Car slump in France, Spain and Italy spells gloomy 2013

PARIS (Reuters) – Car sales in France, Spain and Italy in 2012 fell to the lowest levels in years, with December registration data underscoring the challenges facing the broader European economy.

Automakers are facing a sustained slump in the European car market as the euro zone debt crisis and government austerity measures sap consumer demand.

“The new car market continues to decline – a trait which we anticipate will continue through the course of 2013,” Credit Suisse analyst David Arnold said on Wednesday, adding European auto sales were unlikely to see growth in 2013.

Europe’s stagnating auto market will have knock-on effects for other economic players including steel producers, Nomura analyst Matthew Kates said in a note, citing forecasts by consulting firm AutoAnalysis.

Italy’s car sales, down 22.5 percent in December, slumped 19.9 percent for the full year to 1.4 million units, their lowest levels since 1979.

“The car market is suffering from an overdose of taxes aimed at hitting, if not criminalizing, the acquisition, ownership and use of autos,” said Filippo Pavan Bernacchi, the president of Italy’s car dealers’ trade group Federauto.

He said he expected Italian car sales in 2013 to be close to 1.33 million units.

French car registrations fell 15 percent in December, leaving the full year down 14 percent to 1.90 million vehicles – the lowest since 1997, French industry group CCFA said.

Spain’s monthly sales shrank 23 percent, after a 20 percent fall in November. Its full-year total of 699,589 cars, down 13 percent, was the lowest since industry association Anfac began keeping records in 1989.

Germany will report December data on Thursday.

Ford led December’s declines among mass-market brands with sales down 40 percent in France, 31 percent in Spain and 33 percent in Italy. Opel – the European unit of General Motors – posted declines of 16 percent, 17 percent and 47 percent, respectively.

Volkswagen , Europe’s biggest automaker, saw sales at its core brand slump 25 percent in France, 15 percent in Spain and 36 percent in Italy.

PSA Peugeot Citroen fell broadly in line with both markets, while Fiat brand sales dropped 11 percent in France, 28 percent in Spain and 20.5 percent in Italy.

Renault-brand registrations dropped 20 percent in Spain and 32 percent in France. Its home market is likely to shrink 2-5 percent this year, Renault France marketing director Nicolas Monnot said.

“This is completely coherent with the various macroeconomic forecasts available.”

In a note on Italian data, auto think-tank Promotor said Italy’s full-year fall in car sales was particularly worrying at a time when the global auto market was growing.

“The auto crisis does in fact involve only the euro area and is a direct consequence of the depressive effect of austerity policies on the real economy,” it said.

The chance of a recovery in the euro zone economy has faded further into 2013 after the recession deepened in the final months of last year, a Reuters poll found last month.

KNOCK-ON EFFECTS

Falling business investment and persistently weak consumer sentiment are challenging French President Francois Hollande’s efforts to stem rising unemployment and keep government spending within its 2013 deficit target.

Spain’s year-old recession was expected to continue well into 2013, weighed down by battered economic sentiment and 25 percent unemployment, a record high. Manufacturing activity shrank for a 20th straight month in December.

Italy was seen recording a 0.2 percent economic contraction this year, according to government figures. The International Monetary Fund predicted a 0.7 percent decline.

With fast-growing markets such as China and Russia increasingly meeting their own demand for steel, European producers are more than ever at the mercy of domestic industry.

“It is difficult to get bullish on the outlook for European auto demand in the near term, with obvious implications for European steel demand,” Kates at Nomura said.

German auto demand, which had long resisted the slump spreading north, turned negative in the second half to post a 1.7 percent drop for January through November.

In another sign of contagion, French delivery van sales contracted sharply in December, plunging 22 percent for their biggest monthly decline since the crisis of 2008, CCFA spokesman Francois Roudier said.

“We have already been seeing individual consumers holding back (on car purchases), particularly in the mass market,” Roudier said. “Now company fleet sales are slowing down as well.”

(Additional reporting by Paul Day, Gilles Guillaume, Gus Trompiz and Stephen Jewkes; Editing by Dan Lalor, James Regan and Hans-Juergen Peters)

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Obama: Cliff deal ‘within sight’

31 December 2012 Last updated at 14:18 ET

A deal to avoid the “fiscal cliff” of tax rises and spending cuts is “within sight” – but not yet done, US President Barack Obama has said.

But he told an audience of taxpayers it was unlikely that a “grand bargain” on tax and spending would happen.

Democrats are said to have offered to extend tax cuts on couples earning up to $ 450,000 (£277,000). But divisions remain over how to tackle spending.

Analysts say failure to reach a deal by 1 January could spark a new recession.

Speaking just hours ahead of the midnight deadline for a deal to avert tax rises and spending cuts, the president said: “There are still issues left to resolve but we’re hopeful Congress can get it done.”

Any deal needs to pass the 100-member Senate, which is controlled by Democrats, before heading to the House of Representatives, where Republicans hold the majority.

Agreeing to a $ 450,000 threshold ($ 400,000 for couples) would be a notable compromise by Democrats, analysts say.

The party previously only wanted tax rate extensions for earnings under $ 200,000 (£123,000) for individuals and $ 250,000 (£154,000) for couples.

But after weeks of increasingly desperate horse trading and public pronouncements, the “contours” of a deal were said to be emerging just hours before the midnight deadline.

Inheritance tax rates and the continuation of unemployment benefits were also part of the deal-making, reports said, but disagreements remained over how to deal with the automatic spending cuts due to kick in on 1 January.

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Apple to drop patent claims against new Samsung phone

SAN FRANCISCO (Reuters) – Apple Inc has agreed to withdraw patent claims against a new Samsung phone with a high-end display after Samsung said it was not offering to sell the product in the crucial U.S. market.

Apple disclosed the agreement in a filing on Friday in U.S. District Court in San Jose, California. Representatives for both Apple and Samsung declined to comment.

Last month Apple asked to add the Galaxy S III Mini and other Samsung products, including several tablet models, to its wide-ranging patent litigation against Samsung.

In response, Samsung said the Galaxy S III Mini was not available for sale in the United States and should not be included in the case.

Apple won a $ 1.05 billion verdict against Samsung earlier this year but has failed to secure a permanent sales ban against several, mostly older Samsung models. The patents Apple is asserting against the Galaxy S III Mini are separate from those that went to trial.

Samsung started selling the Mini in Europe in October to compete with Apple’s iPhone 5. In its filing on Friday in U.S. District Court, for the Northern District of California, Apple said its lawyers were able to purchase “multiple units” of the Mini from Amazon.com Inc’s U.S. retail site and have them delivered in the United States.

But Samsung represented that it is not “making, using, selling, offering to sell or importing the Galaxy S III Mini in the United States.” Based on that, Apple said it agreed to withdraw its patent claims on the Mini, “so long as the current withdrawal will not prejudice Apple’s ability later to accuse the Galaxy S III Mini if the factual circumstances change.”

The case in U.S. District Court, Northern District of California is Apple Inc. vs. Samsung Electronics Co Ltd et al., 12-630.

(Reporting by Dan Levine; Editing by Leslie Adler and Dan Grebler)

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The Unemployment Rate Is Dropping, Which Is Not as Good as It Sounds

As long as inflation remains in check, the Federal Reserve has promised not to raise interest rates until unemployment hits 6.5 percent. So how long until that happens? A few estimates are worth noting for the contradictions they reveal in the labor market.

According to calculations by the Brookings Institution’s Hamilton Project, at the current pace of job growth, about 155,000 jobs per month over the past two years, we won’t see 6.5 percent unemployment until 2018. That would mean a decade of zero percent interest rates. It has been four years since the Fed lowered rates to near zero. Imagine another six.

But don’t worry. Most economists think we’ll hit 6.5 percent way sooner than 2018. The average prediction of 75 economists surveyed by Bloomberg is that unemployment will be down to 7.3 percent by the second quarter of 2014. Both Joe Lavorgna, chief economist at Deutsche Bank, and Jacob Oubina, senior economist at RBC Capital Markets, think we’ll be at 6.5 percent by then. That’s not because they feel better about the economy. It’s actually because they’re more pessimistic about it.

The researchers at the Hamilton Project based their projections off the Congressional Budget Office’s 2011 estimates (PDF) of labor force participation over the next decade. The CBO assumes that for the next 10 years, the size of the work force will grow at the same pace it did over the previous decade, 0.8 percent a year. Right now, the labor force is expanding at less than half that pace. As people give up looking for a job, the labor force is growing much slower than anticipated.

The smaller the labor force, the fewer jobs you need to push down the unemployment rate. This is the dark cloud behind the steady decline in the jobless rate we’ve seen over the last year. Much of  the drop has been due to people fading from the labor force, rather than robust job gains. If you factor in the 2.5 million people who want a job but have stopped looking, and therefore aren’t counted as unemployed, the jobless rate jumps to 14.4 percent.

This the trouble with tying monetary policy to the unemployment rate: It’s murky as a signal for the health of the economy. James K. Galbraith, an economist at the University of Texas, thinks that continued shrinkage of the labor force will lower the rate faster than a strong economy that encourages people to start looking again. “A stronger economy might actually hold it up longer,” says Galbraith.

And that’s the irony of the current labor market. The slow pace of job growth has actually hastened the decline in the unemployment rate. Once the economy starts adding more jobs and people are compelled to restart their job search, the unemployment rate may stagnate, if not rise. This is what Jan Hatzius, chief economist at Goldman Sachs, thinks is going to happen in 2013. “I’m surprised at how quickly the participation rate declined this year,” says Hatzius. “Our models say it should stabilize, if not rise, next year.” Which is why he foresees a slowdown in the decline in the unemployment rate through 2013. Not because the economy will be worse off, but because it will be better.

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Say Hello to Higher Taxes: Why Neither Party Wants a Deal

With five days to go until the fiscal cliff, Republicans and Democrats are displaying as much effort as New York Jets quarterback Mark Sanchez in the latter stages of a typical four-interception blowout—which is to say, none whatsoever. They can barely bestir themselves to maintain the pretense that they’re working to avoid the $ 600 billion of tax hikes and spending cuts due to arrive next week.

President Obama is flying back from Hawaii tonight to keep up appearances. But almost nobody expects a deal before Jan. 1. Negotiations essentially ended after John Boehner’s Plan B fell apart last week. As the Wall Street Journal put it this morning, “the parties are engaged in a political staring contest.” Sounds productive.

One reason nothing is happening could be that, at this point, both parties secretly want to go over the cliff. As the political scientist Jonathan Bernstein noted:

[N]ot only do liberals believe that the expiration of Bush-era tax rates gives them a bargaining advantage, but many Republicans may well prefer that outcome as well. I think if there was any information generated by the Plan B fiasco, it might have been just that: some Republicans really would prefer an eventual outcome that involves relatively higher tax rates as long as they don’t have to make an affirmative vote for it.

That strikes me as exactly right, although I’d characterize the Republican motivation slightly differently. I’m not sure how many Republicans actively wish for taxes to go up. But I’m sure they all recognize that taxes will rise on Tuesday, when rates automatically revert to their Clinton-era levels. That’s why Plan B was such a heavy lift: It called on House Republicans to cast a career-threatening vote to raise taxes, when everyone knew full well that such a vote was entirely unnecessary, since the cliff would do the dirty business of raising taxes for them if they just waited a week.

Best of all, once rates reset, Republicans (and Democrats, too) would find themselves in the much more comfortable position of negotiating tax cuts for the vast majority of Americans. Given this reality, the question to ask in the days and hours leading up to the fiscal cliff is not whether the two parties will strike a deal, but why they would want to.

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In Brazil’s Favelas, a Middle Class Arises

The night before appliance retailer Casas Bahia opened in Rio de Janeiro’s largest slum, resident Joana Darc de Morandi couldn’t sleep. Shopping list in hand, Joana was first in line to get in, seven hours before some 200 people began streaming through the store’s front door. “It’s very important for the neighborhood,” Morandi, 57, says of Rocinha, the slum where she lives. “Casas Bahia being here is a show. It’s beautiful. It means everything. You can find anything you need.”

Drawn by improved security, rising incomes, and a booming credit market, Brazil’s big retailers are opening shop in the favelas, the hillside shantytowns once viewed by most Brazilians as no-go areas. About 56 percent of the 12 million people who live in slums such as Rocinha were considered middle class in 2011, up from 29 percent in 2001, according to a study this year by Instituto Data Popular, a São Paulo-based research group. As reforms have taken hold over the last 10 years, the economy has created many more jobs than before, giving inhabitants of the favelas a chance to work. Unemployment in Brazil dropped to 5.3 percent in October, less than half the level a decade earlier. A stepped-up government aid program that paid the poor to keep their children in school, among other things, also boosted income. Today, Rio’s favelas have an economy worth 13 billion reais ($ 6.1 billion), according to the Data Popular study.

Casas Bahia’s Rocinha location sold 10 times more during its Nov. 6 opening than an average store takes in on a typical day. The chain will open its third favela location next year, says Roberto Fulcherberguer, vice president of Via Varejo, which operates the Casas Bahia brand. The company’s competitor, Ricardo Eletro, opened its first Rocinha store in October 2011.

A linchpin of the expansion has been Rio’s so-called pacification community policing strategy, Fulcherberguer says. Special forces last year took control of Rocinha and expelled or arrested drug gangs that controlled the slum of 69,000, which sprawls above the city’s wealthiest beachside neighborhoods, including Ipanema. Rocinha was the 28th favela to be pacified in Rio since 2008, and 12 more are scheduled to be occupied before the city hosts matches of the 2014 FIFA World Cup.

“We are already looking for properties, either to rent or to buy, in any community that has been pacified and where there is protection by police or the army,” Michael Klein, Via Varejo’s chairman, told reporters at the opening of the Rocinha store. “The more communities that are pacified, the more Casas Bahia stores we’ll have.” Sales in the first three quarters of 2012 from Via Varejo’s stores were up 9.1 percent from a year earlier, according to financial results released Oct. 31. The company expects 70 percent of its growth to come from Casas Bahia stores in the northeast, one of the country’s poorest regions, Fulcherberguer says.

A challenge for retailers could arise as more homes in the favelas are formally connected to the power grid. Utilities are working to turn families that tap illegally into the electrical system into regular customers. The problem is that legitimate electric power is much more expensive than illegally obtained power. Families that switch to normal electricity service may not be able to afford appliances that need a lot of power to run, says Marcelo Neri, an economist who studies poverty.

Morandi’s not concerned about having enough electricity to power the blender, mixer, fan, and coffeemaker she bought at Casas Bahia. She paid for her goods in two installments, which means she probably paid interest in the high double digits. That didn’t bother her either. Until recently she wanted to leave her favela; she’s changed her mind. “We were missing Casas Bahia, and now we’ve got that,” Morandi says. “Rocinha is marvelous.”

The bottom line: If the slums of Rio were a separate economy, they would have a GDP worth $ 6 billion—an attention-getting number for chain stores.

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Norway minister’s EU exit warning

23 December 2012 Last updated at 09:08 ET

Norway’s foreign minister has urged the UK to assess the advantages of staying in the European Union, rather than consider leaving.

Norway is not in the EU but has access to the single market. UK Eurosceptics use it as a model for how the UK could relate to the EU from outside.

But Foreign Minister Espen Eide said Oslo had “limited scope for influence”.

“We are not at the table when decisions are made,” he told Radio 4′s The World This Weekend.

Mr Eide is pro-EU, though Norwegian voters have twice rejected the chance to join the EU in referendums in 1972 and 1994.

Sir Nigel Sheinwald, a former UK ambassador to the US and to the European Union, said: “The issue is – do you want to be part of the single market? All the economic indicators are that the UK needs to be.

“But [the Norwegians] have no role in negotiations… they have no impact, no influence and there’s no accountability. So this is regulation without representation.

“It’s the first thing the UK needs to decide, whether it wants to be associated with the single market, from the inside or the outside.

“If on the outside, both the Swiss and the Norwegian models give you no actual impact on the substance of what’s agreed.”

Conservative MEP Daniel Hannan said he was “not aware of any British Eurosceptics who are arguing that we should precisely replicate the Norwegian model”.

He added: “What we’re after is something a bit more like what the Swiss have, but actually I think we could get better terms than either Norway or Switzerland.”

Prime Minister David Cameron has consistently said he supports Britain’s continued membership.

He has hinted, however, at a possible referendum to allow the British people the opportunity to give their “fresh consent” on the issue.

Mr Cameron is expected to give a much delayed speech on Europe early in the new year.

The World This Weekend was broadcast on Radio 4 at 13:00 GMT on Sunday.

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Working-class neighborhood in Madrid wins “El Gordo” lottery

MADRID (Reuters) – Unemployed Spaniards in a highly indebted commuter town in the outskirts of Madrid celebrated with joy after sharing the top prize in “El Gordo“, the world’s biggest lottery.

The 200-year-old Christmas draw doled out more than 2.5 billion euros ($ 3.3 billion) in prizes, with a top individual prize of 4 million euros. The smallest ticket, known as a “decimo” wins a tenth of the prize and costs 20 euros.

Millions of Spaniards living through tough economic times had hoped to pocket part of “The Fat One” although spending in the Christmas lottery dipped heavily this year.

Winning in 2012 was particularly sweet, not just because Spain is suffering its second recession in three years and one in four of the workforce is jobless, but also because 2012 is the last year winners will pay no tax on their takings.

Spain’s centre-right government, which has introduced austerity measures this year to shrink its public deficit, ruled that from next year those who win over 2,500 euros will pay 20 percent to the state.

Javier Hernando, a middle-aged owner of a bar in Alcala de Henares, 35 km (20 miles) northeast of Madrid, said the prize would allow him to look at life differently, as European authorities press countries on the periphery of the euro zone to raise the age of retirement.

Luis, a 28-year-old unemployed electrician, said he would spend the money on buying a flat.

The lottery tickets are sold in thousands of official kiosks across Spain and local bars and shops often sell decimos. This year over 27 million individual prizes will be awarded.

The lottery, which dates back to 1812, is an important Christmas tradition in Spain, with many families, offices and bar regulars clubbing together to buy a full ticket for 200 euros.

Sales dipped 8 percent this year to 2.47 billion euros compared to a 0.5 percent drop in 2011.

“It is no wonder that sales have gone down taking into account the economic situation we are going through. We are in crisis, people are out of work and have no income,” said a spokeswoman for the National Lottery.

Those who did not win big in El Gordo can look forward to the El Nino lottery on January 6, or Epiphany, when Spaniards traditionally give presents to children. That lottery will award 840 million euros, though winners will have to pay tax. ($ 1 = 0.7555 euros)

(Reporting by Clare Kane and Jesus Aguado,; additional reporting by Iciar Reinlein and Silvio Castellanos; Editing by Stephen Powell)

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Boehner: Still hope on cliff deal

21 December 2012 Last updated at 12:09 ET

John Boehner: “It is not the outcome I wanted, but it was the will of the House”

Republicans will keep working to avoid the so-called “fiscal cliff” of tax rises and spending cuts, House Speaker John Boehner has said.

Earlier, right-leaning Republicans rejected a plan by Mr Boehner to raise taxes on higher earners.

Mr Boehner said his party would keep working to break the deadlock but “significant spending cuts and real tax reforms” were needed.

The White House said it would work with Congress to strike a deal.

Analysts say the rejection has weakened Mr Boehner’s position in negotiations with the Obama administration.

Mr Boehner’s plan would have had little chance of passing a Senate vote, but was seen as an effort to tell the US public that the Republicans should not be blamed if a deal could not be reached ahead of the 1 January deadline.

The House is controlled by the Republicans, but the Senate is Democrat-led.

‘God only knows‘

Continue reading the main story

“Start Quote

What happens now depends on whether President Obama’s foot soldiers are as willing to play chicken with the recovery as Mr Boehner’s troops seem to be”

End Quote

At a press conference, Mr Boehner conceded the House’s failure to take up the tax bill was “not the outcome that I wanted”.

He admitted that “God only knows” how the cliff would be avoided but Republicans would keep working on a plan to protect families and small businesses.

He added: “We only run the House. Democrats continue to run Washington.”

If politicians fail to agree new fiscal rules by the end year, steep tax rises and deep spending cuts are meant to take effect automatically.

Analysts say the resulting “fiscal cliff” could take the US into recession.

Despite the failure of Mr Boehner’s proposal, major European stock markets fell, but by only about 0.5%, as most analysts had expected this to be a long drawn-out process.

The White House said President Barack Obama would work with Congress “to get this done”.

“We are hopeful that we will be able to find a bipartisan solution quickly that protects the middle class and our economy,” it said.

Continue reading the main story

What is the fiscal cliff?

• On 1 January 2013, tax increases and huge spending cuts are due to come into force – the so-called fiscal cliff


• Deadline was put in place in 2011 to force president and Congress to agree ways to save money over the next 10 years


• Fear is that raising taxes while massively cutting spending will have huge impact on households and businesses


• Experts believe it could push the US into recession, and have a global impact on growth

The House of Representatives is not expected to meet until after Christmas, while the Senate was due to meet only briefly on Friday.

Although Mr Boehner’s proposal would have ensured a tax cut for 99.8% of Americans, it would have imposed a rise on those earning more than $ 1m (£600,000).

Mr Boehner said he had been unable to garner sufficient votes to secure passage of the bill.

Mr Obama initially sought tax rises for those earning more than $ 250,000, but later offered a compromise threshold of $ 400,000.

He also offered a change to the way Social Security cost of living adjustments are made for some recipients, cuts from government healthcare programmes and a two-year extension of the debt ceiling.

‘Non-starters’

Mr Boehner announced his bill on Tuesday, saying he would bring forward a measure that extended Bush-era tax cuts for those earning less than $ 1m per year – but would not address the automatic spending cuts.

Continue reading the main story

“Start Quote

Mr Boehner has no alternative but to return to negotiations with Obama, his moral authority shredded but his bargaining hand curiously strengthened”

End Quote

On Wednesday, the Republican leadership added a companion bill that would replace the automatic cuts with a proposal to remove cuts from defence and government operating budgets. They would be offset by reductions elsewhere in the budget.

The proposal would cut food stamps, benefits for federal workers and some social services programmes.

That bill was narrowly passed.

Senate Majority Leader Harry Reid said Mr Boehner’s plans were “non-starters in the Senate”, while White House spokesman Jay Carney called them a “multi-day exercise in futility at a time when we do not have the luxury of exercises in futility”.

Analysts have painted a grim picture of the consequences of going over the cliff, with some warning that the impact could push the US back into recession.

The Organisation for Economic Co-operation and Development (OECD) said in its latest economic outlook that the recession from the cliff could become global.

Changing taxation across the years
Tax year	1993-2000	2001	2002	2003-2008	2009-2012	2012 tax brackets	2013 scenarios
Source: Tax Foundation, IRS Tax brackets shown for unmarried individuals
President	Bill Clinton	George W Bush			Barack Obama		Tax cuts expire	Tax cuts expire for top incomes
Bottom rate	15%	15%	10%	10%	10%	Up to $ 8,700	15%	10%
			15%	15%	15%	$ 8,700-$ 35,350		15%
	28%	27.5%	27%	25%	25%	$ 35,350- $ 85,650	28%	25%
	31%	30.5%	30%	28%	28%	$ 85,650- $ 178,650	31%	28%
	36%	35.5%	35%	33%	33%	$ 178,650-$ 388,350	36%	33%
								36%
Top rate	39.6%	39.1%	38.6%	35%	35%	Over $ 388,350	39.6%	39.6%

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IntercontinentalExchange buys NYSE Euronext for $8 billion

NEW YORK/LONDON (Reuters) – IntercontinentalExchange struck an $ 8.2 billion deal to buy NYSE Euronext, a combination that will propel the commodities market powerhouse into European financial futures but threaten to further reduce the clout of the New York Stock Exchange.

The deal will create a new player in global derivatives trading and clearing that would take on CME Group Inc. While the New York Stock Exchange has stood for 200 years as an iconic symbol of U.S. capitalism, it is almost an afterthought in this deal.

Atlanta-based ICE said it will try to spin off the Euronext European stock market businesses in a public offering, generating speculation it may eventually shutter the NYSE‘s trading floor, as well. Profits from stock trading have been significantly eroded by new technology and the rise of private venues run by Wall Street banks and brokers.

Analysts said the deal will give ICE a strategic boost with control of Liffe, Europe’s second-largest derivatives market, helping it compete against U.S.-based CME Group, owner of the Chicago Board of Trade. Derivatives trading remains quite profitable for the exchanges and new rules coming into play next year will dramatically expand the demand for clearing over-the-counter contracts.

Regulatory concerns sank two deals to buy NYSE Euronext last year, including a joint bid by ICE and Nasdaq OMX Group and a separate bid from German exchange Deutsche Bourse. But ICE alone has far less overlapping business and should face easy approvals, antitrust attorneys said.

The deal values each NYSE Euronext share at $ 33.12, a 28 percent premium to the stock’s closing price on Wednesday. Shareholders will have the option of accepting $ 33.12 in cash per NYSE Euronext share or 0.2581 ICE share or a mix of $ 11.27 in cash and 0.1703 ICE share, subject to a maximum cash consideration of $ 2.7 billion..

NYSE Euronext stock rose 33 percent, to $ 31.88, after the deal was announced. ICE’s shares fell as much as 4 percent before clawing back some of the losses to trade down 0.6 percent, at $ 127.60, at 01:10 p.m. ET.

ICE said it would pay an annual dividend of $ 300 million once the deal closes.

NYSE Chief Executive Duncan Niederauer called the deal a “no brainer” on a call with analysts on Thursday. Further consolidation of exchanges was “inevitable” and ICE was a “great partner,” he said, so continuing on alone did not make sense.

“We can sit here and keep slugging away and keep working hard, but the bottom line is we had not delivered, in my mind, sufficient returns to shareholders,” Niederauer said.

Before the latest ICE offer emerged, NYSE Euronext‘s shares had fallen by nearly a third since ICE and Nasdaq launched their thwarted joint bid.

The newest offer first took shape in October when ICE Chairman and Chief Executive Jeff Sprecher, a consummate deal maker, called Niederauer to consider reviving their talks without the Nasdaq involved, said one person familiar with the situation who was not authorized to speak to the press.

ICE started out as an online marketplace for energy trading before Sprecher initiated a string of acquisitions from the London-based International Petroleum Exchange in 2001, to the New York Board of Trade and, most recently, a handful of smaller deals, including a climate exchange and a stake in a Brazilian clearing house.

A tie-up with Liffe would give Sprecher a boost to trade in to interest rates, one of the world’s biggest asset classes and a particular specialty of CME. Liffe and CME have a long-time rivalry in trading of short-term interest-rate contracts, with each launching – to little effect – look-alike versions of the other’s contracts. The CME declined to comment on the proposed deal.

“ICE is after Liffe, that is the crown jewel of NYSE Euronext,” said Peter Lenardos, analyst at RBC Capital Markets. NYSE bought Euronext, including Liffe, for 8 billion euros in 2007. “Strategically it makes sense for ICE to enter the European derivatives space in a meaningful way.”

ICE’s current main operations are in energy futures trading and, it has steered clear of stocks and stock-options trading, key businesses for NYSE Euronext. So there is not much business overlap between the two groups compared with last year’s proposed takeovers.

“This deal is probably not going to generate a lot of concern from an antitrust perspective,” said Warren Rosborough, a veteran of the U.S. Justice Department’s antitrust division who is now with the law firm McDermott Will & Emery.

A small amount of competing derivatives business could be addressed with straightforward divestitures, he said. “It’s an open question about whether it will generate questions,” he said. “If there is a fix, it will be relatively easy fix.”

Sprecher, who will be chairman and CEO of the combined company, said the deal had been “well received” by regulators after he and Niederauer completed a “whirlwind tour” in the United States and Europe ahead of Thursday’s announcement. Officials at the European Commission and the U.S. Securities and Exchange Commission declined to comment.

Last year, the Justice Department blocked a $ 11 billion joint hostile bid by ICE and Nasdaq OMX on concerns the tie-up would dominate U.S. stock listings. A rival $ 9.3 billion bid by Deutsche Boerse fell afoul of European regulators.

A combined ICE-NYSE Euronext would leap-frog Deutsche Boerse to become the world’s third-largest exchange group with a combined market value of $ 15.2 billion. CME Group has a market value of $ 17.5 billion, Thomson Reuters data shows.

Hong Kong Exchanges and Clearing is the world’s largest exchange group with a market cap of $ 19.5 billion.

ICE said it expected to achieve $ 450 million in cost savings from the takeover. In the first year after the deal closes, additional earnings of 15 percent are expected.

Long-time Wall Street traders saw the potential takeover of the venerable stock exchange by a 12-year-old derivatives upstart as weighted with symbolism.

“It’s the end of an era,” said a director on the board of a rival exchange who did not have clearance to speak to the press and asked not to be named. “I think ultimately the floor will be closed, because Jeff (Sprecher) has shut every floor he’s ever had,” the person said.

The exchange was prepared to shut down the floor temporarily during superstorm Sandy and trade completely electronically, Wall Street executives said.

But one former New York Stock Exchange executive was doubtful that ICE would completely shut down the NYSE floor. “It has too strong a marketing brand associated with it to close it,” said the executive, who declined to be identified because he is not permitted to speak to the press.

Morgan Stanley was the lead financial adviser to ICE, with assistance from BMO Capital Markets Corp, Broadhaven Capital Partners, JPMorgan Chase & Co, Lazard Group LLC, Societe Generale Corporate & Investment Banking, and Wells Fargo Securities LLC. ICE legal advisers are Sullivan & Cromwell LLP and Shearman & Sterling LLP.

The principal financial advisers to NYSE Euronext are Perella Weinberg Partners and BNP Paribas. Further financial advice to NYSE Euronext is being provided by Blackstone Advisory Partners, Citigroup, Goldman Sachs & Co. and Moelis & Co. Legal advisers to NYSE Euronext are Wachtell, Lipton, Rosen & Katz, Slaughter & May, and Stibbe NV.

(Additional reporting by Luke Jeffs and David Brough in London, Jessica Toonkel, Diane Bartz and Karen Brettell in New York, Sarah N. Lynch in Washington and Ann Saphir in Chicago; writing by Carmel Crimmins and Aaron Pressman; editing by Philippa Fletcher)

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Bank chief house costs to be paid

19 December 2012 Last updated at 08:39 ET

Mark Carney, the next head of the Bank of England, will be paid £250,000 in housing costs in addition to his salary and pension costs.

He will receive the money on top of his annual £480,000 salary and a yearly pension allowance of £144,000.

The housing allowance will be taxed at the new top rate of tax of 45%, which will be in place by the time he takes up his post next July,

Mr Carney is currently the head of the Bank of Canada.

A housing allowance was agreed as part of the package to tempt Mr Carney, who lives with his wife and four children, from his current post in Canada, but has only just been signed off by the non-executive directors of the Bank of England.

The allowance is designed to help him maintain a similar lifestyle to his current one in Ottawa, where he has a spacious family house near the Bank of Canada’s headquarters.

Continue reading the main story

What may stir controversy is that Mr Carney’s package protects him from the kind of gyrations in the economy that it will be his role to temper”

End Quote

Mr Carney’s salary itself is well above the £305,000 paid to the current governor of the Bank of England, Sir Mervyn King.

The Bank says this reflects in part the increased role the next governor will be faced with, as the Bank is taking over most of the UK’s bank regulation from the Financial Services Authority next year.

The Chancellor, George Osborne, spent months trying to court Mr Carney to take the post as Bank chief.

Mr Carney had gone on record as saying he was not interested in the post, but was persuaded to change his mind by Mr Osborne.

Part of the deal included allowing Mr Carney to serve just five years as Bank governor, rather than the eight-year term normally served in that position.

BBC News – Business

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Only balanced plan to avoid “cliff” is Obama’s: White House

WASHINGTON (Reuters) – The only proposal that avoids the year-end U.S. “fiscal cliff” in a balanced manner is the one President Barack Obama has put forward, White House spokesman Jay Carney said on Monday.

“The only plan that we have seen that achieves the size and the balance that’s required for sustainable – for long-term deficit reduction and for putting our economy on a sustainable fiscal path, is the president’s,” Carney told reporters at a briefing.

Carney had been asked to comment on reports of a proposal from House of Representatives Speaker John Boehner, a Republican, that would allow top tax rates to rise in exchange for cuts to entitlement programs.

(Reporting By Mark Felsenthal; Editing by Eric Walsh)

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Craft Brewers Threatened by Big Beer Brands

American craft brewers love to talk about how they’re stealing market share from the big beer companies, such as MillerCoors and Anheuser-Busch InBev (BUD). In the first half of the year, craft beer sales rose 14 percent, in dollar terms, according to the trade group Brewers Association. Their larger competitors can only dream of such gains in the U.S.

Craft brewers, however, are increasingly worried about how the world’s two largest beer companies are attempting to counter their growth by making beers that appear to be craft products—like MillerCoors’s Blue Moon and AB InBev’s Shock Top—with no indication on their labels that they’re produced by large multinational corporations.

Today the craft brewing industry called out the big guys in an op-ed piece in the St. Louis Post-Dispatch, the hometown newspaper of AB InBev’s North American division. It was written by Charlie Papazian and Bob Pease, the president and chief operating officer, respectively, of the Brewers Association, and Dan Kopman, co-founder of Schlafly Beer, a small independent brewer in St. Louis.

Here’s what they had to say:

Noting the expansion of the craft brewers’ niche and also that many beer drinkers are turning away from the mass-produced light lagers that they are historically known for, the large brewers started producing their own craft-like beers. However, they don’t label these faux-craft beers as products of AB InBev and MillerCoors. So if you are drinking a Blue Moon Belgian Wheat Beer, you are not told it is an SABMiller product. If you crack open a Shock Top, you are not told this brand is 100 percent owned by AB InBev. The large brewers also have bought or own 100 percent of smaller breweries like Goose Island, Leinenkugel and Henry Weinhard. They own significant equity stakes in Red Hook, Widmer and Kona breweries. They sell these beers through their strong distribution channels, but market these faux-craft beers as if they were from independent, locally owned craft breweries.

In an interview, Kopman told Bloomberg Businessweek that all brewers should label their products so consumers aren’t mislead about a beer’s origin. “We definitely need to discuss this as an industry,” he said. “We need to have an agreed-upon standard for transparency where you are a multinational or an independent.”

This craft industry’s increasing aggressiveness comes at a sensitive time for AB InBev. The Belgium-based company that bought Anheuser-Busch in 2008 is now seeking the approval of the U.S. Department of Justice to complete the purchase of Grupo Modelo (GMODELOC). The last thing it needs is the small American brewers complaining that it’s trying to undermine their growth. That doesn’t seem to have escaped the craft industry either.

Businessweek.com — Top News

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US prices fall on cheaper petrol

14 December 2012 Last updated at 10:02 ET

US consumers prices fell in November due to a sharp drop in petrol prices, according to official figures, as inflation in the economy remained weak.

The consumer price index fell 0.3% from October, the first decline since May, the US Labor Department said.

The gasoline index fell 7.4% in November, which more than offset gains in prices elsewhere.

Stripping out food and energy costs, “core” prices rose by 0.1% in November, the figures showed.

Over the past year, consumer prices have risen 1.8%, while core prices have increased by 1.9%.

The US economy remains fragile and, earlier this week, the US central bank pledged to continue buying bonds to keep actual borrowing rates low until the labour market outlook improves substantially.

Though the unemployment rate fell to a four-year low of 7.7% in November, statistics suggest that much of the decline in the jobless rate since 2008 has been due to people dropping out of the workforce, either due to retirement or because they have given up seeking work.

The Federal Reserve also cut its economic outlook. It now expects the economy to grow between 1.7-1.8% this year, down from 1.7-2.0% it previously expected.

The latest data came against the backdrop of the looming “fiscal cliff” – the tax increases and spending cuts due to be implemented in January if Congress and the White House do not strike a deal.

The Fed chief said last month that all of the changes would “pose a substantial threat to the recovery”.

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Fiat CEO: plan to buy Chrysler shares

NEW YORK (Reuters) – Italian carmaker Fiat SpA fully intends to acquire the 41.5 percent of Chrysler Group shares that it does not now own, but wrangling over the price could continue for a while, Fiat-Chrysler chief Sergio Marchionne said on Friday.

Fiat is in arbitration proceedings with the owner of the shares, a United Auto Workers trust fund that pays medical benefits to retired workers. The trust fund acquired the shares during the U.S. government-sponsored bankruptcy and bailout of Chrysler in 2009, when Fiat gained an ownership stake and management control of the U.S. automaker.

“We’ve always taken the position that we would have to pay them, but the question is price,” said Marchionne, speaking on the sidelines of a meeting of the Council for the United States and Italy, an international-relations group. The current arbitration proceedings, he added, are “part of the dance”.

If, as industry experts predict, the two sides cannot agree on a price by year-end, the trust fund can begin the process that would lead to an initial public offering of its shares, potentially depriving Fiat of its goal of gaining full ownership of Chrysler.

However, the IPO process would take months to meet regulatory and other requirements, and a settlement could be reached during that time.

UBS estimates the fair value of Chrysler at between $ 9 billion and $ 13.4 billion, meaning the trust fund’s 41.5 percent stake is worth between $ 4.1 billion and $ 5.5 billion.

Fiat and the health care trust are battling in a Delaware court over a 3.32 percent piece of Chrysler. Fiat is able to purchase up to 16.4 percent of Chrysler in this piecemeal fashion over the next three-and-a-half years. Chrysler has offered about half of what the health care trust believes the 3.32 percent stake is worth.

When Chrysler exited its 2009 bankruptcy, Fiat took a 20-percent ownership and has increased that since to the current 58.5 percent of the No. 3 U.S. automaker.

The system for Fiat to buy tranches of Chrysler for a total of 16.4 percent of the U.S. automaker was also part of that bankruptcy agreement. Fiat says it has used a formula for setting its price for the first tranche of those shares, and the trust wants more than double that figure. The full 16.4 percent of Chrysler to be purchased in this manner would total, Fiat says, $ 754 million, while the trust wants $ 1.7 billion.

Fiat earlier rebutted a report that it was set to raise money to finance its purchase of a further stake in Chrysler, saying it had no need for extra funds.

Its comment came after an unsourced report in Il Messaggero said Fiat was sounding out UniCredit , Morgan Stanley , Bank of America and Goldman Sachs about the possibility of raising between 1 and 2 billion euros ($ 1.3-$ 2.6 billion).

(Reporting by Paul Ingrassia; Editing by Dale Hudson)

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Fed sends clearer signal on keeping rates low

WASHINGTON (AP) — The Federal Reserve sent its clearest signal to date Wednesday that it will keep interest rates super-low to boost the U.S. economy even after the job market has improved significantly.

The Fed says it plans to keep its key short-term rate near zero at least until the unemployment rate drops below 6.5 percent — as long as expected inflation remains no more than 2.5 percent. Unemployment is now 7.7 percent. Annual inflation is about 2 percent.

That plan adds detail to what the Fed had said before: that it expects to keep the rate low until at least mid-2015.

In a statement Wednesday after its final policy meeting of the year, the Fed also said it will keep spending $ 85 billion a month on bond purchases to drive down long-term borrowing costs and stimulate economic growth.

The Fed will spend $ 45 billion a month on long-term Treasury purchases to replace a previous bond-purchase program of an equal size. And it will keep buying $ 40 billion a month in mortgage bonds.

“The Fed has become more explicit and more transparent,” said Steven Wood, chief economist at Insight Economics. “This should provide the markets with much more clarity around monetary policy action in the upcoming year.”

With its new purchases of long-term Treasurys, the Fed’s investment portfolio, which is nearly $ 3 trillion, would swell to nearly $ 4 trillion by the end of 2013 if its bond purchase programs remain in place.

The policies are intended to help an economy that the Fed says is growing only modestly.

Stocks and bond yields rose after the Fed’s statement was released. The Dow Jones industrial average was little changed just before the Fed news crossed at 12:30 p.m. Eastern time and jumped 69 points shortly after.

The yield on the benchmark 10-year Treasury note rose to 1.69 percent from 1.65 percent as investors sold ultra-safe investments and moved money into stocks.

The Fed’s plan to keep stimulating the economy at least until unemployment has reached 6.5 percent is intended to reassure consumers, companies and investors, said Joseph Gagnon, a former Fed official who is a senior fellow at the Peterson Institute for International Economics.

Having only a target date of mid-2015 for any increase in interest rates “sounded gloomy,” as if the economy would remain weak until then, Gagnon said. Specifying an unemployment rate — close to a normal rate of 6 percent or less — makes clear that the Fed will keep stimulating the economy even after the job market has strengthened.

“This is trying to get away from that sense of ‘Oh, my God, this is all about gloom and doom,’ ” Gagnon said.

The Fed’s new plan to link any rate increase to specific levels of unemployment and inflation mirrors a proposal pushed by Charles Evans, president of the Federal Reserve Bank of Chicago.

Updated forecasts that the Fed released Wednesday illustrate why it thinks it should continue stimulating the economy. It expects unemployment to remain at least 7.4 percent next year and 6.8 percent by the end of 2014. The earliest it sees unemployment dropping below 6.5 percent is the end of 2015.

It expects the economy to grow no more than 3 percent next year before picking up to 3.5 percent in 2014 and 3.7 percent in 2015.

The Fed said it can pursue the aggressive stimulus programs because inflation remains below its target. Its statement was approved on an 11-1 vote. Jeffrey Lacker, president of Federal Reserve Bank of Richmond, objected for the eighth time this year.

The meeting was held against the backdrop of the looming “fiscal cliff,” the sharp tax increases and spending cuts that will hit the economy in January if Congress and President Barack Obama are unable to reach an agreement this month to avert them.

Bernanke has said that the Fed’s efforts will not be able to rescue the economy if the budget negotiations fail and the country does go over the fiscal cliff.

Fears of the cliff have led some U.S. companies to delay expanding, investing and hiring. Manufacturing has slumped. Consumers have cut back on spending. Unemployment remains elevated. If higher taxes and government spending cuts were to last for much of 2013, most experts say the economy would sink into another recession.

The latest bond-buying program would replace an expiring program called Operation Twist. With Twist, the Fed sold $ 45 billion a month in short-term Treasurys and used the proceeds to buy the same amount in longer-term Treasurys.

Twist didn’t expand the Fed’s investment portfolio, it just reshuffled the holdings. But the Fed has run out of short-term securities to sell. So to maintain its pace of long-term Treasury purchases and to keep long-term rates low, it must spend more and increase its portfolio.

The Fed’s portfolio totals nearly $ 2.9 trillion — more than three times its size before the 2008 financial crisis.

The Fed has launched three rounds of bond purchases since the financial crisis hit. In announcing a third program in September, the Fed said it would keep buying mortgage bonds until the job market improved substantially.

Skeptics note that rates on mortgages and many other loans are already at or near all-time lows. So any further declines in rates engineered by the Fed might offer little economic benefit.

Inside and outside the Fed, a debate has raged over whether the Fed’s actions have helped support the economy over the past four years, whether they will ignite inflation later and whether they should be extended.

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Petrol strike threatens to cause chaos and hit economy in Italy

ROME (Reuters) – Italian petrol stations began a 60-hour strike late on Tuesday to protest against rising costs and falling profits, causing long queues as drivers rushed to fill up before pumps closed.

Hitting at the peak shopping period before Christmas, the strike comes at unwelcome time for retailers. Weak consumer spending has been a key factor in Italy‘s sluggish economy, which has been dipping in and out of recession since 2008.

“It is incredible, with all that petrol costs us nowadays, that they can even think of going on strike,” Rome resident Ida Lauro said as she queued in her car.

Unions have agreed to maintain minimum service on motorways, with at least one station open every 100 km (62 miles).

In a joint statement, unions said they called the strike to combat “a true aggression against the roughly 24,000 small businesses and 120,000 workers in the sector”.

They say oil companies have forced stations to absorb the costs of discounting campaigns, allowing them a profit of just one euro for every 100 euros ($ 130) or 55 liters of petrol sold.

Oil distributors in Italy Esso and Shell were not immediately available for comment. A government attempt to come to an agreement with the unions this week fell through.

Workers will demonstrate outside government buildings in Rome on Wednesday to pressure the state to intervene.

The strike will end on Friday morning on ordinary roads and late on Thursday on motorways.

Between December 17 and 22 the petrol stations will refuse to pay oil companies for refills. Then, between Christmas and New Year, they will refuse credit and debit card payments in protest at bank charges on electronic payments.

Mario Monti‘s technocrat government has cut spending and raised taxes since it was appointed last year to pull Italy out of a debt crisis, and is the focus of increasing protests.

The government was thrown into crisis last week when the party of former Prime Minister Silvio Berlusconi withdrew its support, prompting Monti to announce he would resign once the 2013 budget bill is passed before Christmas.

(Reporting by Eleanor Biles and Naomi O’Leary)

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Wall St Week Ahead: “Cliff” worries may drive tax selling

NEW YORK (Reuters) – Investors typically sell stocks to cut their losses at year end. But worries about the “fiscal cliff” – and the possibility of higher taxes in 2013 – may act as the greatest incentive to sell both winners and losers by December 31.

The $ 600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-related selling even more appealing than usual.

Tax-related selling may be behind the weaker trend in the shares of market leader Apple , analysts said. The stock is down 20 percent for the quarter, but it’s still up nearly 32 percent for the year.

Apple dropped 8.9 percent in the past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one’s tax bill is going to jump sharply just because the calendar changes.

“Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

“You have a lot of high-net-worth individuals in taxable accounts, and that could be what’s affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual.”

Of this year’s top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.

The rush to avoid higher taxes on portfolio gains could cause additional weakness.

The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.

A PAIN PILL FROM THE FED?

This week’s Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. EST on Wednesday after the conclusion of the meeting – the Fed’s last one for the year.

Friday’s jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that superstorm Sandy had hit the labor market hard.

“After the FOMC meeting, I think it’s going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely,” said Mohannad Aama, managing director of Beam Capital Management LLC in New York.

“I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year,” he said.

MORE VOLUME AND VOLATILITY

Volume could increase as investors try to shift positions before year end, some analysts said.

While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade’s chief derivatives strategist.

Volatility could pick up as well, and some of that is already being seen in Apple’s stock.

“The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple’s volatility to carry over into the market volatility,” said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.

Shares of Apple, the largest U.S. company by market value, on Friday registered their worst week since May 2010. In another bearish sign, the stock’s 50-day moving average fell to $ 599.52 – below its 200-day moving average at $ 601.38.

“There’s a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple,” Aama said.

If tax rates are going up, an investor would sell now to book gains and pay lower capital gains taxes, according to Aama. But if an investor has capital losses, then “you take losses and have them count against capital gains or regular income if you do not have any offsetting capital gains.

“In essence, higher capital gains tax rates will give your losses a higher value next year than this year as the income tax shield will be worth more in 2013. So if you have no capital gains this year, you are better off holding off on selling your losers in 2012 and waiting till 2013,” he said in an email.

While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia announced a special dividend of 52 cents a share to be paid on December 28.

To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.

Even with stocks’ recent declines, the three major U.S. stock indexes are still up for the year. The Dow Jones industrial average <.dji> is up 7.7 percent for 2012 so far, while the benchmark Standard & Poor’s 500 index <.spx> is up 12.8 percent and the Nasdaq Composite Index <.ixic> is up 14.3 percent for the year to date.</.ixic></.spx></.dji>

Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there is a decent chance that the market could rally before the year ends.

“Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it’s hung in there in anticipation of something coming,” he said.

(Wall St Week Ahead runs every Sunday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal; Multimedia versions of Reuters Top News are now available for:; 3000 Xtra: visit Reuters Top News; BridgeStation: view story .134; For London stock market outlook please click on <.l>; Pan-European stock market outlook <.eu>; Tokyo stock market outlook <.t>)</.t></.eu></.l>

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US jobless rate at four-year low

7 December 2012 Last updated at 11:29 ET

The US added 146,000 jobs in November, official data shows, as the economy seemingly shrugged off storm Sandy.

The unexpectedly strong performance brought the unemployment rate down to a four-year low of 7.7% of the workforce.

The jobs figure was well above most analysts’ expectations and continued a recent surge that began in July.

Weekly benefits data registered a sharp but short-lived jump in the number claiming unemployment benefits in the states ravaged by the storm last month.

“Our analysis leads us to conclude that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November,” said John Galvin, acting commissioner at the Bureau of Labour Statistics (BLS), which produced the jobs report.

The jobs survey data for the individual states – which can be used by analysts to determine what effect, if any, the storm had – will not be released until 21 December.

Wobbly confidence

Stock markets gave the figures a cautiously positive response, with both the Dow Jones and S&P 500 indexes rising 0.3% at the start of trading on Wall Street.

European shares, which had been down for the day following a cut in the Bundesbank’s growth forecast for Germany, jumped about 0.5% on the news.

The US Federal Reserve is due to meet next week to decide whether to expand the central bank’s policy of buying up debt from the markets in order to stimulate the recovery.

Continue reading the main story

US government bonds fell slightly in value following the data release, suggesting that markets have lowered the expectations for further intervention by the Fed in light of the strong jobs growth figure.

However, the Fed’s Open Market Committee will also have to weigh the latest consumer confidence survey, also released on Friday, which saw a sharp fall in sentiment in early December.

The University of Michigan’s consumer sentiment index fell to 74.5 from 82.7 the previous month, reaching a level normally associated with recession, although it was still well above the 55 registered at the depth of the 2008 downturn.

The drop in confidence among ordinary Americans may reflect the impasse in Congress in negotiations to avert the “fiscal cliff” of automatic spending cuts and tax rises that kicks in on 1 January.

Consumer sentiment briefly plummeted in 2011 when the US lost its top triple-A after a similar stand-off over the raising of the legal cap on the US federal government’s ability to borrow.

Mixed message

Although the latest jobs report beat expectations, this was in large part because expectations remain very low.

The number of jobs being added by the US economy since the recession ended has been far weaker than during previous economic recoveries, and has scarcely been enough to keep up with the natural growth in the US population.

The total number of people in employment has been stuck at about 58% of the US population since 2009, well down from the 63% level that characterised the boom years of the past decade, as many Americans have retired or given up seeking work.

Moreover, the relatively good news for November was offset by the BLS’s decision to downwardly revise the jobs figures for the preceding two months by a cumulative total of 49,000.

The October figure – which was originally reported just before the elections as 171,000, prompting some Republican supporters to suggest that the numbers had been manipulated – has been cut in the latest estimate to 138,000.

However, the reduction in the October figure was actually entirely due to public sector jobs cuts – mainly at the state and local government level – being 35,000 higher than originally estimated.

“While more work remains to be done, today’s employment report provides further evidence that the US economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression,” said Alan Krueger, chairman of the White House Council of Economic Advisors.

Dropping out

The unemployment rate – which fell to 7.7% in November, down from 7.9% in October – has fallen in fits and starts over the past three years, since peaking at 10% in late 2008, but still remains some way short of the 5% level that has accompanied periods of healthy growth in the past two decades.

The total number of unemployed people remained largely unchanged in the latest month at about 12 million, as did the number of people out of work for over half a year, at 4.8 million. The number of people taking part-time jobs because they cannot find full-time work also remained unchanged at 8.2 million.

Statistics suggest that much of the decline in the unemployment rate since 2008 has been due to people dropping out of the workforce, either due to retirement or because they have given up seeking work.

The unemployment figure only includes those actively seeking a job, and once people stop doing so they drop out of the statistics.

The retail sector continued to lead the way in job creation, with professional services and IT also providing large contributions, while the construction sector, food manufacturing and chemicals saw sizeable job losses.

BBC News – Business

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Citigroup in 11,000 staff cull

5 December 2012 Last updated at 14:17 ET

Citigroup says it is cutting 11,000 jobs worldwide in an efficiency drive, with most of the jobs being lost in its consumer banking division.

The bank said the move, which will see its headcount shrink by 4%, would cost it about $ 1bn (£621m) in pre-tax charges.

Shares in the bank rose 7% following the announcement.

The move comes two months after the bank’s former chief executive, Vikram Pandit, suddenly resigned.

Michael Corbat took over from Mr Pandit as chief executive.

The bank said the $ 1bn charge would be recorded in its fourth-quarter figures for this year.

It said it would also add another $ 100m in charges to the first half profits for 2013.

Citigroup said the changes would leave it $ 900m better off in 2013 and a further $ 1.1bn the following year.

The company said that about 25% of the charges for the fourth quarter related to its securities and banking division, with another 10% in transaction services.

Another third would come from reductions in its global consumer banking division, where 6,200 positions would be cut.

Moving out

The banking group said it would be selling or scaling back consumer operations in Pakistan, Paraguay, Romania, Turkey and Uruguay.

Other countries affected by the changes would be Brazil, Hong Kong, Hungary, South Korea and the US.

It is also closing branches in Greece and Spain, countries hard-hit by the eurozone crisis.

It intends to focus on the 150 cities that have the highest growth potential in consumer banking.

After the changes, Citi said it would have more than 4,000 retail branches around the world.

At the time of Mr Pandit’s sudden departure, the bank’s chairman, Michael O’Neill, said the departure was not due to any “strategic, regulatory or operating issue”.

Mr Pandit left the bank with a settlement of more than $ 15m.

He resigned a day after Citi reported an 88% drop in quarterly profits to $ 468m.

BBC News – Business

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