Business Blog Posts

The well-telegraphed decision would be aimed at pushing down borrowing costs for consumers and businesses still smarting from the worst recession since the Great Depression, though there are doubts about its effectiveness.

With the U.S. economy expanding at only a 2 percent annual pace in the third quarter and the jobless rate seemingly stuck around 9.6 percent, the Fed has come under pressure to do more to stimulate business activity.

Economists expect a new round of Treasury purchases to total about $500 billion over a six-month period and to be accompanied by a signal that officials, who have been divided over the wisdom of the move, might ramp up the operation if needed.

"We expect the statement will express a willingness -- but not necessarily a bias -- to further increase asset purchases if warranted by economic conditions," said Michael Feroli, chief U.S. economist at JPMorgan in New York.

The Fed is expected to announce its decision at around 2:15 p.m. ET.

POLICY MADE IN USA FOR USA

Markets have already seen sharp moves in anticipation of the Fed's expected resumption of bond purchases, which were first undertaken as a response to the financial crisis of 2007-2009. U.S. stocks and government bonds have rallied, while the dollar has taken a drubbing in advance of the decision.

Stocks have also been supported by expectations -- now validated -- that Republicans, viewed as more pro-business by investors, would seize control of the House of Representatives and pick up Senate seats in elections on Tuesday that were largely cast as a referendum on the economy.

As Republicans campaigned on a smaller government platform, Congress may be less likely to offer fresh stimulus spending if the economy sputters, leaving the Fed as the primary source of support.

The Fed cut overnight interest rates to near zero in December 2008 and has already bought about $1.7 trillion in U.S. government debt and mortgage-linked bonds.

With the prospect of a long period of ultra-low returns in the United States, investors have flocked to emerging markets, pushing those currencies higher. Emerging economies, worried about a loss of export competitiveness, have cried foul.

"We are all under attack by the relaxed monetary policy of the United States," Colombian Finance Minister Juan Carlos Echeverry told investors on Tuesday.

The Bank of Japan, which meets on Thursday and Friday, is also poised to launch a new round of bond buying. The European Central Bank and Bank of England also meet this week, but are not expected to make any changes to policy for the time being.

DEBATING THE RISKS

BP, the world's biggest non-government controlled oil company by production last year, said delays in capping its blown-out well prompted the increased charge for ending the leak, cleaning up the damage and compensating those affected.

The charge, up by $7.7 billion, pushed third-quarter replacement cost profit, which strips out unrealized gains or losses related to changes in the value of fuel inventories, down 63 percent to $1.8 billion.

Stripping out one-offs, including the oil spill costs, the underlying results rose 18 percent, compared to the same period in 2009, to $5.53 billion, well ahead of an average forecast $4.60 billion from a Reuters poll of seven analysts.

Underlying net result was boosted by a drop in BP's effective tax rate to 25 percent from 29 percent in the same period last year and analyst forecasts of around 30 percent.

The better-than-expected results, and comments that the oil giant plans to consider reinstating its dividend in 2011 -- something it had only hinted at previously -- lifted BP shares.

These rose 1.9 percent to 432 pence at 0956 GMT, against a 0.6 percent rise in the STOXX Europe 600 Oil and Gas index.

"I think with regards to BP, a lot of the uncertainty is out of the way, and it is slowly but surely getting back to business," Manoj Ladwa, senior trader at ETX Capital, said.

However, some analysts said the result was not a harbinger of better things as the tax rate would likely revert toward normal levels and BP itself said it would be hard to repeat the strong profits from the refining unit.

"The underlying beat is therefore of low quality," Oswald Clint, oil analyst at Bernstein said in a research note.

UNDERLYING PROFITS LAG PEERS

Most rivals benefited more from the 12 percent rise in crude prices in the quarter, compared to a year earlier, the 29 percent hike in U.S. natural gas prices and the doubling in British gas prices.

Royal Dutch Shell Plc reported an 88 percent rise in underlying third-quarter net profit and Exxon Mobil, the largest western oil major by market value, reported a 55 percent rise in net income.

Higher output in the quarter also helped lift BP's peers but the London-based oil company said its production fell 4 percent, compared to July to September 2009, to 3.76 million barrels of oil equivalent per day (boepd), due partly to dislocation related to the oil spill.

Analysts had expected BP to register an extra charge related to the oil spill in the third quarter, after delays in capping the well for good, but most had predicted a figure of around $2-3 billion.

Pfizer, the last of the large U.S. drugmakers to report third-quarter earnings, followed the example of most rivals with higher-than-expected profits -- largely resulting from cost cuts -- but disappointing sales.

The world's largest drugmaker, which merged in October with Wyeth, earned $866 million, or 11 cents per share, compared with $2.88 billion, or 43 cents, in the year-earlier period.

Excluding merger costs and other special items, Pfizer (PFE.N) earned 54 cents per share. Analysts on average expected 51 cents per share, according to Thomson Reuters I/B/E/S.

Results were hurt by a $701 million charge in the quarter for asbestos litigation, related to its Quigley Co subsidiary.

Global sales rose 39 percent to $16.17 billion, swelled by the addition of Wyeth products, but would have risen 40 percent if not for the stronger dollar, which lowers the value of sales in overseas markets.

Sales lagged the consensus Wall Street forecast of $16.68 billion -- in contrast to the second quarter, when sales trounced analyst estimates due largely to a weaker dollar.

Global sales of Lipitor, the world's biggest selling medicine, fell 11 percent to $2.53 billion. Pfizer said the arrival in recent months of Lipitor generics in Canada and Spain hurt its flagship product.

The bigger threat comes in November 2011, when Lipitor loses U.S. marketing exclusivity. Pfizer bought Wyeth and its medicine chest, including lucrative biotech medicines, mainly to replace vanishing Lipitor revenue.

Pfizer is counting heavily on sales from fast-growing emerging markets to bolster results in coming years. But sales of Pfizer's products in those markets, excluding the Wyeth brands, were essentially flat in the quarter.

(Reporting by Ransdell Pierson; Editing by Derek Caney and Maureen Bavdek)

* The MSCI index of Asia Pacific stocks outside of Japan .MIAPJ0000PUS dropped 0.4 percent by 9:41 p.m. ET as material and financial stocks weakened.

* Japan's Nikkei share average .N225 fell to a seven-week low and the broader-based Topix index .TOPX hit a 19-month low, under pressure from the yen's strength as it hovers close to a record high against the dollar.

* The Nikkei was off 0.1 percent and the Topix was down 0.2 percent. They are down 13 percent and 12 percent so far this year, respectively.

* The dollar was last at 80.63 yen and within sight of a record low of 79.75 yen set in 1995. Markets were keeping a wary eye on the currency pair, with the risk of Japanese intervention seen mounting if the dollar slips below 80 yen.

* Gold ticked higher above $1,350 an ounce but investors were reluctant to make big bets ahead of the Federal Reserve's policy meeting, which could determine the fate of the dollar.

* The Fed is expected to announce a programme of large-scale asset purchases on Wednesday following a two-day policy meeting. For a PDF special report: link.reuters.com/pyb23q

* U.S. crude futures extended gains, drawing support from comments by OPEC linchpin Saudi Arabia that consumers would tolerate oil prices as high as $90 a barrel.

NYMEX December crude futures rose 19 cents to $83.11 a barrel, after settling up $1.52 at $82.95 a day earlier.

* Wall Street indexes on Monday were largely flat for the second session in a row as investors were cautious about taking fresh positions ahead of the outcome of U.S. mid-term elections and the Fed's policy meeting.

The elections are being closely watched because they are expected to the balance of power in the U.S. House of Representatives swing in favor of the Republicans.

(Editing by Neil Fullick)