Finance topics

In a sign that the global credit crisis is seeping across Canada’s borders, Bank of Canada Governor Mark Carney warned yesterday that the country "has been importantly affected by global events" and hinted that another interest rate cut may be in the offing.

Pointing to "a tightening in credit conditions," Carney said in a speech to the Canada-United Kingdom Chamber of Commerce in London that "the risks to growth and inflation in Canada identified (in October) appear to have shifted to the downside."

Carney emphasized that Canada is weathering the storm better than most major economies.

But around the world, some economists and policy makers are now anxiously considering another worrisome prospect: A deflationary spiral that could make recovery even more difficult.

Those concerns were heightened yesterday by a report that showed U.S. consumer prices plummeted by 1 per cent in October (month-over-month), the biggest one-month decline since record-keeping started.

The drop was driven by a precipitous fall in oil prices, which have lost more than 60 per cent of their value since peaking in mid-July. But core consumer prices, which exclude food and energy, also fell by 0.1 per cent last month, showing broader price declines.

U.S. Federal Reserve vice-chairman Donald Kohn said yesterday that the risk of deflation "is still small in my mind … But it is also the case that whatever I thought that risk was, four or five months ago, I think it is bigger now even if it is still small."

For consumers, the prospect of deflation – an ongoing fall in the general level of prices – might seem appealing.

Under normal circumstances, lower prices are "supposed to signal to people (that) now might be a good time to buy, and that brings about an adjustment," said Gregor Smith, an economics professor at Queen’s University.

"It encourages people to spend, and that helps sales for those companies."

But a period of deflation carries the risk of "a deflation mentality, where people, if they can, postpone purchases because they expect that prices will fall," said Michael Gregory, a senior economist at BMO Capital Markets cash in one hour.

Businesses may follow suit by postponing building plants or buying new equipment in anticipation of lower prices, creating a pernicious cycle of decreasing demand, production cuts and layoffs that can cause demand to dip even further.

Such a spiral is "very hard to break," said Gregory, pointing to the Great Depression of the 1930s, and Japan’s 10-year spiral of falling prices and economic stagnation.

While rare, he added, "it’s a low probability of something really, really bad happening, which weighs in on your policy thinking."

Some officials have publicly mused about the possibility.

"Deflation is probably the worst case for the financial sector because it is very difficult to overcome. Therefore, all central banks are going to do everything to avoid it," European Central Bank policy maker Ewald Nowotny said earlier this month.

But Smith warned not to read too much into yesterday’s U.S. consumer price figures.

"Certainly, the credit crisis … is one of the causes of a fall in demand in the economy. And that in turn can show up in some falling prices," he said.

"Whether it will really show up in deflation is still an open question. I think it’s a bit early to say based on one month’s CPI numbers."

Canada’s consumer price index for October is scheduled to be released tomorrow .

In September, annual inflation stood at 3.4 per cent, just off August’s five-year high.

Minutes from the Federal Reserve’s October meeting, released yesterday, show that officials slashed economic growth forecasts for 2009, and some believed more interest rate cuts might become necessary.

At that session, the central bank cut its key interest rate by a half a percentage point to 1 per cent.

Its next scheduled interest-rate setting meeting is Dec. 16.

The Bank of Canada is to consider its overnight rate, which sits at 2.25 per cent, on Dec. 9.

With files from the Star’s wire services

Source

For the world’s largest brewery, the sale of Labatt USA represents a small ripple in an ocean of beer.

But for brewery workers in Canada, it could mean the loss of up to 15 per cent of production in Canada within three years.

And for border-town beer drinkers, it means the future of two favourite brands, Labatt Blue and Blue Light, is in doubt.

Belgium-based InBev announced yesterday it had agreed to divest Labatt USA as part of a $52 billion (U.S.) deal to buy America’s largest brewer, Anheuser-Busch Cos.

The U.S. Department of Justice required the divestiture as a condition for approval of the larger deal.

"At this time, it’s too early to tell what the impact will be to our Canadian operations," Charlie Angelakos, a spokesperson for Labatt Brewing Company Ltd., said yesterday.

However, he confirmed the sale of Labatt USA to an unidentified third party would mean the end of production of U.S.-bound beer at Labatt’s Canadian breweries within three years.

The London, Ont.-based company said it brews all the Labatt beer sold in the U.S., which accounts for "just under" 15 per cent of Labatt’s total production in Canada.

The company declined to reveal which of Labatt’s seven breweries ships to the U.S. market, citing competitive reasons.

The breweries are in London, Ont., Edmonton, St freecreditscore. John’s, Nfld., Montreal, Halifax, Creston, B.C. and the recently acquired Lakeport Brewery in Hamilton.

Considered the best-selling Canadian brand south of the border, Labatt USA accounted for 1.7 million hectolitres of production last year.

InBev said yesterday the sale of Labatt USA would have no material impact on its earnings.

The brewer also said it has identified "a number of interested potential purchasers" but has not yet determined a fair market value for the asset.

InBev has owned Labatt since 1995.

Labatt Blue and Blue Light have less than 1 per cent of the broader U.S. market, but upstate New York accounts for 60 per cent of those sales, said Eric Shepard, executive editor of trade publication Beer Marketer’s Insights, based in Nanuet, N.Y.

In Syracuse, Buffalo and Rochester, Labatt competes head-to-head with Anheuser-Busch brands such as Bud and Bud Light. Regulators feared the merger could lead to price increases.

"This divestiture will ensure that consumers will continue to benefit from the significant competition between the merging companies in upstate New York," deputy assistant Attorney-General Deborah Garza said in a statement.

Source

Thomson Reuters Corp (TRIL.L: Quote, Profile, Research, Stock Buzz) (TRI.TO: Quote, Profile, Research, Stock Buzz) reported stronger-than-expected quarterly results as gains in its professional division more than offset slowing growth in the business that serves financial institutions, sending its shares up as much as 5.5 percent.

The news and information publisher, which was formed by Thomson Corp’s purchase of Reuters Group Plc in April, did not provide financial forecasts for 2009, but affirmed its 2008 outlook for revenue and operating profit margin.

“If you look at our average monthly net sales, they’re positive again through October and positive in the third quarter,” Chief Executive Thomas Glocer said in a phone interview. “If you want to start thinking about growth for next year, that’s a good thing.”

The company’s London shares were up 3.72 percent at 1,117 pence in late trading after trading as high as 1,135 pence.

The London shares are down nearly 30 percent since the stock began trading in April.

Third-quarter net income was $380 million, or 46 cents a share, compared with $2.97 billion or $4.61 per share a year ago. Excluding nonrecurring items, discontinued operations and other items, profit was 48 cents a share, beating the average analyst forecast of 34 cents, according to Reuters Estimates.

Pro forma revenue rose 8 percent to $3.33 billion, topping Wall Street forecasts of $3 short-term cash loans.24 billion. Pro forma figures assume the Thomson Reuters deal had closed on January 1, 2007.

“The numbers look slightly ahead,” said Alex DeGroote, a media analyst at Panmure Gordon in London, adding that Thomson Reuters was “not too bearish on ‘09 markets growth potential.”

Thomson Reuters stood by its forecast for 2008 revenue growth of 6 to 8 percent excluding currency effects, and affirmed its forecast for an underlying operating profit margin of between 19 and 21 percent.

“NOT DISCRETIONARY GOODS”

The company raised its forecast for 2008 free cashflow margin to between 13 percent and 15 percent of revenue, excluding synergy and integration costs.

“We went out in February and said, in a company where there were a million moving pieces moving into an awful market, we would do 6-8 percent growth,” Glocer said.

“The fact that we don’t have to change that is a very good thing. Ditto the margin,” he said.

“Our products are not discretionary goods,” he added on a conference call, reiterating that the markets division, which serves financial institutions, could see positive growth in 2009.

Organic revenue growth at the markets division was 5 percent in the third quarter, slowing from 7 percent in the second quarter. 

Read more

General Motors shook an already embattled auto industry Friday as it reported a huge quarterly loss that was much worse than expected and warned it is in danger of running out of cash in the coming months.

The nation’s largest automaker reported that it lost $4.2 billion, or $7.35 a share, excluding special items. That’s up from the loss $1.6 billion or $2.86 a share it reported a year earlier and was far worse than the forecast of analysts surveyed by earnings tracker Thomson Reuters, which had forecast a loss of $3.70 a share.

But the most shocking news came in its statements about its cash position. GM said it had burned through $6.9 billion during the quarter and warned that it "will approach the minimum amount necessary to operate its business" during the current quarter.

In addition, the company said that in the first half of next year its "estimated liquidity will fall significantly short" of what it needs to continue operating. It said the only thing that would save it would be a significant improvement in economic and automotive industry conditions, help from the federal government, better access to capital markets or some combination of those options.

The report was by far the most grim assessment by a company that has insisted it is not considering filing for bankruptcy court protection. While the release did not mention the threat of bankruptcy, the outlook appeared to raise the possibility of such a dramatic step.

In response to questions on a conference call after the report, CEO Rick Wagoner said he would not speculate on whether GM would need to file for bankruptcy protections.

"We’re convinced the consequences of bankruptcy would be dire and extend far beyond General Motors," Wagoner said. "We need to find a way to get through this and that’s our focus."

Shares of GM (GM, Fortune 500) fell 9% Friday to $4.36, a nearly 60-year low.

Industry experts said the incredibly weak October U.S. auto sales that GM and the rest of the industry reported Monday, coupled with Friday’s report, mean that bankruptcy for GM is a very real risk.

"I think we should be worried [about a bankruptcy] right now," said Robert Schulz, Standard & Poor’s senior auto credit analyst. "We were worried before and the relative level of worry is now heightened."

S&P cut GM’s credit rating deeper into junk bond status to a rating of CCC+ Friday afternoon, not far above the D rating that indicates default by a company.

Shelly Lombard, senior high yield analyst at Gimme Credit, an independent research firm, estimates that GM will need to get between $10 billion and $15 billion in federal assistance in order to avoid bankruptcy by 2010 and that the chance of bankruptcy without help is probably 80% to 90%.

"They didn’t want to speak the B word. It doesn’t sound like they have a lot of options if the government doesn’t step forward," she said, adding that aid for the auto industry that has already been approved by Congress amounted to "bringing a Band-Aid to a train wreck."

Both Schulz and Lombard also said that not even a federal bailout may be able to save either GM or Ford in the long-term considering the problems facing the industry.

"To the extent that they do receive some assistance, it’s more buying time rather than a fundamental solution," said Schulz.

Still, experts agreed Congress will need to take swift action to make any difference for the embattled industry.

"This is not something that can go on and be dealt with in the next year, it needs to be dealt with in the next few weeks," said Dave Cole, chairman of Michigan think-tank the Center for Automotive Research. "When your cash is gone, you’re gone."

One possible endgame scenario reported recently involved a corporate tie-up between GM and Chrysler. Wagoner, without mentioning Chrysler by name, said that GM had ended talks about a possible merger with a Detroit rival to concentrate on the cash crisis it now faces.

"While it’s fair to say we conclude this acquisition could have provided significant benefits, we’ve concluded at this particular time that it’s important we put 100% of our efforts on the immediate liquidity challenges," said Wagoner.

Chrysler issued a statement of its own after GM’s report. CEO Robert Nardelli didn’t comment about the merger talks but said Chrysler would keep looking at various options to end its ongoing losses cash advance loans.

"As an independent company, we will continue to explore multiple strategic alliances or partnerships as we investigate growth opportunities around the world that would aid in our return to profitability," he said.

GM announced a series of steps Friday designed to help it improve its cash reserves by $5 billion. Those steps included cutting another 10% of salaried employment costs, on top of the 20% cut in those costs already planned. In addition to expected staffing reductions, those white collar workers will not get their typical incentive pay next year.

The company will also cut capital spending plans by $2.4 billion in 2009, pushing back development plans for some new models. But it warned that even those steps would not be enough unless conditions improve. It did not announce any plans for additional plant closings or hourly staff cuts in its statement, however.

The company is clearly pinning much of its hopes of weathering the current downturn on an industry bailout from Washington.

"The company has engaged in discussions with various U.S. federal government agencies and congressional leaders about the … the need for immediate government funding support given the economic and credit crisis and its impact on the industry, including consumers, dealers, suppliers and manufacturers," according to a company announcement.

Wagoner joined the chief executives of Ford Motor (F, Fortune 500), privately-held Chrysler LLC, as well as the president of the United Auto Workers union Thursday afternoon in meetings with House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., to seek support for a wide-ranging bailout package. Both congressional leaders voiced support for additional help for the sector following their meetings.

Among the topics discussed were a $25 billion loan to fund union-controlled trust funds that would be set up in the coming year to cover the health care costs of retirees and their family members. Shifting about $100 billion of those costs from the automakers’ balance sheet to the trust funds was a key concession the companies won from the UAW in the 2007 labor deals.

The discussions also touched on whether the government would allow the automakers to tap the $700 billion bailout of Wall Street firms and banks that was enacted last month. Treasury has so far rejected auto industry inquiries about accessing that pool of money.

The automakers also renewed their pre-election request to double the $25 billion low-interest loan program approved by Congress to help automakers convert operations to make more fuel-efficient vehicles and meet the demands of car buyers and new federal rules.

But Wagoner said just doubling the money available under that program won’t solve the immediate cash crisis facing the industry. And for the first time, he put a dollar amount on the cash that automakers are looking for from the federal government right now.

"In the meeting yesterday we talked near-term liquidity support for the industry in the range of $25 billion," he said. "No one said yes or no to that number."

The company’s problems have been building for many years. It has not made money on its core North American auto operations since 2004, and since that time it has run up $72 billion in net losses, including this latest period.

The company did see a one-time $1.7 billion gain from a change in accounting for its obligation to pay for health care for retirees and their family. That allowed it to post a net loss of $2.5 billion, or $4.45 a share, an improvement from the net loss of $42.5 billion, or $75.12 a share a year ago when it was hit by huge special charges.

Much of the net losses in recent years have been due to non-cash charges, such as the ones a year ago. But even excluding those kinds of special charges, GM’s core auto operations in North America have lost nearly $18 billion over the course of the last 15 quarters.

GM’s announcement came on the same day that Ford Motor reported a $3 billion loss in the period, excluding special items. Even Japanese rival Toyota Motor (TM), which has a much better cash position coming into this crisis, announced Thursday that its third quarter earnings had plunged nearly 70%, as it slashed its full fiscal-year outlook by 50%. 

Source

Canadian Satellite Radio Holdings Inc. reported its annual net loss narrowed and revenues rose as the Toronto company continued to grow its satellite radio business.

The company, known as XM Canada (TSX: XSR), said Thursday it lost $74.3 million or $1.55 a share for the year ended Aug. 31. That compared with a net loss of $84.6 million or $1.78 a share for fiscal 2007.

In fiscal 2006, XM Canada lost $102.7 million.

Annual revenues rose to $39.5 million from $21.2 million.

For the fiscal fourth quarter, total revenues rose by 72 per cent to $11.8 million.

While the company is still posting big losses, CEO Michael Moskowitz said its business strategy "is working and we are making great progress towards generating long-term sustainable growth and profitability."

“XM Canada had a very successful year capped by two consecutive quarters of positive cash and our first ever quarter of pre-marketing adjusted operating profit,” Moskowitz said in a statement cheapest cash advance.

“Revenue nearly doubled due to our strong import automotive sales, a significant improvement in automotive conversion and growth from both the retail and wireless sectors.

"Top line revenue growth, together with our sharp focus on maximizing the return on investment, has significantly strengthened our financial performance and cash position. We are confident we can operate our business without having to raise additional capital.”

In Thursday trading on the TSX, XM Canada shares fell 35 cents to $1.05, a drop of 25 per cent.

Source

Pharmacy-benefits manager Express Scripts Inc. said today that it received a extortion letter from an unknown person or persons demanding money and threatening to expose millions of the company’s patients’ records.

The letter included information on 75 patients, including their names, birth dates, social security numbers and, in some instances, prescription information, the north St. Louis County-based company said. The letter arrived in early October, Express Scripts said.

The company said it has notified the affected clients and the FBI, which is investigating the letter fast payday loan no faxing. Express Scripts said it also is conducting its own investigation.

The company did not say how much money the extortionist wanted.
Express Scripts’ stock fell about 6 percent to $58.18 in afternoon trading.

atablac@post-dispatch.com | 314-340-8140

Source

WASHINGTON–Google Inc. and Yahoo Inc. have scrapped their Internet advertising partnership, abandoning attempts to overcome the objections of antitrust regulators and customers who believed the alliance would give Google too much power over online commerce.

The retreat announced Wednesday represented another setback for Yahoo, which had been counting on the Google deal to boost its annual revenue by $800 million and placate shareholders still incensed by management's decision to reject a $47.5 billion takeover bid from Microsoft Corp. nearly six months ago.

Without Google's help, Yahoo now may feel more pressure to renew talks with Microsoft and ultimately sell for a price well below the $33 per share that Microsoft offered in May. Yahoo shares traded Wednesday morning at just $13.67, up 2.4 percent on the day.

Surrendering the chance to sell ads on Yahoo's popular Web site won't be a significant financial blow for Google, which already runs the Internet's largest and most prosperous advertising network.

But the capitulation marks a rare comedown for Google, which had been insisting for more than four months that the Internet would be a better place to do business if it were allowed to work with Yahoo.

"We're of course disappointed that this deal won't be moving ahead," David Drummond, Google's chief legal officer, wrote on a company blog. "But we're not going to let the prospect of a lengthy legal battle distract us from our core mission. That would be like trying to drive down the road of innovation with the parking brake on.''

Google's management took a strategic risk by agreeing to the Yahoo partnership in June, knowing the move would increase the government's scrutiny of Google's market power. Even though it is now walking away empty-handed, Google figures to remain in regulators' sights as it tries to expand.

"For the first time, Google has run into real opposition to its marketplace goals," said Jeff Chester, executive director of the Center for Digital Democracy, a consumer advocacy group. "Google is aware that its aggressive moves in the online advertising business are potentially contributing to damaging its brand. The perception of Google has changed.''

The collapse of the Google-Yahoo alliance shapes up as a potential coup for Microsoft.

Although it has publicly said it's no longer interested in buying Yahoo, Microsoft spent a lot of time and money trying to keep Google and Yahoo from coming together.

The world's largest software maker provided evidence that helped persuade regulators the partnership would diminish competition. Microsoft also helped orchestrate the campaign that prompted major advertisers to lodge formal complaints against the proposed partnership.

The Justice Department signaled it was considering a legal challenge to the deal in September when it hired veteran antitrust lawyer Sanford Litvack to review the case.

The Wall Street Journal reported Monday that Google and Yahoo had proposed restrictions on the deal – capping the amount of search ads Yahoo could outsource to Google – in a late bid to win favor no fax pay day loan. Google's statement Wednesday indicated the idea didn't fly.

"After four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement," Drummond wrote. "Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn't have been in the long term interests of Google or our users, so we have decided to end the agreement.''

Now that Google is out of the picture, Yahoo co-founder Jerry Yang will have to come up with another way to accelerate his company's revenue growth and boost a stock price that has lost more than half its value since he became chief executive in June 2007.

If nothing else, Yang appears to have a bigger incentive to join forces with another tarnished Internet star, AOL. Yahoo has been discussing a possible acquisition with AOL's corporate parent, Time Warner Inc., for months. Google also owns a 5 per cent stake in AOL.

But many Yahoo shareholders, including new board member Carl Icahn, have indicated they think the Sunnyvale, Calif.-based company should try to lure Microsoft back to the negotiating table.

Most industry analysts still believe Microsoft will make another run at Yahoo, particularly now that the company can be bought at a fraction of the May offer. Instead of buying Yahoo in its entirety, Microsoft might just want Yahoo's search engine, which ranks a distant second in usage behind Google's. Microsoft attempted to buy Yahoo's search engine shortly before the Google partnership was reached.

Under the terms of the proposed partnership, Yahoo would have drawn on Google's superior technology for some of the ads shown alongside the search results on its Web site. Yahoo would have pocketed most of the revenue generated from Google's ads.

The concept didn't pan out because Google and Yahoo combined control more than 80 percent of the U.S. search advertising market. Microsoft and the Association of National Advertisers, among others, argued the arrangement would enable Google to gradually increase advertising prices and exert more control over the flow of e-commerce.

Google and Yahoo said the complaints were misguided because search advertising rates are set through an auction-style system. What's more, the partnership was supposed to be non-exclusive, leaving an opening for Microsoft and others to vie to sell ads on Yahoo's website.

But helping out Yahoo began to make less sense for Google as it became apparent how much the proposal was alienating the government and advertisers.

Source

General Motors’ October U.S. sales plunged 45 percent, and Ford’s and Chrysler’s weren’t far behind, as low consumer confidence and tight credit combined to bring the industry’s sales to an "unsustainably weak level" that is the worst in 25 years.

Automakers sold 838,156 vehicles in October, 32 percent fewer than in the same month last year and the worst performance since January 1991, according to Autodata Corp. and Ward’s AutoInfoBank. The seasonally adjusted annual sales rate of 10.6 million vehicles was the lowest since February 1983.

"It’s really an unsustainably weak level for all manufacturers," said Mike DiGiovanni, GM’s executive director of global market and industry analysis. "This is clearly a severe, severe recession for the U.S. automotive industry and something we really can’t sustain."

The annual sales rate in October 2007 was 16.1 million.

Chrysler’s sales tumbled 35 percent, and Ford’s dropped 30 percent. Toyota’s sales fell 23 percent despite its zero-percent financing offer, and Nissan and Honda posted 33 percent and 25 percent declines, respectively.

Overall, General Motors Corp. sold 168,719 vehicles in October, while Ford Motor Co., including its Volvo brand, sold 132,278 light vehicles and Chrysler LLC’s sales totaled 94,530 units.

If GM’s sales were adjusted for population growth, October would be the worst month of the post-World War II era, DiGiovanni said.

"Clearly, we’re in a very dire situation," he said. Detroit-based GM said its light truck sales tumbled 51 percent compared with the same month last year, while demand for passenger cars fell 34 percent.

Despite the steep drop, GM’s total was enough to keep it ahead of Toyota Motor Corp bad credit cash loans. for the No. 1 U.S. sales spot. Toyota, which rolled out an offer of zero-percent financing during the month, sold 152,101 vehicles. The Japanese company’s light truck sales fell 34 percent, while car sales dropped 15 percent.

Honda Motor Co.’s sales fell to 85,864 vehicles as truck sales fell 29 percent. But sales of cars from its Acura luxury division rose 6 percent.

Nissan Motor Co. sold 56,945 vehicles, and its truck sales dropped 52 percent.

Ford officials said on a conference call with reporters and industry analysts that as bad as October sales were, it’s probably not the bottom.

Emily Kolinski Morris, the Dearborn, Mich.-based company’s senior economist, said that because automobiles are more durable, people can wait without buying a new vehicle until they feel more confident in the economy.

"The answer to when we will start to come out of that trough lies in when the economy comes out of that trough," Kolinski Morris said.

Ford likely will announce car and crossover vehicle production cuts when it announces its third-quarter earnings on Friday, said George Pipas, Ford’s top sales analyst. Truck production cuts earlier in the year have kept inventories low, but car and crossover inventories need to be brought into line, he said.

The Associated Press reports unadjusted auto sales figures, calculating the percentage change in the total vehicles sold in one month compared with the same month a year earlier. Some automakers report percentages adjusted for sales days. There were 23 sales days last month, two less than in October 2007.

Source

China’s listed companies, after delivering robust earnings growth every quarter for two years, are seeing profits start to shrink as the global financial crisis hits more severely than many had expected.

Slumping demand and falling prices have hit Chinese industries from steel to automobiles to airlines, and the highly profitable financial sector, while largely insulated from the worst of the global credit crisis, will see its bottom line eroded by a slowing economy and a deflating property market.

“The impact of the global financial crisis on China’s real economy and corporate operations has just begun to make itself clear,” said Zheng Weigang, head of research at Shanghai Securities.

“Many industries, such as steel and chemicals, have seen their sales prices nearing their cost points,” he said.

“November and December will see several major sectors fall into losses, boding ill for corporate earnings growth in the fourth quarter and next year.”

In the third-quarter earnings reporting season that ended on Friday, the 1,600-plus firms listed on the Shanghai and Shenzhen stock exchanges posted a 20 percent drop in net profit from the second quarter, according to calculations by state media. Year-on-year comparisons for the quarter were not available.

For the first nine months of the year, net profit was up 7.1 percent year-on-year at 782 billion yuan ($114 billion), slowing sharply from 16 percent growth in the first half, the calculations showed.

Worse news lies ahead.

SHRINKING MARGINS

Analysts estimate that more than half of China’s listed firms have already seen their profit margins drop in the third quarter from the same period of last year creditreports.

That means the only way they could sustain earnings growth is by selling more products — a tough task as global recession crimps exports and China’s slowing economic growth dampens domestic demand.

Among 10 analysts, economists and fund managers polled by Reuters this week, all but one forecast flat to weaker earnings for listed firms in the current quarter compared with a year earlier, while for next year they projected declines ranging from 2 to 10 percent.

“Earnings growth is certain to be negative in 2009, but the extent of the decline should still be in single digits, with the first half expected to be worse than the second half,” said Wu Haijun, Shanghai principal at Power Pacific Corp of Canada, a foreign investor in Chinese stocks.

Earnings at financial firms, the primary engine of China’s profit growth accounting for some 40 percent of the total at all listed companies, slowed significantly after powering total increases of 43 percent in 2007 and 67 percent in 2006.

The country’s biggest insurer, China Life (601628.SS: Quote, Profile, Research, Stock Buzz) (2628.HK: Quote, Profile, Research, Stock Buzz), posted a drop of more than 70 percent in third-quarter net profit, as its investment income sank with the stock market. China’s benchmark Shanghai Composite Index .SSEC has dropped more than 70 percent over the past year. 

Read more

Naysayers who predicted the U.S. dollar’s demise as the world reserve currency of choice have been silent of late given the greenback’s meteoric recovery in recent months.

Slammed over the last several years as U.S. government budget and trade deficits mounted, the greenback was seen ceding its status as the predominant currency to the euro.

Talk of nations reducing their dollar reserves in favor of the euro prompted talk the dollar would also lose favor as the medium of exchange for commodities.

However, the global financial crisis that has rocked markets worldwide has seen investors voting with their cash and buying U.S. dollars, indicating that reports of the greenback’s death as a reserve currency have been greatly exaggerated.

“Talk of the euro replacing the dollar is off the table,” said Michael Woolfolk, senior currency strategist at Bank of New York Mellon. “The U.S. has the only economy in the world that supports a strong currency by policy and is an anchor for the global economy.”

The current credit freeze has its roots in the U.S. subprime mortgage market where overzealous lending in exotic debt products has led to a wave of homeowner loan defaults and problems with repackaged mortgage securities.

But the crisis went global when holders of those mortgage securities faced huge losses and became reluctant to take on additional risk through either lending themselves or buying more securities.

Investors then were quick to understand that the United States was the only nation with the political will to act quickly and the government and private sector infrastructure in place to implement policies http://paydayintime.com. The pockets of the U.S. tax payer to fund a bailout added to the allure of the U.S. currency.

“The United States continues to be the only entity sufficiently large and coordinated enough to deal with the multiple issues surrounding the credit crisis,” said Andrew B. Busch, global FX strategist BMO Capital Markets in Chicago. “It clearly is not over.”

The dollar’s value against major currencies had changed little in the first half of 2008, after a six year slide, but since mid-July when the magnitude of the credit crisis became apparent, the dollar has rebounded significantly.

The Intercontinental Exchange’s U.S. dollar index <.DXY has climbed 21.3 percent since that time, roughly corresponding to a 21.8 percent drop by the euro against the greenback.

The British pound has dropped 23 percent while the Australian dollar plunged 37.5 percent against the U.S. dollar.

Emerging market currencies have been particularly hard-hit as investors fled risk and repatriated funds either home or to the safety of the U.S. dollar.

Latin American-focused funds suffered their 20th straight week of outflows, EPFR Global data showed on Friday, losing a net $134.8 million to redemptions. Europe, Middle East and Africa funds had outflows of $189.1 million.

The U.S. dollar has gained 27 percent against the South African rand since mid-July and 21 percent against the Turkish lira. 

Read more