The Canadian housing market is due for a correction, but it will likely be a slow decline rather than a sharp drop, says a report from the Canadian Imperial Bank of Commerce.
The chief executive officer of Chrysler and Fiat said Monday he and Canadian authorities have begun talking about purchasing Canada’s 1.7 percent ownership in Chrysler.
The Canadian federal government and provincial Ontario governments received 1.7 percent of Chrysler two years ago as part of a bailout that also provided $1.7 billion in loans to help the Detroit company survive.
Chrysler, already controlled by Fiat, recently paid back the last of the money it borrowed from the Canadian and American governments. Fiat then began the process of buying the shares owned by the U.S. government.
Chief executive Sergio Marchionne joined Canadian Finance Minister Jim Flaherty at a Chrysler Canada casting plant in Toronto on Monday to announce the loan repayment.
Marchionne said that he and Flaherty discussed buying Canada’s shares and said they are quite willing to consider purchasing them.
Unlike with the shares owed by the U.S. government, the company has no right to compel the Canadian government to sell.
Flaherty said Ottawa will wait to see how the stock transfer process unfolds in the United States before deciding whether Canada will also sell its shares guaranteed pay day loans.
The Turin, Italy-based automaker said Friday it will buy the U.S. government’s six percent stake in Chrysler under a process that was put in place in 2009 when Chrysler virtually shut down while in bankruptcy court.
Fiat initially received a 20 percent stake in Chrysler in 2009 for providing Chrysler with management expertise and technology.
Since then Fiat has been increasing its holdings in Chrysler and will soon control more than half of the company.
Fiat has helped change the corporate strategy of Chrysler, brought new fuel-efficient vehicles quickly to market and made the company cut costs and operate more efficiently.
The future looks brighter for the company, which has cut thousands of jobs in the United States and Canada in its bid to survive bankruptcy.
In Canada, the company employs 9,000 people and has major assembly plants in Windsor, a southwestern Ontario border city, and Brampton, a community northwest of Toronto.
Singapore raised its growth forecast for 2011 after the island’s economy expanded the most in Southeast Asia last quarter, sustaining pressure on the central bank to allow the currency to appreciate.
Gross domestic product will increase 5 percent to 7 percent this year, from an earlier forecast of 4 percent to 6 percent, the trade ministry said today. The economy expanded 22.5 percent in the three months through March from the previous quarter, compared with a preliminary estimate of 23.5 percent.
Singapore’s expansion has fueled a surge in the cost of living that helped propel opposition parties to a record share of the vote in this month’s election. The report spurred a third straight day of gains in the local dollar, bringing the advance against its U.S. counterpart to 13 percent over the past year as policy makers use currency appreciation to temper inflation.
“Domestic and external demand remains strong and we’ll probably continue to see more gains in the Singapore dollar this year,” said Kit Wei Zheng, a Singapore-based economist at Citigroup Inc. “Consumer price inflation may have peaked but pressures in the pipeline will remain elevated.”
The Monetary Authority of Singapore said last month it would allow further gains in the currency in the third tightening of monetary policy in a year. Global central banks are raising interest rates, removing excess cash from their financial systems or allowing their currencies to appreciate as rising oil and commodity prices fuel inflation.
Best Performer
The Singapore dollar is the best performer in Asia outside Japan in the past 12 months. The currency rose 0.5 percent to S$1.2377 against its U.S. counterpart as of 9:49 a.m. local time.
The island’s expansion came even as the GDP of Japan, the island’s seventh-biggest trading partner, shrank at a more-than- estimated 3.7 percent pace in the first quarter, according to a government report today.
Singapore’s government has boosted financial services and tourism to reduce its reliance on exports. Companies from Singapore Airlines Ltd. (SIA) to hotel operator Shangri-La Asia Ltd. have benefited from record tourist arrivals. Genting Singapore Plc (GENS), one of the two casino operators in the city, turned to a first-quarter profit of S$305.4 million ($247 million) in the three months ended March 31 as sales almost tripled to S$922.6 million.
Global Recovery
While Japan’s GDP is shrinking, economies from Germany and China to Brazil have sustained their economic rebounds. Singapore’s trade ministry said today advanced economies “remain on a path of modest recovery,” citing an improving labor market in the U.S., rising exports and household spending in the European Union and “healthy” growth in emerging Asia.
“The global recovery story remains largely intact and Singapore is a beneficiary of that expansion,” Selena Ling, head of treasury research at Oversea-Chinese Banking Corp. in Singapore, said before the report. “While inflation has probably peaked, the economic environment may get a bit more challenging in coming quarters payday advance.”
Singapore, located at the southern end of the 600-mile (965-kilometer) Malacca Strait, benefited from improving overseas demand for manufactured goods as the global economy recovered from the 2009 slump.
The Southeast Asian nation’s economy grew a record 14.5 percent in 2010. Singapore’s economic performance will probably stay at “high levels” for the rest of 2011, spurring inflationary pressures even as the island tightens monetary policy, the central bank said last month.
Labor Market
A “tight” labor market will add to business costs, the trade ministry said today. Cost pressures may build up further and impact business activity, Kwek Mean Luck, a deputy secretary at the Ministry of Trade and Industry, said in Singapore today.
Prime Minister Lee Hsien Loong’s government is distributing cash to its citizens and giving out utility rebates to limit the effect of price increases. The country held elections this month, and the ruling People’s Action Party was returned to power with the smallest percentage of popular votes since independence in 1965 as citizens complained about the rising cost of living.
Inflation may have peaked and a stronger currency has helped damp price gains, central bank Managing Director Ravi Menon said yesterday. Singapore’s monetary policy remains appropriate and the central bank still expects inflation to average 3 percent to 4 percent this year, Ong Chong Tee, deputy managing director at the Monetary Authority of Singapore, said at a press briefing today.
Property Curbs
Central banks in Vietnam, India and Malaysia raised borrowing costs this month to curb price increases. Malaysia reported yesterday that inflation accelerated to a two-year high.
In Singapore, where demand for private homes and mortgages has boosted earnings for companies including lender DBS Group Holdings Ltd. and real-estate developer City Developments Ltd., policy makers have introduced measures to curb property speculation.
The revised economic expansion in the first quarter compares with the 22 percent median forecast of nine economists in a Bloomberg News survey. Compared with a year earlier, the economy grew 8.3 percent last quarter, the ministry said. That’s higher than the growth rates of Malaysia, Indonesia, Vietnam and the Philippines, and exceeds the 2.7 percent pace estimated for Thailand in a Bloomberg News survey.
Singapore’s manufacturing will be bolstered by new plants in the chemicals industries and higher production by biomedical companies, while economic growth will spur lending and insurance, the trade ministry said in a statement today.
Growth Risks
Risks to growth include “continued concerns of sovereign debt sustainability in Europe, further increases in global oil prices arising from the political turmoil in the Middle East and North Africa region, and a prolonged disruption of industrial activities in Japan,” it said.
Neighboring Malaysia, Singapore’s biggest trade partner, reported yesterday growth slowed to 4.6 percent last quarter as manufacturing and services moderated.
“Local manufacturers could be affected should the disruption supply from Japan persist into the second half of 2011,” the Singapore trade ministry’s Kwek said.
U.K. producer prices rose more than economists forecast in April, suggesting inflation pressures may still be building in the economy.
The cost of goods at factory gates increased 0.8 percent from March, the Office for National Statistics said today in London. The median forecast of 12 economists in a Bloomberg News survey was for a 0.7 percent gain. From a year earlier, output prices rose 5.3 percent. Annual input-price inflation accelerated to the fastest since September 2008.
The Bank of England kept its benchmark interest rate at a record low of 0.5 percent yesterday, favoring support for the economy’s recovery over curbing an inflation rate that’s twice its 2 percent target. Nevertheless, with commodities such as crude oil surging, manufacturers may have no choice but to pass on higher costs to customers, feeding price pressures.
“There are underlying pressures for sure,” said David Tinsley, an economist at National Australia Bank in London. “Still, the recovery looks pretty limp and I don’t think there’s a lot of reason to be optimistic there’s going to be a recovery in domestic demand.”
The pound erased its decline against the dollar after the report and traded at $1.6384 as of 9:38 a.m. in London, little changed on the day.
Tax Increases
Tobacco and alcohol output prices jumped 2.6 percent in April from March, the statistics office said, while petroleum products rose 1.3 percent. The gains in tobacco and alcohol were largely due to an increase in taxes in the government’s budget in March.
Input prices rose 2.6 percent in April from March and were up 17.6 percent from a year earlier, the statistics office said. Crude oil was up 38 percent on the year, it said installment payday loans.
Core output prices, which exclude food, drink, tobacco and petroleum, increased 0.6 percent on the month and 3.4 percent on the year. The statistics office revised the monthly and annual increases in March headline output prices to 1.1 percent and 5.6 percent from 0.9 percent and 5.4 percent respectively.
“Inflation remains an issue,” Chief Executive Officer Robert Schofield said. “We will continue to seek price rises to cover this.”
The U.K. economy stalled over the fourth and first quarters, and surveys this week showed services, manufacturing and construction growth moderated in April. The Bank of England will publish new growth and inflation forecasts next week.
While services growth slowed more than economists forecast last month, a gauge of output prices rose to the highest level in 2 1/2 years, a survey by Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply showed yesterday.
Consumer-price inflation eased to 4 percent in March. Still, the Bank of England’s Monetary Policy Committee said on April 20 it sees a “significant risk” that it will accelerate to above 5 percent in the coming months.
The Bank of England won’t raise its interest rate until 2013 as the economic recovery’s momentum stays “pretty weak,” Deloitte & Touche LLP said.
“The underlying momentum of the economic recovery looks pretty weak,” Deloitte’s economic adviser Roger Bootle, a former adviser to the U.K. Treasury, said in a report today. “My central forecast is still that rates remain on hold throughout this year and next.”
Bank of England policy makers have split four ways on whether to raise interest rates or add stimulus to aid the recovery at a time when inflation remains at twice the Monetary Policy Committee’s 2 percent target. Britain’s economy grew 0.5 percent in the first quarter, just enough to offset the contraction in the final three months of 2010.
“It is not out of the question that the MPC will eventually need to give more support to the economy,” Bootle said. “But additional asset purchases, if they do come, are perhaps unlikely until 2012.”
Bootle expects gross domestic product to increase 1.5 percent this year and next, according to the report. Inflation will average 4.4 percent this year before falling to 1.8 percent in 2012.
The Bank of England kept its benchmark rate unchanged at 0.5 percent last month. The rate will rise by 25 basis points by November, according to forward contracts on the sterling overnight interbank average, or Sonia, compiled by Tullett Prebon Ltd.
The government says Japanese exports in March fell 2.2 percent from a year earlier due to the fallout from last month’s massive earthquake and tsunami.
The finance ministry said Wednesday that the March figure marked the first year-on-year decline in 16 months. Exports shrank to 5.87 trillion yen ($71 billion), while imports rose 11.9 percent to 5.67 trillion yen last month.
The magnitude-9.0 earthquake and ensuing tsunami on March 11 destroyed many factories in northeastern Japan, crippling production and supply chains. The twin disasters have forced manufacturers including Toyota Motor Corp. and Sony Corp. to suspend their output due to parts shortages.
Consumer-price pressures in South Korea will begin to ease in the second quarter while staying “strong” enough for the government to weigh steps to tame inflation, the nation’s finance minister said.
“Inflationary pressures will decline from the second quarter,” Finance Minister Yoon Jeung Hyun said in an interview yesterday in Washington, where Group of 20 finance chiefs and central bankers are meeting. Even so, the pressures “still will be strong, so the government is very cautiously monitoring” prices, he said in an interview.
Oil and food costs have pushed consumer inflation above the central bank’s 4 percent ceiling each month since the start of 2011, prompting it to raise rates by a quarter of a percentage point in January and again in March. The government has stepped up price controls by freezing power and gas charges and pressing a cut to gasoline costs and mobile fees after President Lee Myung Bak declared a “war” against inflation in January and said it should be capped at 3 percent.
“We will be doing everything we can” to lower the burden of inflation on consumers, Yoon said. “We’re looking at many options on the table,” he said, referring to the government’s non-monetary efforts to contain price pressures. These include reducing tariffs on imports to ease supply shortages and steps to identify monopolies in the domestic market, he said.
The won has appreciated the most against the dollar among Asian currencies this year. The currency reached a 31-month high of 1,082.10 on April 8. The strengthening of the currency “would have a stabilizing effect” on import costs while also having “some impact on the price competitiveness of exports,” Yoon said.
No Intervention
“The Korean government has no intention whatsoever to intervene in the exchange rate,” he said. “We fully respect the role and functioning of the market.”
The Bank of Korea projected on April 13 that consumer prices may increase 3.9 percent this year, faster than a December estimate of 3.5 percent. Gross domestic product is forecast to expand 4.5 percent following a 6.2 percent gain in 2010, the bank said after keeping interest rates unchanged at 3 percent on April 12.
Consumer prices climbed 4.7 percent from a year earlier in March, the biggest increase since October 2008. Bank of Korea Governor Kim Choong Soo said on April 12 that high inflation will likely persist in coming months and that he will take monetary policy action “neither too slowly nor too fast.”
‘Strong Reasons’
While there are “some strong reasons for interest rates to be hiked,” Yoon said, there also are “other serious barriers” that call for not raising borrowing costs. The central bank has the independence to decide what course to follow, he said.
The finance ministry last December projected 5 percent economic growth and 3 percent inflation for this year. The government is yet to decide on whether it will bring its own outlook for inflation and growth in line with this week’s revised projections from the central bank, Yoon said.
“Maybe during April or May our position will be announced,” he said. “At this moment, no change.”
The won rose 0.1 percent to 1,086.85 per dollar as the of 3 p.m. close of trading in Seoul on April 14, according to data compiled by Bloomberg, while the Kospi stock index rose 0.9 percent to a record 2,141.06.
The central bank also estimated the economy grew 1.5 percent during the first quarter and expanded 4.1 percent from a year earlier, bolstered by exports. Overseas shipments jumped 30 percent to record $48.6 billion in March, according to a government report on April 1.
Moody’s downgraded Portugal’s debt rating for the second time in less than a month Tuesday and warned that the debt-laden euro country may suffer another cut soon because of heightened political, budgetary and economic uncertainties.
The agency said it has cut its rating on Portugal’s bonds by one notch to Baa1 from A3 and placed the rating on review for another downgrade. If Portugal’s debt rating is cut by a further three notches to Ba1, then its bonds would be considered junk.
Moody’s said the range of difficulties, including the upcoming general election on June 5, increase the risk that Portugal will be unable to achieve the outgoing government’s ambitious deficit reduction targets over the coming three years and put the public finances into shape.
Moody’s also said the recent agreement to replace the current bailout fund with the European Stability Mechanism from 2013 also acted as a trigger for the downgrade as it contemplates the possibility of a debt restructuring within the euro area.
Though the election following last month’s resignation of the previous government complicates how Portugal can tap the EU’s current bailout fund, Moody’s reckons other countries in the eurozone would provide Portugal with help if required in the interim period.
However, once the election is out of the way, Moody’s said it expects the new government will “likely approach the facility as a matter of urgency faxless cash advance.”
Approaching its partners may become inevitable if Portugal’s ability to tap bond market investors dries up. The country faces a couple of key tests over the coming months. As well as having to repay a euro4.5 billion loan in April, it has an almost euro5 billion bond repayment two months later.
Moody’s said it’s “very unlikely” that the long-term debt markets will reopen to the Portuguese government or to the Portuguese banks to any meaningful extent until the government can take action to dispel doubts over its commitment and ability to implement its adjustment program.
The downgrade further illustrates the difficulties Portugal is facing if it is to avoid joining Greece and Ireland in seeking a financial rescue package. With the country’s borrowing costs seemingly hitting a record euro-era high on a daily basis, investors think it’s becoming increasingly unlikely that Portugal will be able to deal with its problems on its own.
By early morning, the yield on Portugal’s ten-year bonds were up a further 0.04 percentage point to a prohibitive 8.63 percent.
Moody’s said it believes that the government’s current cost of funding is “nearing a level that is unsustainable, even in the short-term.”
The chief of General Electric (GE, Fortune 500) on Thursday defended the conglomerate’s zero tax rate in 2010, and called for reform of the U.S. tax code.
In his first public speaking engagement since a barrage of criticism about not having to pay taxes in 2010, GE chief executive Jeff Immelt told the Economic Club in Washington that his company did nothing wrong.
"At GE, we do like to keep our tax rate low, but we do it in a compliant way, and there are no exceptions," Immelt said. "Our tax rate will be much higher in 2011 as GE Capital recovers."
But Immelt added that he, along with many other corporate leaders, wants the federal government to reform the U.S. tax code, which he called "old, complex and uncompetitive."
Immelt also pointed out that over the past five years GE has paid $14 billion in taxes. He said that even though GE made money in 2010, "we didn’t make a lot of that in the U.S."
The company is particularly in the spotlight because Immelt also serves as the chief of President Obama’s innovation and jobs council payday loans with no fax. When asked what he thought of criticism that GE isn’t a good role model and shouldn’t be leading the jobs council, Immelt said he was committed to helping the president build jobs.
"I’m completely committed to doing this job and working with the president and building jobs in the U.S.," Immelt said.
Later, in an interview with the media after his speech, when asked what GE was doing to help job growth, he said the company expects to have hired 16,000 new employees this year and last year, mostly in manufacturing and high tech services industries.
Immelt said he understands why his company is taking heat in the media.
"I don’t fault this type of reporting," Immelt said. "It is what it is. You can’t do any job like this unless you have a thick skin."
European Union leaders called for worldwide stress testing of nuclear plants on Friday and committed to putting their 143 reactors through the toughest security checks possible.
France, one of the nations most reliant on nuclear energy, with 58 reactors, said it would immediately close any plant if it failed a test.
At the end of a two-day summit, the EU nations agreed to submit their nuclear plants to tough safety tests by year-end and promised to heed the lessons from the accident at Japan’s Fukushima Dai-ichi nuclear complex.
German Chancellor Angela Merkel said the 27 leaders agreed “on uniform euro stress tests and the highest possible safety standards.”
“The experience of Japan has to be reflected in the new stress tests. This is not business as usual,” she said.
Merkel’s comments come two weeks since a magnitude-9 quake triggered a tsunami that knocked out the Fukushima reactor’s cooling system. Japanese Prime Minister Naoto Kan said Friday the fight to stabilize the plant remains “very grave and serious,” as officials said they suspected there was a breach in the core of a reactor that could mean more serious contamination.
The fallout has set off fears of the biggest radioactive contamination since the 1986 disaster at Ukraine’s Chernobyl, which spewed radiation across a wide distance and continues to haunt Europeans.
“European stress tests will be prepared in a coordinated fashion,” Merkel said after the summit. “The aim is the highest possible safety standard,” she said, insisting the EU would press for other European nations to follow suit.
EU officials will follow up the nuclear issue during talks in Ukraine next month. Nuclear energy is key for Ukraine, a country of 46 million. Ukraine today operates 15 reactors at four power plants, which generate nearly half of all its electricity.
“Because the danger does not stop at our borders, we encourage and support neighboring countries to do similar stress-tests,” said EU President Herman Van Rompuy. “A worldwide review of nuclear plants would be best.”
There are currently 442 nuclear power reactors in operation around the globe, with 65 more under construction. Five are in long-term shutdown.