Source : The Straits Times, Jan 17, 2008
NEW YORK - US stocks endured fresh losses on Wednesday after a Federal Reserve report said economic growth had slowed and fresh data shone a spotlight on simmering inflationary pressures.
The reports fuelled fears the world's largest economy could be entering a potential recession.
In volatile trade, the blue chip Dow Jones Industrial Average closed down 34.95 points (0.28 per cent) at 12,466.16, after diving by over two per cent a day earlier.
The tech-laden Nasdaq composite lost a heftier 23.00 points (0.95 per cent) to 2,394.59 and the broad-market Standard & Poor's 500 index finished 7.75 points (0.56 per cent) lower at 1,373.20.
The Dow is down around six per cent for the year so far, while the Nasdaq has shed almost 10 per cent.
Stocks tumbled after the Federal Reserve's Beige Book survey said that US economic momentum had moderated during the end of 2007, in part due to 'subdued' retail sales.
'Reports from the 12 Federal Reserve districts suggest that economic activity increased modestly during the survey period of mid-November through December, but at a slower pace compared with the previous survey period,' the report said.
A separate government snapshot added to Wall Street's downbeat sentiment by revealing that US consumer prices rose a slightly stronger-than-expected 0.3 per cent in December, stoking inflation for the year to a 17-year high of 4.1 per cent.
'Headline inflation rates remain well in excess of desired comfort levels and there is no sign of that ending anytime soon,' observed Mr Stephen Gallagher, an economist with Societe Generale.
Investors are worried that a jump in inflationary pressures could deter the Federal Reserve from cutting interest rates. The Fed is widely expected to cut borrowing costs at a policy meeting later this month to help underpin economic momentum. -- AFP
Thursday, January 17, 2008
US Subprime Losses Grow, Top Japan Bank Hit Too
Source : The Straits Times, Jan 17, 2008
NEW YORK - CREDIT losses tied to troubled subprime mortgages continued to mount at major United States financial institutions on Wednesday, while Japan's top bank also took a sizable hit.
JPMorgan Chase, the No. 3 US bank, reported fourth-quarter net fell 34 per cent as it recorded US$1.3 billion (S$1.9 billion) in markdowns on subprime positions and saw sharply higher credit costs.
JPMorgan's write-down sent its net income down to US$2.97 billion, or 86 cents a share, in the period from October to December, from US$4.53 billion, or US$1.26 a share, in the same period a year earlier.
'We remain extremely cautious as we enter 2008,' CEO Jamie Dimon, said in a statement as his bank quadrupled to US$1.1 billion the provision it needs to cover ongoing problems on home equity and high risk mortgage loans.
That said, JPMorgan provided comparative relief from the gloom cast by Tuesday's colossal US$18.1 billion write-down by Citigroup.
Also on Wednesday, bond insurer Ambac Financial Group said it expects a US$5.4 billion pretax write-down in the fourth quarter and will cut its quarterly dividend by two-thirds.
Ambac also announced plans to raise US$1 billion in equity and equity-linked securities and named an interim chief executive as it scrambled to maintain its prized triple-A credit ratings.
Its shares plunged nearly 40 per cent on the day.
If that weren't enough, Wells Fargo said its fourth-quarter profit fell 38 per cent, the first decline in more than six years, hurt by rising losses from home equity loans. But the decline at the San Francisco-based bank was smaller than expected.
'What we are starting to see is the flushing out of all these credit problems and an admission that there are losses,' said Mr Tom Atteberry, a partner at First Pacific Advisors, with assets under management of US$11 billion. 'This is a part of the healing process.' Damage was not contained to the United States.
Japan's largest bank, Mitsubishi UFJ Financial Group, may have lost as much as 50 billion yen (S$666 million) on subprime investments last year, up from the 4 billion yen it reported for the six months to September, according to executives with direct knowledge of the matter.
Shares in Japan's big banks, which have ridden the credit crisis relatively unscathed so far, fell sharply in response.
'Sentiment is bad because no one knows if there will be further losses,' said Mr Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
Merrill looms
Investors are already looking to results on Thursday from troubled Merrill Lynch, following the massive write-off by Citigroup, America's largest bank.
Wall Street analysts' scenarios range from US$10 billion to US$25 billion in write-downs for investment bank Merrill, which wrote off US$8.4 billion in the third quarter.
Banks, wrestling with huge losses stemming from US mortgages lent to people ill-equipped to repay them, have been actively seeking cash from abroad from sovereign wealth funds.
Merrill said on Tuesday it would raise US$6.6 billion from selling preferred shares to an investor group that included the Kuwait Investment Authority.
That is on top of the US$6.2 billion capital infusion announced last month in a deal with Singapore's Temasek Holdings and US-based Davis Selected Advisers.
Citigroup announced an overall fourth-quarter loss of US$9.83 billion - its first quarterly loss since its creation in 1998 - and said it was raising US$14.5 billion from offerings of convertible preferred securities.
Saudi Arabian Prince Alwaleed and the government of Singapore were among the investors. In November, Citigroup raised US$7.5 billion by selling a 4.9 per cent stake to Abu Dhabi.
The Government of Singapore Investment Corp, Singapore's biggest sovereign wealth fund, said on Wednesday its large investment in Citigroup and US$9.75 billion injection into credit-hit Swiss Bank UBS AG were unique at a time of financial turmoil and did not represent a strategy shift.
Many experts say ongoing losses at major banks means the crisis is far from over as crucial lending between commercial banks remains patchy at best.
With fears of a US recession growing, interest rate futures are pricing in an almost 1-in-2 chance of a hefty 75 basis points cut in US interest rates, when the Federal Reserve meets at the end of the month - or possibly even earlier. -- REUTERS
NEW YORK - CREDIT losses tied to troubled subprime mortgages continued to mount at major United States financial institutions on Wednesday, while Japan's top bank also took a sizable hit.
JPMorgan Chase, the No. 3 US bank, reported fourth-quarter net fell 34 per cent as it recorded US$1.3 billion (S$1.9 billion) in markdowns on subprime positions and saw sharply higher credit costs.
JPMorgan's write-down sent its net income down to US$2.97 billion, or 86 cents a share, in the period from October to December, from US$4.53 billion, or US$1.26 a share, in the same period a year earlier.
'We remain extremely cautious as we enter 2008,' CEO Jamie Dimon, said in a statement as his bank quadrupled to US$1.1 billion the provision it needs to cover ongoing problems on home equity and high risk mortgage loans.
That said, JPMorgan provided comparative relief from the gloom cast by Tuesday's colossal US$18.1 billion write-down by Citigroup.
Also on Wednesday, bond insurer Ambac Financial Group said it expects a US$5.4 billion pretax write-down in the fourth quarter and will cut its quarterly dividend by two-thirds.
Ambac also announced plans to raise US$1 billion in equity and equity-linked securities and named an interim chief executive as it scrambled to maintain its prized triple-A credit ratings.
Its shares plunged nearly 40 per cent on the day.
If that weren't enough, Wells Fargo said its fourth-quarter profit fell 38 per cent, the first decline in more than six years, hurt by rising losses from home equity loans. But the decline at the San Francisco-based bank was smaller than expected.
'What we are starting to see is the flushing out of all these credit problems and an admission that there are losses,' said Mr Tom Atteberry, a partner at First Pacific Advisors, with assets under management of US$11 billion. 'This is a part of the healing process.' Damage was not contained to the United States.
Japan's largest bank, Mitsubishi UFJ Financial Group, may have lost as much as 50 billion yen (S$666 million) on subprime investments last year, up from the 4 billion yen it reported for the six months to September, according to executives with direct knowledge of the matter.
Shares in Japan's big banks, which have ridden the credit crisis relatively unscathed so far, fell sharply in response.
'Sentiment is bad because no one knows if there will be further losses,' said Mr Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
Merrill looms
Investors are already looking to results on Thursday from troubled Merrill Lynch, following the massive write-off by Citigroup, America's largest bank.
Wall Street analysts' scenarios range from US$10 billion to US$25 billion in write-downs for investment bank Merrill, which wrote off US$8.4 billion in the third quarter.
Banks, wrestling with huge losses stemming from US mortgages lent to people ill-equipped to repay them, have been actively seeking cash from abroad from sovereign wealth funds.
Merrill said on Tuesday it would raise US$6.6 billion from selling preferred shares to an investor group that included the Kuwait Investment Authority.
That is on top of the US$6.2 billion capital infusion announced last month in a deal with Singapore's Temasek Holdings and US-based Davis Selected Advisers.
Citigroup announced an overall fourth-quarter loss of US$9.83 billion - its first quarterly loss since its creation in 1998 - and said it was raising US$14.5 billion from offerings of convertible preferred securities.
Saudi Arabian Prince Alwaleed and the government of Singapore were among the investors. In November, Citigroup raised US$7.5 billion by selling a 4.9 per cent stake to Abu Dhabi.
The Government of Singapore Investment Corp, Singapore's biggest sovereign wealth fund, said on Wednesday its large investment in Citigroup and US$9.75 billion injection into credit-hit Swiss Bank UBS AG were unique at a time of financial turmoil and did not represent a strategy shift.
Many experts say ongoing losses at major banks means the crisis is far from over as crucial lending between commercial banks remains patchy at best.
With fears of a US recession growing, interest rate futures are pricing in an almost 1-in-2 chance of a hefty 75 basis points cut in US interest rates, when the Federal Reserve meets at the end of the month - or possibly even earlier. -- REUTERS
IMF Warns Subprime Crisis Losses 'May Be Higher'
Source : The Straits Times, Jan 17, 2008
WASHINGTON - THE United States subprime mortgage crisis will likely produce deeper problems than expected because not all market players have 'come out clean' about their losses, the International Monetary Fund said.
'Some analytical work modelled on conservative assumptions suggests that potential losses may be higher and further capital injections are likely,' Mr Manmohan Singh and Mr Mustafa Saiyid wrote in an IMF report.
'Most banks in the United States have not yet marked their assets to genuine transaction prices,' the report said on Wednesday.
Some market participants 'have come out clean such as a few US hedge funds that have written off the value of all junior notes issued by its structured vehicles,' the report said.
The global markets turmoil that erupted last year amid rising defaults on US subprime mortgages was in part due to a lack of appropriate measures to evaluate the risk of new financial products.
Subprime mortgages - home loans given to people with poor credit histories - were packaged into structured securities such as collateralised debt obligations, of CDOs.
Following the collapse of the US subprime market in mid-2007, market worries about the exposure of the structured securities to the subprime crisis caused a credit freeze that made many market players use valuation models that no longer worked in the meltdown, the report said.
Recent moves by financial institutions to bring off-balance-sheet structures like CDOs on the balance sheet are not at explicit 'transfer prices' and thus 'may not be a full reflection of potential losses'.
The IMF report suggested that market participants seek to regularly put a portion of their complex structured securities on the market to obtain a valid valuation.
Some market players 'increasingly relied on ratings as a measure of default risk and inappropriately compared them to those on plain vanilla corporate debt, which has different sensitivities to market conditions'. -- AFP
_________________________________________________
US banks seeing higher delinquencies on more than just mortgage payments
NEW YORK - THE bill for America's excessive borrowing during the housing boom has arrived, and more people are having trouble paying it.
JPMorgan Chase and Wells Fargo, two of the biggest United States banks, on Wednesday joined a growing chorus warning that the subprime mortgage mess is just the start of a sweeping lending crisis. And some fear that consumers falling behind on all kinds of loan payments could tip the economy's scale toward recession.
Strapped consumers are having a tough time making payments on credit cards, home-equity loans, and even for their cars. This has caused three of the top five US commercial banks that have already reported damaging fourth-quarter results to set aside some US$12.5 billion (S$17.9 billion) to cover future loan losses - and that number will likely grow as the year wears on.
Problems in the subprime mortgage market are rapidly spilling over into other areas of the economy. No matter what the experts call it - a recession, slowdown or even the makings of a depression - it's clear banks are under mounting pressure to be more cautious about lending.
'If consumption growth stagnates, the odds of a recession are incredibly high,' said Mr Andrew Bernard, director of the Center for International Business at the Tuck School of Business at Dartmouth.
'All the pieces of household financial health are starting to be shakier, especially at the low end.'
He and others are paying close attention to what top US banks say about their customers' payment habits. Many view this as an early indicator about where the overall economy is headed, but there are other signs that are troublesome.
The stock market has had its worst start to the year in three decades, with investors rattled by signs from the Labor Department that unemployment is on the rise and retail sales are on the decline.
Further, the Commerce Department reported on Wednesday that higher costs for energy and food in 2007 pushed inflation for the year up by the largest amount in 17 years.
There was no sign of a turnaround in the last few months of the year. The Federal Reserve reported that the economy grew at a slower pace in late November and December as credit problems intensified and consumers tightened their spending.
To some, it appears that the Fed came to its rate-cutting decision in August a bit too late. Others point to the falling dollar and surging oil prices, factors that usually prevent the central bank from easing its monetary policy.
While debate persists about the Fed's timing and the extent of the slowdown, bank executives - who have scrambled to prepare for another tumble in home prices and higher unemployment in 2008, feel academic definitions are beside the point.
'We're not predicting a recession - it's not our job - but we're prepared,' JPMorgan Chase CEO Jamie Dimon told analysts after the nation's third-largest bank wrote down US$1.3 billion and said profit dropped 34 per cent.
His financial institution did not do all that bad. Rival Citigroup fared the worst during the fourth quarter, losing US$9.83 billion after writing down the value of its portfolio of mortgage and mortgage-backed products by US$18.1 billion.
Wells Fargo, a more traditional bank that avoided last year's trading woes, saw its profit fall 38 per cent due to troubles with home equity loan and mortgage defaults.
JPMorgan is girding for home prices to decline further in 2008 by 5 per cent to 10 per cent; Citigroup's estimate of 7 per cent falls within that range, too.
'The banks are the infrastructure for everything, the heartbeat of the market,' said Mr Chris Johnson, president of Johnson Research Group. 'They need to be fixed before the market, and economy, can move forward with confidence. They need to get all their dirty laundry out there.'
Banks and card companies like American Express - which warned last week that it would add US$440 million to loan loss provisions - said in the regions where home prices are declining, card default rates are rising faster. The same goes for auto loans, subprime mortgages and home equity loans in these areas, which include Florida, Michigan and California.
A big reason for the rise in credit card default rates is that they are returning to more usual levels following a change in bankruptcy law that sent rates lower for a time. But the fact that more losses are being seen in the weaker parts of the country shows the increase is economically driven as well.
Analysts believe this means one thing: Consumers will be the ones paying for years of lax lending standards by US financial institutions. Many will become more restrictive about who gets credit in a bid to stem future losses - and that could curb consumer spending, which accounts for more than two-thirds of the economy.
'We've pushed the envelope,' Mr Johnson said. 'Along with the joy of a market that goes as high as ours is the agony of when it starts to correct itself.' -- AP
WASHINGTON - THE United States subprime mortgage crisis will likely produce deeper problems than expected because not all market players have 'come out clean' about their losses, the International Monetary Fund said.
'Some analytical work modelled on conservative assumptions suggests that potential losses may be higher and further capital injections are likely,' Mr Manmohan Singh and Mr Mustafa Saiyid wrote in an IMF report.
'Most banks in the United States have not yet marked their assets to genuine transaction prices,' the report said on Wednesday.
Some market participants 'have come out clean such as a few US hedge funds that have written off the value of all junior notes issued by its structured vehicles,' the report said.
The global markets turmoil that erupted last year amid rising defaults on US subprime mortgages was in part due to a lack of appropriate measures to evaluate the risk of new financial products.
Subprime mortgages - home loans given to people with poor credit histories - were packaged into structured securities such as collateralised debt obligations, of CDOs.
Following the collapse of the US subprime market in mid-2007, market worries about the exposure of the structured securities to the subprime crisis caused a credit freeze that made many market players use valuation models that no longer worked in the meltdown, the report said.
Recent moves by financial institutions to bring off-balance-sheet structures like CDOs on the balance sheet are not at explicit 'transfer prices' and thus 'may not be a full reflection of potential losses'.
The IMF report suggested that market participants seek to regularly put a portion of their complex structured securities on the market to obtain a valid valuation.
Some market players 'increasingly relied on ratings as a measure of default risk and inappropriately compared them to those on plain vanilla corporate debt, which has different sensitivities to market conditions'. -- AFP
_________________________________________________
US banks seeing higher delinquencies on more than just mortgage payments
NEW YORK - THE bill for America's excessive borrowing during the housing boom has arrived, and more people are having trouble paying it.
JPMorgan Chase and Wells Fargo, two of the biggest United States banks, on Wednesday joined a growing chorus warning that the subprime mortgage mess is just the start of a sweeping lending crisis. And some fear that consumers falling behind on all kinds of loan payments could tip the economy's scale toward recession.
Strapped consumers are having a tough time making payments on credit cards, home-equity loans, and even for their cars. This has caused three of the top five US commercial banks that have already reported damaging fourth-quarter results to set aside some US$12.5 billion (S$17.9 billion) to cover future loan losses - and that number will likely grow as the year wears on.
Problems in the subprime mortgage market are rapidly spilling over into other areas of the economy. No matter what the experts call it - a recession, slowdown or even the makings of a depression - it's clear banks are under mounting pressure to be more cautious about lending.
'If consumption growth stagnates, the odds of a recession are incredibly high,' said Mr Andrew Bernard, director of the Center for International Business at the Tuck School of Business at Dartmouth.
'All the pieces of household financial health are starting to be shakier, especially at the low end.'
He and others are paying close attention to what top US banks say about their customers' payment habits. Many view this as an early indicator about where the overall economy is headed, but there are other signs that are troublesome.
The stock market has had its worst start to the year in three decades, with investors rattled by signs from the Labor Department that unemployment is on the rise and retail sales are on the decline.
Further, the Commerce Department reported on Wednesday that higher costs for energy and food in 2007 pushed inflation for the year up by the largest amount in 17 years.
There was no sign of a turnaround in the last few months of the year. The Federal Reserve reported that the economy grew at a slower pace in late November and December as credit problems intensified and consumers tightened their spending.
To some, it appears that the Fed came to its rate-cutting decision in August a bit too late. Others point to the falling dollar and surging oil prices, factors that usually prevent the central bank from easing its monetary policy.
While debate persists about the Fed's timing and the extent of the slowdown, bank executives - who have scrambled to prepare for another tumble in home prices and higher unemployment in 2008, feel academic definitions are beside the point.
'We're not predicting a recession - it's not our job - but we're prepared,' JPMorgan Chase CEO Jamie Dimon told analysts after the nation's third-largest bank wrote down US$1.3 billion and said profit dropped 34 per cent.
His financial institution did not do all that bad. Rival Citigroup fared the worst during the fourth quarter, losing US$9.83 billion after writing down the value of its portfolio of mortgage and mortgage-backed products by US$18.1 billion.
Wells Fargo, a more traditional bank that avoided last year's trading woes, saw its profit fall 38 per cent due to troubles with home equity loan and mortgage defaults.
JPMorgan is girding for home prices to decline further in 2008 by 5 per cent to 10 per cent; Citigroup's estimate of 7 per cent falls within that range, too.
'The banks are the infrastructure for everything, the heartbeat of the market,' said Mr Chris Johnson, president of Johnson Research Group. 'They need to be fixed before the market, and economy, can move forward with confidence. They need to get all their dirty laundry out there.'
Banks and card companies like American Express - which warned last week that it would add US$440 million to loan loss provisions - said in the regions where home prices are declining, card default rates are rising faster. The same goes for auto loans, subprime mortgages and home equity loans in these areas, which include Florida, Michigan and California.
A big reason for the rise in credit card default rates is that they are returning to more usual levels following a change in bankruptcy law that sent rates lower for a time. But the fact that more losses are being seen in the weaker parts of the country shows the increase is economically driven as well.
Analysts believe this means one thing: Consumers will be the ones paying for years of lax lending standards by US financial institutions. Many will become more restrictive about who gets credit in a bid to stem future losses - and that could curb consumer spending, which accounts for more than two-thirds of the economy.
'We've pushed the envelope,' Mr Johnson said. 'Along with the joy of a market that goes as high as ours is the agony of when it starts to correct itself.' -- AP
Sombre Fed Says US Economy Has Lost Momentum
Source : The Straits Times, Jan 17, 2008
WASHINGTON - RETAILERS, home builders and many manufacturers should brace for even more rough times ahead, a sombre Federal Reserve suggests amid growing fears that the United States might be sliding into recession.
The Fed's snapshot of business conditions showed a national economy losing momentum heading into the new year and a future riddled with uncertainty. The persistent housing slump and harder-to-get credit are making people and businesses ever more cautious, it said.
Separately on Wednesday, the Labor Department reported that US consumer prices rose in 2007 at the fastest pace in 17 years in 2007, by 4.1 per cent, as motorists paid a lot more for gasoline and grocery shoppers paid higher food bills.
Also, more big banks reported losses and said people were having trouble making payments for everything from credit cards to cars.
Stocks were mostly down on Wednesday, the Dow Jones industrial average declining 34.95 points, or 0.28 per cent.
The Fed report was the unwelcome icing on a recent batch of economic indicators - ranging from a plunge in retail sales to a big jump in unemployment - raising concern that the country is heading for its first recession since 2001.
At the beginning of last year, many economists put the chance of a recession at less than 1-in-3; now an increasing number say 50-50 or even worse. Goldman Sachs, the biggest investment bank on Wall Street, thinks a recession is inevitable this year.
The Fed report said the economy did grow during the survey period - from the middle of November through December - but more slowly than during the late fall. Credit problems intensified in December as did troubles in the housing market. That threw Wall Street into new turbulence.
The economy probably grew at a feeble pace of about 1.5 per cent or less in the final three months of last year and will stay weak in the first quarter of this year as consumers - major shapers of the nation's economic health - tighten their belts.
After retailers suffered their worst sales season in five years in 2007, 'the outlook for 2008 among retail merchants was cautious', the Fed said in its report. And the outlook for housing remains gloomy: 'weak during the first part of 2008'. Fallout from a meltdown in risky 'subprime' mortgages continued to sock financial institutions. JPMorgan Chase and Wells Fargo both reported on Wednesday that their earnings fell - raising fresh fears of a widespread lending crisis.
Federal Reserve Chairman Ben Bernanke, in a speech last week, pledged to aggressively cut a key interest rate as needed to try to prevent all these problems from plunging the economy into a major recession. That may well mean a bold half-point cut at the end of a two-day meeting on Jan 30. The Fed started cutting rates in September, but some critics on Wall Street and elsewhere say Mr Bernanke should have acted sooner and more forcefully.
'Clearly there is a high level of caution,' said Mr Ken Mayland, president of ClearView Economics. 'Everyone's guard is up to protect and insulate one's businesses from the high degree of sluggishness that is expected to prevail in the months ahead.'
With voters expressing angst over the economy, the White House and the Democrat-controlled Congress are exploring ways - including the possibility of temporary tax rebates - to get money quickly into the hands of consumers and help stimulate spending. Presidential contenders also are floating their own ideas for rescue packages.
The chairman of Congress' Joint Economic Committee said he had spoken on Monday with Mr Bernanke and found him 'generally supportive' of lawmakers and Mr Bush approving a stimulus bill.
Mr Bernanke, who has not supported any specific plan, testifies before the House Budget Committee on Thursday.
The recent leap in the nation's unemployment rate, from 4.7 per cent in November to 5 per cent in December, rang one of the loudest warning bells. It raised concerns that consumers would clamp down, sending the economy into a tailspin.
On Wednesday, the Fed observed that 'holiday sales were generally disappointing' and pointed to 'further weakness in auto sales'. A day earlier, the government reported that shoppers cut back on their spending by 0.4 per cent in December, wrapping up the weakest year for retailers since 2002.
Adding to worry about how consumers will hold up: Consumer confidence, as measured by the RBC Cash Index, fell in January to its lowest point in figures dating back to 2002.
The housing picture remains bleak - 'quite weak' in all Fed regions, the survey said. Sales continued to be sluggish, and inventories of unsold homes 'persisted at historically high levels'. Manufacturing activity varied around the country, but there was one common thread: Factories reported 'pronounced weakness' in housing-related industries as well as the automobile business. The Fed, in a separate report on Wednesday, said production by big industry was flat in December, fresh evidence of an economic slowdown. -- AP
WASHINGTON - RETAILERS, home builders and many manufacturers should brace for even more rough times ahead, a sombre Federal Reserve suggests amid growing fears that the United States might be sliding into recession.
The Fed's snapshot of business conditions showed a national economy losing momentum heading into the new year and a future riddled with uncertainty. The persistent housing slump and harder-to-get credit are making people and businesses ever more cautious, it said.
Separately on Wednesday, the Labor Department reported that US consumer prices rose in 2007 at the fastest pace in 17 years in 2007, by 4.1 per cent, as motorists paid a lot more for gasoline and grocery shoppers paid higher food bills.
Also, more big banks reported losses and said people were having trouble making payments for everything from credit cards to cars.
Stocks were mostly down on Wednesday, the Dow Jones industrial average declining 34.95 points, or 0.28 per cent.
The Fed report was the unwelcome icing on a recent batch of economic indicators - ranging from a plunge in retail sales to a big jump in unemployment - raising concern that the country is heading for its first recession since 2001.
At the beginning of last year, many economists put the chance of a recession at less than 1-in-3; now an increasing number say 50-50 or even worse. Goldman Sachs, the biggest investment bank on Wall Street, thinks a recession is inevitable this year.
The Fed report said the economy did grow during the survey period - from the middle of November through December - but more slowly than during the late fall. Credit problems intensified in December as did troubles in the housing market. That threw Wall Street into new turbulence.
The economy probably grew at a feeble pace of about 1.5 per cent or less in the final three months of last year and will stay weak in the first quarter of this year as consumers - major shapers of the nation's economic health - tighten their belts.
After retailers suffered their worst sales season in five years in 2007, 'the outlook for 2008 among retail merchants was cautious', the Fed said in its report. And the outlook for housing remains gloomy: 'weak during the first part of 2008'. Fallout from a meltdown in risky 'subprime' mortgages continued to sock financial institutions. JPMorgan Chase and Wells Fargo both reported on Wednesday that their earnings fell - raising fresh fears of a widespread lending crisis.
Federal Reserve Chairman Ben Bernanke, in a speech last week, pledged to aggressively cut a key interest rate as needed to try to prevent all these problems from plunging the economy into a major recession. That may well mean a bold half-point cut at the end of a two-day meeting on Jan 30. The Fed started cutting rates in September, but some critics on Wall Street and elsewhere say Mr Bernanke should have acted sooner and more forcefully.
'Clearly there is a high level of caution,' said Mr Ken Mayland, president of ClearView Economics. 'Everyone's guard is up to protect and insulate one's businesses from the high degree of sluggishness that is expected to prevail in the months ahead.'
With voters expressing angst over the economy, the White House and the Democrat-controlled Congress are exploring ways - including the possibility of temporary tax rebates - to get money quickly into the hands of consumers and help stimulate spending. Presidential contenders also are floating their own ideas for rescue packages.
The chairman of Congress' Joint Economic Committee said he had spoken on Monday with Mr Bernanke and found him 'generally supportive' of lawmakers and Mr Bush approving a stimulus bill.
Mr Bernanke, who has not supported any specific plan, testifies before the House Budget Committee on Thursday.
The recent leap in the nation's unemployment rate, from 4.7 per cent in November to 5 per cent in December, rang one of the loudest warning bells. It raised concerns that consumers would clamp down, sending the economy into a tailspin.
On Wednesday, the Fed observed that 'holiday sales were generally disappointing' and pointed to 'further weakness in auto sales'. A day earlier, the government reported that shoppers cut back on their spending by 0.4 per cent in December, wrapping up the weakest year for retailers since 2002.
Adding to worry about how consumers will hold up: Consumer confidence, as measured by the RBC Cash Index, fell in January to its lowest point in figures dating back to 2002.
The housing picture remains bleak - 'quite weak' in all Fed regions, the survey said. Sales continued to be sluggish, and inventories of unsold homes 'persisted at historically high levels'. Manufacturing activity varied around the country, but there was one common thread: Factories reported 'pronounced weakness' in housing-related industries as well as the automobile business. The Fed, in a separate report on Wednesday, said production by big industry was flat in December, fresh evidence of an economic slowdown. -- AP
HDB Launches 1,098 Surplus Flats From East To West
Source : The Straits Times, Jan 17, 2008
THE Housing and Development Board (HDB) is launching the sale of 1,098 flats in Bedok, Clementi, Queenstown and Jurong West under its regular balloting exercise.
Interested buyers can submit their applications from Thursday till Feb 6 - either online via HDB's InfoWeb service or by visiting the HDB Hub or any of its branch offices.
The surplus flats from the Selective En-bloc Redevelopment Scheme comprise 234 studio apartments in Queenstown and Jurong West, plus 164 three-room units, 516 four-room units, and 184 five-room units in Bedok, Clementi and Queenstown.
An exhibition will also be held at the Habitat Forum in HDB Hub, where marketing panels and 3D models will be displayed to give interested buyers more information on the flats.
After the computer ballot is done, those eligible will be informed in April if they have been shorlisted before they can be invited to select a unit that they qualify for.
THE Housing and Development Board (HDB) is launching the sale of 1,098 flats in Bedok, Clementi, Queenstown and Jurong West under its regular balloting exercise.
Interested buyers can submit their applications from Thursday till Feb 6 - either online via HDB's InfoWeb service or by visiting the HDB Hub or any of its branch offices. The surplus flats from the Selective En-bloc Redevelopment Scheme comprise 234 studio apartments in Queenstown and Jurong West, plus 164 three-room units, 516 four-room units, and 184 five-room units in Bedok, Clementi and Queenstown.
An exhibition will also be held at the Habitat Forum in HDB Hub, where marketing panels and 3D models will be displayed to give interested buyers more information on the flats.
After the computer ballot is done, those eligible will be informed in April if they have been shorlisted before they can be invited to select a unit that they qualify for.
Subscribe to:
Posts (Atom)
.jpg)
