Finance and Economic

KUWAIT CITY – Kuwait's Central Bank stepped in Sunday to prop up one of the country's biggest banks and said it was considering guaranteeing deposits in domestic banks – in one of the first concrete signs that the global financial crisis may next hit the oil-rich Gulf.

In Saudi Arabia, meanwhile, the government said it would deposit $2.7 billion into the Saudi Credit Bank to help lower-income citizens deal with financial difficulties, the country's Al-Ektisadiya newspaper reported.

The two moves came just a day after finance ministers from the six-nation Gulf Cooperation Council held an emergency meeting to echo assurances, which they have repeatedly voiced over the past few weeks, that the region's banks face no liquidity crisis.

Kuwait's decision to stop trading in shares of Gulf Bank sent a shock wave through the country's bourse, which closed down almost 3.5 per cent and brought its year-to-date losses to over 19 per cent.

"The halting of Gulf Bank shares spread panic in the bourse today, because the government has been saying banks are safe from (global financial crisis) losses," said investor Ahmed al-Fadhli in a telephone interview.

The central bank order said trading in Gulf Bank shares would be suspended pending an investigation into the derivatives deals that caused the losses. The bourse's statement said some investors had balked at covering their losses, but neither the central bank nor Gulf Bank indicated the scope or timeframe of the bank's losses.

But one banking official with access to the information estimated the bank's losses at up to $749 million. The official spoke on condition of anonymity because of the sensitivity of the issue.

Over the past few weeks, Kuwaiti investors have voiced clear concerns about the market. One stockbroker unsuccessfully sued to temporarily close the bourse while other traders last week stormed out of the exchange, demanding the government intervene to halt their near-daily losses.

Investor al-Fadhli said about 40 brokers walked Sunday from the exchange to the nearby seaside Seif Palace, demanding to see the prime minister, Sheik Nasser Al Mohammed Al Sabah, to ask for more government intervention.

The Gulf Bank news further fuelled market turbulence in the broader GCC, not just in Kuwait, a tiny country which is far more dependent on oil revenue than many of its other Gulf counterparts.

Oman's stock exchange was down about 8.29 per cent while Qatar's exchange was off almost 9 per cent. Saudi's benchmark Tadawul index was down a moderate 3.06 per cent, a day after plummeting over 8 per cent.

Sunday is a normal business day in the Arab Mideast, which usually observes Friday as the weekend no teletrack payday loans.

So far, the Gulf countries have been thought to be protected from the crisis, in part because of the cushion of oil money many of them have built up during years of high oil prices. However, because most of the region's banking sector is privately held, not much is known about the institutions' true risk exposure levels.

The Gulf Bank news also appeared to have pushed the Kuwaiti government to take a step it has so far resisted – guaranteeing deposits. The country currently makes no deposit guarantees.

The central bank said it would propose an urgent bill to guarantee bank deposits in an effort to "boost confidence in our banking sector and enhance its ability to compete with banks in countries where deposits were guaranteed by the state" but gave few details on specifics.

The guarantee would cover local Kuwaiti banks.

The various Gulf countries have taken a range of measures to maintain market confidence, including cutting interest rates and pumping billions into their economies.

In tandem, officials have repeatedly said the region is not exposed to the kind of toxic debt that has led to massive losses in the United States and spread to other global markets.

But the move to deposit funds in the Saudi Credit Bank, to be used interest-free by lower-income Saudis, showed the push many of the GCC countries were undertaking to ensure that their citizens are not affected by the current international crisis.

Much of that effort is funded by the countries' massive cash surpluses, accrued from oil wealth. But with crude prices falling, analysts say some spending may be curtailed.

The draft bill to guarantee deposits could prove to be the necessary catalyst for stability, analysts said.

But some, including independent financial analyst Ali al-Nimesh, have criticized demands to stop trading, arguing that such a step was counterproductive and unnecessary since the daily losses have not exceeded 4 per cent, compared to a more than 8 per cent drop in the benchmark Saudi Tadawul index on Saturday, for example.

"Unfortunately, Kuwaitis have been used to demanding help and getting it … and parliament has played a negative role in this," al-Nimesh said.

Legislators have passed pay hikes and set up a state fund to buy bad consumer debts despite strong Cabinet opposition.

The government believes oil revenues should be used for development instead of "popular" demands that do not take into consideration that oil prices might fall sharply, dragging down state revenues in tow.

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Asian and European leaders closed ranks on Saturday to try to bolster the confidence of shell-shocked investors fearful that the year-long global credit crunch is mutating into a worldwide recession.

Poor economic data around the world and another international barrage of corporate profit warnings and job cuts triggered a brutal sell-off in stocks from Tokyo to New York.

“The danger of a collapse (on financial markets) is far from over. Any all-clear would be wrong,” German Finance Minister Peer Steinbrueck said in an interview released on Saturday.

“We are still in a dangerous situation. I am not going to mislead anyone and say: we have got everything under control,” he told Bild am Sonntag newspaper.

The worries of political leaders were mirrored in the markets how to get a free credit report.

Seventy-nine years to the day after the 1929 crash that ushered in the Great Depression, currencies experienced extreme volatility, while oil and other commodities tumbled on fears of plummeting demand that would accompany a slowdown.

Many analysts declared that Europe was in recession after private-sector activity in the euro zone’s economy contracted at the fastest pace in at least a decade and Britain’s economy shrank 0.5 percent in the third quarter, much more than expected.

“The euro area has entered a deep recessionary spiral,” said Aurelio Maccario, chief euro zone economist at Italian bank UniCredit. 

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The Canadian dollar suffered its biggest one-day drop in almost 38 years and oil slid below $78 (U.S.) a barrel yesterday as investors continued panic selling across the board on global markets.

"The dollar is in free fall along with commodity prices," said Sal Guatieri, senior economist at BMO Capital Markets.

"It’s ongoing fear that we’re heading for a global recession, and probably a deep one," he said.

When all was said and done, the S&P/TSX composite index shaved another stunning 535.02 points to close at 9065.16 for a loss of 16 per cent this week.

The Dow Jones industrial average, down nearly 700 points at one point in trading, lost 128 points to close at 8,451.19, rounding out its worst week ever.

"This is unprecedented. We don’t know when it’s going to end," said Guatieri.

"This could be a repeat of the early 1980s. It was pretty bleak for years."

Kate Warne, Canadian market specialist at Edward Jones in St. Louis, said emotions are driving behaviour in the market.

"Typically, we don’t see this kind of fear-based selling continue day after day like we’ve seen so far, but no one knows what the catalyst will be to turn sentiment around," Warne said.

"It’s very difficult to see what will change that, but we know historically it changes quite quickly and that what you tend to see is the emotions swing in the other direction just as dramatically as it’s been on the fear side so far."

As brutal as the markets looked though, most Canadians had their eyes on the ailing loonie, which at one point plunged almost five cents – its biggest drop ever – before settling halfway back.

It closed down 2.59 cents (U.S.) to 84.69 cents. The loonie has lost 7.77 cents, or 8.4 per cent, this past week alone as the U.S. dollar strengthens and as investors continue to bail out of the market on continued fears of economic instability.

"The prospects for the global economy seem to be dwindling fast and, as a result, the prospects for commodity markets are also ebbing and that’s weighing very heavily on the dollar," said Michael Gregory, senior economist at BMO Capital Markets.

"Even China, the engine of global growth, cut interest rates this week hoping to stave off lower growth there. The prospects are looking quite dim for commodities."

And the collapse in oil markets accelerated yesterday as investors grew more pessimistic about a mushrooming global crisis.

Light, sweet crude for November delivery fell $8.63 to settle at $77.99 a barrel on the New York Mercantile Exchange.

Even gold, normally the safe haven in times of turmoil, didn’t escape unscathed, falling $27.70 to close at $855.40 in New York as investors sold the metal to cover losses in the equity markets.

With files from The Canadian Press

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The International Monetary Fund's No. 2 official urged policy makers in the U.S. and elsewhere to consider sweeping, “more proactive'' solutions to a financial market crisis that has reached “historic proportions.''

“The essentially reactive and inevitably case-specific nature of many of these measures raises the questions whether broader and more proactive approaches have become warranted,'' said IMF First Deputy Managing Director John Lipsky in a speech in Washington.

Lipsky, the former chief economist at JPMorgan Chase & Co., said the credit crunch and financial turmoil in markets has “expanded suddenly to historic proportions'' and there is now “an almost universal consensus that the global economy is set to weaken.'' Still, a worldwide recession may be avoided.

“This storm can be weathered without a damaging global recession, but attaining such an outcome will require clear and coherent policy responses,'' Lipsky said.

In the U.S., lawmakers are weighing responses to a crisis that prompted Treasury Secretary Henry Paulson to seize Fannie Mae and Freddie Mac and caused the bankruptcy of Lehman Brothers Holdings Inc. in the past two weeks. Earlier this week, the Federal Reserve announced an $85 billion takeover of American International Group Inc.

`More May be Needed'

“Notwithstanding the recent use of innovative and unconventional measures, more may be needed,'' Lipsky said http://payday-faxless.com. “The implication is that a more systematic approach may be needed to deal with such basic issues as the disposition of distressed assets, the degree of protection offered to depositors, and the scale and scope of liquidity support that is offered to institutions and markets.''

Lipsky said “it would not be surprising if some additional'' banks disappear. The challenge for policy makers is to “strike the right balance'' between bailouts and letting markets resolve the instability, he said.

The IMF is forecasting global growth will average 4 percent in 2008 and “somewhat under 4 percent'' in 2009, he said. Lipsky warned that the financial services sector was “facing the prospect of a much-reduced revenue stream.'' Pessimism in the financial sector, he added, should be partly offset by promising indications of recovery in the U.S. housing market starting next year.

“It is plausible to anticipate that the U.S. housing market will find a bottom in 2009,'' Lipsky said. “Already the inventory overhang is diminishing, while affordability measures are returning to levels that appear much more consistent with past experience.''

He said the U.S. dollar is “still somewhat on the strong side'' relative to economic fundamentals.

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Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) is continuing to fund research and development of new military aircraft, but its technological base may erode if the U.S. Air Force does not move soon to begin a competition for a new bomber and a new fighter, a top executive said on Monday,

“The technology base is eroding for Boeing as we move late into the next decade,” Darryl Davis, president of Boeing’s Advanced Systems unit, told reporters at the annual Air Force Association meeting.

In recent years, Boeing has lost several key military aircraft competitions, including the $200 billion Joint Strike Fighter project, won by Lockheed Martin Corp (LMT.N: Quote, Profile, Research, Stock Buzz); an unmanned combat airplane competition won by Northrop Grumman Corp (NOC.N: Quote, Profile, Research, Stock Buzz); and an unmanned Navy patrol plane, also won by Northrop.

Given that Boeing’s production line for the C-17 transport plane and F-18 fighter jet are beginning to wind down, defense analysts have raised concerns about Boeing’s ability to compete for more military aircraft contracts in the future.

Davis agreed it was a concern, especially if the Air Force’s program to build a new bomber and possibly start work on a sixth-generation fighter were delayed.

Overall, U.S pay day loan. defense spending was likely to level off and possibly decline in coming years, and much would depend on the priorities of the new administration, Davis said.

He said Boeing expected research and development programs to continue being funded, but those programs might not move into design, development and production “as soon as we hoped.”

“It’s going to be a difficult environment,” Davis said. 

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Producer prices in Spain rose at the fastest pace in almost 24 years in July as record oil prices increased costs for manufacturers.

The price of goods leaving Spain's factories, refineries and mines increased 10.2 percent from a year earlier after advancing 9 percent in June, the National Statistics Institute in Madrid said in an e-mailed statement today. Producer prices gained 1.4 percent from June, the biggest monthly increase in more than two years.

Crude oil prices have risen by 60 percent in the last year and touched a record $147.27 a barrel in New York in July. That helped push euro-zone consumer price inflation to more than a 16-year high, making it harder for European Central Bank to cut interest rates, even as the region's economy slows.

The price of intermediate goods in Spain rose 7.3 percent from a year earlier, compared with 6.3 percent in June, signaling further rises in consumer prices.

“This warns us about the performance of other prices further ahead and that is why it worries us,'' said Diego Fernandez, an economist at Fortis Bank in Madrid no fax payday loans. He estimates that rises in the price of intermediate goods take about a year to pass through to final prices.

Still, oil has eased 22 percent from its July record and economists said Spain's producer price inflation probably peaked in July. An economic slowdown in Spain would make it difficult for companies to pass on higher production costs to consumers, they said.

Spain's consumer prices gained 5.3 percent from a year earlier in July, the fastest in more than a decade and above the average for the euro region, previous data showed.

The increase in Spanish producer prices was led by energy as the cost of products from oil refineries rose 52 percent from a year earlier. Food and drink products added 10 percent, the institute said.

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Prices paid by New Zealand farms, factories and other producers for commodities and services needed to run their businesses posted the biggest rise in 28 years in the second quarter led by electricity and fuel.

Producer input prices gained 5.6 percent in the three months ended June 30, the most since the first quarter of 1980, Statistics New Zealand said in Wellington today. From a year earlier, input prices rose 12 percent.

Prices paid for electricity increased 51 percent from the first quarter, the statistics agency said. Low hydro lake levels increased wholesale electricity prices, prompting companies to pay more for power and increase charges for their customers. Power prices rose 86 percent from a year earlier.

Rising crude oil and jet fuel prices increased the fuel costs paid by wholesalers and airlines http://paydayintime.com. The air transport index rose 13 percent. Manufacturers paid more for steel and meat processors paid more for livestock.

Producer output prices, which are paid to factories, farms and other producers, rose 3.5 percent in the second quarter, the agency said. That's the biggest gain in 23 years. From a year ago, output prices increased 8.5 percent.

Generators received more for electricity as wholesale prices rose, the agency said. Oil companies were paid more for gasoline and farmers received more for lambs and cattle.

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Most Americans still think the economy is in a recession, but the number who feel that way has declined, according to a CNN/Opinion Research Corporation poll released Monday.

In a telephone poll of over 1,000 adult Americans, 75% said they believe the nation is now in a recession. That figure fell from 79% in April. In March 74% believed the U.S was in a recession.

This decline is the first time the number - which had been steadily rising since October - has fallen. Then, the poll showed only 46% thought the economy was in a recession.

"From a consumers’s perspective, the economy is bad, and the environment is going to be tough for a while," said Wachovia economist Mark Vitner. "That’s pretty accurate."

The traditional definition of a recession is two consecutive quarters of negative GDP growth. Though growth was sluggish in the last quarter of 2007 and the first quarter of 2008, the U.S. economy has not yet shown retraction in the current slowdown. The advance GDP numbers for the second quarter of 2008 are due to be released on July 31.

"Whether the economy technically meets the definition of a recession matters more for economists and policy makers than it does for consumers," said Vitner. "Consumers’ frame of mind is pretty simple: it’s a bad economy."

It’s evident that times are tough: More than 324,000 jobs have been lost so far in 2008, and the mortgage and credit crises have crushed consumer confidence faxless payday loan. Also, rising food and energy costs are hurting Americans in the pocketbooks.

Of those who think the economy is in a recession, 27% said they believe we are in a serious recession, down from 29% who said so in March. Slightly more people -19% - believe the economy is in a mild recession than the 16% who said so in March.

Americans are less confident in the future of the economy than the were in March. The poll showed that 23% believe the downturn will last more than two years, up from 19% in March. Only 2% think it will end in six months.

Economists also think the economy is due for a long rebound. Though the economy in second and third quarters of 2008 are expected to grow due to a boost from the stimulus checks, experts expect consumer spending and the economy to decline in the fourth quarter.

In a section of the poll released last week, 93% of voters say the economy is "extremely" or "very" important to their vote for president this November, edging out the war in Iraq as the biggest issue on voters’ minds. (More at CNNPolitics.com.)

The poll was conducted between June 26 and June 29. 

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Video game publisher Electronic Arts Inc. has for a third time extended the deadline for its $2 billion tender offer to buy smaller rival Take-Two Interactive Software Inc., but it did not raise the price as many analysts had expected.

Take-Two, meanwhile, confirmed it is in formal talks with an interested party — most likely EA — even as it again spurned the offer price as too low.

Redwood City, Calif.-based EA said Monday it is extending the offer, which had expired Friday, to June 16 at 11:59 p.m. EDT. The price remains $25.74 per share although Take-Two’s stock has not traded below $26 since May 1. Analysts, such as Wedbush Morgan’s Michael Pachter, expect EA to pay more a couple of dollars more per share to get the deal done.

As of Friday, about 6.2 million shares had been tendered, representing about 8% of Take-Two’s outstanding shares. This is slightly below the roughly 6.4 million shares that had been tendered as of April 17, the day before EA last extended the deadline.

EA (ERTS) said the latest extension allows the Federal Trade Commission’s antitrust review of the proposed acquisition to continue.

New York-based Take-Two (TTWO) is best known for its "Grand Theft Auto" series of games. The latest installment of the popular franchise sold 6 million copies worldwide in its first week on sale, bringing in more than $500 million and making it the most lucrative video game launch in history.

Take-Two said the "GTA IV" launch, as well as a recently announced movie deal for its critically acclaimed "BioShock" game, shows the company is worth more money than what EA is offering no fax payday loan. EA, meanwhile, says its offer already takes the success of "GTA IV" into account.

Earlier this month, EA, whose games include the "Madden NFL" football franchise and "The Sims," gave an outlook below Wall Street’s expectations for the current fiscal year, suggesting it could use Take-Two’s titles to boost its performance.

Take-Two urged shareholders to reject the offer.

"The small number of shares tendered into EA’s offer to date demonstrates that our stockholders agree with what our board has maintained from the beginning: EA’s proposal undervalues our company," said Chief Executive Ben Feder in a statement.

In another sign it is serious about going through with the offer, EA earlier this month disclosed it has secured debt financing commitments of up to $1 billion for the proposed acquisition. 

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Plane maker Airbus and diversified manufacturer Honeywell International Inc. on Thursday said they are developing a biofuel that by 2030 could satisfy nearly a third of the worldwide demand from commercial aircraft, without affecting food supplies.

Along with JetBlue Airways Corp (JBLU). and International Aero Engines, they plan to produce fuel from vegetation and algae-based oils that do not compete with existing food production or land and water resources.

Currently, commercial airlines run their planes on kerosene, though some alternative fuels are being tested.

The companies did not say how much they would invest in the project, nor did they give any targets for biofuel production prior to 2030. International Aero Engines is a multinational consortium whose shareholders include United Technologies (UTX, Fortune 500) Corp.’s Pratt & Whitney and Rolls-Royce. (RRYGF)

President Bush in December signed an energy bill that requires refineries to use 36 billion gallons of ethanol a year by 2022 with at least 21 billion gallons of the alternative fuel coming from nonfood raw materials.

The United States currently produces nearly 7 billion gallons of ethanol annually, all from corn. Critics say reliance on that crop has helped inflate food prices, while skeptics note there is no way to know when biofuels from other sources will be commercially available.

Airbus and its partners are undeterred.

"In order to replace a significant portion of that jet fuel with bio-jet, we need to find something that has much greater yield than the current biomass sources available," Sebastien Remy, head of alternative fuels research programs for Airbus, said in a release http://payday-z.com. "Airbus believes that second-generation bio-jet could provide up to 30 percent of all commercial aviation jet fuel by 2030."

A spokesman for Airbus, which is owned by European Aeronautic Defence & Space Co. NV, on Thursday said it’s expected the new biofuel it’s producing with Honeywell (HON, Fortune 500), will be a "drop-in" replacement for today’s kerosene jet fuel and that engine modifications should not be required. Airbus and Chicago-based rival Boeing Co. dominate the global market for commercial airplanes carrying 100 or more people.

On Wednesday, DuPont executives said a new joint venture with a Danish company will enable production of cellulosic ethanol that costs less to manufacture than corn-based ethanol and won’t drive up food prices.

The companies plan to invest $140 million in the U.S.-based venture and hope to have a commercial-scale demonstration facility, making fuel from the leaves and stalks of corn and from the remnants of sugarcane stalks, operating by 2012.

Speaking a Wednesday hearing on the global rise in food prices, Sen. Joseph Biden, D-Del., applauded DuPont’s plan.

"We must push harder in the search for alternatives, and not just because of the price of food," Biden said. "Our foreign policy is held hostage to our dependence on imported oil." 

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