Finance topics

New Zealand house prices increased at a slower pace in November and property sales fell for a second month as home-loan interest rates increase.

Prices rose 0.2 percent from October when they gained 1.3 percent, the Auckland-based Real Estate Institute of New Zealand Inc. said today in an e-mailed statement, citing an index. Property sales fell to 6,056.

Reserve Bank Governor Alan Bollard last week said house- price inflation would moderate in 2010, reducing the need for him to raise the benchmark interest rate before the middle of the year. Lenders have increased home-loan interest rates for fixed terms of one year or longer as global funding costs have increased, curbing demand for property.

“No longer do borrowers get the benefit of certainty and low rates that had been a feature of previous cycles,” said Khoon Goh, senior economist at ANZ National Bank Ltd. in Wellington. “The prospect of higher interest rates and a still weak labor market will continue to be major headwinds facing the housing market.”

The interest rate on a two-year home loan was 7.15 percent in October from 6.31 percent in June, according to central bank figures Online payday loans. Bollard on Dec. 10 said he may increase the official cash rate around the middle of 2010.

The jobless rate rose to a nine-year high of 6.5 percent in the third quarter and may reach 6.7 percent next year, the central bank forecast last week.

House Sales

House sales slumped last year amid a deepening recession, and only began rising on an annual basis in March. Sales in November surged 41.5 percent from a year earlier to 6,056, the institute said today.

Still, sales fell for a second month in November from 6,091 in October and 6,464 in September.

The level of sales is consistent with troughs in previous housing downturns, Goh said.

The dip “could hint at the start of an easing in housing market activity at a time when we are getting a supply response with a rise in the number of houses for sale,” he said.

The median time to sell a house rose to 33 days from 31 in October, and fell from 44 days in November last year, the institute said today.

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The yen fell broadly on Tuesday after the Bank of Japan announced more measures to ease monetary policy to help the ailing economy following an emergency meeting, while holding interest rates at 0.1%.

Despite its gains against the yen, the dollar fell against other major currencies as risk appetite improved after more clarity about the debt situation in Dubai eased some concerns about the region’s stability.

The yen struggled, but pared losses as the BOJ’s move to provide three-month funds at rock-bottom rates surprised some in the market who had been expecting bolder policy steps, such as expanding purchases of government bonds to push yields down.

Addressing strength in the yen, which shot to a 14-year high against the dollar last week, BOJ Governor Masaaki Shirakawa said the central bank’s commitment to keeping rates low would have an effect on currencies in the long run.

"The message is that the BOJ isn’t completely indifferent to currency rates, and this should at least be marginally yen-negative," said Adam Cole, global head of currency strategy at RBC in London, while acknowledging the yen’s initial reaction to the comments had been limited.

Shirakawa spoke to reporters after the BOJ introduced a new operation to provide 10 trillion yen in three-month funds at a fixed rate of 0.1% in a bid to enhance monetary easing by trying to bring down longer-term rates.

The dollar traded 0.5% higher on the day at ¥86.80, having hit ¥87.54 earlier in the day.

The dollar has suffered against the yen, hitting ¥84.82 late last week for the first time since mid-1995, as dollar interbank borrowing costs have fallen below yen ones this year.

The euro rose 1% to ¥130.90, while higher-yielding currencies including the Australian and New Zealand dollar rallied as much as 2% versus the yen.

The euro rose 0.4% to $1.5065 as risk demand rose after restructuring plans by Dubai World, which has been the center of concerns about the region’s debt position, eased some woes about the area’s financial health.

The dollar index fell 0.5% to 74.550, while European share prices rallied roughly 2%.

"The market is keeping an eye on Dubai, but it realizes that it’s likely this won’t lead to a systematic decline in Dubai’s financial sector, so traders are willing to take on risk," said Jane Foley, research director at Forex.com in London.

More dollar/yen weakness?

The Australian dollar rose nearly 1% on the day to $0.9230, boosted after the Reserve Bank of Australia raised interest rates by 25 basis points to 3.75 as expected on Tuesday in its third consecutive hike.

Many in the market expect the dollar to stay weak against the yen, which may seriously hamper Japan’s ability to recovery from recession.

Analysts said there was little standing in the way of more yen strength against the dollar so long as U.S. interest rates also remain essentially at zero, and that the prospects of yen-weakening intervention by Japan will remain low given the dollar’s overall weakness.

"(The new BOJ operation) is unlikely to either have a material impact on economic recovery or alter the downward momentum in USD/JPY," analysts at BTM said in a note.

"In fact it may even exacerbate USD weakness by further encouraging the establishment of liquidity fueled USD-funded risk trades."

Political pressure on the BOJ to avert recession has grown, but Tuesday’s decision is seen as a way to avoid a return to a narrow form of quantitative easing, under which the BOJ slashed rates to zero and flooded markets with cash in 2001-2006. 

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Colorado once again ranks high among the states in a report on business climate — this one from the Small Business & Entrepreneurship Council, a lobbying and policy group.

The SBE Council's "Small Business Survival Index 2009" rates the states on their public policy climates for small business and entrepreneurship, particularly on their tax structures. It ranks Colorado No. 8, up from 10th last year and 11th the year before.

Besides taxes, factors in the ranking — released Tuesday — include regulatory costs, government spending, property rights policies, crime rate and health care and energy costs.

"Most politicians talk a good game when it comes to small business, but their actions don’t often match their rhetoric," SBE Council chief economist Raymond Keating said in a statement. " … Small businesses, of course, drive innovation, economic growth and job creation. If we want to get our economy back on a solid, robust growth track, then we need pro-entrepreneur policies at the federal, state and local levels.”

The council assigned index numbers ranging from 25.693 for South Dakota — deemed the friendliest state for small business — to 84.795 to the District of Columbia — deemed the least friendly.

Colorado's index is 48.250.

Among the Centennial State's individual rankings in the report are:

• 8th for lowest top corporate income tax rates.

• 10th for lowest top corporate capital gains tax rates.

• 15th for lowest state and local sales and excise taxes.

• 18th for lowest electric utility costs.

• 20th for fewest state and local government employees.

• 20th for lowest state and local property taxes.

• 22nd for lowest crime rate.

• 28th for lowest state and local government spend, 2006-07.

• 36th for fewest "health insurance mandates."

Rated ahead of Colorado as most friendly to small business are South Dakota, Nevada, Texas, Wyoming, Washington, Florida and South Carolina.

New the bottom along with D.C. are New Jersey, California and New York.

The Oakton, Va.-based SBE Council is a business advocacy group that says it "works to educate elected officials, policy makers, business leaders and the public to advance initiatives that enhance the environment for entrepreneurship, business start-up and growth."

The group has been visible recently in its opposition to the health-care reform measure that has passed the U.S. House and another that is before the U.S. Senate, calling them overly burdensome to business.

Click here to download the SBEC's summary of its report in PDF format.

And click here for the full report.

In September, Colorado was ranked in fourth place by Forbes.com as among the best states for business in a report assessing business costs, labor supply, regulatory environment, economic climate, growth prospects and quality of life. State officials have been crowing about that ranking ever since. (DBJ report.)

Also in September, the Washington-based Tax Foundation said Colorado has the 13th most business-friendly tax system in the country. (DBJ report.)

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The federal agency in charge of product safety announced the recall of 2.1 million cribs Monday, citing defective hardware that can cause toddlers and infants to suffocate.

The Consumer Product Safety Commission said parents should immediately stop using Stork Craft drop-side cribs, which are made by Stork Craft Manufacturing Inc., of British Columbia, Canada.

About 1.2 million of the cribs have been distributed in the United States and 968,000 units distributed in Canada.

The recall includes about 147,000 Stork Craft drop-side cribs with the Fisher-Price logo, the CPSC said.

The cribs were sold at major retailers including Sears and Wal-Mart and online at Amazon.com and Target.com between January 1993 and October 2009.

The CPSC said the cribs’ drop-side, which is attached with plastic hardware, can detach unexpectedly and create a space between the crib wall and the adjacent mattress. Infants and toddlers can become trapped in the space and suffocate or fall to the floor, the agency said.

There have been 110 documented incidents of drop-side detachment, including 67 in the United States and 43 in Canada. Among those, four resulted in suffocation and 20 resulted in falls that caused injuries ranging from concussion to bumps and bruises.

It was the second time Stork Craft cribs were recalled this year. In January, about 535,000 were recalled amid safety concerns.

Safety advocates have urged federal regulators to impose tougher standards on companies that make drop-side cribs and some have called for an outright ban. "CPSC is working on new federal rules to make all cribs safer," said agency spokesperson Scott Wolfson.

Before Monday’s announcement, more than 5 million cribs, bassinets and play yards had been recalled since the beginning of 2007, according to CPSC.

This includes the recall of 400,000 drop-side cribs by manufacturer Simplicity in July, as the result of some fatalities, according to the CPSC. The agency also said that 600,000 drop-side cribs were recalled by Delta Enterprise in October electronic check payday advance. The recalls were prompted by concerns that infants and toddlers could get trapped by the mechanism of the crib and suffocate.

"This has certainly been a hazard that we’ve been aware of for some time," said Nancy Cowles, director of Kids In Danger, a Chicago-based advocacy group. Drop-side cribs have been associated with "dozens of deaths" over the years, she added.

Toys "R" Us, one of the largest retailers of nursery furniture, said it has decided to stop placing orders for drop-side cribs and expects to stop carrying them by the end of 2009.

Jennifer Albano, a Toys "R" Us spokesperson, said the company supports proposed standards that would, among other things, require that cribs no longer be manufactured with a drop-side.

Albano said a consortium of crib manufacturers, consumer safety advocates and a products standards organization met with the CPSC in March to discuss the possibility of changing voluntary production standards for cribs as part of ongoing efforts to improve safety.

However, no official decision has been made and Toys "R" Us does still have some drop-side cribs in stock, Albano said.

Major retailers in the United States and Canada sold the recalled cribs including BJ’s Wholesale Club, J.C. Penney, Kmart, Meijer, Sears (SHLD, Fortune 500), USA Baby, and Wal-Mart (WMT, Fortune 500) stores and online at Amazon.com (AMZN, Fortune 500), Babiesrus.com, Costco.com, Target.com (TGT, Fortune 500), and Walmart.com from January 1993 through October 2009 for between $100 and $400.

The cribs were manufactured in Canada, China and Indonesia.

Meanwhile, the legislature in Suffolk County, N.Y., at the eastern end of Long Island, banned sales of the drop-side crib in October.  

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JPMorgan Chase & Co is beefing up in Europe by buying the half of Cazenove it does not already own in a deal valuing the 190-year old UK brokerage at $3.4 billion.

J.P. Morgan Cazenove will become a wholly owned part of JPMorgan and its UK investment banking operations will continue to operate as J.P. Morgan Cazenove, the U.S. investment bank said on Thursday.

The deal, which will land windfalls for dozens of top London dealmakers, involves David Mayhew remaining chairman of J.P. Morgan Cazenove, while Chief Executive Naguib Kheraj will oversee the integration, the company said.

JPMorgan (JPM, Fortune 500), the second largest U.S. bank by assets, bought half of Cazenove five years ago to create a UK investment banking joint venture, and as expected took up the option to complete the deal.

JPMorgan has weathered the financial crisis better than most rivals and is now taking advantage of their problems and grabbing opportunities. It said it will pay 535 pence per Cazenove share, valuing the 50% stake at £1 billion ($1.67 billion).  

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The U.S. official who slashed pay for 25 top financial executives on Thursday said regulatory proposals to rein in excessive compensation are like plain “vanilla prescriptions” that might work or might not.

U.S. pay czar Kenneth Feinberg told a panel at New York University law school that his rulings drew so much public interest because they concerned pay for specific individuals, while other regulators have offered only general proposals. He said those proposals sound good, but have not been tested.

“As far as I know, we are the only one who have actually calculated pay,” Feinberg, the Obama administration’s point man on pay, said during the panel discussion about the future of regulation and the capital markets.

Last month, Feinberg slashed compensation for the top 25 earners at the seven companies for the final two months of the year — when bonuses are typically paid.

The seven companies are American International Group Inc, Bank of America Corp, Citigroup Inc, General Motors Co GM.UL, Chrysler, GMAC and Chrysler Financial.

Feinberg has said financial firms should be prepared to face tough scrutiny from regulators on pay plans.

The Federal Reserve last month issued bank pay guidelines aimed at curbing the type of reckless risk-taking officials say contributed to the crisis that nearly brought down the financial system last year payday loan in advance.

Top bank executives met with Fed officials on Monday to discuss the process for the incentive compensation arrangement reviews that are part of the new guidelines.

Feinberg said his office has met regularly with Fed officials and has also met with officials from the Securities and Exchange Commission and with Sheila Bair, chairman of the Federal Deposit Insurance Corp.

Feinberg was appointed as the pay czar in June amid public outrage that companies bailed out by the government were still paying huge bonuses.

Before his first wave of rulings, Feinberg joked he might need to move to Pluto because of the reaction he expected. But on Thursday he said he felt the reaction was “satisfactory.”

The panel also included Neil Barofsky, the special inspector general for the U.S. Treasury’s Troubled Asset Relief Program, which was used to bailout banks amid the financial crisis.

Feinberg is now in the process of ruling on the compensation structures that will apply to the 26th to 100th highest-paid workers at the seven firms. (Reporting by Steve Eder; Editing by David Gregorio)

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The presidents of the nation’s top private universities got 6.5% more in pay last year, with 23 taking home more than $1 million, according to a study published Monday.

The Chronicle of Higher Education said the median pay for private-college chiefs rose to $358,746 in fiscal year 2007-2008.

The study of 419 private colleges nationwide also showed 110 presidents reported total compensation of more than $500,000.

Among the 23 presidents with total compensation above $1 million, the highest paid was Shirley Ann Jackson, president of Rensselaer Polytechnic Institute in Troy, N.Y., with $1,598,247 in salary and benefits.

Jackson, 63, a physicist and former chairman of the U.S. Nuclear Regulatory Commission, was recruited to lead Rensselaer in 1999. She took a voluntary pay reduction of 5% for the current fiscal year, according to the Chronicle.

In a statement issued Monday, Rensselaer defended Jackson’s compensation, saying she helped raise $1.4 billion in capital, which transformed the school into "a top-tier, world class teaching and research institution."

"The value she contributes to the Institute far exceeds the amount she is paid," said William Walker, Rensselaer’s vice president of strategic communications and external relations.

David Sargent, president of Suffolk University in Boston, was the second highest paid college executive in the study. Sargent took home $1,496,593 in total compensation last year. But that’s down from $2,800,461 in fiscal 2006-2007, when he topped the list.

About one-third of Sargent’s pay was reported as deferred compensation in 2006 tax documents, and was reported again as salary this year, according to the report.

The third highest paid college chief was the University of Tulsa president Steadman Upham, with total compensation of $1,485,275.

Looking ahead, the Chronicle said salary increases have probably leveled off in the current fiscal year, with some presidents taking pay cuts.

Meanwhile, tuition prices are going up at many private schools, at least in part because endowments at those schools have dwindled.

Tuition and fees at private 4-year schools rose 4.4% in the current school year to $26,273, according to a survey released by the College Board last month. That doesn’t include room and board. 

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Fruit and vegetable producer Fresh Del Monte Produce Inc posted a higher-than-expected quarterly profit, mostly on tax benefits and lower interest expense, but its net sales missed expectations due to weak demand across most of its businesses.

For the third quarter, net income attributable to the company was $28.6 million, or 45 cents a share, compared with $29.3 million, or 46 cents a share, a year ago.

Excluding items, quarterly profit was 61 cents a share.

Net sales fell 8 percent to $766.2 million. Banana sales rose 5 percent, but this was offset by declining sales of most fresh fruits and vegetables and prepared food.

Analysts on average were expecting earnings of 37 cents a share, before special items, on revenue of $819 million, according to Thomson Reuters I/B/E/S.

The company, whose rivals include Chiquita Brands International Inc and the recently listed Dole Food Co Inc, saw tax benefits of $12.8 million in the quarter, compared with tax expenses of $2.6 million last year.

Fresh Del Monte’s shares closed at $21.92 Monday on the New York Stock Exchange.

(Reporting by Mihir Dalal in Bangalore; Editing by Himani Sarkar)

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The European Central Bank kept its interest rates at a record-low 1.0 percent on Thursday and its head Jean-Claude Trichet is expected to caution against hopes of a speedy economic recovery.

The decision met analyst expectations — all 82 economists in a Reuters poll had expected interest rates to stay on hold in October for the fifth month running, with most expecting them to stay unchanged until late next year.

“This was no surprise at all,” said Nomura economist Laurent Bilke. “The ECB has signaled there wouldn’t be any additional monetary policy stimulus but that they are not ready for a rate hike yet.”

Financial markets were largely unchanged after the decision.

The Governing Council’s Venice meeting was the second of two held annually outside its Frankfurt base and marks the first anniversary of coordinated rate cuts by major central banks in the aftermath of the Lehman Brothers collapse.

The Reserve Bank of Australia on Tuesday became the first Group of 20 central bank to raise rates after the recession hit.

While most analysts expect the next ECB rate move to be a hike, they forecast that it will not happen before the third quarter of next year. But tighter liquidity conditions may push up market rates before that, futures pricing shows.

The Bank of England also kept its rates on hold on Thursday, as was widely expected quick pay day loan.

Attention now turns to Trichet’s news conference, where he is seen confirming that current policy settings are appropriate. Markets will listen for any clues on the timing and order of the ECB’s exit strategy.

“Current rates are appropriate, that is a key sentence that will probably stay until well into next year,” Bank of America economist Holger Schmieding said.

The ECB is unlikely to detail its exit strategy, just to repeat that it can exit when needed, he added.

Trichet’s comments on how governments should wind back their extra spending and how the ECB will take fiscal exit into account in its monetary policy decisions will also be key.

“They will definitely not do any explicit coordination (between fiscal and monetary exit strategies),” Schmieding said, but added: “There might be actually be a case that if fiscal policy is tightened in 2011, the ECB may take that into account and thus have an indirect impact on its rate policy.”

DOLLAR WEAKNESS

Trichet’s comments on economic recovery will also face close scrutiny. The euro zone economy shrank by a revised 0.2 percent in the second quarter of the year, and analysts expect it to have grown 0.3 percent in the July-September quarter. 

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The nation’s service sector expanded in September for the first time in more than a year, according to a report from a purchasing managers’ group released Monday.

The Institute for Supply Management’s non-manufacturing index rose to 50.9 last month from 48.4 in August. Economists surveyed by Briefing.com had expected a reading of 50, which is the point at which the index reflects expansion.

It was the second consecutive month of improvement in the index, which last indicated expansion in August 2008.

The services sector, which includes businesses such as banks, airlines and restaurants, makes up the bulk of economic activity in the United States.

The ISM’s new orders index, which measures requests for services such as construction labor, rose 4.3 points to 54.2. The business activity index added 3.8 points to 55.1 last month.

Both measures are now at their highest levels since before the recession began, according to Tim Quinlan, an economic analyst at Wells Fargo.

Those gains "suggest that businesses outside of manufacturing are transitioning from recession to recovery," Quinlan wrote in a research report.

The index that measures employment in the sector edged up less than one point to 44.3, but it remains well below the level indicating job growth in the sector.

"Jobs are still a major concern," said Ryan Sweet, senior economist at Moody’s Economy.com. "The employment index is weak and points toward a very slow improvement in the labor market."

Still, the larger-than-expected rise in the overall number could mean that U.S. gross domestic product will come in at a 3% annual rate of growth during the third quarter, according to Sweet.

Prices paid by service sector firms fell sharply in September. The prices index sank 14.3 points to 48.8, indicating a significant reversal and decrease in prices paid from August, according to the report.

The ISM said 15 of the 18 service sectors in the survey expect to derive some benefit from the government’s economic stabilization program.  

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