Finance and Economic

WASHINGTON – U.S. sales of existing homes fell more than expected last month as economic fears made buyers leery even though prices plunged to the lowest levels in more than four years.

And the decline is expected to steepen because October's results reflect sales finalized before Wall Street's nosedive.

The National Association of Realtors said Monday that sales of existing homes fell 3.1 per cent to a seasonally adjusted annual rate of 4.98 million units in October.

That compared with a downwardly revised pace of 5.14 million in September. Sales had been expected to fall to a rate of 5.05 million, according to economists surveyed by Thomson Reuters.

The median price – half of homes sold for more, half for less – plunged 11.3 per cent from a year ago to $183,000.

That was the largest year-over-year drop on records going back to 1968, and the lowest median sales price since March 2004.

The realtors group is calling on Congress and president-elect Barack Obama to spend $50 billion to subsidize mortgage rates, projecting this would stimulate 500,000 more home sales.

"If home prices overshoot downward, than it can lead to collateral damage to the economy," said association economist Lawrence Yun. The cost, he added, would be "very reasonable" compared with the billions the government is spending to rescue major banks.

Since the October sales numbers reflect contracts signed in August and September, sales could fall further amid the fallout from the sinking economy.

Evelyn Krazer, sales manager with Johnson Realty in St. Louis, said activity has slowed to "practically nothing" in recent weeks.

"Everybody's afraid of losing their job," she said. "People who are thinking about moving are holding off."

Global Insight economist Patrick Newport said many Americans are moving in with relatives after losing their homes to foreclosure, while lenders "are trying to protect themselves by holding cash."

Still, other economists were encouraged that sales did not fall below June's sales rate of 4 business card.85 million, the lowest point to date in the current housing bust.

"The market is showing signs of bottoming out," said David Resler, chief economist with Nomura Securities.

Compared with last month, sales were down in much of the country. But in the West sales were up 40.5 per cent compared with October last year, as buyers in places like Las Vegas and Orange County, Calif., snapped up distressed properties at bargain prices.

Nationwide, the realtors group estimated distressed properties made up 45 per cent of all property sales in October.

There were 4.23 million unsold homes on the market in October, down slightly from a month earlier, but analysts say that until inventory falls substantially from ongoing historically high levels the housing slump is likely to persist.

"There are still way too many houses being offered and that is likely to stay that way for quite some time as we work through the foreclosure problem," said Joel Naroff, an economist and president of Naroff Economic Advisors in Holland, Pa.

Soaring foreclosures are a driving force behind the credit crisis that has upended Wall Street and caused the government to spend billions rescuing major banking institutions.

President George W. Bush argued Monday that the government's $20-billion-plus rescue of Citigroup, announced late Sunday, was necessary to "safeguard the financial system" and help the economy recover. Bush said there could be more such moves if other institutions need help.

Meanwhile, Obama pledged to honour the commitments the outgoing Bush administration has made, and urged the incoming Congress to immediately pass a major economic stimulus package.

He declined to specify how big a spending package he contemplates, but said: "It's going to be costly."

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North American stock markets fell sharply again today as investor confidence was eroded by bad economic data and pessimism over the prospects of a U.S. bailout for the Big Three automakers.

Wall Street stocks were slammed the hardest, hitting levels not seen since 2003. In Toronto, all of the sectors were lower, led by diversified metals and financials stocks.

The main S&P/TSX composite index fell by 345.17 points to 8,490.56, a drop of nearly four per cent.

On Wall Street, the Dow Jones industrial average shifted down 427.47 points to 7,997.28. The Nasdaq composite index lost 6.5 per cent, or 96.85 points to 1,386.42 and the S&P 500 tumbled 52.54 to 806.58, the lowest close for that index since March 2003.

TSX financials stocks took a beating, down 4.9 per cent, after the Bank of Nova Scotia (TSX: BNS) warned Tuesday of a bigger-than-expected $595-million hit to its quarterly earnings caused by financial-market upheaval.

The other banks are expected to suffer similarly to Scotiabank when they issue their fourth-quarter results, starting next week. Scotia’s shares were down $1.93 to $35.24.

The Canadian dollar was at 79.83 cents US, down 1.48 cents, and the TSX Venture Exchange lost 20.16 points to 730.09.

Top Senate Democrats said today that Congress is unlikely to reach a quick bailout for the Big Three Detroit automakers, who are pleading for $25 billion in cash to stave off bankruptcy.

Congressional Democrats have proposed using part of the $700 billion financial bailout package to pump into the ailing auto industry, but the White House opposes such an approach.

Investors are concerned at the repercussions should any of the three automakers collapse, an event that could ripple through an already battered North American economy.

"There’s a general malaise among investors right now," said James Cox, managing partner of Harris Financial Group. "Everybody is in wait-and-see mode of what is going to happen with these big three automakers."

Bank of Canada governor Mark Carney strongly indicated today that the central bank will cut interest rates further next month in an effort to stimulate the economy. Carney told a luncheon in London that the economy is slowing more than previously thought, and inflation is less of a concern cash advance in one hour.

The TSX diversified metals sector slid 11.5 per cent, and Teck Cominco Ltd. (TSX: TCK.B) slid 15 per cent to $5.22.

Energy stocks were down 3.8 per cent as crude oil lost 77 cents to close at US$53.62 a barrel on the New York Mercantile Exchange.

The gold sector trekked 2.8 per cent lower as gold futures ended ahead for the first session this week on U.S. dollar weakness.

The December bullion contract closed up $3.30 to US$736 an ounce.

In economic news, Statistics Canada’s composite leading index – an indicator of future activity – fell 0.4 per cent in October. It was the biggest decline since the early-1990s recession, after a 0.3 per cent drop in September.

New American data showed deepening weakness. Construction of new homes plunged 4.5 per cent last month to the lowest level on government records. The Commerce Department said residential construction fell to an annualized rate of 791,000 units.

U.S. consumer prices, meanwhile, fell by the largest amount in records dating back to 1947, down one per cent last month as gasoline prices receded sharply. Core prices, excluding volatile food and energy costs, were down 0.1 per cent – the first decline in more than a quarter-century.

In earnings news, supermarket operator Metro Inc. (TSX: MRU.A) rang up $72.3 million in summer-quarter profit, up 25.5 per cent from year-ago earnings that were reduced by the integration of A&P stores. Sales were up 1.8 per cent from a year ago. Metro shares were at $33.

The Resolve Business Outsourcing Income Fund (TSX: RBO.UN) is suspending distributions to investors. The trusts units plunged 55 per cent, or $1.94, to $1.56.

Norsemont Mining Inc. (TSX: NOM) says its board has set up a special committee to deal with "recent unsolicited expressions of interest to acquire the company" and shares were ahead 15 per cent, or 25 cents, to $1.95.

Forestry company Tembec Inc. (TSX: TMB) fell to a quarterly loss of $4 million from year-earlier profit of $22 million, as sales declined to $629 million from $675 million. Shares dropped a penny to $1.56.

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A global credit crisis that has felled large investment banks and prompted multi-billion dollar bailout packages is also hurting unlikely victims half a world away: small south Asian businesses dependent on microfinance.

Microfinance has helped poor women and farmers in Bangladesh and India set up businesses and grow crops since the 1970s.

But as credit tightens and largesse from corporations and socially-minded investors dries up, microfinance will be hit, impacting poor people who have no other access to finance.

“A liquidity crisis is the very worst-case scenario for microfinance institutions,” said Roy Jacobowitz, managing director of development and communications at ACCION International in Boston, which backs microfinance institutions.

“The demise of microfinance will be devastating. It will leave people that depend on it in a very, very bad situation: they could go from a level of success back to poverty.”

South Asia accounts for the most microfinance borrowers, making up more than half of global demand, according to Sa-Dhan, an association of community development finance institutions.

While ACCION hasn’t seen a “catastrophic impact” on MFIs there yet, Kashf Foundation, an MFI in Pakistan, whose economy is tanking, is now seeking international lines of credit, he said credit score.

In India and Bangladesh, microfinance has given hope to hundreds of thousands, especially women, who have built successful businesses that have changed their lives.

But these may now be under threat because of tighter credit.

“There’s less money out there, so there’s less money for MFIs,” said Siddhartha Chowdri, a manager for ACCION in India.

“For MFIs, the cost of their funds has gone up, and at the same time, they’re under pressure not to raise lending rates to their borrowers. At some point that becomes unsustainable.”

REGULAR INCOME

Microfinance shot into the spotlight in 2006 when the Nobel Peace Prize went to Bangladesh’s Muhammad Yunus and his Grameen Bank that pioneered giving small loans without collateral.

But today in Bangladesh, one of the poorest nations in the world, microfinance borrowers and workers are a worried lot.

Kulsum Bibi, a 45-year-old mother of three, set up a nursery with a loan of 3,000 taka ($44) from Bangladesh Rural Advancement Committee (BRAC), after her husband left her and their children. 

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Have money, will buy Mercedes and mobile phone.

That seems to be the mantra in India, where sales of luxury cars and mobile subscriptions are bucking the overall trend of lower consumer demand and slowing economic growth.

India’s benchmark stock market is down more than half in 2008, industrial production has fallen and analysts expect economic growth could slow to below 7 percent in the year to March 2009 from 9 percent or higher in the past three years.

But that has not stopped mobile phone operators in the fastest growing market for mobile phone services from adding a record 7.7 million mobile users in October to their GSM networks.

Leader Bharti Airtel alone added 2.7 million new subscribers, while No. 3 Vodafone Essar rang in its highest numbers ever, a whopping 2.1 million.

Subscriber additions can continue at the same fast clip if operators stick to their expansion plans, said Usha Rajeev, head of the telecom practice at PricewaterhouseCoopers.

“Generally, in times of trouble, people feel a heightened need to stay connected and keep up with the news,” she said.

“Also, the mobile phone is not considered a luxury product anymore; it’s almost an essential commodity,” she said.

Young consumers see the mobile phone “as an extension of themselves,” Rajeev said, and would not cut spending on it, while for new users from small towns and villages, staying connected may be critical to earning a livelihood short term cash loans.

With just over a quarter of its billion-plus population owning a mobile, consultancy Gartner forecasts India’s mobile user base will increase to 737 million by 2012, helped by call rates as low as 1 U.S. cent a minute and handsets at $15.

MORE CONVICTION

At the other end of the spectrum is demand for luxury cars with a sticker price of more than 2 million rupees ($41,000), which has stayed strong despite a slump in car sales overall.

Car sales in India fell for the third time in four months in October as high borrowing costs and tighter credit depressed demand, with some firms including top vehicle maker Tata Motors Ltd shutting plants to avoid a build-up in inventory.

Car sales fell nearly 7 percent from a year earlier to 98,900 units in October, but Mercedes-Benz has already met its full-year target with sales of 3,141 units so far this year, a 47 percent increase from the same period a year earlier.

BMW’s sales have more than doubled this year. 

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BONN–Deutsche Post AG is poised to announce thousands of job cuts at its DHL Express operations in the United States, possibly as early as today, a German weekly reported yesterday.

The Bonn-based express mail and logistics company was poised to announce the cutbacks at its DHL operations in the United States would affect between 12,000 and 13,000 jobs, the report in the Frankfurter Allgemeine Sonntagszeitung said.

The cuts are part of a wider plan to curtail operations in the U.S., including ground deliveries, and would likely affect drivers, shipping clerks and warehouse workers. The express unit employs some 18,000 workers.

The expected move will not signal Deutsche Post’s exit from the U Faxless pay advances.S., where it faces strident competition from UPS Inc. and FedEx Corp.

The report said the company’s U.S. logistics unit, which employs some 25,000 people, would not be affected and some staff at DHL would remain.

Deutsche Post itself did not comment yesterday.

Deutsche Post said earlier this year that competition, rising fuel prices and other factors have put its U.S. DHL operations on track to lose 1.3 billion euros ($1.6 billion U.S.) by the end of the year.

Associated Press

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ALGIERS–OPEC's next meeting must confirm that members have made all the oil output reductions they promised before taking any more action on output levels to prop up sagging prices, OPEC President Chakib Khelil said on Saturday.

"We will discuss another cut, whatever happens, but will there be a consensus? I cannot tell you today," Khelil said at a seminar on oil, referring to cuts agreed at an Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna last month.

Oil fell below $60 a barrel for the first time since March 2007 on Thursday, depressed by dismal projections for the world economy next year, and OPEC ministers are due to meet formally next on Dec. 17 in Oran, Algeria.

"There will be a consensus in Oran, and this consensus will depend on the application of the reduction," Khelil said.

"If everyone has applied (the cuts) and everything in terms of prices stays at the levels we have today, it's of course clear that we will probably go towards a decision to reduce," he said, adding that if the cuts had not all been implemented it would be difficult to decide further action.

Taking further action at a time when previous cuts had not all been implemented would send a bad signal to the markets, which reacted to "the reality on the ground" rather than mere words, he said cash advance usa.

Khelil said he expected prices to rise shortly, adding: "If we apply the reductions totally the probability of another cut is weaker."

Arab members of the group could discuss market developments informally on Nov. 29 in Cairo on the sidelines of a meeting of the Organization of the Arab Petroleum Exporting Countries, he said.

Oil's steep slide from a peak of more than $147 a barrel in July has already spurred OPEC to rein in supply by 1.5 million barrels per day (bpd) from Nov. 1. Some members of OPEC want to cut more.

Khelil said that in addition to the 1.5 million bpd OPEC cut, Saudi Arabia, the world's biggest exporter, was expected by itself to cut another 300,000 bpd that he said it had added to its own supply in recent months.

Evidence of a worldwide economic downturn has mounted. The International Monetary Fund has predicted 2009 global economic growth of 2.2 per cent, down 0.8 percentage points from its October forecast.

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General Motors Corp and Ford Motor Co posted more than $27 billion of net losses in the first half of 2008 — and that was before a deepening economic slowdown pushed industry sales beyond 15-year lows.

What either automaker will report for an encore in the third quarter could be overwhelmed by the potential merger of Chrysler LLC into GM or various other scenarios of some or all of the Auburn Hills, Michigan automaker being sold.

Both are expected to post dismal third-quarter results on Friday, capping off a disastrous week that started with reports that U.S. auto sales plunged to the lowest annualized rate in a quarter century in the first month of the fourth quarter.

Analysts on average expect GM and Ford to post losses of roughly $2 billion each for the third quarter excluding one time items, according to Reuters Estimates.

Cash flow remains key to investors, who saw GM stock fall to a 58-year low and Ford stock to a more than quarter century low in October, as does U.S. consumer confidence, which fell to a record low in October.

A deal to unite GM and Chrysler hit a wall after the Bush administration last week ruled out funding it, leaving any merger between the companies contingent on federal aid under the next administration, people familiar with the talks said.

October sales fell from bad to worse amid the financial sector failures that forced a $700 billion bailout plan in the United States and numerous props for banks in other countries.

“Auto companies just don’t make money in a recession,” Morgan Stanley analyst Adam Jonas said in an October note to clients referencing the slowdown in European automaker results that is just as relevant for U direct payday loan cash advance.S. companies.

While the talks between GM and Chrysler owner Cerberus Capital Management LP have taken most of the spotlight, Ford also has had discussions with policymakers about the challenges facing the industry and the automaker.

“We just want to make sure we continue that ongoing dialogue and make sure that whatever happens there is a degree of parity,” Mark Fields, Ford’s president of the Americas, told reporters last week.

Ford earlier in 2008 said it would accelerate plans to bring European-designed cars to North America and convert some pickup truck plants to car production. It is expected to provide a business plan update on Friday.

WHERE THE RUBBER HITS THE ROAD

GM’s U.S. sales were down more than 20 percent in 2008 through October, while Ford sales were down 18 percent in its core brands. Both lagged the 15 percent industry decline.

In recent years, special charges have been hard to predict for Ford and GM due to massive North American restructurings that have failed to keep pace with eroding markets. They combined for $17.1 billion of charges in the second quarter.

Charges could include costs for white collar job cuts and buyouts of unionized hourly workers. Ford cut white collar expenses in the summer and told the UAW in September that it had about 4,000 more hourly workers than it needed. 

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The global downturn is forcing South Korea, Thailand and Indonesia to put on ice long-planned privatizations of banks which are either now needed as policy tools or look unattractively short of capital.

As crumbling financial markets hammer asset values of banks across Asia and with no sign of any quick recovery, governments are unlikely to dare loosen control over banks already in their charge and may well tighten their grip.

“In the current situation, governments have to take a leading role in stabilizing financial markets and that could be done through state-run banks,” said Park Jeong-hyun, a Hanwha Securities analyst in Seoul.

“Bank privatization should come once financial markets stabilize and we gain confidence in them.”

The delay also means retreating from attempts to reform and consolidate the region’s battered banking sector, which Asian governments spent hundreds of billions of dollars bailing out in the wake of the 1997-98 Asian financial crisis.

It also removes potential extra revenue just as governments want to boost fiscal spending to cushion the impact of a looming global recession.

Governments around the world have so far agreed to inject more than $4 trillion into banks, nationalizing some and guaranteeing deposits for many.

“In the short term, we should expect to see more government intervention in banks in order to support them through the credit crisis, not less,” said David Marshall, Managing Director of Fitch Ratings.

“In some other countries, banks are being wholly or partly nationalized as part of government support mechanisms cash advances pay day loan. I would not expect to see this happen on a significant scale in Asia but banks may well need liquidity support from central banks.”

DELAYS

The Bank of Thailand’s rescue arm, Financial Institutions Development Fund (FIDF), said last month market conditions meant it was not ready to sell stakes in Krung Thai Bank KTB.BK, Thailand’s No. 2 bank, or Siam City Bank SCIB.BK.

When South Korea’s chief financial regulator, Jun Kwang-woo, said the government would be flexible about the timing of privatizing Korea Development Bank (KDB), it was taken as a signal of a delay in what has been central to ambitious financial reforms President Lee Myung-bak wanted to wrap up by 2012.

South Korea has also put off cutting its 73 percent stake in Woori Finance Holdings (053000.KS: Quote, Profile, Research, Stock Buzz), the country’s No. 2 financial services group, and the Industrial Bank of Korea (IBK) (024110.KS: Quote, Profile, Research, Stock Buzz), citing market conditions.

Full privatization of the three banks is valued at more than 37 trillion won ($29 billion), according to a KDB estimate and market prices.

Instead, the government is now set to inject 1 trillion won in KDB and 500 billion won into IBK to give them room to expand lending to cash-strapped small companies. 

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Has your latest brokerage statement got you down? Maybe it’s time to try something completely different: a $96 billion market built entirely on the certifiable absence of a colorless, odorless gas.

That would be the curious and high-growth business of carbon finance. Its primary purpose is to curb global warming by stimulating the trade of a new commodity known as a carbon-emissions reduction credit. Scoff if you like, but know this: During 2008 (through Oct. 15), the value of an index of carbon credits - which you can now purchase on the New York Stock Exchange - grew 5.4%. Can you say that about anything in your portfolio?

What’s more, almost everyone expects carbon trading to really take off once the U.S. government regulates greenhouse gases, as both presidential candidates promise to do. Of course, if Washington doesn’t act, the market could vaporize. "These are political markets, and you can’t take the politics out," says V

Shares of Hartford Financial Services Group Inc. plummeted more than 50% on Thursday after a handful of analysts downgraded and cut profit estimates for the insurance company on concerns of rating agency downgrades and a possible capital raise.

Late Wednesday, the Hartford, Conn.-based insurer reported a $2.6 billion loss for the third quarter and cut its full-year profit outlook. The company now expects 2008 earnings to range from $4.30 and $4.50 per share, less than half its estimate in July of $9.20 to $9.50 per share. The quarterly loss was in line with the company’s results which were preannounced earlier this month.

"The risk of a rating agency downgrade and the inability of management to provide comfort on the level of their capital cushion make it very difficult to assess the downside or to argue that there is significant upside in the near term," wrote Fox-Pitt Kelton analyst Gary Ransom in a research note to clients.

Ransom, who downgraded Hartford (HIG, Fortune 500) shares to "In-Line" from "Outperform" and reduced his 2008 profit estimate to $4.30 per share from $5 per share, added that it is difficult to rule out the possibility of an additional capital raise by the company due to "considerable uncertainty" in the financial markets.

Earlier this month, Hartford bolstered capital with a $2 freecreditreport.5 billion infusion from German insurer Allianz SE (AZ).

Insurers have been under pressure to maintain solid capital positions in order to avoid damaging downgrades by ratings agencies. Keeping high ratings is key for insurers because lower ratings can mean higher costs, and in some cases, even a loss of business.

Deutsche Bank analyst Darin Arita also lowered his yearly outlook to $4.45 per share from $5.40 per share, and said in a note to clients, "The life insurance business is suffering from capital strain."

Arita slashed his price target by $18 to $36, but maintained a "Buy" rating on the company’s shares.

Analyst Bijan Moazami of Friedman, Billings, Ramsey lowered his yearly outlook to $4.30 per share from $5.20 per share, and cut his price target on Hartford shared by $3 to $37.

On average, analysts surveyed by Thomson Reuters forecast an annual profit of $5.25 per share.

Shares fell $10.28, or 51.4%, to $9.38 in heavy afternoon trading and earlier bottomed at a multiyear low of $8.23. 

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