Finance topics

Even as they seek a grand deal to bring the deficit under control, both President Barack Obama’s Democratic allies and GOP rivals head into a rare weekend negotiating session with their options sharply limited by months of angry rhetoric and political posturing.

Faced with sharp divisions over increasing taxes and cutting public benefit programs, hopes of reaching agreement on an ambitious plan to cut spiraling deficits by $4 trillion or more over the coming decade have diminished since a friendly, earnest meeting at the White House on Thursday. Officials now say a smaller, $2 trillion agreement, appeared more doable.

“It’s not like there’s some imminent deal about to happen,” said House Speaker John Boehner, R-Ohio. “There are serious disagreements about how to deal with this very serious problem.”

Added Boehner: “In all honesty, I don’t think things have narrowed. I don’t think this problem has narrowed at all in the last several days.”

Obama cited a bleak jobs report Friday in hopes of prodding Congress toward a swift agreement on deficits and the national debt. But the higher unemployment numbers hardened the views of partisan lawmakers who think a weak economy can’t tolerate added taxes or cuts in spending, key components for the sweeping kind deal that Obama seeks.

White House and congressional negotiators and their aides continued to work Friday on deficit-cutting ideas to add to a set of proposals tentatively agreed to in talks led by Vice President Joe Biden in May and June. The earlier proposals would shave $2 trillion or so off the deficit. Obama has asked the top eight leaders of Congress to come to the White House Sunday to assess progress in the talks.

A budget agreement is central to increasing the nation’s borrowing limit, currently capped at $14.3 trillion, by Aug. 2. If that deadline is not met, there could be a potentially catastrophic government default on obligations to bondholders, government contractors and people relying on Social Security and other government programs. That looming deadline and a new unemployment rate of 9.2 percent heightened the pressure for a deal, uniting the two most high-profile challenges facing Obama’s presidency.

Obama urged Congress to move quickly to raise the debt ceiling, saying the uncertainty over a potential default has hindered hiring in the private sector.

“The sooner we get this done, the sooner that the markets know that the debt limit ceiling will have been raised and that we have a serious plan to deal with our debt and deficit, the sooner that we give our businesses the certainty that they will need in order to make additional investments to grow and hire,” Obama said Friday from the White House Rose Garden.

Obama later made his case privately to House Democratic leader Nancy Pelosi during a half-hour meeting at the White House.

Both parties and private economists agree that if Washington does not raise the debt ceiling by early August, the economy will be deeply shaken and perhaps slip back into recession.

The White House and Congress are seeking common ground on a budget deal that would trim 10-year deficits by as much as $4 trillion. Obama has urged lawmakers to strive for that number, but some officials on Friday said they believed that a smaller, $2 trillion deal appeared more realistic.

The larger package would require new tax revenues _ with hundreds of billions of dollars flowing into federal coffers from a future overhaul of the loophole-laden tax code _ and significant spending reductions in large government benefit programs, such as Medicare, Medicaid and Social Security.

But liberal Democrats whose votes will be needed to balance GOP defections and get a deal passed recoiled over the possibility that Obama would endorse cuts to Medicare or Social Security. The administration and lawmakers are eyeing, for example, less generous adjustments for inflation, a move that would reduce future Social Security payments.

“I’m a Democrat. I got elected to Congress to protect Social Security and Medicare, not dismantle them,” said Rep. Jim McGovern, D-Mass. “Yes, we do need entitlement reform, but we need to do this thoughtfully, not come to a deal in a weekend.”

Republicans, meanwhile, played down media reports suggesting that Boehner was willing to entertain the possibility of higher tax revenues as part of a “grand bargain” that included cuts to benefit programs like Social Security and Medicare.

“Conservatives are just not going to vote for a tax increase on this economy,” Rep. Trent Franks, R-Ariz., said, reflecting a common view among his GOP colleagues. “It’s just not going to happen.”

The jobless numbers only cemented that view, as Republicans argued that increasing taxes would be ill-timed during an economic slowdown.

“The revenue idea was trumped up by the president and latched onto by the press,” said Rep. Tom Price, R-Ga. “There isn’t anything to the fanciful notion by this president that we’ll go along with his desire to increase taxes on the American people.”

At the same time, Democrats argued that a weak economy is not the time to consider trimming government spending.

“It’s pretty clear that in this time of economic distress, attacks on Social Security and on Medicare are really wrong for the country,” said Sen. Sheldon Whitehouse, D-R.I.

On health care, negotiators have been closing in on cuts of about $200 billion over 10 years, about equally divided between Medicare and Medicaid, with most of the burden falling on individual industries such as hospitals, drug manufacturers and nursing homes.

One Social Security proposal on the negotiating table would lower annual cost-of-living increases, reducing the retirement benefits for older Americans over the long term.

While Pelosi said she will not countenance any Social Security change that reduces benefits, she appears open to a proposal to use a lower cost-of-living measurement to calculate Social Security adjustments. She said that any savings in Social Security would have to be funneled back into the trust fund that finances the retirement program.

Republicans have showed some new flexibility on the closing tax loopholes and ending corporate tax breaks as Obama has demanded. But they say any revenue generated by those steps would have to be used to lower tax rates and simplify the tax system. Such a step would require a major overhaul of the tax code and could not be accomplished in the few weeks left before the Aug. 2 debt ceiling deadline.

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OTTAWA

Global stocks were steady Wednesday ahead of a raft of U.S. economic figures which will culminate in the key monthly jobs data at the end of the week, while the euro held on to recent gains on hopes Greece will get more help with its debts.

At the start of each month, investors have a slew of U.S. economic indicators to digest, in particular the monthly nonfarm payrolls data, which often set the tone in markets for a week or two after their release.

Before Friday’s payrolls data, traders will on Wednesday focus on the May manufacturing survey from the Institute for Supply Management. The main index is expected to drop to around 57 from the previous month’s 60.4, providing further evidence that the U.S. recovery is slowing down.

Concerns over the U.S. economic recovery and Europe’s debt crisis, particularly whether Greece will get more emergency loans, have dominated market attention over recent weeks.

The May survey from the private payrolls firm ADP could also shed some light on whether Friday’s government data, which also includes the public sector, will come in line with expectations.

Adrian Foster, an analyst at Rabobank International, is expecting the ADP report to show 175,000 jobs added in May, little changed on the previous month’s 179,000.

“Such a result will likely calm nerves as we look to Friday’s payrolls report,” Foster said.

At the moment, the consensus in the markets is that Friday’s government data will show that around 200,000 jobs were added during May, slightly down on April’s 244,000 increase.

Ahead of the U.S. figures later, Wall Street futures and stocks in Europe were trading in narrow ranges.

In Europe, the FTSE 100 index of leading British shares was down 0.1 percent at 5,987 while Germany’s DAX fell an equivalent rate to 7,287. The CAC-40 in France was flat at 4,007.

A similarly steady opening is expected when the U.S. opens for business _ Dow futures were down 0.1 percent at 12,552 while the broader Standard & Poor’s 500 futures were unchanged at 1,344.

The ADP data, which are released before the bell, could change expectations for the open though. The ISM survey is released half an hour into the trading session.

“The ADP numbers ahead of the open will attract some interest with some using it as a proxy to second guess Friday’s nonfarm payrolls, but with that event looming over markets, and considering the strong gains made on Tuesday, we may be in for a couple of quiet, range days,” said Yusuf Heusen, a senior sales trader at IG Index.

Currency markets were also subdued, with the euro down 0.1 percent at $1.4413 and the dollar down an equivalent rate to 81.25 yen.

The euro, which suffered in April on fears over Greece’s debt, has recovered strongly over the past days on mounting expectations that Greece will get more help from its partners in the eurozone and the International Monetary Fund to meet financing commitments through to 2013. Alongside a second rescue package following last year’s euro110 billion package of loans, Greece is expected to have to increase its privatization program and make more austerity cuts.

Few analysts, however, think that a second rescue package would necessarily prevent a Greek debt restructuring down the line given weak economic growth forecasts and political infighting.

“We remain sceptical that the modest rebound in risk sentiment over the past week will prove sustainable beyond the near-term especially any renewed optimism regarding Greece where a rehash of previously unsuccessful support steps will likely fail again,” said Lee Hardman, a currency strategist at the Bank of Tokyo-Mitsubishi UFJ.

Earlier in Asia, Japan’s Nikkei 225 rose 0.3 percent to close at 9,719.61 after Bank of Japan Governor Masaaki Shirakawa said in a speech that supply and electricity disruptions caused by the March 11 earthquake and tsunami were easing. The economy could stage a moderate recovery starting in the second half of fiscal 2011, he said.

Elsewhere, South Korea’s Kospi index slipped less than 0.1 percent to 2,141.34 after the government announced the country’s inflation rate eased for a second straight month in May, to 4.1 percent.

Hong Kong’s Hang Seng index drifted 0.2 percent lower to 23,626.43 while mainland China’s Shanghai Composite Index dropped 0.3 percent after data showed China’s manufacturing sector easing in April. The state-affiliated China Federation of Logistics and Purchasing reported that its purchasing managers index, or PMI, fell to 52.9 in April, down from 53.4 in March.

Australia’s S&P/ASX 200 failed to hold onto gains and closed flat at 4,707.30.

In the oil markets, the price of crude continued to hover around the $100 a barrel mark. Benchmark oil for July delivery was down 10 cents to $102.58 a barrel in electronic trading on the New York Mercantile Exchange after a $2 plus gain on Tuesday.

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Pamela Sampson in Bangkok contributed to this report.

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Berkshire Hathaway CEO Warren Buffett says he expects his eventual successor to do some things differently, but the conglomerate he built will be in good hands.

The 80-year-old Buffett still refuses to name the internal chief executive candidates Berkshire’s board will chose from after his death. But Buffett talked a bit during this weekend’s annual shareholder events about the qualities he believes his successor will have.

He says his successor will be an ethical leader who can act like an interested shareholder for Berkshire’s roughly 80 different subsidiaries guaranteed cash advance.

But Buffett says Berkshire’s next CEO might well change the way Berkshire’s managers report to headquarters.

Currently, Buffett reviews figures for Berkshire’s business but doesn’t require regular reports. He jokes that he hasn’t heard from some managers in more than a year.

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Faded social networking site Friendster will soon delete nearly a decade’s worth of user photos, blog entries and other data in a revamp to set it apart from Facebook, a company official said Thursday.

The overhaul is meant to help Friendster regain a semblance of online relevance after being outmuscled by Facebook, which boasts about 600 million active users. Friendster has accumulated at least 115 million registered members since 2002, but only about 40 million currently have valid emails and fewer still are active users.

Friendster emailed its members over the past week to inform them to save their pictures, profile information, messages and blog posts on other sites by May 31, said Nor Badron, a company spokesman based in Singapore.

“This is an evolution of the site to push the boundaries of our business,” Nor told The Associated Press. “It’s not about direct competition with Facebook. Whoever wants to compete with Facebook would be crazy.”

It is the biggest change to Friendster since Malaysian tycoon Vincent Tan’s online payment systems company MOL Global purchased the site in late 2009. Tan’s businesses include retail franchises in Southeast Asia such as Starbucks and 7-Eleven.

In June, Friendster will launch services that are not provided by Facebook, focusing on a new platform for social interaction in gaming, music, entertainment and online shopping, Nor said.

Friendster members can have a different social networking experience by cultivating unique online identities that are different from their real-life ones, Nor said. They can connect with people whom they don’t personally know and share music with them or play online games together.

“We realize there’s no need to have photo albums or the duplication of status updates on both Facebook and Friendster, so this is something totally different, a whole new ball game,” Nor said. “It’s about something you don’t do on Facebook that you can do on Friendster.”

Nor declined to say how much Friendster is investing in the changes or give details about its financial targets.

The biggest number of Friendster users are now in the Philippines, the United States, Malaysia, Indonesia and Britain.

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TOKYO

Japanese automakers have begun checking the level of radiation on cars to be exported from the country in a bid to ease worries among foreign consumers, an industry group said Friday.

The automakers will inspect radiation inside cars and on tires before shipment, said Hirokazu Furukawa, a spokesman for the Japan Automobile Manufacturers Association. No radiation has been detected so far on cars to be exported from Japan, he said.

“Some foreign consumers voiced concern over radiation. We want to erase their worries by taking this measure,” he said. Furukawa said he has not seen a fall in Japanese car sales abroad due to radiation concerns.

Japan has been struggling to contain radiation leaks since a tsunami on March 11 damaged a coastal nuclear power plant in northern Japan, causing radiation leaks. Furukawa said automakers are currently checking the level of radiation on cars to be shipped from eight ports.

Around 10 cars out every 5,000 are being checked for radiation, he said. The carmakers will continue the radiation check on vehicles until the nuclear crisis subsides.

Toyota Motor Corp. said it has checked the level of radiation on 30 cars to be shipped to the United States. Around 46 percent of Toyota cars made in Japan last year were shipped for export.

Around 30 percent of Honda Motor Co.’s cars made in Japan are for export. Over 50 percent of Nissan Motor Co.’s cars made in Japan are to be shipped abroad.

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South African retail sales growth unexpectedly slowed in February as rising prices curtailed consumer spending.

Sales growth dropped to 5.6 percent from a revised 6.3 percent in January, Pretoria-based Statistics South Africa said on its website today. The median estimate of 16 economists surveyed by Bloomberg was 7.1 percent.

“The prospects of higher food, petrol and electricity prices, along with rising rates and taxes, could constrain” retail spending, Kgotso Radira, an economist at Investec Ltd. in Johannesburg, said in a note to clients before today’s data.

Inflation accelerated to a nine-month high of 4.1 percent in March as food and fuel prices climbed, the statistics agency said earlier today. The Reserve Bank cut its benchmark interest rate three times to 5.5 percent last year to help support the economy’s recovery. The bank left the rate unchanged on March 24, as price pressures increased and growth picked up pace.

Pick n Pay Stores Ltd. (PIK), South Africa’s second-biggest grocer, said April 18 that sales rose 5.9 percent to 51.9 billion rand in the year through February. Foschini Ltd., a clothing retailer, said on the same day that its per-share earnings for the year through March were expected to be from 19 percent to 22 percent higher than the previous year. Both companies are based in Cape Town.

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The head of a Senate panel investigating the financial crisis is questioning the accuracy of testimony Goldman Sachs executives gave to Congress last year about whether the firm steered investors toward mortgage securities it knew would likely fail.

Goldman Sachs and Co. agreed in July to pay $550 million to settle civil fraud charges over similar accusations.

Sen. Carl Levin, D-Mich., said Wednesday the subcommittee has found new evidence that shows Goldman’s misleading of investors went beyond that one case. He raised doubts about the testimony given last year by a half-dozen Goldman executives. Goldman CEO Lloyd Blankfein was among those who testified.

Goldman spokesman Michael DuVally said the testimony given by the executives was “truthful and accurate” and that the subcommittee’s report confirms that.

The report released Wednesday notes that Goldman marketed four sets of complex mortgage securities to banks and other investors. But it says the firm failed to tell them that the securities were very risky, secretly bet against the investors’ positions and deceived the investors about its own positions to shift risk from its balance sheet to theirs.

At the hearing last year by the Senate panel, Goldman executives were questioned about the deals. Company e-mails showed Goldman employees deriding the securities as “junk” and “crap.”

Goldman CEO Lloyd Blankfein said the company didn’t bet against its clients, and couldn’t survive without their trust. The company lost $1.2 billion in the mortgage meltdown in 2007 and 2008 that touched off the financial crisis and the worst recession since the 1930s, Blankfein testified. He also insisted that Goldman wasn’t making an aggressive negative bet _ or short _ on the mortgage market’s slide.

The company’s short positions were mostly offset by long holdings of the securities, the executives said at the hearing.

The new subcommittee report cites internal Goldman documents that it says contradict that assertion.

“I believe they misled the Congress,” Levin told reporters. Goldman “gained at the expense of their clients and they used abusive practices to do it,” he said.

DuVally, the Goldman spokesman, said that while the company disagrees with many of the report’s conclusions, “We take seriously the issues explored by the subcommittee online payday loan lenders. We recently issued the results of a comprehensive examination of our business standards and practices, and committed to making significant changes.”

Goldman agreed last summer to pay $550 million to settle civil fraud charges by the Securities and Exchange Commission of misleading buyers of mortgage-related securities. The agreement applied to one of the four deals cited by the Senate subcommittee.

The report culminates a two-year investigation by the panel, which examined millions of documents and interviewed scores of executives, traders and salespeople.

It portrays “a financial snake pit rife with greed, conflicts of interest and wrongdoing,” Levin said.

The panel cited four key areas of causes of the financial crisis:

_Risky mortgage lending as exemplified by Washington Mutual, which became the biggest U.S. bank ever to fail in September 2008.

_The failure of regulators to clamp down on lending abuses and risky conduct at banks in the years leading up to the housing bust and financial crisis.

_The AAA ratings given by the big credit rating agencies to high-risk subprime mortgages that later went bad and helped cause the housing bust.

_The role of investment banks like Goldman Sachs and the finance deals they put together, which flooded the markets with risky securities.

The report also urges federal regulators to make several changes, such as a strong ban on conflicts of interest for investment banks and other financial players. It says the financial overhaul law enacted last year in response to the crisis could help prevent future abuses.

“At the heart of the financial crisis were unresolved, and often undisclosed, conflicts of interest,” Sen. Tom Coburn of Oklahoma, the panel’s top Republican. “Blame for this mess lies everywhere from federal regulators who cast a blind eye, Wall Street bankers who let greed run wild, and members of Congress who failed to provide oversight.”

Levin said the panel planned to convey findings to the Justice Department and the Securities and Exchange Commission for possible further investigation.

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The U.S. trade deficit probably narrowed in February from a seven-month high as overseas demand for American goods outpaced the rising cost of imported oil, economists said before a report today.

The gap shrank to $44 billion from the $46.3 billion shortfall in January, according to the median of 71 estimates in a Bloomberg News survey ahead of Commerce Department data. Another report may show the price of goods from abroad increased in March by the most in more than a year.

Countries from Russia to Indonesia are ramping up demand for U.S. goods as their economies grow, benefiting manufacturers like Caterpillar Inc. (CAT) The global expansion is also pushing up costs of commodities like fuel, which means it will be difficult for the trade gap to narrow much more in coming months.

The Peoria, Illinois-based company may also benefit from President Barack Obama’s April 7 decision to ask Congress to approve a free-trade agreement with Colombia, one of Caterpillar’s 10 largest U no fax pay day loan.S. export markets by country.

“Colombia is a huge market for us,” Oberhelman said in an interview March 30. “There’s infrastructure, there’s mining. We send a lot of equipment today, all of it built in the Midwest, most of it built in central Illinois.”

Bloomberg News ============================================================== Trade Import Import Federal Balance Prices Prices Budget $ Blns MOM% YOY% $ Blns ============================================================== Date of Release 04/12 04/12 04/12 04/12 Observation Period Feb. March March March ————————————————————– Median -44.0 2.1% 8.6% -189.0 Average -44.5 2.1% 8.7% -180.3 High Forecast -41.0 3.9% 9.5% -60.0 Low Forecast -50.5 1.0% 8.1% -200.0 Number of Participants 71 50 14 28 Previous -46.3 1.4% 6.9% -65.4 ————————————————————– 4CAST Ltd. -43.5 1.8% — -189.0 Action Economics -43.0 2.5% — -189.0 Aletti Gestielle -47.5 — — — Ameriprise Financial -43.5 1.7% 8.2% — Banesto -43.9 1.9% — — Bank of Tokyo- Mitsubishi -50.5 2.1% — -190.0 Bantleon Bank AG — 1.8% — — Barclays Capital -44.5 2.4% 9.1% -190.0 Bayerische Landesbank -44.0 — — — BBVA -45.0 2.0% 8.6% -189.0 BMO Capital Markets -45.0 2.2% — -189.0 BNP Paribas -45.0 2.2% — — BofA Merrill Lynch -44.0 1.7% — -190.0 Briefing.com -45.0 — — -189.0 Capital Economics -44.0 — — — CIBC World Markets -46.0 — — — Citi -44.5 2.5% — -180.0 Commerzbank AG -43.0 — — — Credit Agricole CIB -44.0 — — — Credit Suisse -46.0 2.2% — — Daiwa Securities America -43.2 — — -190.0 DekaBank -44.0 2.5% 9.2% — Desjardins Group -45.9 1.8% — -189.0 Deutsche Bank Securities -43.0 2.0% — — Deutsche Postbank AG -42.5 1.7% 8.3% — DZ Bank -44.0 2.0% — — Fact & Opinion Economics -46.3 2.5% — -192.0 First Trust Advisors -41.9 2.5% — -189.0 FTN Financial -45.0 — — — Goldman, Sachs -42.5 — — -189.0 Helaba -42.5 — — — High Frequency Economics -43.0 2.3% — — HSBC Markets -44.0 2.6% 9.3% — Hugh Johnson Advisors -43.0 1.6% — — IDEAglobal -43.0 2.2% — -185.0 IHS Global Insight -44.3 — — — Informa Global Markets -43.0 1.9% — -189.0 ING Financial Markets -44.0 1.7% — -71.4 Insight Economics -46.5 2.5% — -189.0 Intesa-SanPaulo -43.5 2.0% — — J.P. Morgan Chase -44.5 1.7% 8.3% -189.0 Janney Montgomery Scott — 1.6% 8.2% — Jefferies & Co. -47.3 2.4% — — Landesbank Berlin -50.0 2.0% — — Landesbank BW -44.0 — — — Manulife Asset Management -45.0 1.5% 8.1% — MF Global -42.0 2.0% 8.5% -189.0 Mizuho Securities -45.0 1.5% — -60.0 Moody’s Analytics -42.6 2.3% — — Morgan Keegan & Co. -48.7 1.4% — — Morgan Stanley & Co. -45.0 — — -185.0 National Bank Financial -45.5 — — — Natixis -45.4 — — — Nomura Securities -42.2 — — -190.0 Nord/LB -44.5 2.2% — — Parthenon Group -44.0 1.0% — — Pierpont Securities -43.2 — — -190.0 PNC Bank -47.5 — — — Raiffeisenbank International -45.0 2.5% — — Raymond James -46.0 — — -189.0 RBC Capital Markets -42.4 2.8% 9.5% — RBS Securities -45.5 — — — Scotia Capital -43.0 — — — Societe Generale -43.1 3.9% — — Standard Chartered -46.0 — — — State Street Global Markets -43.9 2.2% 8.9% -188.7 Stone & McCarthy Research -44.6 2.3% — — TD Securities -45.0 2.0% — — UBS -42.0 2.0% 8.6% -189.0 Union Investment -46.0 — — — University of Maryland -42.6 2.0% — -200.0 Wells Fargo & Co. -46.8 2.6% 9.3% — Westpac Banking Co. — 2.2% — — Wrightson ICAP -41.0 2.2% — — ==============================================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

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