SKS, more than a quarter of whose loans are in Andhra Pradesh, rally 5.4 percent that day.

Rival Share Microfin Ltd., backed by New Zealand billionaire Christopher Chandler, plans to delay an initial public offering until customers restart payments and state and central governments deal with the current upheaval. Banks need to regain confidence in the companies’ operations, M. Udaia Kumar, its managing director, said in a Nov. 18 interview.

‘Trickle-Down Effect’

“Even if a single MFI defaults, it might have a trickle- down effect on the entire sector,” he said pay day loans. “Institutions with stronger net worth have a possibility of survival for a period of time.”

Share Microfin, based in Andhra Pradesh’s capital of Hyderabad, had planned to raise 10 billion rupees in early 2011.

Microfinance, which focuses on loans in poor areas largely shut out from traditional banking services, gained prominence globally when Muhammad Yunus won the Nobel Peace Prize in 2006 for his role in founding Bangladesh’s Grameen Bank. India, where banking services are available in about 5 percent of cities and towns, is the largest market for such credits.

India’s micro-lending has expanded at an average annual rate of 62 percent over the past five years in terms of number of customers, and 88 percent in terms of credit, according to Micro-Credit Ratings International Ltd., a Gurgaon, India-based ratings agency for the industry.

Moneylenders

A shortage of microfinance funding may force borrowers to turn to moneylenders, said Dipak Gupta, executive director of Mumbai-based Kotak Mahindra Bank Ltd. These unauthorized lenders operate outside the formal credit-delivery system and charge usurious interest rates.

“Money has stopped and a borrower is used to getting that money and circulating it,” he said. “If you don’t create an alternate system or don’t allow the system to rotate, he will go back to the moneylender.”

SKS, whose stakeholders include George Soros, has received 3.67 billion rupees from eight lenders including Axis Bank Ltd. in the past two weeks, Chief Financial Officer Dilli Raj said on Nov. 19 from Hyderabad, where the company is based.

Axis, India’s fourth-largest lender by market value, is awaiting a report by a committee set up by the central bank last month to review concerns about the microfinance industry, CFO Somnath Sengupta said.

The report, due in January, “will be the guiding principles for lending to the sector,” he said in an interview on Nov. 19. “We will continue to be prudent. There is no reason to panic.”

Axis’s loans outstanding to microfinance companies account for about 1 percent of the total, he said.

Still, the industry is bracing for consolidation, said Mahajan, who is also chairman of Hyderabad-based microfinance company Basix Group.

“We could see casualties among small microfinance institutions,” he said.

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Asian stocks were mixed Friday as speculation that China may be gearing up for more measures to combat inflation tempered a Wall Street rally fueled by an upswing in U.S. manufacturing.

Oil prices fell toward $81 a barrel in Asia as investors mulled Ireland’s debt crisis and China’s next moves to attack rising consumer prices. In currencies, the dollar weakened against the yen but strengthened against the euro.

Japan’s benchmark Nikkei 225 stock average gained 0.3 percent to 10,044.78 and South Korea’s Kospi was up 0.4 percent to 1,934.52.

Australia’s S&P/ASX 200 was 0.3 percent lower at 4,628.3. The benchmark Shanghai Composite Index was down 1.4 percent to 2,825.34 and Hong Kong’s Hang Seng was off 1.5 percent at 23,284.41.

Markets in Singapore and New Zealand were also down, while indexes in Indonesia and the Philippines were higher.

Asia’s mixed picture came after a strong day in U.S. markets, where the Dow Jones industrial average rose 1.6 percent to close at 11,181.23, its first increase in three days. The broader Standard and Poor’s 500 index rose 1.5 percent to 1,196.69.

Speculation over China’s next step to curb inflation kept some investors on edge, particularly in Shanghai and Hong Kong, analysts said.

On Wednesday, China said it would take targeted steps, such as food subsidies for poor families, to curb surging food prices. Global markets welcomed the moves since it appeared to some that China might sidestep interest rate hikes to control inflation, which could potentially slow its rapid economic growth.

However, a day later, traders in mainland China were experiencing “a little bit of a fear problem” because of the realization that a decision by China’s central bank to hike interest rates may in fact be looming, according to Tom Kaan, head of sales for Louis Capital Markets in Hong Kong check cash advance.

“Shanghai is down and that is dragging Hong Kong down as well,” he said. “With recent concerns about inflation, the market is expecting a rate hike either after markets close today or over the weekend.”

A similar view was expressed by Bank of America Merrill Lynch in a research report.

“We believe the Chinese government will tackle inflationary pressures through various channels, including further hikes to interest rates and increases of required reserve ratios,” the report said. It said such moves were expected to have a “knock-on impact on economic growth.”

U.S. shares were boosted by a strong manufacturing report from the Federal Reserve Bank of Philadelphia and the news that Ireland is closer to accepting financial assistance from the European Union and Great Britain. Concerns about Ireland’s mounting debt had dragged down shares in recent days, although sentiment improved Thursday.

In currencies, the dollar fell to 83.38 yen from 83.50 yen late Thursday in New York. The euro dropped to $1.3627 from $1.3654.

Benchmark oil for December delivery was down 39 cents to $81.46 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.41 to settle at $81.85 on Thursday.

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Sri Lankan President Mahinda Rajapaksa may cut taxes to spur investment next year as he seeks to boost economic growth and shrink the budget deficit in a nation recovering from civil war.

A state-backed commission on taxes has recommended that the government lower rates and reduce the number of levies on companies to about 15 from 25, according to Saman Kelegama, executive director of the Institute of Policy Studies in Colombo and a member of the panel. Rajapaksa, due to unveil the 2011 budget in parliament on Nov. 22, may predict a smaller budget gap next year, a Bloomberg News survey shows.

The government has focused on reviving Sri Lanka’s $42 billion economy since Rajapaksa defeated the separatist Liberation Tigers of Tamil Eelam in May 2009 to end a 26-year civil war. A reduction in levies would test the role of tax policy in bolstering economic expansion while avoiding large- scale fiscal deficits, an issue debated by policy makers across developed and emerging markets.

“The experience in the U.S. under presidents Ronald Reagan and George W. Bush did not seem to support the notion that lowering tax rates would increase government revenues,” said David Cohen, Singapore-based head of Asian forecasting at Action Economics. Nevertheless, “as long as the budget is not too far in deficit, it might still be useful in promoting economic development.”

Budget Gap

The budget gap may narrow to 7.5 percent of gross domestic product next year, according to the median of six estimates in the Bloomberg survey. The government expects a shortfall of 8 percent of GDP in 2010.

Sri Lanka’s benchmark Colombo All-Share Index has climbed over 90 percent this year, lagging behind only Mongolia, and companies including Aitken Spence Plc are boosting investment as peace spurs an economic recovery one hour payday loans. The Sri Lankan rupee has gained about 3 percent since the war ended and traded at 111.65 per dollar yesterday.

Rajapaksa has pledged to spend $1 billion a year on infrastructure and the central bank lowered interest rates in July and August to boost growth even as counterparts from India to Australia raised borrowing costs this year. Aitken Spence, Sri Lanka’s biggest operator of resorts, said Sept. 30 it will build a hotel with Six Senses Resorts & Spas in an investment worth as much as $40 million.

Company Tax

“A reduction in corporate and personal tax rates will be an economy-boosting measure and help improve revenue collection,” said Sarath Rajapakse, director of research at Capital Trust Securities Pvt.in Colombo. “The government may also reduce more excise duties on imports, which additionally will ease pressure on the rupee and cost of living.”

Russia credits the adoption of a 13 percent flat income- tax rate with helping boost revenue 12-fold over eight years. In the U.S., tax reductions during the administrations of John F. Kennedy and Ronald Reagan might have helped bolster revenue because they reduced relatively high marginal rates, according to the Washington-based Tax Foundation.

By contrast, reductions from lower levels enacted by former President George W. Bush added about $1.7 trillion to deficits between 2001 and 2008, according to the Center on Budget and Policy Priorities.

Sri Lanka, which secured a $2.5 billion loan from the International Monetary Fund last year, has pledged to overhaul its tax system based on the recommendations of the panel set up by Rajapaksa. Banks and tourism companies may benefit from tax cuts, said Bimanee Meepagala, a Colombo-based analyst at NDB Aviva Wealth Management Ltd., the nation’s biggest non-state fund.

Credit Delivery

A reduction in the 20 percent value-added tax on financial services would release more funds for lenders, including Commercial Bank of Ceylon Plc, said Samantha Amerasinghe, a Colombo-based economist at Standard Chartered Plc.

The country has earned 15 billion rupees ($134 million) this year after cutting the import tax on cars in June as shipments increased to 11,815 vehicles, compared with 1,282 a year earlier, the government said on its website.

“The move towards a lower corporate tax regime is essential if Sri Lanka is to become a regionally competitive business hub,” Amerasinghe said. The tax rate on Sri Lankan companies is about 35 percent, compared with 25 percent in Malaysia.

Tax Commission

The tax commission has also recommended “widening the tax base,” said Kelegama. Sri Lanka, where only about 3 percent of the 20 million population pay taxes, may bring more people under the tax net and remove some concessions offered through the Board of Investment, central bank Governor Ajith Nivard Cabraal said on Nov. 11.

“A more equitable tax system will ensure more people will pay because it is not too much of a burden,” Cabraal said. “People also like to see a more level playing field for investment 500 payday loans. Concessions for some have discouraged people in general.”

Economic expansion may increase tax revenue to 15.5 percent of GDP in 2011 from 14.9 percent currently, giving Rajapaksa room to keep spending on public works, said Amerasinghe. The South Asian island’s economy, which has been performing better than policy makers had expected, may expand as much as 8 percent in 2010 and 2011 as agriculture and tourism grow, Cabraal said Nov. 11.

Foreign Investment

Sri Lanka is also expected to announce easier foreign- exchange rules, including enabling overseas investors to buy corporate debt on the island, Cabraal said.

The president may also offer minority stakes in recently “renationalized” companies by listing them on the Colombo Stock Exchange, said Capital Trust’s Rajapakse.

Sri Lanka this month purchased a 51 percent stake it didn’t already own in the local unit of Royal Dutch Shell Plc for $63 million. The government in July bought out Emirates Airline’s 44 percent stake in SriLankan Airlines for $53 million to gain full control of the company.

“The government’s policy is to draw more foreign direct investment to sustain 8 percent economic growth. This policy will be enunciated in the budget,” Deputy Finance Minister Sarath Amunugama said on Nov. 17.

The budget “will also be revenue generating and help boost growth,” he said.

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An economic outlook from Scotiabank says Ontario will see considerably slower economic growth in 2011, underperforming resource-rich areas of the country.

Ontario’s economic growth is expected to ease back to two per cent next year — down from about 3.5 per cent this year.

Quebec’s growth rate will be slightly lower than Ontario’s next year at an estimated 1.9 per cent.

Alberta will lead the country with growth of 3.5 per cent followed by Saskatchewan at 3.3 per cent.

Canada’s easternmost province is expected to be near the top of the pack due to the strength of iron ore and nickel.

Newfoundland and Labrador is expected to see growth of 3.1 per cent this year and next, ahead of Nova Scotia and P.E.I and 1.9 per cent and New Brunswick at two per cent.

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LONDON—Ireland is not close to asking for an EU rescue, Eurogroup Chairman Jean Claude-Juncker was quoted as saying on Monday, but an Irish opposition leader said moves to support Dublin were already under way.

With pressure growing for quick action to prevent its crisis spilling over into other euro zone countries, the Irish government denied it would need a bailout.

But a senior member of the European Central Bank confirmed discussions were under way with Dublin and said that aid, if requested, would be available for Ireland’s banks or for the state itself.

The governor of the Bank of Spain, one of a number of countries on the euro zone’s periphery which has debt problems and has seen its borrowing costs spiral as a result of Ireland’s troubles, prodded Dublin to act quickly by saying its indecision had increased jitters on financial markets.

There was some market speculation that euro zone finance ministers could announce some form of support after a meeting on Tuesday, but Juncker — the group’s chairman — said Ireland had not requested aid and that a deal was not imminent.

“The Irish think that they can keep the problems they’re facing under control,” he told news agency Bloomberg.” They are not near the point where they would ask for external help.”

Economists say Prime Minister Brian Cowan’s government may be able to wait until after a by-election later this month.

Irish opposition finance spokesman, Michael Noonan, told the BBC: “I’m extremely concerned. I think the reports (of an imminent bailout) over the weekend are true . . . I think there is European intervention under way.”

Portuguese Finance Minister Fernando Teixeira dos Santos also told Reuters news agency there were no plans for it to request emergency foreign funding after the Financial Times quoted him as saying there was a high risk Lisbon would have to seek aid.

“Such a request is not imminent, there are no contacts, be it formal or informal,” Teixeira dos Santos told Reuters. “The rest are rumours and speculation.”

Noonan, who could become Ireland’s finance minister if the government falls, said that a bailout could lead to Ireland being suspended from bond markets for three or four years.

Ireland’s high borrowing costs and large deficit have caused fears of a Greek-style scenario where budget problems in one country plunge the entire euro zone into crisis, even though Ireland’s debt requirements are funded until mid-2011.

The Irish government has been reluctant to apply for assistance, partly because it faces a by-election it can ill afford to lose on Nov. 25 and also because it says it wants to preserve its sovereignty.

But the Irish Independent newspaper said the government was considering asking for money for its banks, a politically less risky move than asking for a state bailout.

European Central Bank Vice-President Vitor Constancio said Ireland had been talking to European institutions but there had not yet been a formal request for assistance.

“The Irish state is financed until part of next year, but it is also a problem of the banks that are at the centre of the problems in Ireland and considerations have to be pondered,” he told a news conference in Vienna.

Constancio said such help, if needed, could involve the 440 billion euro European Financial Stability Facility (EFSF) set up after Greece was forced to seek help in May.

EU sources say aid under discussion ranges from 45 billion to 90 billion euros ($63 billion-$123 billion), depending on whether Ireland needs support for its banks.

Ireland and others say Germany has aggravated problems by pushing the idea of asset value reductions or “haircuts” for private bondholders under a permanent euro zone rescue mechanism which Berlin wants in place from 2013.

Greek Prime Minister George Papandreou said Berlin’s demand that banks and bond markets share the pain of a sovereign debt default could push some euro zone economies toward bankruptcy.

“It created a spiral of higher interest rates for countries that seemed to be in a difficult position, such as Ireland or Portugal,” Papandreou said during a visit to Paris. “This could create a self-fulfilling prophecy . . . This could break backs. This could force economies towards bankruptcy.”

Bank of Spain Governor Miguel Angel Fernandez Ordonez, a member of the ECB’s governing council, told a banking conference in Madrid he expected an “appropriate reaction” by Ireland to help calm markets.

He later told reporters: “The situation in the markets has been negative due in some part to the lack of a decision by Ireland. It’s not up to me to make a decision on Ireland, it’s Ireland that should take the decision at the right moment.”

Ewald Nowotny, another ECB governing council member, said in a radio interview the EU wanted a “quick, good solution to Ireland, so that there will be no spill-over” to other heavily indebted countries such as Portugal and Spain.

Ireland’s borrowing costs shot to record highs in the past week on concerns over a deficit set to hit 32 per cent of gross domestic product this year and growing borrowing costs.

Lenihan has promised to pump up to 50 billion euros ($68 billion) into the banks and has pledged a four-year debt-cutting plan will be published before the month is out, with a full 2011 budget following early in December.

But pressure is mounting to produce concrete plans sooner.

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MONTREAL — Power Financial Corp. said its net profits plummeted nearly 29 per cent to $323 million in the third quarter due to a litigation charge by its insurance subsidiary.

The main operating arm of Montreal-based Power Corp. said it earned 42 cents per share for the three months ending Sept. 30, compared to 61 cents a year earlier when it earned $452 million.

Its share of a $225 million litigation provision established by Great-West Lifeco was $144 million or 20 cents per share.

Operating earnings grew 1.1 per cent to $467 million, or 62 cents per share, compared with $455 million or 61 cents in 2009.

Great-West Lifeco said its operating earnings excluding the litigation charge were $479 million, up 7.2 per cent from $445 million in the year-ago period.

The stronger Canadian dollar had a negative $22 million impact on earnings in the quarter. Power Financial’s share of the currency hit was $16 million.

IGM Financial Inc. operating earnings were $178 million in the third quarter, compared to $167 million a year earlier. Net earnings including a $8 million share of the litigation charge was $170 million.

Power Financial’s stake in European-based Pargesa Holding S.A. generated $59 million in operating earnings, down from $72 million in 2009.

Power Financial declared a 35-cents quarterly dividend payable Feb. 1 to shareholders of record Dec. 31.

The litigation charge results from a $455.7 million settlement of a class-action lawsuit over the financing of a 1997 takeover of London Insurance Group.

Nearly two million policyholders of Great-West Lifeco Inc. and its London Life subsidiary could get payouts of an average $300.

A judge in London, Ont., rule that Great-West breached sections of the Insurance Companies Act. when it transferred money from the accounts of subsidiaries London Life Insurance Co. and Great-West Life Assurance Co. to finance the takeover.

Great West Life has said it will appeal the decision and that several aspects of the decision are “in error.”

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The Toronto stock market opened lower Friday as commodity prices retreated amid worries of another round of monetary tightening in China that could slow the country’s economy.

The S&P/TSX composite index lost 77.8 points to 12,856.9 while the TSX Venture Exchange declined 24.31 points to 2,014.97.

The Canadian dollar was lower against the U.S. dollar, as prices for oil and metals fell back, losing 0.87 of a cent from Wednesday’s close to 99.13 cents US.

Expectations of more Chinese government measures to tighten credit and slow economic growth have been rising since data released Thursday showed that inflation hit a 25-month high in October.

“There are some rumours there might be another interest rate hike this weekend,” said Linus Yip, a strategist for First Shanghai Securities in Hong Kong.

Speculation of more lending curbs send Chinese markets sharply lower with the Shanghai Composite index plunging 5.2 per cent while the Shenzhen Composite Index for China’s smaller second exchange slumped 6.1 per cent.

TSX energy and mining stocks were under selling pressure since any moves to slow the Chinese economy have been negative for the resource-heavy Toronto stock market as heavy demand from China has helped raise prices for oil and metals, along with commodity stocks.

The energy sector lost almost one per cent with the December crude contract on the New York Mercantile Exchange down $1.45 to US$86.36 a barrel. Suncor Energy (TSX: SU) fell 47 cents to $35.59 and Canadian Natural Resources (TSX: CNQ) lost 45 cents to $40.10.

The base metals sector led decliners, down almost two per cent with December copper contract in New York down six cents to US$3.96 a pound. Teck Resources (TSX: TCK.B) shed 82 cents to $49.53 and Western Coal Corp. (TSX: WTN) fell 16 cents to $7.60.

Gold stocks were also weak as the December bullion contract was down $11.30 to US$1,392 an ounce. Goldcorp Inc. (TSX: G) faded 27 cents to $47.16.

TSX losses were widespread with the financial sector losing 0.5 per cent as CIBC (TSX: CM) gave back 78 cents to $76.16.

The U.S. dollar gained strength against the loonie and the euro amid mounting speculation that Ireland — one of Europe’s most financially troubled countries — would not be able to cut public spending and may have to resort to a bailout.

Traders have been dumping Ireland’s sovereign bonds on fears that new European Union rules being discussed will force investors to take on heavier losses in case of a bailout no credit check payday loans.

The debt crisis eased somewhat Friday after the finance ministers of Germany, France, Italy, Spain and Britain stressed in a joint statement that the EU’s proposed new bailout mechanism “does not apply to any outstanding debt.”

Meanwhile, leaders from the G20 countries have failed to agree on policies about trade and currency manipulation that could stoke protectionism and a trade war.

The group refused to endorse a plan the U.S. presented to force China to allow the value of its currency to rise. The U.S. argues that China is keeping the value of its currency artificially low because a weak currency makes exports cheaper.

But the U.S. position has been undermined after the Federal Reserve last week announced a plan to buy government debt in an effort to spark growth. However, that plan also weakens the value of the American dollar, which could eventually help its own exports.

New York markets were also lower with the Dow Jones industrial average down 49.1 points to 11,234.

The Nasdaq composite index lost 12.44 points to 2,543.08 while the S&P 500 index lost seven points to 1,206.55.

In earnings news, auto parts company Linamar Corp. (TSX: LNR) said Thursday it earned $21 million in its latest quarter as sales grew by nearly a third. Canada’s second-biggest auto parts maker said the profit amounted to 32 cents per share for the quarter ended Sept. 30 compared with a loss of $500,000 a year ago when the company took $1.6 million in one-time charges. Its shares fell $2.09 or 9.3 per cent to $20.30.

The operator of Wendy’s and Arby’s restaurants lost money in its third quarter, pressured by higher commodity costs and weak performances at both restaurant chains. Wendy’s/Arby’s lost US$909,000, or break-even on a per-share basis, compared with earnings of US$14.7 million, or three cents per share, a year ago. Revenue fell five per cent to US$861.2 million. Both earnings and revenue missed expectations.

Elsewhere in Asia, Japan’s benchmark Nikkei 225 stock index ended down 1.4 per cent while Hong Kong’s Hang Seng fell 1.7 per cent.

London’s FTSE 100 index dipped 0.09 per cent, Frankfurt’s DAX inched up 0.03 per cent while the Paris CAC 40 lost 0.79 per cent.

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The operator of Wendy’s and Arby’s restaurants lost money in its third quarter, pressured by higher commodity costs and weak performances at both restaurant chains.

Wendy’s/Arby’s Group Inc. also lowered its 2010 adjusted EBITDA outlook on Friday, but boosted its quarterly cash dividend by 33 percent.

The Atlanta company lost $909,000, or breakeven on a per-share basis, for the period ended Oct. 3. That compares with earnings of $14.7 million, or 3 cents per share, a year ago.

Revenue fell 5 percent to $861.2 million from $903.2 million.

A key revenue metric dropped 1.7 percent for Wendy’s, while Arby’s reported a 5.9 percent decline in the figure.

Analysts expected earnings of 4 cents per share on revenue of $882.6 million.

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