Finance and Economic

Europe’s manufacturing and services industries expanded at the fastest pace in 22 months in October as evidence mounted that the global economy is pulling out of the recession.

A composite index of both industries in the euro-area economy rose to 53 from 51.1 in September, London-based Markit Economics said today. Economists forecast a gain to 51.6, according to the median of 13 estimates in a Bloomberg News survey. A reading above 50 indicates expansion.

European companies are stepping up output to meet reviving orders after governments around the world spent $2 trillion in stimulus measures to fight the worst recession in at least six decades. The International Monetary Fund said on Oct. 1 the global economy will expand at a faster pace than previously expected in 2010. Still, the euro’s ascent against the dollar may curb a European recovery.

“The second half of the year will be relatively strong,” said Juergen Michels, chief euro-area economist at Citigroup in London. “Looking ahead, there are a lot of reasons for momentum to weaken partly because of a stonger euro.”

The world economy will shrink 1.1 percent this year, less than the 1.4 percent projected in July, the Washington-based IMF forecast. In 2010, the economy may expand 3.1 percent instead of a previously projected 2.5 percent, the fund said. In the euro region, the economy probably returned to growth in the third quarter, the European Commission forecast last month.

Global Recovery

Adding to signs of global recovery, confidence in the world economy rose for a third straight month in October, a Bloomberg survey of users on six continents showed earlier this month. In the U.S., the world’s largest economy, industrial output increased more than expected in September and China’s manufacturing expanded at the fastest pace in 17 months.

Wolfsburg, Germany-based Volkswagen AG, the biggest overseas carmaker in China, sold 150,000 cars last month, a monthly record, as sales for the first nine months surged 37 percent. Volkswagen is investing 4 billion euros ($6 billion) to expand capacity in China through 2011.

“China is the steam engine of the world economy,” Volkswagen sales chief Detlef Wittig said in a Sept. 25 interview in Frankfurt. “The lust for mobility there seems almost bottomless. We’re very well positioned there and will keep investing to secure our share of the market.”

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The number of home foreclosures in process and delinquent mortgages rose during the second quarter, while home retention actions also increased, U.S. bank regulators said on Wednesday.

Foreclosures jumped 16 percent to 2.9 percent of serviced mortgages, while home retention actions such as loan modifications rose 21.7 percent, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a report.

“The mortgage data reported for the second quarter of 2009 continued to reflect negative trends influenced by weakness in economic conditions, including high unemployment and declining home prices in weak housing markets,” the report said.

The report covers mortgages serviced by most of the industry’s largest mortgage servicers, whose loans make up about 64 percent of all mortgages outstanding in the United States.

The regulators said there was a lull in newly initiated foreclosures during the second quarter as mortgage servicers worked to implement the federal “Making Home Affordable” program.

The $50 billion program, launched in March, is designed to stabilize the housing market by helping up to 9 million Americans reduce their monthly mortgage payments to more affordable levels.

The OCC and OTS said the emphasis on the program contributed to a dramatic shift in the composition of home retention actions toward lowering payments. Previously, the vast majority of loan modifications either did not change or increased monthly payments.

The weak economy continued to drive up the number of delinquent mortgages. The number of mortgages delinquent 30 to 60 days jumped 10.9 percent during the second quarter to 3.2 percent of all mortgages covered by the report.

The number of mortgages that were more than 90 days delinquent increased 11.5 percent, rising to 5.3 percent of serviced mortgages.

Separately, the Mortgage Bankers Association said on Wednesday that U.S. mortgage applications fell last week despite the lowest loan rates in four months, another sign that housing will likely recover slowly from its three-year plunge.

(Reporting by Karey Wutkowski, editing by Gerald E. McCormick and John Wallace)

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U.S. bank regulators are expected to propose on Tuesday that banks prepay three years of regular assessments to replenish the dwindling deposit insurance fund, according to a source familiar with the matter.

Such an option would give the Federal Deposit Insurance Corp more liquidity to deal with the sharp increase in bank failures, while banks would not be required to report the expense of the fees until they would normally be due.

The source, speaking anonymously because the regulator discussions have been private, said the FDIC would likely propose for the banking industry to prepay $12 billion per year in assessments, for a total of $36 billion.

The board of the FDIC is meeting on Tuesday to propose alternatives to charging the banking industry hefty emergency fees to avoid having the balance of the insurance fund hit zero.

The industry has said such upfront fees could hurt banks just as their balance sheets are starting to recover from the recent financial crisis.

FDIC Chairman Sheila Bair has said the agency is considering alternatives to the upfront “emergency” fees, including prepayments of regular assessments, tapping the FDIC’s $500 billion line of credit with Treasury, and borrowing from healthier banks to rebuild the fund.

It is unclear what combination of options the FDIC board will propose to put out for public comment on Tuesday, as it seems regulators have narrowed the menu of options.

An FDIC spokesman declined to comment.

The source said the total amount of prepaid assessments could reach higher than $36 billion if the FDIC decides to ask the bank industry to also prepay special assessments.

The FDIC is exploring ways to replenish the insurance fund that safeguards bank deposits after a sharp increase of bank failures has been draining the fund.

So far this year 95 U.S. banks have failed, compared with 25 last year and only three in 2007.

Those failures have whittled the balance of the insurance fund down to $10.4 billion at the end of the second quarter from $45 billion a year earlier. The FDIC notes it has an additional $32 billion in reserves to handle failures over the next year.

(Reporting by Karey Wutkowski; editing by Carol Bishopric and Andre Grenon)

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Bank of America Corp CEO Ken Lewis has survived troubled acquisitions, massive credit losses and two government bailouts, but experts question whether he can survive a series of investigations.

Lewis and other senior bank executives face intense scrutiny from regulators, state attorneys general and the U.S. Congress over whether they failed to disclose key information about Merrill Lynch’s financial health and bonus plans before Bank of America bought the brokerage.

“It comes to a point that the company is so completely distracted by the legal fight it can’t focus on the business,” said Tony Plath, banking professor at UNC-Charlotte who follows the bank closely. “This is becoming a significant impediment to management’s job.”

A Bank of America spokesman said the board fully supports Lewis, but did not elaborate further.

At a Monday meeting, the bank’s directors were expected to discuss legal options if he is charged with civil fraud, The Wall Street Journal said.

In the latest in a series of investigations and lawsuits, a U.S. House of Representatives panel gave the bank until noon Monday to provide additional information about its purchase of Merrill Lynch. The panel said the bank cannot use attorney-client privilege to withhold details of the deal from Congress.

And New York Attorney General Andrew Cuomo’s office is considering filing civil charges against Lewis,

Whatever Cuomo and other investigators decide, legal issues can drag on for years, and companies often cut ties with executives to minimize such distractions, according to corporate governance experts free insurance quotes.

“Whether a management change happens depends on the size of the distraction,” said Karen Brenner, a business professor at New York University specializing in ethics and corporate governance. “Legal issues can ebb and flow, but the company is dealing with a great deal of pressure now.”

Brenner said while it is early to assume the pending legal issues will quickly force wholesale management change, such changes are not unprecedented.

Some investors are already getting restless.

Michael Nix, co-chief investment officer for Greenwood, South Carolina-based Greenwood Capital Associates, said the firm is considering selling its 100,000 Bank of America shares because of short-term performance and long-term litigation worries.

“We’ll still be talking about these lawsuits three to five years from now,” Nix said. “A lot of people will get pulled into this thing.”

Bank of America shares were down 2 percent at $17.28 in Monday afternoon trading.

ABRUPT ENDS 

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The world’s top cellphone maker Nokia cut its forecast for second half profitability and 2009 market share at its key phone unit on Thursday, sending its shares sharply lower.

Nokia, which is facing tough competition from the likes of Apple, Samsung and RIM, scaled back its second-half underlying operating profit margin forecast for its key phone unit to the first-half level of 11.3 percent, from 13-19 percent previously.

Nokia also cut its forecast for 2009 market share at its phone business, seeing it now on a par with last year, compared with an earlier forecast for a rise.

Shares in Nokia fell more than 8 percent on the news to 10.18 euros, compared with a 2.8 percent lower DJ Stoxx technology index.

“(The reaction) is the impression that Nokia concedes that the competition in the market place is heating up in the second half … that is related both to the reduced margin outlook and the market share outlook,” said West LB analyst Thomas Langer health insurance quotes.

Nokia’s underlying earnings per share slumped to 0.15 euros from 0.37 euros, but beat the average forecast of 0.13 euros in a Reuters poll of 31 analysts.

The handset industry this year is facing its worst downturn ever, and market No 5 Sony Ericsson reported earlier on Thursday a deep loss for April-June.

“Amid the doom and gloom Nokia have delivered some excellent results … Nokia’s high-tier performance continues to be the biggest concern,” said CCS Insight analyst Geoff Blaber.

Nokia also said its telecom equipment arm, Nokia Siemens Networks, had won a 1.1 billion euro ($1.55 billion) order to operate the telecoms networks of Brazilian operator Oi over the next five years.

(Reporting by Tarmo Virki, editing by Elaine Hardcastle)

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Barclays Plc is in talks to sell Barclays Global Investors (BGI), the British bank said on Monday, with U.S. fund manager BlackRock the frontrunner to land the asset manager for about $12 billion.

BlackRock and Bank of New York Mellon are both in talks to buy BGI in a deal that might come early this week, people familiar with the matter said.

The complex deal could see Barclays take a stake of up to 20 percent in the enlarged asset manager, according to the sources, who asked not to be named as the talks are confidential.

“It sounds like a deal is coming and the price is undeniably attractive,” said Ian Gordon, analyst at Exane BNP Paribas.

“It’s an opportunity to realize a premium price for a business that has delivered exceptional growth but might be expected to grow at a slower pace from here, and also bolster capital ratios,” he added.

Barclays said on Monday it had received proposals for BGI and iShares from a number of parties, including BlackRock, and was continuing talks. Blackrock also confirmed the talks but both companies said issues remained that could derail a deal.

San Francisco-based BGI is the world’s biggest fund manager with $1.5 trillion in assets under management and would swell BlackRock’s assets to $2.8 trillion, double the amount managed by nearest rival State Street.

BGI is staffed by academics from a range of disciplines from economics to engineering, attracting graduates from the nearby University of California at Berkeley color business cards. They have helped the staid index-tracking fund manager shift to more active and lucrative management, and many will land windfalls if a deal is reached.

Barclays agreed to sell iShares, which is part of BGI, to buy-out house CVC for $4.4 billion in April, but is allowed to hunt for better offers until June 18.

By 1150 GMT (7:50 a.m. EDT) Barclays shares were down 2 percent at 279.25 pence, underperforming a weaker European bank sector, and valuing the bank at just under 24 billion pounds ($38 billion).

MIDEAST FUNDING?

Bankers told Reuters last month that Barclays would likely sell BGI if offers approached $12 billion.

BlackRock is likely to get funding for a deal from Middle East investors, possibly including some Barclays shareholders, according to media reports.

The Qatar Investment Authority (QIA) and Adia, the government investment arm of Abu Dhabi, are in talks alongside Kuwait’s KIO to inject $3 billion into BlackRock for a 12 percent stake, the UK’s Sunday Telegraph newspaper said.

BlackRock, founded in 1988, had a market value of just over $21 billion at Friday’s close. Bank of America owns 49 percent of it, stemming from a 2006 deal when Merrill Lynch, now owned by Bank of America, sold it its fund unit. 

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SIOUX FALLS, S.D. – Oil prices briefly passed US$69 per barrel today in a weeklong rally that appears short on fundamentals, yet exceedingly full of momentum.

Average retail gasoline prices continued to march upward: A gallon of gas in the United States now costs about 46 cents more than it did a month ago.

After peaking at $69.05 this afternoon, a price not seen since early November, benchmark crude for July delivery fell three cents to settle at $68.55 a barrel on the New York Mercantile Exchange.

There have been a few indications that the economy is mending in some of the hardest hit sectors.

Pending sales of existing homes showed the biggest jump in nearly eight year, the National Association of Realtors reported today.

That report came on the heels of manufacturing data Monday that showed some improvement both here and in China, two major energy consumers.

Yet much of the momentum on Nymex appears to be fuelled by the weakening U.S. dollar, which hit a new low for the year today, and an influx of money from speculators.

Investors buy commodities like oil and gold as a protection against inflation and U.S. dollar weakness.

Oil prices have risen every day since May 21 on snips of moderately good news from manufacturers, home builders and the U.S. government.

"What kind of news? Well any kind of news because we seem to be living in a world where good economic news for oil is bullish and bad economic news might be bullish too," said Phil Flynn, an analyst at Alaron Trading Corp.

For instance, even though unused crude in storage remains near 19-year highs, which would typically drive prices down, levels have fallen for the past three weeks, according to the Energy Department guaranteed payday loans.

That is typical for this time of year, however.

And there are some signs that major oil exporting countries, squeezed for months by low energy prices, have been bumping up production.

Analysts expect another drawdown of two million barrels when the Energy Information Administration reports crude levels Wednesday, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Prices at the pump added slightly more than a penny overnight to hit $2.525, according to auto club AAA, Wright Express and Oil Price Information Service. That's a dime higher than last week and well above the $2.07 that gas cost just a month ago.

Still, a gallon of gas last year at this point was three cents shy of $4 per gallon.

In Canada, the price of gas averaged C$1.015 per litre, up from 90.1 cents a month ago, but down from $1.331 per litre a year ago, according to price-watching website GasBuddy.com.

In other Nymex trading, gasoline for June delivery rose less than a penny to settle at US$1.9252 a gallon and heating oil rose 1.24 cents to settle at $1.7979 a gallon. Natural gas for June delivery slid 12.9 cents to settle at $4.12 per 1,000 cubic feet.

In London, Brent prices rose 20 cents to settle at $68.17 a barrel on the ICE Futures exchange.

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The employment situation in the states showed signs of stabilizing last month.

The unemployment rate declined in 21 states in April, compared with the month before, while 11 states had no rate change, according to federal data released Friday.

The work situation, however, deteriorated in 18 states and Washington, D.C., last month, according to the Bureau of Labor Statistics.

A month earlier, unemployment rates rose in 46 states.

In April, Michigan once again led the nation with a jobless rate of 12.9%, up from 12.6% in March. Oregon, South Carolina, Rhode Island, California, North Carolina, Nevada and Ohio all had rates exceeding 10%.

Nationally, the unemployment rate rose to 8.9% in April, up from 8.5% a month earlier.

Missouri saw the biggest drop in unemployment, falling 0.6% to an 8.1% rate in April. Alaska followed with a 0.4% decline to 8%.

Some states, however, suffered rising rates. West Virginia fared the largest jump in joblessness, with its rate climbing 0 car insurance quotes.7% to 7.5% in April. Rhode Island and Ohio followed with 0.5% increases to 11.1% and 10.2% respectively.

State budget woes

States and their budgets have been hammered by rising unemployment rates. Income and sales tax revenues decline as people lose their jobs and rein in their spending.

Many state leaders are scrambling now to close last-minute budget gaps that opened when April tax revenues came in below estimates. The fiscal year in 46 states ends on June 30, and unlike the federal government, states cannot run deficits.

State and local officials are also working to deploy federal stimulus dollars that are starting to flow to them. The White House estimates that the funds have created or saved 150,000 jobs and will create or save another 600,000 by August. 

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J.C. Penney Co. said Friday that its first-quarter profit tumbled 79 percent because of a big one-time pension expense, but it beat analysts’ estimates as its expenses fell and demand remained strong for the Sephora cosmetics and American Living merchandise it sells. Looking ahead, however, the department store chain said it will miss Wall Street’s full-year forecast because of soft consumer spending and weak mall traffic. Plano, Texas-based J instant payday loan.C. Penney earned $25 million, or 11 cents per share, for the quarter that ended May 2. That compares with $120 million, or 54 cents per share, a year earlier. Penney’s sales dropped 6 percent to $3.88 billion from $4.13 billion in the period a year earlier. (AP)

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As the impact of the global recession weighs in on wealthy Americans, high-end retailer Barneys New York Inc aims to close two of its seven department stores, the Wall Street Journal said, citing people familiar with the matter.

The 85,000 square-foot store at the Shoppes at the Palazzo in Las Vegas is one of the stores that the luxury retailer is trying to close, the people told the paper.

The location of the other store could not be immediately determined, the paper said.

Barneys had expected to generate $6 million a month in sales at the Las Vegas store, but the company has managed to earn only a quarter of that since last autumn, a person familiar with the issue told the paper cash advance lenders.

Dubai’s Istithmar World Capital owns the luxury retailer, which has stores in New York, Beverly Hills, Chicago, Boston, Dallas, San Francisco and Las Vegas.

Reuters attempts to contact Barneys outside of normal business hours were unsuccessful.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Muralikumar Anantharaman)

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