Business Blog Posts

With three weeks to go in 2010, investors were reluctant to throw much money into any single trade now that a big selloff in Treasuries died down and opted to take profits on small positions in thin trading volumes.

Whether China would raise interest rates this year, perhaps even this weekend, was still a question on investors' radar screens with regard to risk taking, especially after a state-run newspaper said inflation may have hit 5.1 percent in November.

Tighter policy in China and other emerging markets though has already been factored into economic and market forecasts for 2011, a year in which some strategists favor riskier assets such as stocks, commodities and credit but not government bonds.

"The environment looks quite favourable for equities now, but as we proceed through 2011 investors need to be alert to a change," Larry Kantor, head of research at Barclays Capital, said in a statement.

"Overstretched valuations may provide that signal, as might central banks in emerging market countries as they pull back from extremely supportive policies over the course of 2011."

Japan's Nikkei share average was down 0.4 percent .N225 after briefly touching the highest since May 14, with investors concerned for a second day that share prices have been pushed up too quickly without any fundamental news to support the move.

"On top of profit-taking and overheating of the market, some foreign investors are unloading positions and hedging ahead of the Christmas break," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities in Tokyo.

The broader TOPIX index was up 1.2 percent .TOPX so far this week, exceeding the flat reading of the MSCI index of Asia Pacific stocks outside of Japan .MIAPJ0000PUS.

The MSCI index was also relatively unchanged on Friday, with gains in financials offset by declines in the materials and consumer sectors.

The U.S. Treasury market cooled down after global investors sold mid to longer-maturity bonds earlier in the week after news the White House proposed a payroll tax holiday that some analysts and fund managers reckon could boost growth next year as much as a full percentage point.

The March 10-year U.S. Treasury future was up around 4/32, while the cash 10-year note yield was relatively unchanged on the day at 3.21 percent. The yield is up 41 basis points so far in December, on track for the biggest monthly increase since December 2009 when yields rose 64 basis points.

Pacific Investment Management Co, which runs the world's biggest bond fund, is revising its U.S. growth forecast for next year in light of the tax-cut compromise. PIMCO sees the economy growing 3 percent to 3.5 percent in the fourth quarter of 2011 from the same period of this year. That compares with its previous estimate for 2 percent to 2.5 percent growth.

The euro was flat at $1.3234 with overnight news that Fitch Ratings downgraded Ireland's sovereign debt rating keeping dealers from buying on dips.

"The euro reacted well to the Fitch news on Ireland and that really tells you that maybe this story is too well known and traders don't really want to sell it," said Robert Rennie,

Initial claims for state unemployment benefits dropped 17,000 to a seasonally adjusted 421,000, the Labor Department said on Thursday, below economists' expectations for 425,000.

"It's another report that suggests the monthly employment numbers that we got last week probably understated the position in jobs, and it's another number that suggests we're going to get some upside surprises in economic activity," said Michael Strauss, chief economist at Commonfund in Wilton, Connecticut.

The economy added a mere 39,000 jobs in November, with the unemployment rate spiking to 9.8 percent from 9.6 percent in October.

U.S. Treasury debt prices briefly pared gains on the jobless claims data, while the dollar trimmed gains versus the euro.

A Labor Department official said there was nothing unusual in the state level data, but noted that claims on a not seasonally adjusted level recorded their biggest increase this year, which was typical as claims tend to spike in the week after the Thanksgiving holiday.

He also said the jump reflected seasonal layoffs in industries such as agriculture and surface mining.

The four-week average of new jobless claims, considered a better measure of underlying labor market trends, fell 4,000 to 427,500, still the lowest since early August 2008.

A surprisingly small gain in employment last month blurred the labor market picture and the bigger-than-expected drop in new claims, and sustained drop in the four-week average, should strengthen perceptions a durable recovery is under way.

Job creation is expected to receive a boost from a compromise deal struck by the Obama administration and Republican lawmakers on Monday to maintain all Bush-era tax cuts through 2012, extend emergency unemployment benefits and cut employee payroll taxes by 2 percentage points.

The number of people still receiving benefits under regular state programs after an initial week of aid fell 191,000 to 4.09 million in the week ended November 27, the lowest since mid-November 2008, from 4.28 million the prior week.

Economists had expected so-called continuing claims to dip to 4.25 million from a previously reported 4.27 million.

The number of people on emergency unemployment benefits fell 233,032 to 3.71 million in the week ended November 20, the latest week for which data is available. A total of 8.30 million people were claiming unemployment benefits during that period under all programs.

Emergency benefits for 4 million people which were due to expire by February are now set to be extended.

Treasuries prices edged higher following a recent selloff that pushed benchmark yields to six-month highs on Wednesday. Higher bond yields make it more expensive for consumers and businesses to borrow, a potential problem for the still-fragile economic recovery.

The weekly jobless claims report is on tap for 8:30 a.m. EST (1330 GMT) and is expected to show first-time claims improved slightly to 425,000 from 436,000 the week before. Wholesale inventories data for October is due at 10 a.m. EST (1500 GMT), and anticipated to gain 0.9 percent compared with an increase of 1.5 percent the month before.

The jobless claims data will come on the heels of last week's larger nonfarm payrolls report that showed the economy added far fewer jobs than expected in November.

Analysts are betting the market will rally into year-end, though stocks may trade sideways in the short term after strong gains since the beginning of the month.

"There's been some chit-chat in articles and on TV about the underperformance of active managers that might want to show a little better results. So they might be the marginal buyer that push up the stock market," said Kim Caughey Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

The S&P 500 closed at 1,228.28 Wednesday right around a key resistance level that represents the 61.8 percent Fibonacci retracement of the 2007-2009 bear market slide, a key technical indicator. Decisive gains above this level could turn it into support for the index and open the way for more advances.

S&P 500 futures added 3.7 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were up 30 points, while Nasdaq 100 futures rose 5.75.

Shares of Johnson & Johnson (JNJ.N) were off 0.6 percent to $62.10 before the opening bell after Wells Fargo Securities downgraded the stock to "market perform" from "outperform.

Shares of United Parcel Service Inc (UPS.N) will be in the spotlight after its chief financial officer told a German newspaper the package deliverer plans to woo shareholders with a higher dividend and more share buybacks rather than use its strong cash flow for large acquisitions.

A compromise plan by U.S. President Barack Obama to broadly extend tax cuts moved forward on Wednesday despite opposition from his own Democrats.

Stocks edged higher Wednesday as gains in financial and technology stocks offset declines caused by a recent surge in bond yields.

(Editing by Jeffrey Benkoe)

A total of 57 billionaires now have joined The Giving Pledge, which was launched by Microsoft founder Gates and investor Buffett in June. The campaign announced the new pledges in a statement late on Wednesday.

Gates, his wife Melinda, and Buffett have asked U.S. billionaires to give away at least half their wealth during their lifetime or after their death, and to publicly state their intention with a letter explaining their decision.

The Giving Pledge does not accept money or tell people how to donate their money but asks billionaires to make a moral commitment to give their fortunes to charity.

"People wait until late in their career to give back. But why wait when there is so much to be done?" Zuckerberg, who gave $100 million in September to the beleaguered public schools of Newark, New Jersey, said in a statement.

"With a generation of younger folks who have thrived on the success of their companies, there is a big opportunity for many of us to give back earlier in our lifetime and see the impact of our philanthropic efforts," he said.

In addition to Zuckerberg and Moskovitz, the world's youngest billionaires, pledges were made by AOL co-founder Steve Case, financier Carl Icahn and Michael Milken, a former Wall Street executive who went to prison in the early 1990s for securities violations.

"CHANGE LIVES"

Morningstar Chief Executive Joe Mansueto, businessman Nicolas Berggruen and private investor Ted Forstmann also are among the new billionaires to take the pledges.

"In just a few short months we've made good progress," said Buffett, who made his fortune with insurance and investment company Berkshire Hathaway Inc.

"The Giving Pledge has re-energized people thinking about philanthropy and doing things in philanthropy and I look forward to many more conversations with families who are truly fortunate and whose generosity can and will change lives," he said.

Along with speaking to about a quarter of the wealthiest people in the United States about The Giving Pledge, Gates and Buffett hosted a dinner with Chinese billionaires in Beijing in September in a bid to promote a culture of philanthropy in China. The pair plan to visit India in March.

Forbes magazine said the United States is home to more than 400 billionaires, the most of any country.

Individual Americans gave more than $227 billion in 2009, according to the Giving USA report by the Center on Philanthropy at Indiana University, down just 0.4 percent from the previous year despite the U.S. recession.

Buffett pledged in 2006 to give away 99 percent of his wealth to the Bill & Melinda Gates Foundation and family charities. Bill and Melinda Gates have so far donated more than $28 billion of their fortune to their foundation.

The full list of billionaires and their letters can be seen at www.thegivingpledge.org.

(Editing by Bill Trott)

He has spent 20 yuan ($3) at Ding's electrical appliance shop on a heat-belt, which he can fill with boiling water and strap around his waist to ward off the bitter winter chill on the Himalayan plateau.

The 66-year-old grins: "I already have a television at home. But I would like a washing machine and a fridge. I hope to buy those next year."

Timothy Geithner harbors similar hopes. The U.S. Treasury Secretary is counting on hundreds of millions of Chinese like Gyelyanjia to spend more and save less.

That way, Chinese factories would produce more for domestic

consumption and less for export, helping to narrow the trade imbalances that are destabilizing the global economy.

Chinese consumption is, in fact, strong. It has grown by more than 9 percent a year, after adjustment for inflation, over the past decade. China overtook the United States in 2009 as the world's leading automobile market. The real-estate market is on fire, swelling demand for appliances and furniture. China is No. 2 in sales of luxury goods.

There are no luxuries for sale in Xiahe, a rapidly developing town in the western province of Gansu and home to Labrang monastery, the largest outside Tibet.

Tibetans wrapped in long woolen robes, their hair falling in long plaits, crowd the broad pavement lined with shops along the main street leading to the sprawling monastery. Monks, taking a break from their prayers, chat on mobile phones on their way to the tea house or to buy a pair of handmade felt boots.

Renqing, 33, who like many Tibetans uses only one name, watches over her two-year-old daughter, sleeping in her stroller outside a shop. "Life is difficult for us. I only have enough money to feed and clothe my family."

Still, she admits, she has a washing machine, a fridge, a television and a computer at home. And, of course, a DVD player. But it's not enough. "If there's one thing I dream of having, it's Tibetan religious art. I wish I could buy statues to put in my home."

The Ding family are Hui minority Muslims. Mrs Ding Yuying gestures around her store filled with freezers and televisions. "Business is up 50 percent this year because the government has given a subsidy to farmers to buy electrical goods," she said.

Yet appearances are deceptive, at least through the prism of economic statistics.

INVESTMENT TRUMPS CONSUMPTION

Spending might be sturdy in China, but investment has been off the charts. As a result, consumption was just 35.6 percent of Gross Domestic Product in 2009, from 46.1 percent a decade earlier - and that was helped by a massive government stimulus to counter the global financial crisis.