Finance and Economic

The U.S. trade deficit widened in September by an unexpectedly large 18.2 percent, the largest increase in more than 10 years, as oil prices rose for the seventh straight month and imports from China bounded higher.

Adding urgency to talks President Barack Obama will have with Chinese leaders in coming days, the monthly trade gap grew to $36.5 billion, from a slightly revised estimate of $30.8 billion in August, the Commerce Department said on Friday.

The monthly trade gap grew to $36.5 billion, from a slightly revised estimate of $30.8 billion in August, the Commerce Department said on Friday.

Wall Street analysts had expected the shortfall to grow modestly in September to around $31.65 billion.

Both U.S. exports and imports had their best month since December 2008. But in a sign of renewed U.S. economic growth, imports grew 5.8 percent in September, the biggest monthly gain since March 1993, while exports rose 2.9 percent.

Some analysts had expected more of an export boost because the drop in the value of the dollar against other major currencies makes American goods more competitive overseas.

But “the overall upturn in U.S. demand is trumping the fall of the dollar,” said Craig Peckham, an equity trading strategist with Jefferies and Company in New York payday loan companies.

TRADE FLOWS PICKING UP

Imports of industrial supplies and materials showed the biggest gain in September, suggesting that U.S. manufacturers are ramping up for production.

International trade flows are picking up as massive stimulus from governments and central banks lift the global economy out of its deepest swoon since the 1930s.

The EU statistics office Eurostate said the euro-zone economy grew 0.4 percent in the third quarter from the second quarter, snapping the region’s recession. For details, see

The U.S. government said last month the U.S. economy grew at an annual rate 3.5 percent in the third quarter after four contractionary quarters.

The average price for imported oil leapt to $68.17 per barrel and imports from the Organization of Petroleum Export Countries increased to $11.9 billion in September, both the highest since November 2008.

A separate report showed U.S. import prices rose for the third straight month in October, pushed up by a jump in the cost of fuel imports and the depreciating dollar. 

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Some 650,000 troubled borrowers have been put into trial loan modifications under the president’s foreclosure rescue plan, the Treasury Department said Tuesday.

That number represents 20% of eligible homeowners at least 60 days behind in their payments, according to the Treasury report. This is up from 16% a month earlier.

Despite the progress, housing counselors say the number of people falling into foreclosure vastly exceeds the ranks getting assistance. The number of filings hit a record high of 937,840 in the third quarter, according to RealtyTrac, an online marketer of foreclosed homes. That’s a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

The $75 billion Obama plan is "lagging behind the massive number of foreclosures that continue to pile up," said John Taylor, head of the National Community Reinvestment Coalition.

But administration officials have said that the program, which was projected to help up to 4 million homeowners, is on track.

The rescue tries to keep borrowers in their homes by adjusting monthly payments to no more than 31% of a borrower’s pre-tax income. Servicers, borrowers and investors can get financial incentives to participate.

Administration officials have been pressuring loan servicers to ramp up their modification efforts. Many people have complained that financial institutions lose their paperwork, transfer them repeatedly between departments and require that they fill out applications again and again.

But the rising unemployment rate is prompting more homeowners, even those with strong credit histories, to fall behind on payments. And the president’s plan is not designed to help the jobless.

At Neighborhood Housing Services of Chicago, only about one in four people are getting help from the Obama program, said Michael van Zalingen, director of homeownership services.

About 30% are not being put into trial modifications for reasons including too little income or too much equity in their homes, van Zalingen said payday cash advances. The rest are in limbo, mainly because the banks say their applications are incomplete.

Certainly, banks have quickened the pace of loan modification approvals, van Zalingen said. His group secured 180 modifications for clients in the second quarter, but was able to help 400 in the third quarter. He expects that a total of 1,000 clients will be put into trial modifications by year’s end.

Still, the modifications are not keeping pace, van Zalingen said. NHS-Chicago will see 3,000 to 3,500 distressed borrowers seek help this year. "Loan servicers are offering trial modifications more often, but not anything like the need or demand," he said.

Just how many modifications are completed depends on the servicer. Performance remains very uneven, as it has since the start of the program.

Through October, Saxon Mortgage Services put 44% of eligible delinquent borrowers in trial modifications — the highest percentage of about two dozen companies. Among the largest banks, Citigroup (C, Fortune 500) came in at 40% and JPMorgan Chase (JPM, Fortune 500) 32%, while Wells Fargo (WFC, Fortune 500) has placed 29% and Bank of America (BAC, Fortune 500), the biggest servicer, 14%.

What’s becoming even more important is how many people in trial modifications receive permanent adjustments. The Treasury in September lengthened the trial period to five months, from three months, to give borrowers more time to send in their paperwork and banks to process it.

Treasury’s monthly updates are expected to start reporting the number of permanent modifications offered within the next few months. 

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China on Tuesday restated its long-standing policy to maintain the basic stability of the yuan at a reasonable and balanced level, after President Barack Obama said he would discuss the currency when he visits Beijing.

Asked about Obama’s comments, Foreign Ministry spokesman Qin Gang said China would keep improving the currency’s exchange rate mechanism with a view to gradually making the yuan more flexible.

Qin added that China hoped the United States, as the most important economy in the world, would pursue a stable fiscal policy to keep the dollar’s exchange rate steady and ensure its own growth and that of other nations.

“I want to make it clear that the United States is the number-one economic entity in the world,” he told a regular news conference.

“We hope that … the United States can overcome the difficulties brought by the international financial crisis and at the same time maintain the medium-term and long-term sustainability of its fiscal policy,” Qin said.

Obama told Reuters in an interview in Washington that he would raise the issue of the yuan, which many economists and U.S. manufacturers consider to be undervalued, when he comes to China next week.

But Obama also said the two countries share a common interest in helping to rebalance the global economy in order to deliver sustainable growth, a view echoed by Qin payday advance.

“If you ask me how relations between the two countries are right now, my first answer is: the economies of China and the United States are mutually related, integrated, dependent on each other and getting closer to each other day by day.”

But there are tensions between the two.

U.S. manufacturers complain that Beijing artificially holds the value of the yuan down to make its exports cheaper and American goods more expensive for Chinese consumers.

Economists say this has led to imbalances in the world economy by contributing to big trade deficits in the United States and trade surpluses in China.

Leaders of the Group of 20 developed and emerging economies have pledged to aim for policies to ease these imbalances.

But China has also been angered by recent controls slapped on some of its imports, and Qin issued a new warning against barriers to commerce.

“We urge the U.S. side to make positive efforts with China to resolve frictions and questions in trade, including acknowledging China’s status as a full market economy and halting some protectionist measures,” Qin said.

(Reporting by Emma Graham-Harrison and Yu Le; Editing by Alan Wheatley and Ken Wills)

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World governments should consider urgently a levy on banks to fund future bailouts, British Prime Minister Gordon Brown said on Saturday, departing from London’s longstanding resistance to a global tax.

France and Germany have led the way in Europe in seeking to force the financial sector to return some of the billions of public money plowed into banks over a year of crisis.

A global levy would be hard if not impossible without U.S. backing, a country traditionally hostile to new taxes. U.S. officials declined comment on Brown’s proposal before a later news conference by U.S. Treasury Secretary Timothy Geithner.

London to date had also resisted, mindful of the interests of its powerful financial services industry, which generates a large proportion of Britain’s tax revenues.

“We should discuss whether we need a better economic and social contract to reflect the global responsibilities of financial institutions to society,” Brown told a meeting of financial policymakers from the G20 nations in Scotland.

“There have been proposals for an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global transaction levy,” he said.

Brown said any measure would have to be global in nature and implemented by all the world’s main financial centers in the United States, Europe, Asia, Middle East and Switzerland.

In recent Congressional testimony, U.S. Treasury Secretary Timothy Geithner was cool to an idea from a domestic regulator who called for big financial firms to pay risk-based assessments into a fund that would be available for use if they hit trouble.

Geithner opposed pre-funding bank bailouts on the basis that it make banks less wary of risk taking.

Britain this week forked out another 30 billion pounds on bailing out two of its biggest banks for the second time, and opinion polls all show Brown heading for defeat at the hands of opposition conservatives in next year’s election.

IMF REVIEW

Brown said the International Monetary Fund would review the possibility of a global transaction tax and report back in April next year — signaling the G20 had agreed as a group to take up the matter more seriously.

“I do not in any way underestimate the enormous and difficult practical and technical issues that will need to be overcome that a globally cohesive system requires and raises.

“But I do not think these issues should prevent us from considering with urgency the legitimate issues I have discussed,” he said.

Banks have already warned the G20 that if they have to meet new higher capital charges too soon, they will have less money left to lend and aid recovery. 

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Time Warner Inc. said Wednesday that its business outlook has improved, after the company posted quarterly profit and sales that fell from year-ago results but beat Wall Street’s forecasts.

The recession has cut into the company’s media subscriptions and advertising sales, which are its primary revenue streams. But its television and film units outperformed expectations in the quarter, raising the company’s hopes that it has turned a corner.

"Time Warner is firmly on track to post solid results this year in spite of the tough economic environment," said Jeff Bewkes, Time Warner’s CEO, on a conference call with investors.

The media conglomerate raised its full-year guidance, saying it expects to earn $2.05 per share for 2009. That’s better than the $1.98 per share estimate the company provided in April and is slightly higher than analysts’ consensus expectation of $2.02 per share.

The outlook excludes the effects of a $100 million restructuring at publishing unit Time Inc., which the company expects to incur in the current quarter. Time Warner confirmed that the cost-cutting would come in the form of layoffs at Time Inc. during this quarter, but the company didn’t disclose the number or timing of those job cuts.

A source familiar with the job cuts said the company had offered voluntary buyouts Tuesday night to Time Inc. employees who are members of the Newspaper Guild. Most of those employees work for Fortune, Fortune Small Business, Money, Time, Sports Illustrated and People. The company is expected meet with the remaining staff members on Wednesday, with total job cuts reaching about 500, according to the source.

Time Warner also said it still plans to spin off its AOL unit by the end of the year.

The AOL spin off will follow other recent moves at Time Warner to focus on the company’s core businesses. Earlier this year, the company completed a spinoff of its cable service provider Time Warner Cable (TWC), and the company began to reorganize Time Inc. in late 2008, laying off 600 and stopping publication of a handful of magazines in the process.

"I’m confident that the new content-focused Time Warner will be well positioned to deliver steady and attractive stockholder returns in 2010 and beyond," Bewkes added.

Shares of Time Warner (TWX, Fortune 500) fell 1% in premarket trading.

Income falls on AOL, Time Inc: The New York-based parent company of CNNMoney.com and Fortune said its net income fell to $662 million, or 56 cents per share, down 38% from a year earlier payday loans online. Results included a charge of 5 cents per share.

Without the charge, Time Warner said it earned 61 cents per share. Analysts polled by Thomson Reuters, who typically exclude one-time items from their estimates, forecasted earnings of 53 cents per share.

The company said adjusted operating income before depreciation and amortization (adjusted OIBDA), a commonly used profit metric for media companies, fell 9% to $1.8 billion, topping analysts’ expectations of $1.7 billion. Adjusted OIBDA declines at AOL and Time Inc. negated moderate growth at the company’s television networks and film units.

Profit rose modestly in the company’s TV networks and film units, but earnings were halved at AOL and Time Inc.

Advertising, magazine sales tumble: Sales for the company fell 6% to $7.13 billion, just topping analysts’ forecasts of $7.07 billion.

Revenue fell in every segment except for the company’s TV networks unit. Network sales rose 5% in the quarter, despite a 1% dip in advertising sales from the same period a year ago.

The biggest decline in sales came from the Time Inc. unit, in which revenue dove 18%. Ad sales fell 22% at the company’s publishing arm, and subscriptions were down 24% in the quarter.

The company’s filmed entertainment segment, which includes film studio Warner Bros., posted sales that fell 4% in the quarter. That decline was mostly due to a difficult comparison to the same period last year, which brought in hefty revenue from the blockbuster "The Dark Knight." The company said the new Harry Potter movie and "Final Destination" performed very well, and it was still taking in carryover ticket sales from the summer blockbuster "The Hangover."

Sales at AOL, which the company has been planning to spin off since May, fell 23% on an 18% decline in online ad revenue.

Time Warner’s results come a day after rival Viacom (VIA) reported profit jumped 15%, even as advertising sales slumped.

Also on Wednesday morning, cable provider Comcast (CMCSA, Fortune 500) reported 22.5% earnings growth. Comcast is reportedly in negotiations to buy General Electric’s (GE, Fortune 500) NBC Universal unit, but some analysts believe Time Warner is also in the running for the Peacock Network. 

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Societe Generale’s lower-than-expected third quarter profit has highlighted the French bank’s weakness compared to many of its rivals and its position as a possible bid target if there is a sector shake-up.

Like peers Credit Suisse and Deutsche Bank, SocGen’s investment banking results powered the profit line although debt provisions rose to cover an expected further rise in bad loans in 2010.

Net profit rose to 426 million euros ($623 million) euros from 183 million a year earlier, mainly due to the fact that SocGen’s investment banking arm swung to a profit from a year-earlier loss.

However, the bank missed the average estimate of 481 million euros in a Reuters poll of 10 analysts as group revenues were weaker-than-expected and provisions were higher. The banking group’s revenues took a hit at its international arm, affected by the Russian economic slowdown and its investment management arm, due to outflows.

France’s second-biggest and the euro zone’s No.6 bank by market value has been steadily recovering since a 4.9 billion euro trading loss in January 2008, which it blamed on unauthorized deals carried out by Jerome Kerviel, a former junior trader at the bank.

However, SocGen remains the subject of persistent bid speculation in France. Last week, Credit Agricole — the country’s biggest bank by branches — denied a report in Le Monde that it was considering a merger with SocGen and insurer Groupama.

La Tribune newspaper said on Wednesday that BNP Paribas was looking at SocGen.

BNP Paribas, France’s biggest bank by market capitalization, denied the Tribune article. BNP reiterated that its immediate focus was on integrating its recent buy of Fortis assets.

“This rumor is unfounded from A to Z!,” a BNP spokesman said in an emailed statement to Reuters.

SHARES RECOVER

Nevertheless, the Tribune article helped push up SocGen’s shares, which were also boosted by the company’s solid performance at its French retail banking division.

“Even though BNP has denied it, it would be a good opportunity for them,” said Agilis Gestion fund manager Arnaud Scarpaci. Agilis Gestion owns some SocGen shares.

SocGen shares, which fell 4 percent on Tuesday, were up 4.6 percent at 45.65 euros in early morning trade. At that price, SocGen has a market capitalization of around 34 billion euros.

BNP Paribas shares were up 2.3 percent at 52.06 euros, giving BNP a market capitalization of around 62 billion euros.

SocGen’s results kicked off the third-quarter earnings season for French banks, with BNP Paribas also expected to post higher earnings on Thursday. 

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The U.S. economy may have turned a corner after the deepest recession in some 70 years, but Federal Reserve policymakers appear to be in no rush to raise interest rates.

The Fed is widely expected to keep its benchmark interest rate where it has been since December — near zero — when it meets this week.

With underlying inflation pressures actually decreasing and most Fed officials expecting the recovery to be slow, there is little incentive for the Fed to change its easy money policy.

“Anybody who expects major changes to the Fed’s statement is likely to be disappointed,” said Stephen Stanley, U.S. economist at RBS.

Fed officials, who meet on Tuesday and Wednesday, could discuss how they will prepare markets for an eventual policy shift, but analysts say it is too soon for the Fed to even hint toward an exit by tweaking its pledge to keep rates extraordinarily low for an “extended period.”

Even as the U.S. economy appears to be still in need of Fed support, the repercussions of emergency monetary policies are being felt around the world.

Brazil has acted to stem the flood of speculative capital to its economy by adopting a 2 percent tax on foreign investment. Other nations have begun to intervene to keep their currencies from rising too sharply against the falling dollar.

Among top Fed officials a debate has broken out about how soon the central bank will need to act to nip inflation in the bud, although none are advocating a move now.

Financial markets will comb through the central bank’s policy statement, which will be released at around 2:15 p easy online payday loans.m. EST (1915 GMT) on Wednesday, for any clues on when the easy money period will start drawing to a close.

Most analysts at top U.S. banks expect the Fed’s policy-setting Federal Open Market Committee to keep interest rates on hold until mid-2010 or later, though interest-rate futures markets are pricing in an increase earlier in 2010.

The most significant outcomes of the Fed’s last two policy meetings concerned the central bank’s purchases of U.S. government and mortgage-related debt. The Fed stopped buying longer-term Treasury debt last week, while the mortgage-related asset purchase program has been extended into early 2010 to provide for an orderly wind down.

“Things are going to start to get interesting in 2010, but for the moment they’ve got all their ducks in a row,” Stanley said.

GROWTH HAS ARRIVED, BUT JOBS HAVE NOT

The Fed will note that the economy grew in the third quarter, snapping a deep four-quarter plunge and likely ending the U.S. recession. The officials are also likely to repeat there is still enough slack in the economy for inflation not to be an immediate worry.

Last week, data showed U.S. GDP rebounded at a solid 3.5 percent annual pace in the third quarter. A separate report showed inflation, outside of food and energy costs, bumping along at a eight-year low. 

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