Finance news

Oil rose above $85 per barrel Tuesday on encouraging economic news from Asia and Europe. Benchmark West Texas Intermediate crude rose $1.02 to finish at $85.44 per barrel in New York. Brent crude, which is used to price oil produced abroad, increased $1.08 to $109.44 per barrel in London.

Prices rose following reports of better-than-expected manufacturing activity in China and Europe. And stocks rose in the U.S. ahead of an expected announcement from the Federal Reserve on Friday to further stimulate the nation’s economy.

The positive news was offset by reports of more unrest in Libya’s capitol as the Gadhafi regime appeared near collapse.

An end to the country’s six-month rebellion would clear the way for oil exports to resume, but analysts cautioned that it will likely take more than a year for oil to begin flowing at levels that would affect prices.

“Crude from Libya is going to be a story for 2012 or 2013. Not today,” said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service fast cash loans.

Fighting during the last six months has all but stopped activity in Libya’s oil fields. The country previously supplied about 1.5 million barrels per day for world markets. That’s roughly 2 percent of daily global oil demand.

Meanwhile, U.S. gas pump prices rose Tuesday to a national average $3.572 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 86.4 cents more expensive than the same time last year.

In other energy trading, heating oil rose 3.18 cents to end at $2.9425 per gallon and gasoline futures added 4.15 cents to finish at $2.8766 per gallon. Natural gas rose 10.4 cents to end the day at $3.993 per 1,000 cubic feet.

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The leaders of France and Germany said Wednesday that they want the heads of the eurozone countries to elect the president of a new “economic government” who would direct regular summits to respond to the continent’s financial crisis.

For many in the markets, the proposal fell short of hopes: a grand plan to save the euro and, in particular, a sign the eurozone was moving toward a single bond issued by the 17 countries.

French President Nicolas Sarkozy and German Chancellor Angela Merkel outlined their proposals in a letter to Herman Van Rompuy, president of the European Council. They said that they hoped Van Rompuy would get the job.

The two leaders, who met in Paris on Tuesday, called the twice-yearly summits “the cornerstone of the new economic government of the eurozone.”

However, heads of the eurozone governments already hold summits, though not regularly scheduled ones, under the chairmanship of Van Rompuy. The first was in 2008.

Sarkozy and Merkel also raised the politically sensitive issue of pensions, saying eurozone states should rapidly implement structural reforms, including changes in “retirement policy.” They did not elaborate.

As global stocks fell, shares in stock exchange operators were hit particularly hard on news the two leaders want to introduce a tax on financial transactions. Deutsche Boerse slid 3.7 percent and the London Stock Exchange Group PLC was down 4.7 percent. Merkel and Sarkozy said the two countries’ finance ministers would come up with a proposal by September that would be forwarded to the European Commission.

A transaction tax _ a small percentage taken from foreign exchange and share transactions, for instance _ has been proposed as a source of money to pay for bank bailouts. But European Central Bank head Jean-Claude Trichet says it would only work if introduced globally. The U.S. is also against the idea.

Yusuf Heusen, senior sales trader at IG Index, said the news was hurting the shares. “It’s worth bearing in mind, however, that this is simply a proposal and there are many hurdles to be overcome, but without doubt it’s going to be squarely in focus in the weeks and months ahead.”

German Chancellor Angela Merkel’s spokesman, Steffen Seibert, said the proposals would bring a “higher level of commitment” to efforts to stabilize budgets and fight debt payday loan online. Yet Wednesday’s letter seemed to back away from the boldest proposal Sarkozy had put forward a day earlier _ the creation of a eurozone economic government. The letter gave few details and described it primarily as a reinforcement of current policies.

Former Belgian Prime Minister Guy Verhofstadt told VRT radio the biannual summits would “absolutely not create an economic government,” and called the proposal window dressing.

A prominent opposition lawmaker in Germany was equally unimpressed.

“What has been proposed here isn’t a European economic government, but that Mr. Van Rompuy will be allowed to give an occasional report to Ms. Merkel and Mr. Sarkozy,” Juergen Trittin, a co-leader of the Greens’ parliamentary group, told Radio Eins.

Analysts said the proposals would do little to pull Europe out of its quagmire.

“It’s all very long-term stuff, which is why the outcome’s been quite disappointing,” said Jennifer McKeown, a European economist at Capital Economics. “It doesn’t address the current problems.”

She said Sarkozy and Merkel had avoided the only real solution: a close fiscal union in which struggling countries could receive aid quickly without long negotiations. The eurobond would be one likely outcome of a closer union and would allow weaker countries to borrow more cheaply since the bonds would be backed by the entire eurozone. It might, however, raise costs for a powerhouse like Germany.

Sarkozy and Merkel said Tuesday that a eurobond might eventually be created, but not in the near future. Eurobonds are viewed with suspicion in Germany, where critics say they would encourage other countries to continue running up debt.

Without such a move, the eurozone is doomed, said McKeown.

“The likely outcome is the eurozone ceases to exist,” she said, though the stronger core countries, like Germany, the Netherlands and France, might continue to band together.

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Declining first-time buyer demand and stronger immigration has seen apartment vacancy rates in the Toronto market drop sharply.

Vacancy rates were at 1.6 per cent in April compared with 2.7 per cent a year earlier, according to the Canada Mortgage and Housing Corporation in a report released Thursday.

A 1.6 per cent vacancy rate means that only 16 of every 1000 apartments remain vacant.

Automaker Daimler AG says May was the best month ever for unit sales of its Mercedes-Benz brand.

The company said Monday it delivered 108,766 Mercedes vehicles during the month, helped by strong sales increases in emerging markets such as Brazil, Russia, India and China.

That was 7.3 percent more than in May of last year.

Germany’s automakers recorded strong profits in the first quarter thanks largely to increasing sales outside Europe.

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Prime Minister George Papandreou is meeting opposition party leaders in an effort to seek consensus on extra austerity measures being taken to deal with Greece’s crippling debt crisis.

Papandreou met Tuesday morning with conservative party leader Antonis Samaras, and was to meet with another four party leaders later in the day. The head of the Communist party, which is influential with trade unions, has refused to meet.

The talks come amid increasing pressure from the European Union, which has called for cross-party support in Greece for a midterm austerity program, arguing that political bickering could derail the struggling country’s fiscal efforts.

Greece is currently dependent on a euro110 billion ($154 billion) bailout from the EU and International Monetary Fund.

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India’s inflation accelerated more than economists estimated in March as the cost of fuel and manufactured goods rose, putting pressure on policy makers to raise interest rates in Asia’s third-largest economy.

The benchmark wholesale-price index rose 8.98 percent from a year earlier after an 8.31 percent gain in February, the commerce ministry said in a statement in New Delhi today. That exceeded all 28 estimates in a Bloomberg News survey, where the median forecast was for an 8.36 percent increase.

Expansion in India’s $1.3 trillion economy has boosted consumer demand and spurred manufacturing, car sales and credit growth, stoking price risks and prompting the central bank to raise rates eight times since early 2010. Inflation in the first quarter has exceeded the Reserve Bank of India’s forecast that price increases would be 8 percent by the end of March this year.

“Inflation is going to remain uncomfortably high this year,” said Leif Eskesen, Singapore-based chief economist at HSBC Holdings Plc. “The RBI needs to raise rates more aggressively and we are looking at three more rate increases this year.”

The Bombay Stock Exchange’s Sensitive Index extended declines after the inflation report, falling 1.4 percent at 11:52 a.m. in Mumbai. The yield on the 8.08 percent bond due in August 2022 was at 8.25 percent, compared with 8.21 percent before the data was published.

Rate Increase

Rising oil and commodity costs and sustained economic growth are escalating pressure on Asian central banks to boost borrowing costs. China on April 5 raised rates for the fourth time since mid-October. Vietnam, Taiwan, South Korea and Thailand also increased borrowing costs this year to curb inflation, and Singapore said yesterday it would allow further currency gains.

China’s economy grew a more-than-estimated 9.7 percent in the first quarter and inflation accelerated in March to the fastest pace since 2008, with consumer prices rising 5.4 percent from a year earlier, a report showed today.

Reserve Bank Governor Duvvuri Subbarao on March 17 increased the repurchase rate by a quarter point to 6.75 percent after raising the inflation forecast for the second time since late January, when he estimated it at 7 percent by March end. The central bank’s next monetary policy announcement is scheduled for May 3.

Food Inflation

“In the absence of a strong supply response, increasing demand will inevitably lead to higher prices,” Reserve Bank Deputy Governor Subir Gokarn said April 5. He said a “monetary response is warranted” should demand exceed supply and stoke inflation.

Manufactured-products inflation was 6.21 percent in March, compared with 4.94 percent in February, today’s report showed. Fuel and power prices rose 12.92 percent, compared with 11.49 percent the previous month. India relies on imports to meet three-quarters of its annual energy needs.

Food prices rose 8.28 percent in the week to April 2, compared with 9.18 percent in the previous week, the commerce ministry said in a separate report today.

India’s economy may expand as much as 9.25 percent in the year ending March 31, 2012, the finance ministry said in February.

Production Growth

Still, India’s industrial production growth unexpectedly slowed to 3.6 percent in February, a report showed this week.

“Even as industrial production continues to be volatile, other indicators, such as the latest purchasing managers’ index, direct and indirect tax collections, merchandise exports and bank credit, suggest that the growth momentum persists,” the central bank said in the March 17 statement.

India’s industrial output has fluctuated since May, when it registered a 12.2 percent expansion. The growth eased to 7.2 percent in June, rebounded to 15.1 percent in July, slid to 4.9 percent in September and then recovered in October, according to government data.

Maruti Suzuki India Ltd. (MSIL), the nation’s biggest carmaker, plans to boost capacity by 21 percent in the current financial year as part of investment plans totaling as much as 40 billion rupees ($900 million), Chief Financial Officer Ajay Seth said in an interview on April 6. The company’s sales climbed to a record in March.

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Billionaire investor Carl Icahn, Dish Network and a group of debtholders are the three remaining bidders for movie-rental chain Blockbuster in an auction Tuesday at U.S. Bankruptcy Court in New York.

The bankruptcy auction will decide the fate of the Dallas movie-rental chain. The auction process was still going on as of 4:30 p.m. ET. At that time, Icahn’s bid of $310.6 million was on top.

Another bidder, SK Telecom, has dropped out. An expected joint bid by two liquidation firms, Gordon Brothers Group and Hilco Merchant Resources, did not materialize.

Though the bidding took place in open court, the process was hardly action-packed. Lawyers, bidders and others took extended breaks over the day to revise their bids and negotiate. Icahn himself made an appearance in court at midday.

The successful buyer or buyers could continue to operate the chain in full or part or liquidate the company, pressing “stop” on the stores that brought movie night to millions of families payday lenders.

When Blockbuster, based in Dallas, filed for bankruptcy protection, it was down to 3,000 stores, less than a third of the peak of 9,100 in 2004. There are about 2,400 currently open with plans to close about 700 more by mid-April.

Icahn was part of the group of debtholders that provided Blockbuster financing to operate while in bankruptcy in September. Everyone in that group except for Icahn, is part of the bidding group of debtholders led by Monarch, called Cobalt Video Holdco LLC.

Blockbuster used to dominate the U.S. movie rental business. But it lost money for years as that business declined because customers shifted to Netflix Inc., video on demand and DVD rental kiosks.

The auction is expected to be complete before a sale approval hearing scheduled for Thursday.

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Liberal leader Michael Ignatieff, seeking to make up ground in polls, opened week two of Canada’s election campaign asking voters to choose between more social spending and Conservative Prime Minister Stephen Harper’s tax breaks for businesses.

Ignatieff proposed programs worth C$8.2 billion ($8.5 billion) over two years yesterday, to be paid for by reversing corporate tax cuts implemented by Harper, capping tax deductions for stock options and ending subsidies for energy companies.

The Liberal platform “belongs to everyone because it’s about your family,” Ignatieff, 63, said yesterday in Ottawa. “We can strengthen families, without raising their taxes, if we stop corporate giveaways.” The 94-page document repeated commitments to create early child education spaces, boost benefits for people caring for sick or elderly relatives and establish grants for postsecondary education. Another C$700 million a year would go to seniors living in poverty.

Ignatieff trails Harper by about 10 percentage points in the most recent polls, and his emphasis on social programs is an attempt to win more of the anti-Conservative vote from the other opposition parties and close that gap ahead of the May 2 elections, said Michael Behiels, a history professor at the University of Ottawa.

“When you are seeking power you go on the offense,” Behiels said in a telephone interview.

The New Democratic Party, which also is calling for higher corporate income taxes and more social spending, had 36 seats in the 308-member House of Commons before elections were called. The Liberals held 77 seats, the Conservatives 143 and the Bloc Quebecois 47.

Majority Unclear

Polls suggest the Conservatives would win the most seats in the election, although it isn’t clear if they would win a majority.

The Conservatives were supported by 40.7 percent of decided voters, followed by 29.4 percent who supported the Liberals, according to a CTV/Globe/Nanos election survey published yesterday and taken March 31-April 2. The telephone survey of 1,200 people has a margin of error of plus or minus 2.8 percent.

Ignatieff’s strategy has been to attack Harper for wasting money on new fighter jets and prisons, and neglecting education and health care. The Liberal leader, a former professor at Harvard University in Cambridge, Massachusetts, is also seeking to portray himself as more open and democratic than Harper, aiming to take advantage of a parliamentary finding last month that held the governing Conservatives in “contempt” of the House of Commons for withholding information.

Ignatieff has challenged Harper to a one-on-one debate, on top of the traditional multiparty debates held during Canadian election campaigns. He has also spoken at town hall meetings and done interviews with national media.

Bubble Tour

Ignatieff, who last week regularly took public walks and entered shops to shake hands, has accused Harper of running a tour in a bubble because the Conservative leader limits his press conferences to five questions and relies primarily on scripted campaign events direct payday lenders. At one event in Halifax, Nova Scotia, Harper kept reporters behind a fence about 40 feet away from the podium.

The Conservatives looked at pre-election polls showing they had a lead and “decided to go into a bubble campaign where they take no risks whatsoever, none,” Behiels said.

Harper has said his preference was to have only one debate with Ignatieff alone, without the other leaders, a proposal he says the Liberals rejected. When asked at a press conference last week why his campaign was limiting questions, Harper asked reporters if they had any additional questions to ask.

Corporate Taxes

The central component of the Liberals’ economic platform is to boost revenue by returning the corporate income tax rate back to 18 percent. The country’s corporate tax rate was lowered on Jan. 1 to 16.5 percent from 18 percent, and will fall to 15 percent in 2012 under Canadian law.

Ignatieff’s platform also says the Liberals will shrink Canada’s deficit to 1 percent of gross domestic product within two years if elected.

The Conservatives also continue to draw distinctions between the two leading parties, saying the increase in taxes threaten to drive the economy back into recession.

“They want loads of new spending and they are prepared to finance that through tax increases,” Harper said at a press conference in Ottawa yesterday where he promised to extend tax breaks that promote fitness. “That’s a very different position than our party.”

Won’t Shake Confidence

The Canadian dollar has appreciated 1.2 percent against its U.S. counterpart since the election was called, and the 30-year government bond yield has increased to 3.77 percent from 3.70 percent. The election probably won’t shake “market confidence” Toronto-based Canadian Imperial Bank of Commerce economists Avery Shenfeld and Warren Lovely wrote in a March 31 report.

Harper spent the first week of the campaign announcing measures likely to be popular with families and regions reliant on manufacturing, aiming to bolster his party’s support in suburban ridings around Toronto the conservatives need to gain to win a majority. Those include a pledge to let families with children under 18 split up to C$50,000 of their income for tax purposes, and plans to reintroduce measures in Finance Minister Jim Flaherty’s budget that provide tax breaks for manufacturers and small business owners.

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Soldiers and riot police in Bahrain overran a protesters’ camp, imposed a 12-hour curfew and choked off movement nationwide Wednesday. Witnesses described helicopters firing on homes in a hunt for Shiites and attacking doctors treating the wounded, while the government called the demonstrators “outlaws” for demanding an end to the monarchy.

The nation that once led the Middle East in entrepreneurial openness went into lockdown, its government propped up by troops from Sunni Gulf neighbors fearful for their own rule and the spread of Shiite Iran’s influence.

The unrest that began last month increasingly looks like a sectarian showdown. The country’s Sunni leaders are desperate to hold power, and majority Shiites want more rights and an end to the monarchy.

Wednesday’s assault began in Pearl Square, the center of the uprising inspired by Arab revolts in Egypt and Tunisia. But the violence that left at least five people dead on Wednesday did not stop in the capital.

Doctors at the country’s main hospital said their facility was taken over by security forces, blocking physicians from either leaving or treating the wounded on site.

“There are many people injured, but we can’t bring them to the hospital because of the travel restrictions, and doctors can’t come to us,” said Ali Marsouk, a resident of the Shiite village of Sitra, who said helicopters fired on homes in a three-hour attack.

Rania Ali, another resident, said police were charging after Shiites as they sought shelter.

“I saw them chasing Shiites like they were hunting,” said Ali, a Sunni whose husband is Shiite.

The Salmaniya hospital complex has become a political hotspot. The mostly Shiite personnel are seen by authorities as possible protest sympathizers. The staff claim they must treat all who need care.

There have been moments of open anger. As overwhelmed teams treated the injured from Tuesday’s clashes, many broke out in calls to topple the monarchy.

“We are under siege,” said Nihad el-Shirawi, an intensive care doctor who said she had been working for 48 hours. “We cannot leave, and those on-call cannot come in.”

Officials in the hospital said they took in 107 injured from Wednesday’s violence. Nine were in critical condition, officials in the hospital said on condition of anonymity because they were not authorized to speak to reporters.

The Salmaniya hospital also treated 322 people injured in clashes across the kingdom on Tuesday, the official said.

The king’s announcement of a three-month emergency rule and the crackdown on Pearl Square sent a message that authorities will strike back in the strategic island nation, which hosts the U.S. Navy’s 5th Fleet.

President Barack Obama called King Abdullah of Saudi Arabia and King Hamad bin Isa Al Khalifa of Bahrain to express deep concern over the violence. White House spokesman Jay Carney said Obama stressed the need for “maximum restraint.”

Security forces barred journalists and others from moving freely. A 4 p.m to 4 a.m. curfew was imposed in most of the country.

U.S. Secretary of State Hillary Rodham Clinton said the introduction of Gulf forces was “the wrong track.”

“There is no security answer to this, and the sooner they get back to the negotiating table and start trying to answer the legitimate needs of the people, the sooner there can be a resolution that will be in the best interests of everyone,” she told CBS News.

Witnesses said at least two protesters were killed when the square was stormed. Officials at Ibn Nafees Hospital said a third protester died later. The witnesses spoke on condition of anonymity because of fear of reprisals.

A government statement said the only deaths during the raid were two policemen who were “repeatedly run over by three vehicles containing protesters.”

The government did not say whether the offensive included soldiers from other Gulf nations _ a Saudi-led force that has grown to nearly 1,000.

State TV showed military vehicles flying Bahrain’s red-and-white flag as security officials moved through the wreckage of the encampment, set up at the base of a monument to the country’s history as a pearl diving center.

During the attack, protesters fled into side streets and security forces blocked main roads into Manama. Mobile phones were apparently jammed during the height of the attack and Internet service remained at a crawl.

Hamid Zuher, a 32-year-old protester who slept at the square, said riot police first moved in on foot.

“They fired tear gas and then opened fire,” Zuher said. “We lifted our arms and started saying ‘Peaceful, Peaceful.’ Then we had to run away.”

The government said security forces came under attack from about 250 “saboteurs” hurling gasoline bombs and responded with tear gas. It denied live ammunition was used.

In Shiite villages, people went to mosques and held protest prayers. Others lit fires in anger. Clashes were reported in other mostly Shiite areas, where traffic was controlled by military forces in an apparent attempt to prevent gatherings or a surge of people toward the capital.

The government offers hints of a growing propaganda campaign. A statement said forces conducted an operation to “cleanse” Pearl Square and later state TV called the demonstrators “saboteurs” and “outlaws.”

A senior opposition leader, Abdul Jalil Khalil, believes the messages seek to bring sectarian civil war.

“And what do they think, that spreading this hate will break our will?” Khalil said. “Until now, we were defiant at Pearl Square. Now we are defiant in every village and town.”

Bahrain’s sectarian clash is increasingly viewed as an extension of the region’s rivalries between the Gulf Arab leaders and Iran. Washington, too, is being pulled deeply into the Bahrain’s conflict because of its naval base _ the Pentagon’s main Gulf counterweight to Iran.

Iranian President Mahmoud Ahmadinejad on Wednesday denounced the crackdown and the presence of the Saudi-led force.

“How is it possible to stop waves of humanity with military force?” Ahmadinejad said.

Before the rise of Dubai and Qatar’s capital Doha, the business center of the Gulf was in Bahrain. The tiny nation successfully marketed itself in the 1990s as a Western-friendly outpost for banking and financial services as a way to offset its relatively meager oil revenue. Its skyline _ now dwarfed by Dubai _ was once a symbol of the Gulf’s emergence on the world stage.

The unrest has already given a stinging blow: the cancellation of the Formula 1 season-opening Bahrain Grand Prix this month. The race is a major tourism draw and the highlight of Bahrain’s international calendar.

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