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Brazil’s $67 Billion Offshore Derivatives Growing as Oversight Steps Up

March 31, 2010

By Fabiola Moura March 31 (Bloomberg) — Brazil’s biggest clearinghouse has recorded 120 billion reais ($67 billion) of offshore financial derivative contracts used by domestic banks, as the country tries to better supervise a market that caused losses in 2008. Cetip SA – Balcao Organizado de Ativos e Derivativos may register 100 billion reais more of derivatives outside the country as banks and other companies seek to hedge and diversify risk, predicted Jorge Sant’Anna , a Cetip director, in a March 26 interview at Bloomberg’s headquarters in New York. Brazilian law requires that companies register the contracts, and make an estimate of their potential risk, at Cetip. Brazil stepped up oversight of the market after Aracruz Celulose SA , the world’s biggest eucalyptus-pulp maker, and meatpacker Sadia SA reported unexpected losses in 2008 from currency derivatives when the real tumbled more than 20 percent against the dollar. Brazilian companies depend less on the contracts than other emerging markets do, leaving derivatives poised for growth as the economy strengthens, Sant’Anna said. “We are below the average,” he said. “What helps our economy is that the regulatory issue is already solved.” The value of over-the-counter derivatives in Brazil equals 0.4 times gross domestic product, Sant’Anna said, citing 2007 data. That compares with 4.1 times in Mexico and 14 times in South Africa. Brazil’s domestic over-the-counter derivatives market totals 360 billion reais and probably will grow 20 to 30 percent yearly until 2012 as economic growth accelerates, Sant’Anna said. The market, which shrank by about one-third between 2008 and 2009 as global credit markets seized up, will return to pre- crisis levels by the first quarter of 2011, he estimated. Derivatives Center Derivatives are contracts used to protect against changes in stocks, bonds, currencies, commodities, interest rates and even the weather. Beginning next month, a Center for Derivatives Exposure run by the Brazilian Banks Federation , together with Cetip and BM&FBovespa SA , the owner of Latin America’s biggest exchange, will start compiling data provided by local companies on the contracts they hold. Local banks, with the companies’ consent, will use the information to better assess their risks when doing deals, Sant’Anna said. “We needed to create a mechanism that also protects the financial system,” he said. Brazil approved three different regulations since the end of 2009 to improve risk supervision of derivatives held outside the country. Three months ago, Cetip started registering overseas contracts used by Brazilian banks. The size of the domestic derivatives market was 548 billion reais before the global economic crisis worsened in 2008. The market shrank to 355 billion reais after Aracruz and Sadia reported unexpected losses that year, before expanding again in 2009, Sant’Anna said. “There has been a huge development in Brazil in understanding what a derivative contract is,” Sant’Anna said. To contact the reporter on this story: Fabiola Moura in New York at fdemoura@bloomberg.net

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Sugar `Crash’ Isn’t Over as Crops in India, Brazil Recover, Analysts Say

March 31, 2010

By Yi Tian and Debarati Roy March 31 (Bloomberg) — Sugar prices, heading for the biggest quarterly drop since 1985, will extend a slump as Brazil and India, the world’s largest producers, harvest bumper crops next season, analysts and traders said. Raw sugar will fall 16 percent to 15 cents a pound by early July as the bulk of Brazilian supplies reach the market, said Marcelo Dorea , a partner at Round Earth Capital in New York. The price will tumble to 13 cents at the end of the year, posting a 52 percent annual loss, said Mark Hansen at CPM Group. Last year, the sweetener more than doubled. “Sugar has transitioned from a bullish scenario to a bearish scenario,” said Dorea, who began trading agricultural commodities in 1981. “Investors should sell into rallies. The market may correct itself a little bit more, but there isn’t anything that would bring sugar up to the levels of the mid- 20s.” Raw sugar tumbled as much as 47 percent from a 29-year high of 30.4 cents on Feb. 1, as importers including India, Pakistan and Egypt withdrew from the market. Yesterday on ICE Futures U.S., the contract for May delivery rose 0.37 cent, or 2.1 percent, to 17.88 cents. The commodity has tumbled 34 percent in the first quarter. “It has basically been a price crash,” said Hansen at CPM, a New York-based research and asset-management company that structures hedges and trades for producers and consumers. “It’s not unreasonable to expect some kind of a bounce, but it’s unlikely to see sugar return to anywhere near” 27 cents, the level at the end of the year, he said. Mills Open Early Today, Brazilian sugar industry group Unica will issue its first output forecast for the Center South, which produces about 90 percent of the nation’s sweetener and ethanol. Brazilian yields are beating forecasts as a waning El Nino brings dry weather, boosting prospects for a record harvest. Mills began crushing cane early after two years of heavy rains pared output, said Maurilio Biagi Filho, the world’s second- largest grower. “I had never seen a single mill operating in January before,” Biagi said in an interview on March 24. “This January, we had 90 of them working at full capacity.” The Indian Sugar Mills Association on March 25 estimated production in the year ending Sept. 30 will be 17 million tons, up 1.5 million from a February projection. Output next season may be as much as 24 million tons, the group said. ‘Overestimated Deficit’ “The market had basically overestimated the extent of the deficit,” said Judith Ganes-Chase , a Katonah, a New York-based consultant. She forecast “single-digit” prices in 12 months, assuming favorable weather conditions. The global supply shortfall will be 12.8 million tons this year, down from 14.8 million projected in February, Czarnikow Group Ltd. said on March 24, citing higher-than-expected output in India. The market will return to a surplus next year, according to London-based Czarnikow and Ratzeburg, Germany-based F.O. Licht. “The unknown issue is the weather,” Round Earth’s Dorea said. “Last year, we were under this El Nino regime which is beginning to go away now. We’re moving to La Nina, which is typically better for crops in terms of rainfall distribution. In most cases, crops are going to be better and yields are going to be higher.” The cyclical heating of the Pacific Ocean known as El Nino will continue to fade, U.S. forecasters said this month. The weather event, which occurs every four to seven years, brings more rain to South America and less precipitation to Asia. In 2009, sugar soared partly because two straight years of drought damaged the Indian crop. El Nino Weakens A weakening El Nino is a “positive sign” for the monsoon, India’s main source of irrigation, Ajit Tyagi, a director general at the India Meteorological Department, said on March 18. “A repeat of last year is positively not going to happen.” The sweetener will rebound in the second half as prices become “appealing enough to ramp up demand,” said Claudio Oliveira , a trader at New York-based Castlestone Management LLC., which manages $600 million, including sugar futures. The commodity may fall to 15 cents in three months, he said. Hedge-fund managers and other large speculators reduced their net-long position in New York futures by 9.3 percent in the week ended March 23, according to U.S. Commodity Futures Trading Commission data . Speculative long positions, or bets prices will rise, outnumbered short positions by 155,463 contracts, down 15,890 contracts from a week earlier. Net-longs have dropped 23 percent since Feb. 2, the day after sugar reached the highest level since January 1981. The bullish wagers were up 19 percent from a year ago. “There’s still a very large speculative-long position in the market,” CPM’s Hansen said. “We need prices probably to fall further to see that washed out.” To contact the reporters on this story: Yi Tian in New York at ytian8@bloomberg.net ; Debarati Roy in New York at droy5@bloomberg.net

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Northeast States Declare Emergency on Record Rainfall

March 30, 2010

By Aaron Clark March 30 (Bloomberg) — Massachusetts, Rhode Island and Connecticut declared emergencies, closing roads and sandbagging low-lying areas as storms pounded the U.S. Northeast for a second day today. Massachusetts Governor Deval Patrick mobilized about 1,000 National Guard troops. The storm, which set a daily rainfall record in Boston, is expected to bring “beach erosion, major flooding and widespread road closures,” he said on his Web site yesterday . Connecticut Governor M. Jodi Rell said in a statement the weather had created “extremely dangerous situations” in the eastern part of the state. In Rhode Island, where officials warned of “historic flooding,” Governor Donald Carcieri urged residents to leave work early and head home, said a spokeswoman, Amy Kempe. “In some cases there has been two months of rain in the matter of a few days,” Tom Kines , a senior meteorologist for AccuWeather Inc., said in a telephone interview. “When you get that much rain over a few-day period, that spells trouble.” Storm Upon Storm Flooding in the Northeast from two storms earlier this month caused more than $10 million in damage, drove residents from their homes as power failed and sewer systems backed up, and washed out a section of the Massachusetts Bay Transit Authority’s Green Line light rail service. The Charles River, which divides Boston and Cambridge, is set to break the record crest of 9.24 feet reached in August 1955 when two hurricanes dumped more than 26 inches of rain in less than two weeks, the National Weather Service said. Boston’s Logan International Airport set a single-day record for rain after 1.96 inches fell yesterday, breaking the high of 1.85 inches set in 1984. March 2010 became the wettest March in Boston history and the second-wettest month on record today after the 30-day total reached 13.63 inches. Rainfall from the three separate storms within the last three weeks is “unprecedented in our recent 100-year weather history,” said the National Weather Service office in Taunton, Massachusetts. As much as 8 inches of rain is expected in parts of Rhode Island before the three-day storm ends tomorrow, with the Pawtuxet and Blackstone basins hardest-hit, according to the state’s Emergency Management Agency. Rivers Rise The Yantic River in Connecticut is expected to reach record flood levels, said Rell, who activated 150 National Guard troops and said helicopters from the U.S. Coast Guard, the military and state police are on standby. Mandatory evacuations are under way in Rhode Island, although Kempe said she did not know how many. State officials are monitoring Interstate 95, which runs from Maine to Florida, and will close it if necessary, she said. “The rain is still coming down very heavily and it has caused major street flooding, major street closures” throughout Rhode Island, said Kempe. “The governor is recommending that individuals consider leaving work early to head home.” The Pawtuxet River in Cranston, Rhode Island, set a flooding record of 17.03 feet at 2:45 p.m. and is expected to crest at 19 feet tomorrow, according to the weather service. Charles River The Charles River at Dover, Massachusetts, will crest at a record 9.9 feet on April 1, the weather service estimated. The 1955 storms and flooding killed at least 180 people and caused more than $650 million in damage, including the complete or partial failures of more than 200 dams in southern New England, according to the agency. New York City had received a monthly total of 10.16 inches by early today, heading toward the March record of 10.54 inches set in 1983. The rain was easing off in the city by mid- afternoon today. About 150 people have evacuated their homes in the Fall River area in southeast Massachusetts because of flooding, said Peter Judge , a spokesman for the state’s Emergency Management Agency . Record flooding is forecast on the Sudbury and Assabet rivers, he said. “Every river in central and eastern Massachusetts is expected to be at well-above flood stage before this storm is over,” Judge said. To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net

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Massachusetts, Rhode Island Declare Rain Emergencies

March 30, 2010

By Aaron Clark March 30 (Bloomberg) — Massachusetts and Rhode Island declared emergencies and Boston recorded unprecedented rainfall as storms pounded the U.S. Northeast for a second day today. Massachusetts Governor Deval Patrick mobilized about 1,000 National Guard troops because of the threat of “beach erosion, major flooding and widespread road closures,” according to a statement on his Web site yesterday. “In some cases there has been two months of rain in the matter of a few days,” Tom Kines , a senior meteorologist for AccuWeather Inc., said in a telephone interview. “When you get that much rain over a few-day period, that spells trouble.” Boston’s Charles River is set to break the record crest of 9.24 feet reached in August 1955 after two hurricanes dumped more than 26 inches of rain on the region in less than two weeks, according to the National Weather Service. In Rhode Island, where officials warned of “historic flooding,” Governor Donald Carcieri urged residents to leave work early and head home, said a spokeswoman, Amy Kempe. As much as 8 inches of rain is expected in parts of Rhode Island before the three-day storm ends tomorrow, with the Pawtuxet and Blackstone basins hardest-hit, said the state’s Emergency Management Agency. Boston’s Logan Airport set a single-day record for rain after 1.96 inches fell yesterday, breaking the high of 1.85 inches set in 1984. Storm Upon Storm Flooding in the Northeast from two storms earlier this month caused more than $10 million in damage, drove residents from their homes as power failed and sewer systems backed up, and washed out a section of the Massachusetts Bay Transit Authority’s Green Line light rail service. An AccuWeather meteorologist, Jesse Ferrell, posted a radar loop showing, by his count, 22 storms hitting the Northeast since the official start of the winter season Dec. 1, with almost double the average amount of moisture. “The rain is still coming down very heavily and it has caused major street flooding, major street closures, throughout” Rhode Island, said Kempe. “The governor is recommending that individuals consider leaving work early to head home.” Mandatory evacuations are under way in the state, although Kempe said she did not know how many. State officials are monitoring Interstate 95, which runs from Maine to Florida, and will close it if necessary, she said. Rivers Rise The Pawtuxet River in Cranston, Rhode Island, set a flooding record of 15.07 feet at 9:45 a.m. and is expected to reach 17.5 feet by tomorrow, according to the weather service. The weather service projects the Charles River at Dover, Massachusetts, will reach 9.9 feet on April 1. The 1955 storms and flooding killed at least 180 people and caused more than $650 million in damage, including the complete or partial failures of more than 200 dams in southern New England, according to the National Weather Service. Both Boston and Providence, Rhode Island, have set records this month for the wettest March in history, AccuWeather said. An additional 1.06 inches had fallen at Logan Airport as of 10 a.m. today, according to the National Weather Service . March 2010 is already the fourth wettest-month in Boston history and may become the second-wettest. New York City had received a monthly total of 10.16 inches by early today, heading toward the March record of 10.54 inches set in 1983. About 150 people have evacuated their homes in the Fall River area in southeast Massachusetts because of flooding, said Peter Judge , a spokesman for the state’s Emergency Management Agency . Record flooding is forecast on the Sudbury and Assabet rivers, he said. “Every river in central and eastern Massachusetts is expected to be at well-above flood stage before this storm is over,” Judge said. To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net

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Massachusetts, Rhode Island Declare Emergencies as Rain Pounds Northeast

March 30, 2010

By Aaron Clark March 30 (Bloomberg) — Massachusetts and Rhode Island declared emergencies and Boston recorded unprecedented rainfall as storms pounded the U.S. Northeast for a second day today. Massachusetts Governor Deval Patrick mobilized about 1,000 National Guard troops because of the threat of “beach erosion, major flooding and widespread road closures,” according to a statement on his Web site yesterday. “In some cases there has been two months of rain in the matter of a few days,” Tom Kines , a senior meteorologist for AccuWeather Inc., said in a telephone interview. “When you get that much rain over a few-day period, that spells trouble.” Boston’s Charles River is set to break the record crest of 9.24 feet reached in August 1955 after two hurricanes dumped more than 26 inches of rain on the region in less than two weeks, according to the National Weather Service. In Rhode Island, where officials warned of “historic flooding,” Governor Donald Carcieri urged residents to leave work early and head home, said a spokeswoman, Amy Kempe. As much as 8 inches of rain is expected in parts of Rhode Island before the three-day storm ends tomorrow, with the Pawtuxet and Blackstone basins hardest-hit, said the state’s Emergency Management Agency. Boston’s Logan Airport set a single-day record for rain after 1.96 inches fell yesterday, breaking the high of 1.85 inches set in 1984. Storm Upon Storm Flooding in the Northeast from two storms earlier this month caused more than $10 million in damage, drove residents from their homes as power failed and sewer systems backed up, and washed out a section of the Massachusetts Bay Transit Authority’s Green Line light rail service. An AccuWeather meteorologist, Jesse Ferrell, posted a radar loop showing, by his count, 22 storms hitting the Northeast since the official start of the winter season Dec. 1, with almost double the average amount of moisture. “The rain is still coming down very heavily and it has caused major street flooding, major street closures, throughout” Rhode Island, said Kempe. “The governor is recommending that individuals consider leaving work early to head home.” Mandatory evacuations are under way in the state, although Kempe said she did not know how many. State officials are monitoring Interstate 95, which runs from Maine to Florida, and will close it if necessary, she said. Rivers Rise The Pawtuxet River in Cranston, Rhode Island, set a flooding record of 15.07 feet at 9:45 a.m. and is expected to reach 17.5 feet by tomorrow, according to the weather service. The weather service projects the Charles River at Dover, Massachusetts, will reach 9.9 feet on April 1. The 1955 storms and flooding killed at least 180 people and caused more than $650 million in damage, including the complete or partial failures of more than 200 dams in southern New England, according to the National Weather Service. Both Boston and Providence, Rhode Island, have set records this month for the wettest March in history, AccuWeather said. An additional 1.06 inches had fallen at Logan Airport as of 10 a.m. today, according to the National Weather Service . March 2010 is already the fourth wettest-month in Boston history and may become the second-wettest. New York City had received a monthly total of 10.16 inches by early today, heading toward the March record of 10.54 inches set in 1983. About 150 people have evacuated their homes in the Fall River area in southeast Massachusetts because of flooding, said Peter Judge , a spokesman for the state’s Emergency Management Agency . Record flooding is forecast on the Sudbury and Assabet rivers, he said. “Every river in central and eastern Massachusetts is expected to be at well-above flood stage before this storm is over,” Judge said. To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net

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Massachusetts Declares Emergency as Rain Pounds Northeast for Second Day

March 30, 2010

By Aaron Clark March 30 (Bloomberg) — Massachusetts declared a state of emergency and Rhode Island warned of “historic flooding” as rainfall pounded the U.S. Northeast again today. Massachusetts Governor Deval Patrick planned to mobilize as many as 1,000 National Guard troops as rainfall was forecast to cause “beach erosion, major flooding, and widespread road closures,” according to a statement yesterday. As much as 8 inches of rain is expected in parts of Rhode Island before the three-day storm ends tomorrow, with the Pawtuxet and Blackstone basins hardest-hit, according to a statement from the state’s Emergency Management Agency. “When you get that much rain over a few-day period, that spells trouble,” Tom Kines , a senior meteorologist for AccuWeather Inc., said in a telephone interview. “In some cases there has been two months of rain in the matter of a few days.” Flooding in the Northeast from two storms earlier this month caused more than $10 million in damage, drove residents from their homes as power failed and sewer systems backed up, and washed out a section of the Massachusetts Bay Transit Authority’s Green Line light rail service. “Significant river and small stream flooding is likely. Urban and basement flooding are also significant threats,” according to a National Weather Service bulletin . “Residents should take action to protect property.” The Pawtuxet River in Cranston, Rhode Island, which set a flooding record of 14.98 feet March 15, is expected to reach a new record of 17.5 feet by tomorrow, according to the weather service. The river was at 14.79 feet at 8:45 a.m. Both Boston and Providence, Rhode Island, have set records this month for the wettest March in history, AccuWeather said. New York City had received a monthly total of 9.25 inches as of 9 a.m., heading toward the March record of 10.54 set in 1983. An AccuWeather meteorologist, Jesse Ferrell, posted a radar loop showing, by his count, 22 storms hitting the Northeast since the official start of the winter season Dec. 1, with almost double the average amount of moisture. To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net

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Housing Starts in U.S. Fall as Fewer Permits Signal Rebound to Take Longer

March 16, 2010

By Shobhana Chandra March 16 (Bloomberg) — Housing starts fell in February as record snowfall in parts of the U.S. hampered construction, while fewer building permits signaled the recovery in real estate will take longer to unfold. Builders broke ground on 575,000 homes at an annual rate, down 5.9 percent from 611,000 in January, Commerce Department figures showed today in Washington. February starts reflected declines in the Northeast and South, which experienced winter storms. Prices of goods imported into the U.S. fell more than anticipated in February, another report showed. Homebuilders may be cautious about taking on new projects as mounting foreclosures add to inventory and the Federal Reserve prepares to end mortgage-backed security purchases. A lack of job growth that could invigorate housing and few signs of inflation will give Fed policy makers meeting today room to keep interest rates near zero. “Some of the numbers reflect the severe snowstorms, but apart from the weather, there’s no evidence of a pickup in activity,” Michael Feroli , an economist at JPMorgan Chase & Co. in New York, said about the real estate market. “If we see the job market pick up, it’ll eventually feed through to housing.” Stocks climbed after Standard & Poor’s affirmed Greece’s credit rating. The S&P 500 gained 0.5 percent to 1,156.62 at 11:43 a.m. in New York. Some economists said the housing market will be able to weather the removal of the stimulus programs once the economy begins to create jobs and banks ease up on credit. Homes have also become more affordable . Homebuilders’ Shares Homebuilders’ shares reflect the optimism. The S&P Supercomposite Homebuilding Index , which includes Pulte Homes Inc. and Lennar Corp., has increased about 15 percent so far this year. The Labor Department reported that its import price index fell 0.3 percent, the first decline in seven months, pointing to few signs of inflation from abroad. Economists forecast a 0.2 percent drop, according to the median estimate in a Bloomberg survey. Fed policy makers will leave the benchmark lending rate unchanged at zero to 0.25 percent, where it’s been since December 2008, according to all 90 economists in a Bloomberg survey. They’re also likely to stick to their timetable of completing their plan to purchase $1.25 trillion in mortgage- backed securities at the end of this month that helped reduce borrowing costs. The Fed’s purchases were part of a U.S. government effort aimed at reviving the housing market. Tax Credit President Barack Obama in November extended a tax credit of as much as $8,000 for first-time homebuyers, and expanded it to some current owners. The extension covers closings through June as long as contracts are signed by the end of April. Obama administration officials said companies won’t hire enough workers this year to lower joblessness much below the 9.7 percent rate reached in February. The percent of Americans who can’t find work is likely to “remain elevated for an extended period,” Treasury Secretary Timothy F. Geithner , White House budget director Peter Orszag and Christina Romer , chairman of the Council of Economic Advisers, said in a joint statement. Housing starts were projected to fall to 570,000 after a previously reported 591,000 in January, according to the median forecast of 71 economists surveyed by Bloomberg. Estimates ranged from 510,000 to 610,000. Permits Drop Building permits , a sign of future construction, decreased 1.6 percent to a 612,000 annual rate after a 4.7 percent drop in January. Permits were forecast to decrease to a 601,000 annual pace, according to the survey median. Construction of single-family houses dropped 0.6 percent to a 499,000 rate in February. Work on multifamily homes , such as townhouses and apartment buildings, slumped 30 percent to the lowest level in four months. The decrease in starts was led by a 16 percent decline in the South and a 9.6 percent drop in the Northeast. Starts rose 11 percent in the Midwest and 7.9 percent in the West. Executives at Hovnanian Enterprises Inc. , New Jersey’s largest homebuilder, are among those watching if demand will hold up after government incentives fades. The Red Bank, New Jersey-based company this month reported its first quarterly profit since 2006. “With the tax credit for first time and repeat buyers expiring at the end of the second quarter, we too are interested to see if the positive momentum that we established can be sustained,” Chief Executive Officer Ara Hovnanian said on a conference call with investors on March 3. “We’re keeping a close eye on this as we head into the summer months.” To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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Housing Starts in U.S. Fall as Fewer Permits Signal Rebound to Take Longer

March 16, 2010

By Shobhana Chandra March 16 (Bloomberg) — Housing starts fell in February as record snowfall in parts of the U.S. hampered construction, while fewer building permits signaled the recovery in real estate will take longer to unfold. Builders broke ground on 575,000 homes at an annual rate, down 5.9 percent from 611,000 in January, Commerce Department figures showed today in Washington. February starts reflected declines in the Northeast and South, which experienced winter storms. Prices of goods imported into the U.S. fell more than anticipated in February, another report showed. Homebuilders may be cautious about taking on new projects as mounting foreclosures add to inventory and the Federal Reserve prepares to end mortgage-backed security purchases. A lack of job growth that could invigorate housing and few signs of inflation will give Fed policy makers meeting today room to keep interest rates near zero. “Some of the numbers reflect the severe snowstorms, but apart from the weather, there’s no evidence of a pickup in activity,” Michael Feroli , an economist at JPMorgan Chase & Co. in New York, said about the real estate market. “If we see the job market pick up, it’ll eventually feed through to housing.” Stocks climbed after Standard & Poor’s affirmed Greece’s credit rating. The S&P 500 gained 0.5 percent to 1,156.62 at 11:43 a.m. in New York. Some economists said the housing market will be able to weather the removal of the stimulus programs once the economy begins to create jobs and banks ease up on credit. Homes have also become more affordable . Homebuilders’ Shares Homebuilders’ shares reflect the optimism. The S&P Supercomposite Homebuilding Index , which includes Pulte Homes Inc. and Lennar Corp., has increased about 15 percent so far this year. The Labor Department reported that its import price index fell 0.3 percent, the first decline in seven months, pointing to few signs of inflation from abroad. Economists forecast a 0.2 percent drop, according to the median estimate in a Bloomberg survey. Fed policy makers will leave the benchmark lending rate unchanged at zero to 0.25 percent, where it’s been since December 2008, according to all 90 economists in a Bloomberg survey. They’re also likely to stick to their timetable of completing their plan to purchase $1.25 trillion in mortgage- backed securities at the end of this month that helped reduce borrowing costs. The Fed’s purchases were part of a U.S. government effort aimed at reviving the housing market. Tax Credit President Barack Obama in November extended a tax credit of as much as $8,000 for first-time homebuyers, and expanded it to some current owners. The extension covers closings through June as long as contracts are signed by the end of April. Obama administration officials said companies won’t hire enough workers this year to lower joblessness much below the 9.7 percent rate reached in February. The percent of Americans who can’t find work is likely to “remain elevated for an extended period,” Treasury Secretary Timothy F. Geithner , White House budget director Peter Orszag and Christina Romer , chairman of the Council of Economic Advisers, said in a joint statement. Housing starts were projected to fall to 570,000 after a previously reported 591,000 in January, according to the median forecast of 71 economists surveyed by Bloomberg. Estimates ranged from 510,000 to 610,000. Permits Drop Building permits , a sign of future construction, decreased 1.6 percent to a 612,000 annual rate after a 4.7 percent drop in January. Permits were forecast to decrease to a 601,000 annual pace, according to the survey median. Construction of single-family houses dropped 0.6 percent to a 499,000 rate in February. Work on multifamily homes , such as townhouses and apartment buildings, slumped 30 percent to the lowest level in four months. The decrease in starts was led by a 16 percent decline in the South and a 9.6 percent drop in the Northeast. Starts rose 11 percent in the Midwest and 7.9 percent in the West. Executives at Hovnanian Enterprises Inc. , New Jersey’s largest homebuilder, are among those watching if demand will hold up after government incentives fades. The Red Bank, New Jersey-based company this month reported its first quarterly profit since 2006. “With the tax credit for first time and repeat buyers expiring at the end of the second quarter, we too are interested to see if the positive momentum that we established can be sustained,” Chief Executive Officer Ara Hovnanian said on a conference call with investors on March 3. “We’re keeping a close eye on this as we head into the summer months.” To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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Housing Starts in U.S. Declined by 5.9% Amid February Snow; Permits Eased

March 16, 2010

By Shobhana Chandra March 16 (Bloomberg) — Housing starts in the U.S. fell in February as record snowfall in parts of the country hampered construction, while fewer building permits signaled demand is stagnating. Builders broke ground on 575,000 homes at an annual rate last month, down 5.9 percent from January’s revised 611,000 pace that was higher than initially estimated, Commerce Department figures showed today in Washington. February starts reflected declines in the Northeast and South and compared with a median estimate of 570,000 in a Bloomberg News survey of economists. Mounting foreclosures are making it harder to clear inventories, keeping pressure on prices and discouraging new construction. The economy has yet to create the sustained job growth that could invigorate housing demand and is one reason Federal Reserve policy makers will probably keep interest rates near zero after their meeting today. The report “definitely reflects the severe weather effect,” said Ellen Zentner , senior U.S. macroeconomist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Housing has now got enough support that it has stabilized. With or without support, the housing recovery will be slow going.” Starts on dwellings were projected to fall after a previously reported 591,000 in January, according to the median forecast of 71 economists surveyed by Bloomberg. Estimates ranged from 510,000 to 610,000. Import Prices Decline A separate report showed prices of goods imported into the U.S. declined more than anticipated, pointing to few signs of inflation pressure from abroad. The import price index fell 0.3 percent, the first decline in seven months, Labor Department figures showed today. Economists forecast a 0.2 percent drop, according to the median estimate in a Bloomberg survey. Companies may be reluctant to raise prices as the world’s largest economy climbs out of the worst recession since the 1930s. Unemployment and tame inflation are among reasons Fed policy makers are expected to hold the benchmark rate on overnight loans between banks between zero and 0.25 percent today, according to the forecast of all 90 economists surveyed. Stocks were little changed as investors waited for the Fed’s decision, due at about 2:15 p.m. in Washington. The Standard & Poor’s 500 Index rose 0.2 percent to 1,153.2 at 10:30 a.m. in New York. The 10-year Treasury note rose, pushing up the yield to down to 3.67 percent from 3.70 percent late yesterday. Permits Decrease Building permits , a sign of future construction, decreased 1.6 percent to a 612,000 annual rate after a 4.7 percent drop in January. Permits were forecast to decrease to a 601,000 annual pace, according to the survey median. Construction of single-family houses dropped 0.6 percent to a 499,000 rate in February. Work on multifamily homes, such as townhouses and apartment buildings, slumped 30 percent to an annual rate of 76,000, the lowest in four months. The decrease in starts was led by a 16 percent decline in the South and a 9.6 percent drop in the Northeast. Starts rose 11 percent in the Midwest and 7.9 percent in the West. The report bolsters the view of some economists that the weather played a bigger role in depressing employment last month. The economy lost 64,000 construction jobs in February, according to figures from the Labor Department released earlier this month. Overall employment fell by 36,000 workers, a smaller decline than anticipated, leading to speculation that the labor market is stabilizing. The number of homes under construction in February declined 2.2 percent to a record-low 492,000, today’s report showed. Builder Confidence A report yesterday showed builder confidence unexpectedly declined in March as prospective-buyer traffic fell to a one- year low. The National Association of Home Builders/Wells Fargo’s index of builder confidence dropped for the third time in four months. Fed policy makers will leave the benchmark lending rate unchanged at zero to 0.25 percent, where it’s been since December 2008, according to the median forecast in a Bloomberg survey. They’re also likely to stick to their timetable of completing their plan to purchase $1.25 trillion in mortgage- backed securities at the end of this month that was part of an effort to reduce borrowing costs and revive the housing market. President Barack Obama in November extended a tax credit of as much as $8,000 for first-time homebuyers, and expanded it to some current owners. The extension covers closings through June as long as contracts are signed by the end of April. Bigger gains in housing sales ultimately require a pickup in job creation. Unemployment may end the year at 9.5 percent, according to a Bloomberg monthly survey. Hovnanian on Credit Executives at Hovnanian Enterprises Inc. , New Jersey’s largest homebuilder, are among those watching if demand will hold up after the incentive fades. The Red Bank, New Jersey- based company this month reported its first quarterly profit since 2006. “With the tax credit for first time and repeat buyers expiring at the end of the second quarter, we too are interested to see if the positive momentum that we established can be sustained,” Chief Executive Officer Ara Hovnanian said on a conference call with investors on March 3. “We’re keeping a close eye on this as we head into the summer months.” To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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Real-Estate Recovery Signaled by Homebuilders’ Surge as Fed Unwinds Credit

March 15, 2010

By Kathleen M. Howley and Rich Miller March 15 (Bloomberg) — The U.S. housing market is poised to withstand the removal of government and Federal Reserve stimulus programs and rebound later in the year, contributing to annual economic growth for the first time since 2006. Increases in jobs, credit and affordable homes will help offset the end of the Fed’s purchases of mortgage-backed securities this month and the expiration of a federal homebuyer tax credit in April. Sales will rise about 6 percent this year, and housing will account for 0.25 percentage point of the 3.6 percent growth, according to forecasts by Dean Maki , chief U.S. economist for Barclays Capital in New York. “I would bet even odds that we’re at a bottom and that we’re going to see improvement in the coming months,” said Karl Case , co-creator of the S&P/Case-Shiller Home Price Index and a professor of economics at Wellesley College in Wellesley, Massachusetts. An improving market would allay concerns at the Fed that sales will relapse after the tax credit expires. It would also give Fed Chairman Ben S. Bernanke and his colleagues, who meet this week in Washington, a freer rein to ultimately raise the interest rate for overnight loans among banks from near zero. “They’re going to be tightening credit sooner than people expect,” said Chris Rupkey , chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. He forecasts that the Fed’s first increase since 2006 may come as soon as June. Reflecting Optimism Homebuilders’ shares reflect the optimism. The 12-member Standard & Poor’s Supercomposite Homebuilding Index hit a five- month high March 9 on speculation the expanding economy will boost sales. The index has gained 14 percent this year, led by a 41 percent jump in Columbus, Ohio-based M/I Homes Inc. , a 31 percent increase by Standard Pacific Corp. in Irvine, California, and a 28 percent rise in Miami-based Lennar Corp. Recent housing data have been mixed. Sales of existing homes fell 7.2 percent in January, while housing starts rose 2.8 percent, according to statistics from the National Association of Realtors in Chicago and the Commerce Department in Washington. Employment is key to the outlook, according to Patrick Newport , an economist with IHS Global Insight in Lexington, Massachusetts. “When people get jobs, that’s when they move or decide to buy a bigger house,” he said. The U.S. may add as many as 300,000 jobs in March, the most in four years, thanks to an improvement in the weather, government hiring of temporary workers for the census and a growing economy, said David Greenlaw , chief fixed-income economist at Morgan Stanley in New York. Payrolls dropped by 36,000 in February, according to the Labor Department, depressed in part by East Coast snowstorms that closed many businesses. ‘Turning Positive’ “The underlying trend is turning positive,” said Bruce Kasman , chief economist at JPMorgan Chase & Co. in New York. The Senate last week approved a $138 billion measure that would extend unemployment benefits and provide additional aid to states. President Barack Obama praised the bill’s passage, saying it will help put the U.S. back on a solid footing. The economy is projected to grow 3 percent this year, according to the median forecast of 52 economists surveyed by Bloomberg News from March 1 to March 10. It expanded at a 5.9 percent annual pace in the fourth quarter, the most in more than six years, after a 2.2 percent increase in the third. Credit conditions may also be improving. A net 13.2 percent of banks surveyed by the Fed in January reported that they tightened standards on prime mortgage loans in the fourth quarter, the smallest percentage since the central bank began tallying such data three years ago. ‘Important Step’ “This is an important step in the right direction,” Peter Hooper , chief economist at Deutsche Bank Securities in New York, and his colleagues wrote in a report to clients last month. Mortgage originations for the purchase of a home will rise to $745 billion this year and $822 billion next year, the highest since 2008, from $740 billion in 2009, according to forecasts from the Washington-based Mortgage Bankers Association. Falling home prices and low mortgage rates have made homes more affordable. The median price was $164,700 in January, matching the year-ago level, which was the lowest since May 2002, according to the Realtors’ association. The trade group will report February housing data next week. The average rate for a 30-year fixed mortgage was 4.95 percent last week, up from a record-low 4.71 percent in December, according to Freddie Mac , the McLean, Virginia-based mortgage buyer. The average household had 177.8 percent of the income needed to purchase a property in January, the highest since a record 184 percent in April 2009, when mortgage rates tumbled to 4.78 percent, according to data from the Realtors’ association. First Hurdle The housing market’s first hurdle comes at the end of this month, when the Fed completes its program to purchase $1.25 trillion of mortgage-backed securities and about $175 billion of housing-agency debt. The move probably won’t have much impact, said Mahesh Swaminathan , a mortgage strategist at Credit Suisse Holdings USA in New York. Private demand will replace the central bank, keeping down the spread at which mortgage-backed securities trade to 10-year Treasury notes, he said. The spread on Friday was about 60 basis points. “We don’t anticipate a massive widening of spreads once the Fed stops buying,” he said. “It will be a few basis points here and there.” As a result, he sees mortgage rates remaining “about where they are now.” Mortgage-Backed Securities Much of the private buying will come from money managers who are underweight mortgage-backed securities in their portfolios relative to their benchmarks, said Ajay Rajadhyaksha , managing director of Barclays Capital in New York, who sees spreads rising about 15 basis points in the second quarter. Once the Fed completes its purchases, the next obstacle for the market is the expiration of the tax credit for first-time home buyers. The original credit helped boost existing-home sales by 4.9 percent to 5.16 million in 2009, the first increase since 2005, according to the Realtors’ association. The credit, which was slated to end on Nov. 30, was expanded and extended through April. The Fed’s Beige Book business survey released March 3 found that some contacts in the housing industry are “apprehensive about future sales” of homes once the credit expires, even though the extension hasn’t helped as much as the initial incentive. Potential Buyers “A lot of people moved up their purchases to meet the original deadline and that used up a lot of the pool of potential buyers,” Newport of IHS Global said. The credit of as much as $8,000 stimulated only 180,000 extra sales from December to April, said David Crowe , chief economist at the National Association of Home Builders in Washington. It was “certainly positive, but it has not fueled a huge increase in sales,” Ara K. Hovnanian , chairman and chief executive officer of Red Bank, New Jersey-based Hovnanian Enterprises Inc. , the nation’s seventh largest homebuilder by revenue, told analysts on March 3. The final challenge for the housing market this year is the supply of available properties and the prospect that it may rise. Foreclosures may increase to 2.2 million this year from a record 1.7 million last year, according to a forecast by Mark Zandi , chief economist for Moody’s Economy.com in West Chester, Pennsylvania. The number of vacant homes for sale rose to 2.09 million in the fourth quarter from 1.99 million in the prior period as banks seized property, the U.S. Census Bureau said Feb. 2. Excess Supply An improvement in the job market would spur household formation and help absorb the excess supply , said Thomas Lawler , a former economist with Washington-based mortgage company Fannie Mae who now is an independent housing consultant in Leesburg, Virginia. There may be 1.25 million new households in 2010 if the economy continues to expand, he said. The number has stayed below 1 million for the last three years as adult children lived with their parents and Americans generally conserved cash, he said. “If we get a rebound, you could see excess supply disappear very quickly,” Lawler said. “The underlying trend in home sales is for gradual improvement,” Maki of Barclays Capital said. “While activity will remain at low levels for some time, the housing bust is essentially over.” To contact the reporters on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net Rich Miller in Washington rmiller28@bloomberg.net

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Retail Sales in U.S. Unexpectedly Rose in February as Shoppers Braved Snow

March 12, 2010

By Bob Willis March 12 (Bloomberg) — Sales at U.S. retailers unexpectedly climbed in February as shoppers braved blizzards to get to the malls, signaling consumers will contribute more to economic growth. Purchases increased 0.3 percent, the fourth gain in the past five months, Commerce Department figures showed today in Washington. Figures for the prior two months were revised down, taking some of the shine off of today’s data. Sales excluding autos rose 0.8 percent, exceeding all estimates. A report last week showing the economy lost fewer jobs than anticipated in February signaled employment is on the verge of accelerating, a development that would spur spending in coming months. Macy’s Inc. was among retailers that beat estimates last month as customers overcame the weather to shop for Valentine’s Day gifts and spring merchandise, a sign the expansion is broadening beyond manufacturing. “The storms were apparently not quite as disruptive as anticipated,” said Adam York , an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, whose forecast for a 0.6 percent gain excluding autos was the highest of those surveyed. “As we start adding jobs in the spring, employees will gain income and hours and retail sales should follow.” Stocks reversed gains after a separate report showed consumer sentiment unexpectedly declined this month. The Standard & Poor’s 500 Index fell 0.2 percent to 1,148.19 at 10:12 a.m. in New York after rising as much as 0.3 percent. Consumer Sentiment The Reuters/University of Michigan preliminary index of consumer confidence fell to 72.5 in March from a final reading of 73.6 a month earlier. The index was forecast to rise to 74, according the median estimate in a Bloomberg News survey of 68 economists. Inventories at U.S. businesses were little changed in January as sales climbed, signaling companies may need to increase orders to prevent shelves from emptying, the Commerce Department reported today. Retail sales were projected to fall 0.2 percent, according to the median estimate of 77 economists in a Bloomberg survey. Forecasts ranged from a decline of 1 percent to a 0.9 percent gain. The Commerce Department revised January data down to show a 0.1 percent increase compared with an originally reported 0.5 percent gain. Purchases excluding autos were projected to increase 0.1 percent, according to the survey median. GDP Figures Excluding autos, gasoline and building materials — the retail group the government uses to calculate GDP figures for consumer spending — sales increased 0.9 percent after a 0.6 percent gain. The government uses data from other sources to calculate the contribution from the three categories excluded. Ten of 13 major categories showed increases in sales last month, led by electronics and appliances stores, and grocery stores. Purchases of electronics climbed 3.7 percent, the biggest gain since January 2009. Receipts at bars and restaurants climbed 0.9 percent, the most since April 2008. Auto sales dropped 2 percent after decreasing 1.5 percent in January. The storms that pushed seasonal snowfall totals to records in parts of the eastern U.S. made some dealers lots impenetrable, while a recall by Toyota Motor Corp . may have also hurt auto demand. Chain Stores Chain stores turned in a better-than-forecast performance last month, compared with a low point last year, industry figures showed last week. Macy’s Inc., Abercrombie & Fitch Co. and Gap Inc. beat analysts’ estimates in February as holiday sales tempted consumers to go shopping in a month of record snowfalls. February comparable-store sales climbed 4.1 percent, topping the Retail Metrics 3 percent estimate. It was the sixth straight monthly gain and the biggest in 27 months. Purchases fell 4.1 percent in February 2009, Ken Perkins , president of Swampscott, Massachusetts-based Retail Metrics, said last week. TJX Corporation Inc ., an off-price apparel chain, reported a 16 percent sales increase in the four weeks ended Feb. 27 from a year earlier. “We achieved these sales despite the harsh snowstorms that affected many regions in the country,” said Sherry Lang , vice president for investors, in a teleconference on March 4. “The month ended on a stronger note than we had anticipated.” Figures last week that showed the economy lost fewer jobs than anticipated last month signal employment is on the verge of accelerating, a development that would spur spending in coming months. Job Losses The Labor Department reported March 5 the economy lost 36,000 jobs in February, even accounting for job losses caused by the blizzards. The unemployment rate held at 9.7 percent for a second month, indicating the labor market is stabilizing. Consumer spending rose at a 1.7 percent annual pace in the first quarter, the government reported last month. Economists surveyed by Bloomberg last week forecast growth to average 2.25 percent in the first half, compared with the 3.3 percent average during the two decades through 2007. Households are still trying to overcome a record loss of wealth during the recession as home values and stock prices plunged, reasons why spending will be slow to recover. The economy grew at a 5.9 percent annual pace in the fourth quarter, the strongest showing in more than six years as companies tried to stabilize inventories, the government reported last month. Economists surveyed by Bloomberg this month forecast growth will slow to 2.8 percent in this quarter. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Paula Berg: 4 Tips for Measuring Social Media: It’s Not All About The Numbers

March 10, 2010

In 2006 the responsibility of Southwest Airlines’ social media efforts fell into my lap. I knew nothing about social media at the time – I didn’t read blogs, Twitter didn’t even exist, and I playfully mocked a couple of ex-boyfriends who were on MySpace. But, with my new assignment, I had no choice but to make it part of my life. So I did the only reasonable thing. I locked myself in my office every night with a bottle of wine and tried to figure it out. And, like my first Phish concert, I discovered an amazing world that I hadn’t previously known existed. Everyday provided a new lesson and a new challenge. And, my experiences forced me to completely rethink corporate communications. More than blogging, Tweeting, or Facebooking, my role, as I saw it, was to slash through red tape and revolutionize the business of communication; to tear down old infrastructure to meet the needs of the changing environment. It was clear that in order to do social media successfully, we needed more…well…everything. We needed more information. And, we needed to receive it faster. We needed more eyes and ears. And, we needed people who knew our company inside and out. We needed new reporting structures, approval processes and more agile response teams. We needed people to push the envelope and take risks. And, we needed to invest money where there was no proven ROI. Measurement and reporting were among our most powerful tools in justifying our needs – but even for a company that completely bought in to social media, changing minds wasn’t always that easy. Consider this: In July 2007, Southwest Airlines joined Twitter. Shortly thereafter we began sourcecoding all of our links. Then, sometime in 2008, something amazing happened. My colleague Christi Day (who now leads Southwest’s social media efforts) came into my office to tell me that seven people had clicked from Twitter to southwest.com and made a purchase that week. A whopping seven ! We went completely nuts. I started spinning around in my chair while Christi did high kicks in the doorway. We were completely deflated, however, when one of our colleagues suggested we not report our findings because the number “was so small.” Technically, she was right. Relative to the millions of people that book their travel on southwest.com each year, seven didn’t sound very impressive. But where she saw something small, we saw something huge… potential. Less than a year later, Southwest launched a 48-hour fare sale using nothing more than social media and public relations to promote it – no paid advertising – and achieved its top two sales and web site traffic days in the airlines’ 38 year history. If anyone thought it was an anomaly, three months later, they did it again. The challenge Anyone who works in social media sees its power and possibility every day. The ultimate challenge is finding ways to convince our peers and leaders that some things are going to have to change if we want our organizations to evolve and adapt to the new environment. During my time at Southwest Airlines, we had a number of measurement tools at our disposal; but charts, graphs, and numbers alone weren’t going to inspire the change. So when measuring and preparing our social media reports, we always tried to answer the following questions: 1. What are the numbers trying to tell us? When we began our social media efforts, the numbers really weren’t that impressive. We didn’t yet have much traffic to our blog. Our Twitter and Facebook followings were still relatively small. So we tried to read between the numbers to spot trends and “ah-ha moments.” For us, reporting social media was like reporting the weather. The question wasn’t “what were the numbers yesterday?” but rather “what are they going to be tomorrow?” 2. What are we trying to prove? The answer to this question changed over time, and our reports had to change with it. For example, when we began using social media there was still this myth that bloggers were all 17-year-olds in their mothers’ basements. Our challenge, at that time, was simply to prove that these folks were credible journalists worthy of our time and attention. Our early social media reports read like biographies. 3. What should we be doing differently? Our biggest failures were always our biggest learning experiences, but in order to inspire organizational change, we had to make sure that everyone else was learning from them as well. With each misstep, we would document exactly what had happened: what went wrong, how it could have been prevented, what infrastructure changes were needed, and how we planned to address similar situations in the future. 4. Who cares? Ultimately, our reports were more for us than anyone else. And, we quickly learned that if we weren’t dazzled by them, no one else was going to be dazzled either. Our challenge was not just to tell the story, but to sell the story by bringing the information to life and presenting it in a way that made jaws drop. Old habits die hard. And slashing through corporate red tape takes time and resolve. Four years in, and I still find myself trying to convince people of things that seem so obvious to those of us who live and breathe social media every day. Sometimes I win. Sometimes I lose. But it’s worth the fight. And, those occasional victories are among my proudest accomplishments.

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McDonald’s Sales Surpass Estimates, Helped by Olympics, Chinese New Year

March 8, 2010

By Matthew Boyle March 8 (Bloomberg) — McDonald’s Corp. , the world’s largest restaurant company, said global sales rose 4.8 percent in February, topping some analysts’ estimates, as demand in Asia countered snow-hampered results in the U.S. Sales at restaurants in Asia, the Middle East and Africa open at least 13 months increased 10.5 percent, the biggest gain since November 2008, helped by Chinese New Year celebrations, the Oak Brook, Illinois-based company said today in a statement. Comparable-store sales rose 0.6 percent at U.S. restaurants and 5.4 percent in Europe. Snowstorms reduced U.S. comparable sales last month by about 2 percentage points, Heidi Barker , a company spokeswoman, said today in an e-mail. That offset the contribution of Olympic-themed ads for Chicken McNuggets, McCafe beverages and a $1 breakfast menu, introduced in January. “We estimate the weather hurt sales by at least one to two percent in the U.S., so the positive same-store comp was very encouraging and bodes well for future sales trends,” said Steve West , an analyst at Stifel Nicolaus in St. Louis. McDonald’s rose $1.42, or 2.2 percent, to $65.09 at 10:27 a.m. in New York Stock Exchange composite trading . The stock had gained 2 percent this year before today. Wendy’s/Arby’s Group said March 4 that snowstorms across the central and eastern U.S. stifled its February sales. Snowstorms also cut into McDonald’s U.S. sales in January, Chief Executive Officer Jim Skinner said on a Jan. 22 conference call. McDonald’s global sales were projected to rise 4 percent, the average of estimates from analysts at Jefferies & Co., Robert W. Baird & Co., Janney Montgomery Scott and Telsey Advisory Group. They predicted gains of 6.5 percent both in Europe and in Asia, the Middle East and Africa. U.S. sales were expected to rise 1 percent. Along with Chinese New Year, a lunch value menu introduced in December drove sales in Asia, according to a note today from analyst Jeff Farmer at Jefferies & Co. in Boston. The hamburger chain said European sales were fueled by demand for menu staples and seasonal products in France and the U.K. To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net .

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Labor Market in U.S. Is Poised for Gains as Unemployment Rate Stabilizes

March 6, 2010

By Timothy R. Homan March 6 (Bloomberg) — The unemployment rate in the U.S. held at 9.7 percent in February and employers cut fewer jobs than anticipated, indicating improvement in the labor market even as East Coast blizzards forced temporary closings of some businesses. Payrolls dropped by 36,000 last month after a revised 26,000 decrease in January, a Labor Department report showed yesterday in Washington. The jobless rate, which has not increased since October, held at 9.7 percent, even as more people entered the workforce. Stocks and the dollar rallied while Treasuries fell as investors reckoned the economy would have added jobs were it not for seasonal snowfall records in cities including Baltimore and Philadelphia. The U.S. needs employment growth to sustain a recovery from a recession that has cost 8.4 million jobs since December 2007. “The weather effects were enough to transform what would’ve been a positive into a negative,” said David Resler, chief economist at Nomura Securities International Inc. in New York, referring to payrolls. “Job growth is happening as we speak. Companies are seeing a stabilization of demand.” The Standard & Poor’s 500 Index rose 1.4 percent to close at 1,138.7 in New York. The dollar strengthened 1.4 percent to 90.3 yen from 89.02 the previous day. The yield on the 10-year Treasury note rose to 3.68 percent at 4:24 p.m. in New York from 3.60 percent late the prior day. Payrolls were forecast to decrease by 68,000, according to the median estimate of 82 economists surveyed by Bloomberg News. The jobless rate was projected to increase to 9.8 percent. Technology Services Among companies adding workers is Accenture Plc, the world’s second-largest technology-services provider, which plans to boost payrolls by about 50,000, with as many as 9,000 jobs being added in the U.S. by the end of August. “We are seeing a very broad uplift globally” in demand, John Campagnino , director of worldwide recruiting, said in a March 3 interview. He said the trend “brings us right back to the pre-recession” levels. The number of temporary workers increased by 48,000 in February, the fifth straight monthly gain. Payrolls at temporary-help agencies often turn up before total employment because companies prefer to see a steady increase in demand before taking on permanent staff. Christina Romer , President Barack Obama ’s chief economist, told Bloomberg Television yesterday that it’s “very realistic” to expect employment growth in the U.S. in the next few months. Even so, “anyone that goes out and talks to people across this country knows that the labor market is still very distressed.” Factory Payrolls Factory payrolls increased 1,000 in February after rising 20,000 in the prior month. The median forecast by economists called for a drop of 15,000. Payrolls at builders fell 64,000 after decreasing 77,000. Financial firms reduced payrolls by 10,000 after a 13,000 decline. The labor market may be slow to recover from the biggest slump since World War II, giving the Federal Reserve scope to keep interest rates low and putting pressure on Obama and lawmakers to foster job growth. “A lot of people are not seeing the kind of job gains or income gains that they are looking for,” John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said yesterday. “There is going to be a lot of dissatisfaction with politicians and that is giving rise to this political angst.” Many companies have been reluctant to hire even after the world’s largest economy grew at a 5.9 percent annual rate in the last three months of 2009, the most in six years. Underemployment Rate Economists surveyed by Bloomberg last month projected the jobless rate will average 9.8 percent in 2010 and end the year at 9.5 percent. The underemployment rate — which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking — rose to 16.8 percent from 16.5 percent. The number of part-time workers for economic reasons climbed to 8.8 million in February from 8.3 million the previous month. Two storms blanketed parts of the country in early February, the second coming during the week that included the 12th of the month, the government’s survey week. Yesterday’s report showed 1 million Americans said bad weather prevented them from getting to work during the survey week. About 290,000 people on average say bad weather has prevented them from getting to work, according to February figures going back three decades. Economists at Macroeconomic Advisers LLC in St. Louis projected the weather would reduce the payroll count by anywhere from 150,000 to 220,000 workers. The drop will probably be reversed this month, they said. January 1996 The most recent storm of similar intensity that occurred during a survey week was in January 1996. The current data for payrolls that month, which have gone through several revisions since the initial estimate, show a 19,000 drop in employment followed by a gain of 434,000 in February. Government payrolls decreased by 18,000 in February. State and local governments reduced employment by 25,000, while the federal government added 7,000. The increase at the federal level reflected in part the hiring of 15,000 temporary workers to conduct the 2010 census. The Census Bureau said it will hire 1.15 million temporary workers in the first half of the year to conduct the population count that takes place every 10 years. The program may have the biggest impact on payroll figures in April through June, when the bulk of the hiring will take place, and will then subtract from the job count the following months after the work is done. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Jobless Rate Holds at 9.7% in Face of Snow as U.S. Payrolls Fall by 36,000

March 5, 2010

By Timothy R. Homan March 5 (Bloomberg) — The U.S. unemployment rate held at 9.7 percent and payrolls fell less than forecast, indicating the labor market strengthened even as East Coast snowstorms forced some employers to temporarily close. Payrolls dropped by 36,000 last month after a revised 26,000 decrease in January, a Labor Department report showed today in Washington. Manufacturers added workers for a second straight month, the first back-to-back gain since 2006, while construction companies fired workers. Stocks and the dollar rallied while Treasuries slid as investors reckoned the economy would have added jobs were it not for seasonal snowfall records in cities including Baltimore and Philadelphia. The U.S. needs employment growth to sustain a recovery from a recession that has cost 8.4 million jobs since December 2007. “We do have an economic recovery, it’s certainly uneven, but it’s there,” said John Silvia , chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who correctly forecast unemployment would be unchanged. “The job market is still continuing to improve for those that have the skills.” The Standard & Poor’s 500 Index rose 1.4 percent to close at 1,138.7. The dollar strengthened 1.5 percent to 90.3 yen at 4:56 p.m. in New York from 89.02 late yesterday. The yield on the 10-year Treasury note rose eight basis points to 3.68 percent. Payrolls were forecast to decrease by 68,000, according to the median estimate of 82 economists surveyed by Bloomberg News. The jobless rate was projected to increase to 9.8 percent. Technology Services Among companies adding workers is Accenture Plc, the world’s second-largest technology-services provider, which plans to boost payrolls by about 50,000, with as many as 9,000 jobs being added in the U.S. by the end of August. “We are seeing a very broad uplift globally” in demand, John Campagnino , director of worldwide recruiting, said in a March 3 interview. He said the trend “brings us right back to the pre-recession” levels. The number of temporary workers increased by 48,000 in February, the fifth straight monthly gain. Payrolls at temporary-help agencies often turn up before total employment because companies prefer to see a steady increase in demand before taking on permanent staff. Christina Romer , President Barack Obama ’s chief economist, told Bloomberg Television that it’s “very realistic” to expect employment growth in the U.S. in the next few months. Even so, “anyone that goes out and talks to people across this country knows that the labor market is still very distressed.” Factory Payrolls Factory payrolls increased 1,000 in February after rising 20,000 in the prior month. The median forecast by economists called for a drop of 15,000. Payrolls at builders fell 64,000 after decreasing 77,000. Financial firms reduced payrolls by 10,000 after a 13,000 decline. The labor market may be slow to recover from the biggest slump since World War II, giving the Federal Reserve scope to keep interest rates low and putting pressure on Obama and lawmakers to foster job growth. “A lot of people are not seeing the kind of job gains or income gains that they are looking for,” said Wells Fargo’s Silvia. “There is going to be a lot of dissatisfaction with politicians and that is giving rise to this political angst.” Many companies have been reluctant to hire even after the world’s largest economy grew at a 5.9 percent annual rate in the last three months of 2009, the most in six years. Underemployment Rate Economists surveyed by Bloomberg last month projected the jobless rate will average 9.8 percent in 2010 and end the year at 9.5 percent. The underemployment rate — which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking — rose to 16.8 percent from 16.5 percent. The number of part-time workers for economic reasons climbed to 8.8 million in February from 8.3 million the previous month Two storms blanketed parts of the country in early February, the second coming during the week that included the 12th of the month, the government’s survey week. Today’s report showed 1 million Americans said bad weather prevented them from getting to work during the survey week. About 290,000 people on average say bad weather has prevented them from getting to work, according to February figures going back three decades. Economists at Macroeconomic Advisers LLC in St. Louis projected the weather would reduce the payroll count by anywhere from 150,000 to 220,000 workers. The drop will probably be reversed this month, they said. January 1996 The most recent storm of similar intensity that occurred during a survey week was in January 1996. The current data for payrolls that month, which have gone through several revisions since the initial estimate, show a 19,000 drop in employment followed by a gain of 434,000 in February. Government payrolls decreased by 18,000 in February. State and local governments reduced employment by 25,000, while the federal government added 7,000. The increase at the federal level reflected in part the hiring of 15,000 temporary workers to conduct the 2010 census. The Census Bureau said it will hire 1.15 million temporary workers in the first half of the year to conduct the population count that takes place every 10 years. The program may have the biggest impact on payroll figures in April through June, when the bulk of the hiring will take place, and will then subtract from the job count the following months after the work is done. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Robert Reich: The Jobless Rate Makes Health Care Reform Both Harder and More Important

March 5, 2010

The loss of 36,000 jobs in February is better than expected but it’s still miserable. 26,000 were lost in January, according to the government’s revised figures. And the “underemployment” rate — including jobless workers who have given up looking for work and part-time workers who want full time jobs — rose from 16.5% in January to 16.8% in February, offsetting some of January’s gains. And don’t blame it mostly on the weather. Although the surveys on which the report is based were done in mid-February during winter snowstorms in the east, the major impact of bad weather was on hours worked, not the numbers of jobs. If you had a job in February but were snowed in, the Bureau of Labor Statistics reported you as having a job. This complicates the president’s final push for health care reform. With employers still shedding jobs and consumer confidence down, Americans are worried first and foremost about paying their bills. Because most people aren’t aware of how much of their paychecks are being eaten up by rising health care costs, but can easily be persuaded they’ll be paying more to cover those who don’t have health insurance under any new health plan, the continuing bad news on the jobs front makes it harder for the president to make his health-care sale. The bad news on jobs also allows economic illiterates (and scoundrels who know better) to continue to claim the stimulus is failing and what’s needed is less government rather than more, including not only a smaller “jobs bill” but less or no health care reform. In politics as in economics and love, timing is everything. Obama can’t wait much longer if he wants to convince wavering and worried conservative Democrats to join him in a last ditch 51-vote reconciliation measure to get health care through the Senate. We’re already in the gravitational pull of November’s mid-term elections. But the economy is taking a longer time to turn around than anyone expected, and telling Americans the jobs numbers are getting worse more slowly isn’t exactly reassuring. One small political consolation is the worst job numbers continue to be on the coasts and the old rust belt where Democrats are relatively safer, and the best numbers in the midwest and mountain states and south where Democrats are weakest. So at least Blue Dog Democrats who are under the most pressure from their conservative constituents on health care aren’t grappling with the biggest job losses. Another is that all across the nation, the people being hit worst by this continuing jobs recession/depression are poor and the lower-middle class who Republicans are trying to court. They’re in greatest danger of losing health care coverage if they haven’t lost it already, and in greatest need for subsidies to allow them and their families to afford it. Wavering and worried congressional Dems should be reaching out to them. Americans desperately need health care reform. They also desperately need jobs. Even if it’s difficult for many to make the connection, it’s still possible for the nation to try to do two important things at the same time. We need a big jobs bill — including especially extended unemployment insurance, aid to hard-hit states and cities — and we need health care reform. The sooner we do the former and get the economy moving into positive job numbers again, the more quickly and easily we can afford the latter. The big question is whether the president can make the case. Cross-posted from RobertReich.org

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Company Bonds Rally Most in Two Months on Greece, ECB Rate: Credit Markets

March 5, 2010

By Bryan Keogh March 5 (Bloomberg) — Corporate bonds are rallying the most since the beginning of the year as Greece successfully raised 5 billion euros ($6.8 billion) in a sale of 10-year bonds and European policy makers pledged to keep interest rates low. The extra yield investors demand to hold investment-grade bonds instead of government debt narrowed 3 basis points this week to a one-month low of 165, heading for the biggest decline since the period ended Jan. 8, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. On Feb. 17, spreads were 171 basis points. The Greek sale was a test of Prime Minister George Papandreou ’s austerity measures designed to tame Europe largest budget deficit, and the bonds rose in the first day of trading. European Central Bank President Jean-Claude Trichet kept the region’s key interest rate unchanged yesterday and extended some economic stimulus measures to cement the recovery. “Low rates and ample liquidity are clearly supportive for corporate credits and risky assets in general,” said Tim Brunne , a Munich-based credit strategist at UniCredit SpA. “As long as the interest-rate curve is very low, at the short end in particular, holding cash is a prohibitive strategy.” Elsewhere in credit markets, HSBC Holdings Plc raised A$1.5 billion ($1.35 billion) in its first sale of Kangaroo notes, and Teco Energy Inc. , the parent of the electricity provider serving west-central Florida, led issuers selling the most utility debt in six weeks. Kangaroo Notes HSBC, Europe’s biggest bank, sold five-year local-currency notes in Australia priced to yield 1.25 percentage point more than benchmark swap rates, it said in an e-mailed statement. JPMorgan Chase & Co. raised A$1 billion at a 1.3 percentage- point spread yesterday in Wall Street’s first Kangaroo sale since Lehman Brothers Holdings Inc. collapsed in September 2008. “There’s more risk appetite now that concerns about Greece have abated somewhat, and that is helping Asia,” said Krishna Hegde , a credit strategist at Barclays Capital in Singapore. Investors “are taking down their hedges given the improved risk backdrop,” he said. The Markit iTraxx index of credit-default swaps on 50 investment-grade Asian borrowers outside Japan fell 4.5 basis points to 102 basis points in Hong Kong today, the lowest since Jan. 25, according to Citigroup Inc. In London, the Markit iTraxx Europe index of swaps on 125 companies with investment- grade ratings fell 1.5 basis points to 79.5, near the lowest level since Jan. 26, according to JPMorgan prices. U.S. Bond Risk The Markit CDX North America Investment-Grade Index Series 13, which is linked to credit-default swaps on 125 companies, increased 0.25 basis point to a mid-price of 88.75 basis points yesterday, according to Barclays Capital. Default swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting against default on $10 million of debt for five years. “This is a reflection of improving credit conditions and investors’ improving confidence,” said Tom Irving , head of Asian syndicate at TD Securities Inc., the top underwriter of Kangaroo bond sales last year. Investors plowed a record $2.6 billion into global bond funds in the week ended March 3, moving out of money markets to seek higher returns because of the threat of quickening inflation, EPFR Global said in a report published today. Bond Funds U.S. bond funds drew in $2 billion, attracting cash for a 61st straight week, the report showed. Money market funds lost $30 billion of assets, the Cambridge, Massachusetts-based data company said. Companies globally issued $38.7 billion of bonds this week, compared with $50.2 billion last week, according to data compiled by Bloomberg. Year-to-date, sales totaled $490.2 billion, down 34 percent from the $745 billion raised through March 5, 2009. Teco, which sold $550 million of six- and 10-year notes through its Teco Finance Inc. unit, has the largest of five utility offerings totaling about $1.62 billion this week, according to data compiled by Bloomberg. Newark, New Jersey- based Public Service Electric & Gas Co. , the state’s largest utility, sold $300 million of 30-year bonds on March 2. Investors are buying utility bonds amid mixed signals on the strength of the U.S. economic recovery. While initial jobless claims fell last week, pointing to a strengthening labor market, pending sales of existing homes dropped in January. Debt from electric and gas companies represents a middle ground for investors looking to pick up yield while curbing risk, said Bill Larkin , a portfolio manager at Cabot Money Management. ‘Perfect Model’ “The thing that’s attractive about utilities is that it’s regulated, in place,” said Larkin, who helps oversee $500 million for the firm in Salem, Massachusetts. “It’s the perfect business model for fixed-income investing.” Teco’s offering was its first in almost two years, Bloomberg data show. The utility sold $250 million of six-year, 4 percent notes at 180 basis points more than similar-maturity Treasuries, and $300 million of 10-year, 5.15 percent bonds at a 160 basis-point spread. A basis point is 0.01 percentage point. This week’s utility offerings are the most since the period ended Jan. 22, when Electricite de France led $2.7 billion of issuance, Bloomberg data show. U.S. utility bonds returned 0.21 percent in February, lagging the 0.38 return on all investment-grade debt, according to Bank of America Merrill Lynch data. In January, each returned about 2 percent. Utility debt has lost 0.14 percent this month. Europe Rally Bonds in Europe led the company-debt rally, with spreads narrowing 5 basis points to a one-month low of 157 basis points yesterday, according to Bank of America’s EMU Corporate Index. Spreads are heading for the biggest weekly drop since the period ended Jan. 8, when they narrowed 14 basis points. The bonds rose even as investors anticipated a worsening in U.S. unemployment. Payrolls in the largest economy dropped by 68,000 workers last month after falling by 20,000 in January, according to the median estimate of 82 economists surveyed by Bloomberg News before a government report today. The unemployment rate, which may be less affected by the weather, probably rose to 9.8 percent from 9.7 percent the previous month. “The market is much healthier, and even if U.S. payrolls data aren’t that good, it’ll be disregarded because of the snow,” which may mean economic indicators are worse than they should be, said Mehernosh Engineer, a strategist at BNP Paribas SA in London. Greek Bond Sale Greece’s bond sale was “seemingly a great success” after the European Union provided implicit support and the new budget austerity measures “paved the way for Greece to fund a small part of their 2010 refinancing needs,” according to Jim Reid , head of fundamental strategy at Deutsche Bank AG in London. The new Greek bonds rose to about 99.4 cents on the euro to yield 6.32 percent, compared with an issue price of 98.94 cents yesterday, according to EFG Eurobank Trading prices on Bloomberg. according to EFG Eurobank Trading prices on Bloomberg. The ECB yesterday phased out some of the emergency tools used to fight the financial crisis. The bank will tighten the terms of its three-month market operations in April by returning to the pre-crisis practice of offering the funds at a variable rate. In its main seven-day operations, it will keep lending commercial banks as much money as they need at its benchmark rate for at least seven months. The ECB left that rate at a record low of 1 percent yesterday. To contact the reporter on this story: Bryan Keogh in London at bkeogh4@bloomberg.net

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Payrolls in U.S. Fall Less Than Economists’ Forecasts; Jobless Rate Holds

March 5, 2010

By Timothy R. Homan March 5 (Bloomberg) — The U.S. unemployment rate held at 9.7 percent and payrolls fell less than forecast, indicating the labor market strengthened even as East Coast snowstorms forced some employers to temporarily close. Payrolls dropped 36,000 last month after a revised 26,000 decrease in January, figures from the Labor Department in Washington showed today. Manufacturers added workers for a second straight month, the first back-to-back gain since 2006, while construction companies fired workers. Stocks and the dollar jumped while Treasuries slid as investors reckoned the economy would have added jobs were it not for seasonal snowfall records in cities including Washington and Philadelphia. The U.S. needs employment growth to sustain a recovery from a recession that has cost 8.4 million jobs since December 2007. “This is strong evidence that the labor market is moving firmly in a positive direction,” said Richard DeKaser , chief economist at Woodley Park Research in Washington, who had forecast the unemployment rate would stay at 9.7 percent. “It’s clear that except for the weather effect we would be seeing a very positive payrolls report.” The Standard & Poor’s 500 Index rose 0.7 percent to 1,131.1 at 10 a.m. in New York. The dollar strengthened 1.4 percent to 90.27 yen from 89.02 yesterday. The yield on the 10-year Treasury note rose seven basis points to 3.67 percent. Economists’ Forecasts Payrolls were forecast to decrease by 68,000, according to the median estimate of 82 economists surveyed by Bloomberg News. Estimates ranged from a decline of 150,000 to a gain of 30,000. The jobless rate was projected to increase to 9.8 percent. Forecasts ranged from 9.5 percent to 10.1 percent. The unemployment rate was unchanged even as more people entered the workforce. One clue about the effect of the weather on employment may come from the survey of households, which the Labor Department uses to calculate the unemployment rate. Today’s report showed 1 million Americans said bad weather prevented them from getting to work during the survey week. About 290,000 people on average say bad weather has prevented them from getting to work, according to February figures going back three decades. Federal Reserve Companies have been reluctant to hire even after the world’s largest economy grew at a 5.9 percent annual rate in the last three months of 2009, the most in six years. The labor market may be slow to recover the jobs lost since the recession began, giving the Federal Reserve scope to keep interest rates low and putting pressure on President Barack Obama and lawmakers to foster job growth. The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — rose to 16.8 percent from 16.5 percent. AMR Corp. is among companies continuing to trim employment, while Caterpillar Inc. and General Motors Co. have announced they will recall some workers dismissed during the depths of the economic slump. Two storms blanketed parts of the country in early February, the second coming during the week that included the 12th of the month, the government’s survey week. Economists at Macroeconomic Advisers LLC in St. Louis projected the weather would reduce the payroll count by anywhere from 150,000 to 220,000 workers. The drop will probably be reversed this month, they said. January 1996 The most recent storm of similar intensity that occurred during a survey week was in January 1996. The current data for payrolls that month, which have gone through several revisions since the initial estimate, show a 19,000 drop in employment followed by a gain of 434,000 in February. Monthly employment gauges that are less influenced by weather point to job-market stability. The Institute for Supply Management’s employment gauge in non-manufacturing businesses, which covers almost 90 percent of the economy, rose to an almost two-year high. The group’s corresponding manufacturing index climbed to the highest level since 2005. Companies in February cut the fewest jobs in two years, according to data from ADP Employer Services. Similarly, employers last month announced the fewest job cuts in more than three years, according to a report by the job-placement firm Challenger, Gray & Christmas Inc. Government Jobs Today’s report from the Labor Department showed that government payrolls decreased by 18,000 in February. State and local governments reduced employment by 25,000 during the month, while the federal government added 7,000. The increase at the federal level reflected in part the hiring of 15,000 temporary workers to conduct the 2010 census. The Census Bureau said it will hire 1.15 million temporary workers in the first half of the year to conduct the population count that takes place every 10 years. The program may have the biggest impact on payroll figures in April through June, when the bulk of the hiring will take place, and will then subtract from the job count the following months after the work is done. Payroll figures for manufacturers, construction firms and retailers are most likely to gauge the extent to which weather affected overall job numbers since those industries are more likely to be influenced by severe storms, economists said. The average work week and weekly earnings were probably affected by the snow, they said before the report. Hours Worked Fall The average work week for all workers fell to 33.8 hours in February from 33.9 hours the prior month. The number of part- time workers for economic reasons climbed to 8.8 million in February from 8.3 million the previous month. Factory payrolls increased 1,000 in February after rising 20,000 in the prior month. The median forecast by economists called for a drop of 15,000. Payrolls at builders fell 64,000 last month after decreasing 77,000. Financial firms reduced payrolls by 10,000, after a 13,000 decline the prior month. Service industries, which include banks, insurance companies, restaurants and retailers, added 24,000 workers after an increase of 27,000 in January. Some companies continue to trim payrolls. American Airlines, the world’s second-largest carrier, said yesterday that it would eliminate jobs of 230 baggage handlers, ramp workers and cargo employees nationwide. The reductions at American, a unit of AMR, will begin March 13, spokeswoman Missy Latham said in an interview. Accenture Hiring Other firms are adding workers. Accenture Plc, the world’s second-largest technology-services company, is boosting payrolls by about 50,000 workers, with as many as 9,000 jobs being added in the U.S. by the end of August. “We are seeing a very broad uplift globally” in demand, John Campagnino , director of worldwide recruiting, said in a March 3 interview. He said the trend “brings us right back to the pre-recession” levels. The number of temporary workers increased 48,000 in February. Payrolls at temporary-help agencies often turn up before total employment because companies prefer to see a steady increase in demand before taking on permanent staff. Retail payrolls were little changed after a 42,000 gain. The economy grew at a 5.9 percent annual rate in the fourth quarter, the biggest gain in six years, according to data from the Commerce Department released last week. Economists surveyed by Bloomberg last month projected the jobless rate will average 9.8 percent in 2010 and end the year at 9.5 percent. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Job Losses in U.S. Probably Deepened in February as Snow Forced Shutdowns

March 5, 2010

By Timothy R. Homan March 5 (Bloomberg) — Job losses in the U.S. probably accelerated in February as severe weather forced some employers to temporarily close, economists said before a report today. Payrolls dropped by 68,000 workers last month after falling by 20,000 in January, according to the median estimate of 82 economists surveyed by Bloomberg News. The unemployment rate, which may be less affected by the weather, probably rose to 9.8 percent from 9.7 percent the previous month. Blizzards during the week the government surveys businesses and households on jobs set seasonal snowfall records in cities including Washington and Philadelphia, prompting many Americans to stay home. The economic expansion that began last year has yet to generate sustained gains in employment, raising the risk that the recovery will cool as households keep a lid on spending. The snowstorms are “massively unpredictable factors” surrounding the jobs report, said Guy LeBas , chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. They “reduce the importance of the numbers” because their effect will be difficult to quantify, he said. “Right now, monthly job losses are trending around zero.” The Labor Department’s report is due at 8:30 a.m. in Washington. Economists’ payroll forecasts range from a decline of 150,000 to a 30,000 gain. Estimates for the unemployment rate spanned from 9.5 percent to 10.1 percent. Little Hiring Companies have been reluctant to hire even after the world’s largest economy grew at a 5.9 percent annual rate in the last three months of 2009, the most in six years. The labor market may be slow to recover the 8.4 million jobs lost since the recession began, giving the Federal Reserve scope to keep interest rates low and putting pressure on President Barack Obama and lawmakers to foster job growth. AMR Corp. is among companies continuing to trim employment, while Caterpillar Inc. and General Motors Co. have announced they will recall some workers dismissed during the depths of the economic slump. Two storms blanketed parts of the country in early February, the second coming during the week that included the 12th of the month, the government’s survey week. Economists at Macroeconomic Advisers LLC in St. Louis projected the weather will reduce the payroll count by anywhere from 150,000 to 220,000 workers. The drop will probably be reversed this month, they said. Similar Episode The most recent storm of similar intensity that occurred during a survey week was in January 1996. The current data for payrolls that month, which have gone through several revisions since the initial estimate, show a 19,000 drop in employment followed by a gain of 434,000 in February. Monthly employment gauges that are less influenced by weather point to job-market stability. The Institute for Supply Management’s employment gauge in non-manufacturing businesses, which covers almost 90 percent of the economy, rose to an almost two-year high. The group’s corresponding manufacturing index climbed to the highest level since 2005. Companies in February cut the fewest jobs in two years, according to data from ADP Employer Services. Similarly, employers last month announced the fewest job cuts in more than three years, according to a report by the job-placement firm Challenger, Gray & Christmas Inc. Weather’s Influence Economists today will be taking a close look at the payroll figures for manufacturers, construction firms and retailers to gauge the extent of the weather’s influence on the job numbers since those industries are more likely to be affected by severe storms. Manufacturing, which accounts for about 12 percent of the economy, has been a driver of the recovery and is projected to continue to expand. While the strength translated into more factory jobs in January, the first gain in three years, manufacturers are projected to have cut 15,000 workers last month, according to the survey median. Countering the potential weather-related drop in overall payrolls is a government boost to hiring already under way at the Census Bureau. The agency said it will hire 1.15 million temporary workers in the first half of the year to conduct the population count that takes place every 10 years. The program may have the biggest impact on payroll figures in April through June, when the bulk of the hiring will take place, and will then subtract from the job count the following months after the work is done. After climbing 23 percent last year, the Standard & Poor’s 500 Index is little changed so far this year. The S&P yesterday gained for a fifth straight day as fewer Americans filed claims for unemployment insurance last week and another Labor Department report showed productivity topped economists’ estimates. Some companies continue to trim payrolls. American Airlines, the world’s second-largest carrier, said yesterday that it would eliminate 230 baggage-handler, ramp-worker and cargo-employee jobs nationwide. The reductions at American, a unit of AMR, will begin March 13, spokeswoman Missy Latham said in an interview. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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New York City Storm Breaks 114-Year-Old Snowfall Record for Central Park

February 26, 2010

By Brian K. Sullivan Feb. 26 (Bloomberg) — A winter storm that pummeled New York City for two days broke a monthly record for snowfall in Central Park that stood for 114 years, according to the National Weather Service. The storm killed at least three people, knocked out power to more than 700,000 electrical customers across the U.S. Northeast, grounded at least 3,844 flights from regional airports and disrupted shipping as far away as Maine. As the city digs out, forecasters are already watching another storm that may hit the U.S. East Coast next week. “It’s pretty significant for our area to see this kind of snowfall,” said Jeffrey Tongue, a weather service meteorologist in Upton, New York . “This is stuff that doesn’t happen too often, maybe a couple of times a century.” Manhattan’s Central Park had received 36.9 inches (93.7 centimeters) as of about 5 p.m. today, the most ever for a single month, the weather service said. The previous record for February was 27.9 inches in 1934, and the mark for a single month was 30.5 inches in March 1896. Almost 21 inches blanketed the city during the storm, which began yesterday at about 8 a.m. The record for a single snowstorm was set Feb. 11-12, 2006, when 26.9 inches fell. Storm Warning Canceled With the storm winding down and moving east, the weather service dropped a winter storm warning and replaced it with an advisory at about 4:30 p.m. Tongue said the advisory was in place to warn drivers that roads may be slick tonight, and wasn’t a caution that more snow was on the way. A few snow showers may linger overnight, he said. At its peak, the storm was powerful enough to set daily records for both rain and snowfall in Newark, New Jersey, and blast a 90-mph wind gust past a weather service buoy in the Atlantic. Its central barometric pressure rivaled that of hurricanes. Heating oil gained on speculation stockpiles would fall as winter storms boosted demand. Heating oil for March delivery added 3.87 cents, or 1.9 percent, to settle at $2.0249 a gallon on the New York Mercantile Exchange. U.S. demand for heating oil through March 5 will be 6 percent above normal for the period, according to David Salmon , a meteorologist at Weather Derivatives, which forecasts temperature changes and the impact on demand for commodities. Flights Grounded At Newark Liberty International, a hub for Continental Airlines Inc., 65 percent of today’s 607 scheduled commercial and freight flights were canceled, according to FlightStats.com, which tracks airline and airport performance. At LaGuardia, 61 percent of the 577 scheduled departures were scrubbed, and John F. Kennedy International reported 39 percent of its 579 flights canceled. Major U.S. carriers scrubbed 2,344 flights today, mostly across the northeast. Delta Air Lines Inc ., the world’s largest carrier, trimmed 500 flights, said Susan Elliott , a spokeswoman. The Atlanta-based airline doesn’t anticipate more cancellations this weekend, “although there will be some delays,” she said. Continental grounded 500 flights, including all 200 of its regional jet flights at Newark, said Mary Clark , a spokeswoman. Demand for jet fuel, averaged over the four weeks ended Feb. 19, was down 1.9 percent from a year earlier, according to the Energy Department. “The storm just kills jet fuel demand,” said Andy Lipow , president of Lipow Oil Associates LLC in Houston. “When an airline cancels its flights, it’s not like it doubles up the next day.” Week’s Second Storm The system was the second winter storm of the week for the U.S. Northeast. It came just weeks after parts of the mid- Atlantic region set seasonal records for snowfall. A Brooklyn man was killed in Central Park by a falling tree branch, while two people died in car accidents on slick roads near Lebanon and Victor, New York. New York City’s public schools shut down. Utilities in the Northeast reported a total of more than 700,000 homes and businesses without power this morning. New York-based Consolidated Edison Inc. had as many as 40,000 customers lose power in Westchester County, and about 500 in Manhattan, Brooklyn, Queens, Staten Island and the Bronx, said a spokesman, Chris Olert . New Hampshire was especially hard-hit, and Governor John Lynch declared a state of emergency. About 330,000 residents lost power because of the storm and accompanying high winds, said Katya Brennan, a spokeswoman for the state Department of Safety. Deliveries Delayed Crude oil tanker deliveries to a Portland, Maine, pipeline that supplies two Montreal-area refineries were delayed a second day because of unsafe swells and high winds. A storm expected to hit the West Coast tonight may be the Northeast’s next big problem, said Tom Kines , a senior expert meteorologist with AccuWeather Inc. Some forecast models keep the storm fairly far south, although Kines said he isn’t sure that will happen. “I don’t trust it,” he said. “If this storm we are seeing now is getting out of the way, it will allow this next storm to move farther north. We are getting into the time of year where rain is more favored, but in this weather pattern anything goes.” To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ;

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New York City May Get Up to 13 Inches of Snow, Making Travel `Hazardous’

February 25, 2010

By Brian K. Sullivan and Alex Morales Feb. 25 (Bloomberg) — New York City may receive more than a foot of snow in a storm that’s forecast to hit in rush hour, disrupting travel, the National Weather Service said. The service issued a winter storm warning that starts at 6 a.m. and runs through 6 p.m. tomorrow, and forecast as much as 13 inches (33 centimeters) of snow. “Snow is expected to develop around the start of rush hour Thursday morning then continue through Friday,” the National Weather Service said in a statement on its Web site. “This will make travel very hazardous or impossible.” Continental Airlines Inc. and Delta Air Lines Inc. canceled some of their flights into the area, while Amtrak canceled some trains. It was raining at about 5 a.m. in New York City. “Expect the steadiest and heaviest snow to fall from mid- morning Thursday through Thursday evening,” the weather service said. “Snow may mix with rain for brief periods of time on Thursday. If no mixing-in occurs, amounts will be up towards the higher end of the range, if not more.” Winter storm warnings, meaning heavy snow, ice and freezing rain are imminent, were issued for a swath of the Northeast, including parts of Maine, Vermont, New Hampshire, New York, Pennsylvania, New Jersey and Maryland. In Washington, snow was forecast before 10 a.m., and winds may gust as high as 37 miles (60 kilometers) an hour, the weather service said. The Washington-Baltimore corridor may receive as much as five inches of snow in the storm, according to Brandon Peloquin, a weather service meteorologist in Sterling, Virginia . Flights Canceled The system is the latest from an El Nino-driven weather pattern that has pushed moist air across the southern U.S., where it has mixed with colder air coming down from the Arctic, Matt Rogers , president of Commodity Weather Group in Bethesda, Maryland, said. The result has been record snows from Washington to Philadelphia. El Nino is a warming of the Pacific Ocean that occurs every two to five years and lasts about 12 months. Continental , the fourth-largest U.S. carrier, canceled all flights today from Newark Liberty International Airport by regional partners including Continental Express and Pinnacle Airlines Corp.’s Colgan unit, said Mary Clark , a spokeswoman for the Houston-based carrier. The cancellations involve “several hundred” flights, Clark said. She didn’t have a more specific number. Delta , the world’s largest carrier, canceled 65 flights in the New York area for today, said Susan Elliott , a spokeswoman for the Atlanta-based company. UAL Corp. ’s United Airlines scrapped 70 flights yesterday because of weather and was considering plans for today, Sarah Massier, a spokeswoman, said. The three airlines issued travel waivers allowing passengers to re-schedule their plans for free, according to statements on their Web sites. Canceled Trains Amtrak canceled eight trains on its Empire Service lines in the upstate New York area, said a spokeswoman, Karina Romero . In northern New Jersey , as much as 18 inches of snow may fall, the weather service said. Parts of Maine, Connecticut, Massachusetts, New York, New Hampshire and Rhode Island were issued with flood watches, with as much as 3 inches of rain forecast. Today’s will be from the second storm to hit the area this week. A system brought rain to New York City and almost two feet of snow to western Massachusetts starting Feb. 23, disrupting air traffic in Newark, Boston, Baltimore and New York. “The Northeast is being impacted by one storm now, and the monster storm is going to impact the region tomorrow into Friday,” Eric Wilhelm of private forecaster AccuWeather.com . said yesterday. “A really complex situation is developing in the Northeast.” Power Failures Likely On the Massachusetts coast, sustained winds of 30 mph are expected, with gusts as intense as 50 mph, according to a weather service high wind watch issued for the area. “There could be real problems with power outages,” Wilhelm said. “That could be the real legacy of this storm.” More than 50,000 customers in the Albany area and western Massachusetts were left without power by the storm that moving north through New England yesterday, according to utilities. High winds may also create wind-chill problems that will boost energy consumption, Rogers said. Temperatures in the region are expected to be in the 30s Fahrenheit, while the wind will make it feel colder. Demand for heating oil may be 8 percent higher than normal through March 3, according to Weather Derivatives , a Belton, Missouri, forecaster. Heating oil for March delivery rose 0.98 cent, or 0.5 percent, yesterday to settle at $2.0421 a gallon on the New York Mercantile Exchange. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ; Alex Morales in London at amorales2@bloomberg.net

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New York City May Get as Much as 10 Inches of Snow Starting Early Thursday

February 24, 2010

By Brian K. Sullivan and Alex Morales Feb. 24 (Bloomberg) — Snow will probably begin falling in New York City by 3 a.m. tomorrow, and before the storm ends a day later there may be as much as 10 inches (25 centimeters) on the ground, according to the National Weather Service. Between 5 and 10 inches of snow is forecast to fall on New York with as much as 14 inches to the north and west of the city, said Matt Scalora, a weather service meteorologist in Upton, New York . Tomorrow’s snow will be from the second storm to hit the area this week. A system that brought rain to New York City and 12 inches of snow to Albany starting yesterday is now disrupting air traffic in Philadelphia and New York’s La Guardia Airport. It will move into Maine today, said Eric Wilhelm of private- forecaster AccuWeather.com . “A really complex situation is developing in the Northeast,” Wilhelm said by telephone from State College, Pennsylvania. “The Northeast is being impacted by one storm now, and the monster storm is going to impact the region tomorrow into Friday.” Wilhelm said an exact forecast for snowfall in New York will be difficult because a slight variation in the track of the second storm could mean no snow at all for the city or even more than forecast. “It is a very tricky forecast in that zone,” Wilhelm said. More Washington Snow Wilhelm said Washington may receive about 3 inches of snow from the storm, while Boston and Providence, Rhode Island, will likely just experience rain and heavy winds. The storms will add to what’s already been a benchmark winter in the eastern U.S., where seasonal snowfall records were broken in Washington and Baltimore. Philadelphia may receive as much as 8 inches of snow, according to the National Weather Service in Mount Holly, New Jersey. Delays of about an hour were being reported today at LaGuardia airport and about 30 minutes at Philadelphia International Airport, according to the Federal Aviation Administration’s Web site. Winter snow warnings and watches have been issued from northern Virginia to Maine, the weather service reported. A storm watch means snow can be expected within 12 to 36 hours, while a warning means it has already started or is about to begin. Tomorrow’s snow will likely be heavy and wet, Wilhelm said. The storm will also produce high winds through much of the Northeast, he said. High Winds Scalora said wind gusts as intense as 30 miles per hour (48 kilometers per hour) could whip New York. On the Rhode Island and Massachusetts coasts, gusts as high as 70 mph may occur, Wilhelm said. “There could be real problems with power outages,” Wilhelm said. “That could be the real legacy of this storm.” The heavy snow will taper off the day after tomorrow, although snow flurries and clouds will linger over much of the Northeast through the weekend, Wilhelm said. To contact the reporters on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ; Alex Morales in London at amorales2@bloomberg.net

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`Snow Hurricane’ Threatens New York, New England; Bigger Storm Approaches

February 24, 2010

By Brian K. Sullivan and Alex Morales Feb. 24 (Bloomberg) — A winter storm threatened to dump more than a foot (30 centimeters) of snow across parts of upstate New York and New England, while forecasters warned of an even more powerful system hitting the northeast tomorrow. “You may hear it called a ‘snow hurricane’ because blizzard may not even do it justice,” said Alex Sosnowski , an expert senior meteorologist with AccuWeather Inc. in State College, Pennsylvania. “It is like we’re getting a decade’s worth of storms all in one season.” Warnings for the current storm stretch from Maine through New Hampshire, Vermont and New York state as well as Massachusetts and Connecticut, according to the National Weather Service. Rain was falling today in New York, while inland, it was snowing in Albany, where up to 13 inches of snow were forecast through the night and today, the agency said. The next storm will develop off the U.S. East Coast out of a system coming up from the Gulf of Mexico, Sosnowski said. They’ll add to what’s already been a benchmark winter in the eastern U.S., where seasonal snowfall records have already been set for Washington and Baltimore. AccuWeather’s Web site describes the coming storm as “nothing short of a monster” and predicts high winds and heavy rain across Long Island, Connecticut and New York. “Midday models show a region from Cape Cod to northern Maine receiving hurricane-force winds at the storm’s peak, Thursday afternoon and overnight,” private forecaster MDA Federal Inc. said in a statement. The lowest hurricane-force wind is 74 miles per hour (119 kilometers per hour). NYC Snow The storm is forecast to enter New York’s metropolitan area early in the morning on Feb. 25, said Joe Pollina, meteorologist with the National Weather Service in Upton, New York. The weather service Web site said up to five inches of snow may fall there tomorrow, with winds gusting as high as 36 miles an hour. In coastal areas, the storm is likely to draw in warm air that will mean rain, while areas from upstate New York to Ottawa may receive 12 inches or more of snow, Sosnowski said. “This thing is a little different animal,” Sosnowski said by telephone. “Instead of passing on by, it looks like it is going to hook back.” To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net ; Alex Morales in London at amorales2@bloomberg.net

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German Business Optimism Unexpectedly Drops on Coldest Winter in 14 Years

February 23, 2010

By Jana Randow Feb. 23 (Bloomberg) — German business confidence unexpectedly fell for the first time in 11 months in February as the coldest winter in 14 years damped retail sales and construction. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, fell to 95.2 from 95.8 in January. Economists expected a gain to 96.1, according to the median of 37 forecasts in a Bloomberg News survey . The index reached a 26-year low of 82.2 in March last year. Germany’s recovery from its worst recession since World War II stalled in the final quarter of 2009 as domestic spending waned. Below-average temperatures and snow have brought construction sites to a standstill and prompted companies to curtail hiring, hurting household spending. “The harsh winter is taking its toll,” said Carsten Brzeski , senior economist at ING Group in Brussels. “The bumpy ride is not over yet. However, the underlying trend of the German recovery remains healthy.” A global economic pickup is fueling foreign demand for German goods . Greece’s fiscal crisis has also pushed the euro to a nine-month low against the dollar, boosting export returns. The euro eased to $1.3629 at 11 a.m. in Frankfurt from $1.3679 before the Ifo report was published. The benchmark DAX share index declined 0.4 percent. Current Situation Ifo President Hans-Werner Sinn said retailers “experienced a setback” in February and construction activity is being “strongly constrained by the weather conditions.” “The economic recovery is expected to continue when winter is over,” he said in a statement. The Bundesbank forecasts Europe’s largest economy will grow 1.6 percent this year. It shrank 5 percent in 2009. Ifo’s gauge of the current situation fell to 89.8 from 91.2, while a measure of expectations rose to 100.9 from 100.6. Today’s report “adds to evidence that the recovery in Germany and indeed the euro zone as a whole is losing pace,” said Nick Kounis , chief European economist at Fortis Bank Nederland NV in Amsterdam. “Exports are still powering ahead but domestic demand is sluggish and will remain so for an extended period.” Italian consumer confidence unexpectedly declined for a second month in February as job losses fueled concern about the economic outlook. In France, consumer spending dropped in January after the government trimmed a program to encourage new car sales. Rising Unemployment Rising unemployment is also damping consumer sentiment in Germany, where support for Chancellor Angela Merkel ’s coalition government has fallen since the Sept. 27 election. Investor optimism fell this month as concern about budget deficits in Greece, Spain and Portugal rattled financial markets. The euro has dropped 10 percent against the dollar since Nov. 25. “A weaker euro should caress business expectations and demand from emerging markets, Japan and the United States will boost exports,” said Stefan Bielmeier , an economist at Deutsche Bank AG in Frankfurt. “Germany is relatively fit and doing fine.” Germany’s manufacturing industry expanded at the fastest speed in more than two and a half years this month, a survey of purchasing managers showed on Feb. 19. Exports jumped 3 percent in December for their fourth successive monthly gain. Bayerische Motoren Werke AG , the world’s largest maker of luxury cars, predicts an increase in auto deliveries in China of at least 10 percent this year after sales more than doubled in January. Siemens AG , Germany’s biggest engineering company, plans to double its annual investment in India, Chief Executive Officer Peter Loescher said on Feb. 2. To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net .

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German Business Confidence Unexpectedly Drops as Cold, Snow Curb Consumers

February 23, 2010

By Jana Randow Feb. 23 (Bloomberg) — German business confidence unexpectedly fell for the first time in 11 months in February, as below-average temperatures and snow damped construction and retail sales. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, fell to 95.2 from 95.8 in January. Economists expected a gain to 96.1, according to the median of 37 forecasts in a Bloomberg News survey . The index reached a 26-year low of 82.2 in March last year. Germany’s recovery from its worst recession since World War II stalled at the end of last year as domestic spending waned. The coldest winter in 14 years may damp growth in the current quarter. “You just have to look out of the window — for the longest time no crane moved in the snow,” said Ralph Solveen , head of economic research at Commerzbank AG in Frankfurt. “But manufacturing and exports seem to run like clockwork and I’m confident the recovery will continue.” A global pickup is fueling foreign demand for German goods . Greece’s fiscal crisis has also pushed the euro to a nine-month low against the dollar, boosting export returns. The euro eased to $1.3657 at 10:20 a.m. in Frankfurt from $1.3679 before the Ifo report was published. It has dropped 10 percent since Nov. 25. Current Situation The Bundesbank forecasts Europe’s largest economy will grow 1.6 percent this year. It shrank 5 percent in 2009. Ifo’s gauge of the current situation fell to 89.8 from 91.2, while a measure of expectations rose to 100.9 from 100.6. Ifo President Hans-Werner Sinn said retailers “experienced a setback” in February and construction activity is “strongly constrained by the weather conditions.” “The economic recovery is expected to continue when winter is over,” he said in a statement. Unemployment rose in January, damping consumer confidence. Investor optimism declined this month as concern about budget deficits in Greece, Spain and Portugal rattled financial markets. “A weaker euro should caress business expectations and demand from emerging markets, Japan and the United States will boost exports,” said Stefan Bielmeier , an economist at Deutsche Bank AG in Frankfurt. “Germany is relatively fit and doing fine.” Germany’s manufacturing industry expanded at the fastest speed in more than two and a half years this month, a survey of purchasing managers showed on Feb. 19. Exports jumped 3 percent in December for their fourth successive monthly gain. Bayerische Motoren Werke AG , the world’s largest maker of luxury cars, predicts an increase in auto deliveries in China of at least 10 percent this year after sales more than doubled in January. Siemens AG , Germany’s biggest engineering company, plans to double its annual investment in India, Chief Executive Officer Peter Loescher said on Feb. 2. To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net .

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New York Blanketed With More Snow, Delaying Flights; Storm Heads to Boston

February 17, 2010

By Brian K. Sullivan Feb. 16 (Bloomberg) — New York’s evening rush hour may be disrupted after more than 3 inches of snow were dumped on the city on top of an overnight snowfall, according to the National Weather Service. The snow comes as the latest government forecasts predict cooler weather will dominate the eastern two-thirds of the U.S., with the exception of Maine, until at least March. The lowest temperatures are likely to be in the mid-Atlantic states, according to the U.S. Climate Prediction Center in Camp Springs, Maryland. The Northeast consumes four-fifths of the nation’s home heating oil, and the fuel rose today partly on speculation the cold will boost demand. Heating oil for March delivery was up 7.74 cents, or 4 percent, to settle at $1.9963 a gallon on the New York Mercantile Exchange. “It is beginning to look quite likely that the extensive snow that currently covers the northern two-thirds of the country will enhance the probability of winter cold lingering well into March,” said Jim Rouiller , a senior energy meteorologist at Planalytics Inc. Manhattan’s Central Park reported about 3 inches (7.6 centimeters) in the six hours before 1 p.m. New York time, pushing the seasonal snowfall amount to 28.5 inches, 12.9 inches above the average of 15.6 inches, said John Murray, a weather service meteorologist in Upton, New York. The record for Central Park is 75.6 inches set in 1995-1996, he said. Heavy at Times Snow today has been heavy at times, falling at a rate of as much as 2 inches per hour in the New York area, Murray said. The storm is forecast to taper off around 6 p.m., when a winter weather advisory will be lifted. “It is going to make travel difficult,” Murray said. “People should exercise caution.” Danbury, Connecticut reported 6.3 inches, while 4 inches fell in Bridgeport, 7.5 inches in Paramus, New Jersey, 2.3 inches in Newark and 4 inches in Armonk, New York, according to a weather service statement. New York’s LaGuardia and Newark’s Liberty International airports had delays of more than an hour, according to the Federal Aviation Administration’s Web site. Boston’s Logan International Airport reported delays of 45 minutes and a block on incoming flights was implemented at John F. Kennedy International Airport in New York. Boston Snow Boston is expected to receive about 5 inches, according to a weather service statement. Winter weather advisories and storm warnings stretch from Indiana to Maine, the agency said. The storms spared Baltimore and Washington, where back-to- back blizzards earlier this month closed the federal government and set new seasonal snowfall records. Yesterday’s heating degree days value in Central Park was 31, or normal, according to the weather service. Last year it was 30. The value, which is calculated by subtracting the daily average temperature from 65 degrees Fahrenheit, gives an indication of how much energy will be needed for heating. The average temperature in Central Park this month has been 31.1 degrees, 2.1 degrees below normal, according to the weather service. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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New York City May Get 3 Inches of Snow an Hour as Blizzard Warnings Issued

February 10, 2010

By Brian K. Sullivan Feb. 10 (Bloomberg) — Blizzard warnings for as much as 20 inches of snow were posted from Washington to Long Island as a storm settled in for a daylong siege, closing government offices, grounding thousands of flights and threatening an inch an hour for New York. The storm is also stirring up tropical storm-strength winds from North Carolina to Massachusetts, where gusts of nearly 60 mph (96 kph) are expected, according to the National Weather Service . The gusts may knock down trees and power lines, causing widespread power disruptions, the agency said. “With the storm intensifying rapidly this morning, the worst-case scenario in terms of a truly paralyzing blow to the Washington-Philadelphia-New York urban corridor will be realized,” said Jim Rouiller , a senior energy meteorologist at Planalytics Inc. “Many cities within this corridor are now very near or have exceeded their all-time snowfall for a winter season. It may take days for the infrastructure associated within this corridor to fully recover.” The storm is the second in less than a week for Washington, which received as much as 20 inches over the weekend and had been struggling to dig out. Federal offices closed early on Friday and have not been open since. Gaining Strength The new system is intensifying along the U.S. East Coast, and Joe Bastardi , AccuWeather Inc. chief meteorologist, believes “the resemblance of an eye” may form later today, said Tom Kines , a senior expert meteorologist with AccuWeather. Eyes and low barometric pressure are usually associated with hurricanes. “Because it is still intensifying, by this afternoon this will be a very, very powerful storm,” Kines said by telephone from State College, Pennsylvania. “If you have a barometer at home, from Jersey on up to southern New England it is going to be reading very low today.” Snow was falling on Long Island at a rate of 2 inches per hour, Glenn Field, a weather service warning coordinator meteorologist in Taunton, Massachusetts, said at mid-morning. The weather service office in Upton, New York, received 5 inches in just two hours, he said. Hurricane-strength winds and seas of as high as 30 feet (9 meters) are expected to develop off the U.S. East Coast, according to weather service bulletins. Power Disruptions New York-based Consolidated Edison Inc. is adding extra crews to help avert snow- and ice-related blackouts, according to a company statement. Washington’s electric supplier, Pepco, a subsidiary of Pepco Holdings Inc., pulled its crews off the streets because of unsafe conditions, according to the company’s Web site. Governors in Massachusetts, New Jersey and Delaware have either declared emergencies or closed some or all state offices, according to official statements. New York, Washington and Philadelphia have closed schools and some or all city offices, and Baltimore shut the city streets to all but emergency vehicles. A blizzard warning issued early today for the New York City area is in effect until 6 a.m. tomorrow, the National Weather Service said. Washington’s blizzard warning is in effect until tonight, while Boston may receive 8 inches (20 centimeters) of snow and as much as 12 inches may fall south of the city, said Paul Walker , a senior meteorologist at AccuWeather. Travel Snarled Amtrak , the national passenger railroad, hasn’t run a full schedule since last week’s storm and more trains were canceled yesterday, a spokesman, Cliff Cole , said. More than 4,000 flights were grounded nationwide. Delta Air Lines Inc. , the world’s largest carrier, scrubbed 900 flights today and expects operations in Washington and Philadelphia to be almost entirely halted through mid-day Thursday, said Betsy Talton , a spokeswoman for the Atlanta-based company. AMR Corp. ’s American Airlines planned to shut down its operations at New York’s LaGuardia airport at noon, said Tim Wagner , a company spokesman. The U.S. Senate won’t meet today because of the storm, Senate Democratic Leader Harry Reid announced on the floor. The House has canceled votes for the rest of the week. Cattle futures fell in Chicago on speculation that the blizzard will keep consumers from going out to grocery stores and restaurants. Shoppers may stock up on essential food items, while avoiding high-end cuts of meat, like beef rib and loin cuts, said Paul Beere , a market adviser with Prime Agricultural Consultants Inc. in Brookfield, Wisconsin. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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Jobs Bill to Be Introduced in U.S. Senate as Reid Seeks Passage This Week

February 9, 2010

By James Rowley Feb. 9 (Bloomberg) — Senate Majority Leader Harry Reid said job-creating legislation will be introduced today. He predicted it can be passed this week with “good” bipartisan support, depending on the weather in Washington. To contact the reporter on this story: James Rowley in Washington at jarowley@bloomberg.net

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Federal Offices Closed Another Day as Washington Readies for Second Storm

February 9, 2010

By Brian K. Sullivan Feb. 9 (Bloomberg) — Federal government offices remain closed for a second full day as Washington, still reeling from a weekend blizzard, prepared for a storm packing as much as 20 inches (51 centimeters) of new snow. The storms, which may also dump 8 to 13 inches of snow on New York and Long Island, will be accompanied by cold and winds gusting from 35 to 55 mph (56 to 88 kph) in the Northeast, forecasters said. The National Weather Service urged people not to travel except for emergencies. The snow “has a very distinct potential of reaching crippling proportions from Washington and Philadelphia to New York City and possibly Boston,” said Jim Rouiller , a senior energy meteorologist at private-forecaster Planalytics Inc., in Wayne, Pennsylvania. “If this upcoming storm indeed verifies, it will lift annual snowfall to historic levels and set many all-time snowfall records across this portion of the country,” he said. Crude oil rose for the first time in four days on the forecast, rebounding from a seven-week low. Heating oil also was up in trading in Europe, boosted by the forecasts for cold weather and more snow in the U.S. A winter storm warning was posted for Washington starting at noon today, where 10 to 20 more inches may fall, the agency said. Federal government offices, which closed early Friday, remain shut, the Office of Personnel Management said in an e- mailed statement. Warnings Posted A snow emergency issued in the District of Columbia on Feb. 5 when as much as 40 inches of snow began falling over the mid- Atlantic region had been lifted yesterday, the Washington Post said. A winter storm warning also was posted for New York City starting at midnight. Snow in metropolitan New York was expected to be heavy at times before tapering off tomorrow evening, the weather service in Upton, New York, said. A system moving in from the west is forecast to collide with a coastal system moving north. Tom Kines , a senior expert meteorologist with AccuWeather Inc., said 6 to 12 inches of snow may fall along a corridor from Washington to Boston and some areas may receive as much as 18 inches. Winter storm watches, warnings and advisories stretch across much of the eastern half of the U.S. from Minnesota to Delaware and south to Alabama and the Florida Panhandle, according to the National Weather Service . Temperatures from Southern California to Maine are expected to be below normal from Feb. 13 to Feb. 17, according to the latest forecast by the U.S. Climate Prediction Center . Midwest Snow The region from Chicago to Detroit, where snow began yesterday, were expected to receive as much as 12 inches, Kines said. More than 230 flights at Chicago’s airports including those by Southwest Airlines Co. have already been cancelled, the Sun-Times reported today. Forecasters expect up to 20 inches of new snowfall in the Baltimore area. Public schools in central Maryland remained closed today and may keep students from class for the rest of the week if heavy snows continue, the Baltimore Sun reported. Ski areas in Pennsylvania and Virginia will get a boost from the storm while resorts in Maine, Vermont and New Hampshire are likely to miss out, Kines said. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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Washington, Baltimore Face Record Snow as Manhattan Prepares for 4 Inches

February 5, 2010

By Brian K. Sullivan Feb. 5 (Bloomberg) — Washington and Baltimore prepared today for what may be a record snowfall from an East Coast storm that prompted blizzard warnings for parts of New Jersey and tornado watches in Florida. As much as 30 inches (76 centimeters) of snow is forecast to fall overnight and into tomorrow in the Baltimore-Washington region, which would shatter records in both cities, according to the National Weather Service in Sterling, Virginia. The forecast drove up the price of natural gas futures, as well as area power prices. “Heavy snow will develop tonight to produce near-blizzard and extremely dangerous winter weather conditions tonight through Saturday morning,” according to a weather service bulletin. In Manhattan, the storm may leave 2 to 4 inches of snow, about half of what was predicted earlier, the agency said at 4:28 p.m. Its winter storm watch was lowered to an advisory. New York is on the northern edge of the storm, so Staten Island, which is under a storm warning, may get more snow than the Bronx, and even a small deviation could change the outlook, the agency said. “New York City is probably one of the toughest to call right now because there is such a sharp edge on the storm, from where there is nothing, to where there is a foot,” Tom Kines , a senior meteorologist at AccuWeather Inc. in State College, Pennsylvania, said earlier today. Washington’s record was set by the 1922 “Knickerbocker Storm” that dropped 28 inches of snow, while Baltimore’s record of 26.8 inches came during the 2003 “Presidents’ Day Storm,” the weather service reported. Travel Disrupted The storm prompted the cancellation of more than 175 airline flights at Washington airports , left more than 17,990 people without power in North and South Carolina and drove up the price of natural gas. Flood warnings were posted from Florida to North Carolina, and blizzard warnings went up in New Jersey, including Atlantic City, as well as Delaware and Maryland’s Chesapeake Bay coast. In Florida, heavy thunderstorms swept across the center of the state, and at least one waterspout was seen near Tampa. Radar picked up a tornado near Bowling Green, about 80 miles southwest of Orlando, the weather service said. Natural gas for March delivery rose 9.9 cents, or 1.8 percent, to settle at $5.515 per million British thermal units at 2:36 p.m. on the New York Mercantile Exchange. Prices advanced 7.5 percent this week. Virginia Emergency Virginia Governor Bob McDonnell declared a state of emergency in advance of the storm, while federal government offices in Washington closed early. Philadelphia will declare a snow emergency at 8 p.m., according to the city’s Web Site . The Amtrak national passenger rail system said most service to the south of Washington has been canceled, although the Silver Service between New York and Miami, site of this weekend’s Super Bowl game between the New Orleans Saints and the Indianapolis Colts, will operate. Power prices in the regions affected by the storm soared to four-week highs on the Intercontinental Exchange. In the New England Power Pool, electricity traded today for delivery on Feb. 8 surged $13.12, or 21 percent, to $76.73 a megawatt-hour. Power in the PJM Interconnection, a benchmark for the mid-Atlantic region, jumped $17.19, or 35 percent, to $66.65 a megawatt-hour. The storm is playing havoc with Virginia and Washington budgets. Virginia has already spent the $79 million it had budgeted this year for snow removal and will pay for the current storm from a $25 million reserve fund, according a statement by its Transportation Department . When the reserve fund is depleted, the state will start taking money from maintenance programs. Washington had $6.2 million for plowing and “we’re probably over budget at this point,” Karyn Le Blanc, a city spokeswoman, said by telephone. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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Winter Storm Watch Posted for New York as New Jersey Gets Blizzard Warning

February 4, 2010

By Brian K. Sullivan Feb. 4 (Bloomberg) — A winter storm watch was posted for New York City and a blizzard warning for southern New Jersey today as a system heading for the East Coast threatened to drop more than 2 feet of snow in the Washington-Baltimore area. The snowfall in New York City will begin after tomorrow’s evening rush, tapering off the following morning, said Rick Castro, a spokesman for the National Weather Service in Upton, New York. Six to 8 inches (15 to 20 centimeters) is possible across most of the city, while 9 inches may fall in Brooklyn and Staten Island, he said. “There has been somewhat of a shift north today in the model guidance, and it has given our forecasters enough confidence to issue the winter storm watch ,” Castro said by telephone. The storm, which prompted alerts as far south as Georgia, may cover the Washington-Baltimore area with as much as 24 inches of snow, the agency said. Parts of Virginia, including Charlottesville and Petersburg, may receive 28 inches. “The Baltimore-D.C.-Philadelphia corridor will be hit hard,” said Tom Kines , a senior meteorologist at AccuWeather Inc. in State College, Pennsylvania. Southern New Jersey, including Atlantic City, and Delaware have been placed under a blizzard warning beginning tomorrow at 4 p.m., according to the National Weather Service in Mount Holly, New Jersey. ‘Red Alert’ “We’re preparing to go to red alert,” Sandy Roumillat, a spokeswoman for the Delaware Department of Transportation, said in an interview today. The department is laying in extra road salt and doing equipment checks to get ready. As much as 2 feet of snow is possible in the southern New Jersey and Delaware area and gusts may reduce visibility to less than a quarter-mile. “This will lead to white-out conditions making travel extremely dangerous,” according to the weather service bulletin. The snow is likely to miss most of New England’s resort areas in Maine, New Hampshire and Vermont, although the storm will be a benefit to ski operations in Virginia and Pennsylvania as the February school vacations approach, Kines said. “While it is bad for some people, some are cheering,” he said by telephone. Slick Roads Kines said the snow will probably be light and fluffy, which makes shoveling easier while making roads slick and driving dangerous. The National Weather Service said the Washington and Baltimore areas should “plan for substantial disruptions to travel Friday afternoon through the weekend.” If more than 8 inches falls in Washington, above-ground Metro service will be suspended, according to a Washington Metropolitan Area Transit Authority alert. The storm is also expected to drop 6 to 12 inches of snow on Philadelphia and Wilmington, Delaware, the weather service said. Elsewhere, a storm is expected to move ashore in Los Angeles tomorrow, dropping as much as 2 inches of rain in the city and as much as 4 inches in the foothills, said Jamie Meier, a weather service meteorologist in Oxnard, California. The heaviest rain will fall in areas that had fires about six months ago, raising the possibility of mudslides in those areas, she said. Kines said that storm may develop into a major East Coast storm by the middle of next week. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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El Nino Warming May Fade, Removing Block to Active 2010 Hurricane Season

February 4, 2010

By Brian K. Sullivan Feb. 4 (Bloomberg) — El Nino, a warming in the Pacific Ocean that can influence the severity of the Atlantic hurricane season and weather patterns around the world, will likely fade sometime in the next six months, the U.S. Climate Prediction Center said today. Models indicate the Pacific may return to normal temperatures between April and June, although forecasters are uncertain exactly when, according to a CPC statement. If El Nino fades in June, it is one factor that may mean more Atlantic storms this year, said David Streit , a senior meteorologist for Commodity Weather Group Llc in Bethesda, Maryland. The Atlantic hurricane season runs from June 1 through Nov. 30. “With the loss of El Nino altogether, that will definitely help to give greater numbers than you would see in normal seasons,” Streit said. The Australian Bureau of Meteorology yesterday released an El Nino outlook that said the phenomenon seems to have peaked in December and is likely to be over by June. El Nino is a warming that occurs every two to five years, on average, and lasts about 12 months. It is credited with making the 2009 Atlantic hurricane season, which ended Nov. 30, the least active in 12 years, forecasters said. Nine named storms formed in 2009, while the historical average is 11, according to the U.S. National Oceanic and Atmospheric Administration. Wind Shear The warming in the Pacific sets up wind shear in the Atlantic that tears potential hurricanes apart before they can form. When an El Nino fades, those winds decline in the areas through which storms usually move and gather strength, said Dan Cottlowski, an expert senior meteorologist at private-forecaster AccuWeather Inc. in State College, Pennsylvania. Atlantic hurricanes can be a threat to Gulf of Mexico, which is home about 27 percent of U.S. oil and 15 percent of U.S. natural gas production, according to the U.S. Department of Energy . In December, Colorado State University forecasters Philip Klotzbach and William Gray predicted a more active hurricane season with 16 named storms, based on their belief El Nino would fade. They estimated that as many as eight of those would become hurricanes, with five developing into major storms with winds of 111 mph (179 kph) or more on the five-step Saffir-Simpson scale . Similarities to 1969 Streit said his group sees parallels between the current conditions and 1969. There were 18 storms in the Atlantic that year, 12 of which were hurricanes, according to the Weather Underground Web site. “1969 is a pretty good analog year,” Streit said by telephone. “It was quite a bit above normal.” The Climate Prediction Center said the effects of El Nino will persist, showing themselves in cooler and stormier weather in the southern U.S. and above-average temperatures across the northern tier of the country, excluding the six New England states, according to the report. “You are seeing more storms across the South and above normal rainfall in the southern U.S.,” Cottlowski said by telephone. The rains are one of the benefits of the weather pattern, because it can ease drought conditions, he said. It is also responsible for recent flooding in Peru and Ecuador as well as drought conditions in Venezuela, while bringing reliable rains to the crop areas of Brazil and Argentina, Streit said. To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net .

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Corporate Bond Risk Tumbles as EU Backs Greek Deficit Plan: Credit Markets

February 3, 2010

By Paul Armstrong and Tim Catts Feb. 3 (Bloomberg) — The cost of insuring against a corporate bond default tumbled on speculation Greece’s deficit crisis, which helped push credit spreads to the widest in a month, is closer to being resolved. European Union Monetary Affairs Commissioner Joaquin Almunia said today the European Union endorses Greece’s three- year plan to cut the region’s widest budget deficit by more than three quarters. Greek Prime Minister George Papandreou promised more action to bring the country’s finances under control, including a freeze on state workers’ pay and an increase in fuel tax. “The market is taking its cue from what happens in the sovereign world,” said Nick Burns , a credit strategist at Deutsche Bank AG in London. “Positive sentiment on sovereign CDS seems to have a positive effect on the corporate world as well.” Credit-default swaps, derivatives used to hedge against losses and speculate on credit quality, tumbled in Europe. Contracts on the high-yield Markit iTraxx Crossover Index dropped 14 basis points to 434, according to JPMorgan Chase & Co. prices at 11:45 a.m. in London, after climbing for the past three weeks. The extra yield investors demand to hold company bonds rather than the safest government debt fell 1 basis point to 165, Bank of America Merrill Lynch indexes show. Global corporate bond spreads had widened on concern Greece’s economic crisis would infect the rest of Europe. The gap climbed to as much as 166 on Feb. 1, the most since Jan. 7, after Moody’s Investors Service said Greece and Portugal face a “slow death” from deteriorating public finances, Merrill Lynch indexes show. Greek Bond Risk “We are endorsing the Greek program,” Almunia told reporters. “We are giving confidence and supporting the Greek authorities.” Credit-default swaps on Greek government bonds also fell today, signalling an improvement in perceptions of credit quality, and extended their decline after Almunia spoke in Brussels. The swaps dropped 13.5 basis points to 373.5, after rising to a record 422 on Jan. 28, according to CMA DataVision prices. Greek 10-year government bonds rose for the third time in four days, narrowing the premium investors demand to hold the debt over benchmark German bunds by 15 basis points to 3.39 percentage points. Greece had the EU’s widest deficit at 12.7 percent of gross domestic product last year and struggled to convince investors it can bring the shortfall within the bloc’s 3 percent limit. The Brussels-based commission, the EU executive, said today it will demand monthly updates from Greece on its progress in completing the budget-cutting plan. Papandreou yesterday announced a fuel-tax increase and said he would broaden a planned partial wage freeze to cover all public workers. Energy Company Debt Elsewhere in credit markets, energy companies are increasing bond sales at the fastest rate since October as investors snap up the notes of companies with rising profits while the overall pace of debt issuance slows. Williams Partners LP , the Tulsa, Oklahoma partnership created from the merger of Williams Cos. affiliates, issued $3.5 billion of bonds yesterday, adding to the $5.3 billion sold last month by energy producers, according to data compiled by Bloomberg. Denbury Resources Inc. in Plano, Texas, and Crosstex Energy Inc. of Dallas are marketing a total of $1.7 billion in notes. Sales by industrial companies fell 7 percent last month. Moody’s raised more ratings on energy companies than it cut by a 1.38-to-1 margin in the fourth quarter as rising oil and natural gas prices boosted earnings. The ratio for all U.S. companies was 0.68. ‘Respectable’ Data The flurry of sales is a “combination of the corporate debt markets being open and the financial numbers that they show being respectable,” said Jason Brady , a managing director who helps invest $54 billion at Thornburg Investment Management Inc. in Santa Fe, New Mexico. The extra yield investors demand to hold energy bonds instead of Treasuries was unchanged at 175 basis points, or 1.75 percentage points, on average. A basis point is 0.01 percentage point. The cost to protect bonds of North American companies from default fell for a second consecutive day yesterday even as Moody’s said the U.S.’s top Aaa bond rating may come under pressure amid mounting debt. High-Yield Debt High-yield bonds are a better investment than U.S. stocks, according to Rex Macey , the chief investment officer of Wilmington Trust Corp. , which is a member of the creditor committee in the three biggest active U.S. bankruptcies. Stocks will provide returns of less than 10 percent through 2016, he said yesterday in a presentation in New York. Prices of loans to companies in Europe with speculative- grade credit ratings fell for the first time in 12 weeks amid concern that Greece’s budget deficit crisis may spread to corporate borrowers. Investment-grade energy company bonds have returned 29.6 percent on average since the beginning of last year, compared with 21.9 percent for all corporate bonds, according to Bank of America Merrill Lynch indexes. “We are in the midst of a very hot debt market,” Steven Malcolm , the chief executive officer at Williams Cos., said in an interview on Jan. 19. That was the day the company said it was selling most of its pipeline assets to the partnerships and Moody’s said it would review Williams Partners’ Ba2 rating for an upgrade. Williams Partners sold $750 million of five-year debt to yield 145 basis points more than Treasuries, $1.5 billion of 10- year notes at a spread of 162.5 basis points, and $1.25 billion of 30-year bonds at a spread of about 180 basis points, Bloomberg data show. Proceeds will fund the cash portion of the purchase, the company said. Petroleo Brasileiro The offering was the biggest for an energy company in the U.S. bond market since Petroleo Brasileiro SA , Brazil’s state- controlled oil producer, sold $4 billion of notes on Oct. 23 to repay a bridge loan, Bloomberg data show. Denbury , a Gulf Coast exploration and production company, said in a regulatory filing it will sell $1 billion of debt due in 2020 to pay for its purchase of Encore Acquisition Co. Crosstex , an energy supplier. It’s marketing $700 million of eight-year bonds to repay debt, the company said in a statement distributed by Business Wire. More energy companies may borrow this year to pay for takeovers, said Ken Duffel , an analyst at bond research firm KDP Investment Advisors Inc. in Montpelier, Vermont. West Texas Intermediate crude oil prices have more than doubled since falling to $33.98 on Feb. 12. The price rose $0.53 to $77.76 today. “A lot of last year’s issuance was to extend maturities,” he said. “The issuance we’re seeing this year will be more to fund acquisitions and growth.” North American Swaps Credit-default swaps on North American companies fell 2.5 basis points yesterday to a mid-price of 92.5 basis points on the Markit CDX North America Investment-Grade Index Series 13, according to Barclays Capital. The benchmark is linked to 125 companies. Derivatives are contracts with values derived from assets or events, including stocks, bonds, commodities, currencies, interest rates or the weather. The perceived risk of companies declined even as Moody’s said the U.S. must take additional measures to reduce budget deficits projected for the next decade. The ratios of government debt to the U.S. gross domestic product and revenue have increased “sharply” during the credit crisis and recession. The U.S. keeps its Aaa rating because of a “high degree of economic and institutional strength,” the New York-based rating company said in a statement. Rating Pressure “If the current upward trend in government debt were to continue and become irreversible, the rating could come under downward pressure,” said analysts led by Steven A. Hess , senior credit officer at Moody’s in New York. The average bid for so-called leveraged loans in Europe fell to 96.16 percent of face value from 96.33 for the week of Jan. 21, when it reached the highest since November 2007, according to Standard & Poor’s Leveraged Commentary & Data. “High-yield loan and bond markets have been under pressure in the past two weeks, driven more by macro events such as Greece and equity markets,” said John Seal , a London-based partner at New Amsterdam Capital Management LLP, which oversees about 1.6 billion euros of assets. High-yield debt is rated below Baa3 by Moody’s and BBB- by S&P. Cable & Wireless Plc is marketing $500 million of high- yield bonds due in 2017 to investors as the U.K.’s second- biggest fixed-line phone utility prepares to split into two publicly listed companies. Their shares will start trading by the end of March, Cable & Wireless said in an e-mailed statement yesterday. Emerging Markets In emerging markets, Coca-Cola Femsa SAB , the largest soft- drink company in Latin America, sold $500 million of 10-year bonds after boosting the offering 25 percent. Coca-Cola Femsa, based in Mexico City, sold the bonds at a spread of 105 basis points above Treasuries. The company, controlled by Monterrey-based Fomento Economico Mexicano SAB , is seeking to expand soft-drink operations beyond Latin America, Fomento Chief Executive Officer Jose Antonio Fernandez said in an interview last month. It may try to buy Coca-Cola’s bottler in the Philippines, JPMorgan Chase said in a report Jan. 20. To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net ; Paul Armstrong in London at parmstrong10@bloomberg.net

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2010 Commercial Real Estate Outlook: Welcome to Weather Markets …

January 17, 2010

To be sure, there are significant differences in the cause of distress between then and now. But the cycle is the same. Read the original here: 2010 Commercial Real Estate Outlook: Welcome to Weather Markets … Tagged as: cause, cycle, …

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Relief Pouring Into Haiti From Around World Overwhelms Airport Facilities

January 14, 2010

By Roger Runningen and Peter Green Jan. 14 (Bloomberg) — President Barack Obama said the U.S. must respond to the earthquake in Haiti that may have killed as many as 100,000 people with “every element of our national capacity,” including military and civilian forces. “This is one of those moments that calls out for American leadership,” Obama said at the White House. He ordered agency and department heads to make rescue and relief efforts in Haiti “a top priority,” and pledged $100 million for relief efforts. As he spoke, television reports showed survivors trying to pull dead and wounded from piles of rubble in the main streets of the capital. Haiti’s prime minister said yesterday that 100,000 people may have died in the 7.0 magnitude quake that struck the Haitian capital Port au Prince on Jan. 12. Hospitals and roads were destroyed by the quake, compounding the difficulty of aiding survivors. “Search and rescue and medical care for the survivors are absolute priorities,” said Florian Westphal, a spokesman for the International Committee of the Red Cross, speaking by telephone from the organization’s Geneva headquarters. “Even as we move as quickly as possible, it will take hours — and in many cases days — to get all of our people and resources on the ground,” Obama said. “Right now in Haiti roads are impassable, the main port is badly damaged, communications are just beginning to come online, and aftershocks continue,” Obama said. ‘Our Neighborhood’ Secretary of State Hillary Clinton said in a television interview “this one’s in our neighborhood,” as she pledged the U.S. would take a lead role in aiding Haiti. The United Nations and international aid groups said time is running out to save thousands of people trapped beneath collapsed buildings in the capital by the country’s worst quake in more than a century. President Rene Preval said his nation, the Western Hemisphere’s poorest, has been “destroyed.” “This calamity has affected 3 million people,” Clinton said today in an NBC television interview. “It has caused the collapse of tens of thousands of buildings. We know there will be tens of thousands of casualties.” In Port-au-Prince, a city of about 2 million, bodies are heaped along streets and corpses of small children piled outside schools, the Associated Press reported. The UN said clean water is lacking and hotels, hospitals and the national penitentiary suffered extensive damage, as did the offices of UN peacekeeping forces and the presidential palace. “I cannot live in the palace, I cannot live in my own house,” Preval told CNN in an interview at the airport yesterday. “The two collapsed.” Airport Opened U.S. rescue teams have arrived and have re-opened the country’s main airport, which has a single landing strip, Clinton said on MSNBC. The “United States is on the ground, we’ve got the 82nd Airborne on the way,” Clinton said in a FOX television network interview. The New York Police Department said a 38-member search and rescue team was preparing to leave New York by midday. Rescuers shouldn’t be hampered by the weather in Port-au- Prince, which is forecast to be partly cloudy, with rain possible in the afternoon and a high of 31 degrees Celsius (88 degrees Fahrenheit), according to AccuWeather.com. Haiti’s population of 9.6 million has a per capita income of about $560, with 54 percent of Haitians living on less than $1 a day and 78 percent on less than $2 daily, according to the World Bank. The gross domestic product was $7 billion in 2008. The country is still recovering from four tropical storms or hurricanes that killed at least 800 people in 2008. USAID said in a statement today it is sending 14,550 tons of food aid to Haiti to feed 1.2 million people for two weeks. Aircraft Carrier A U.S. Navy aircraft carrier, Coast Guard cutters and search and rescue teams from across the U.S., Latin America and Europe are arriving or already there. The U.S. Geological Survey said on its Web site the quake was the “most violent” in Haiti in more than 100 years. Exact estimates of casualties and damage aren’t yet available said the Red Cross’s Westphal. A U.S. Coast Guard inspection found significant quake damage to piers at Port-au-Prince port that may limit the flow of relief supplies brought by sea in the next few days, State Department spokesman Philip J. Crowley told reporters in Washington. Clinton and Defense Secretary Robert Gates called off a trip to Asia to help coordinate relief efforts in Washington. Field Hospital Israel said it is sending a 220-person contingent that includes a field hospital and police officers. In Latin America, the governments of Chile, Brazil, Argentina and Colombia were among those sending aid. “We have a moral and ethical commitment to the people of Haiti,” Chile’s President Michelle Bachelet said in an interview on Radio Cooperativa this morning. French Prime Minister Francois Fillon said in Paris that three planes with military police and first aid have already arrived in Haiti and a fourth is on its way. “A city has sunk and the toll is terrible,” Fillon said. Germany’s Red Cross is airlifting a field hospital with doctors and nurses to Haiti tomorrow, Peter Ossowski, head of Red Cross logistics in Berlin, said in an N24 television interview. The tent facility will have space for 200 patients. The U.K. has sent 64 fire fighters and eight search and rescue specialists to Haiti. The teams, which landed in Haiti this morning, are equipped with heavy lifting gear and search and rescue dogs, U.K. International Development Secretary Douglas Alexander told the BBC. The U.K. will give $10 million to relief efforts, the government said in London. Economic Damage Economic damage may be in the hundreds of millions of dollars, according to estimates from Eqecat Inc., an Oakland, California-based company that builds financial risk models to help insurers prepare for catastrophes. Citigroup Inc. , the U.S. bank that operates in more than 100 countries, said its three-story office building in Port-au- Prince collapsed. The bank is trying to account for 44 people who worked in the building, said Liliana Mejia , a spokeswoman for the New York-based bank. Montreal-based Gildan Activewear Inc. , the largest T-shirt maker in North America, said in a statement distributed by Marketwire that one of its three contract facilities in Haiti suffered “substantial damage.” Search and rescue squads from Fairfax County, Virginia, and Los Angeles have been sent to Haiti aboard U.S. military flights, Crowley said. Crowley said the U.S. Embassy is checking on the status of the estimated 45,000 U.S. citizens on the island, while it works to help direct relief efforts. At least one U.S. citizen has died, Crowley said today. The headquarters of the UN’s 9,000-person security mission in Haiti collapsed, hampering efforts to coordinate international aid. The UN said 22 staff were confirmed dead and at 56 were injured. To contact the reporters on this story: Bill Faries in Buenos Aires at wfaries@bloombeg.net ; William Varner in New York at wvarner@bloomberg.net

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China May Have to Shut Power Plants as Snow Spurs Demand, Snarls Transport

January 11, 2010

By Bloomberg News Jan. 12 (Bloomberg) — China may be forced to shut 11 percent of power generators connected to the nation’s main grid because of coal shortages as freezing weather spurs demand and snow snarls transport, the official Xinhua News Agency reported. Coal stockpiles at 598 power plants connected to China State Grid Corp.’s network have fallen to just nine days’ worth of supplies, Xinhua reported, citing the National Power Dispatch and Communication Center. Coal stockpiles at 205 power plants are enough for seven days, according to the report. Supplies for 11 percent of power plants connected to China State Grid Corp.’s network have fallen to less than three days’ worth and could be shut at “any time,” Xinhua reported. Freezing temperatures and snowfall have forced Beijing, Shanghai, and other regions of China to limit gas and electricity use to guarantee power needed for heating. The Chinese capital was hit by the heaviest snow in almost six decades earlier this month, as temperatures fell to the lowest since 1971. Snowfall is forecast today for the southwestern provinces of Guizhou and Yunnan, with snowy and rainy weather in other parts of southern China subsiding, the China Meteorological Administration said today in an e-mailed statement. Temperatures in parts of northern and eastern China may fall by as much as 8 degrees Celsius today, the weather bureau said. Beijing is forecast to be sunny today with temperatures as low as minus-15 degrees Celsius, the bureau said. Shanghai is expected to be partly cloudy with temperatures falling to as low as minus-2 degrees Celsius, according to the weather bureau. For Related News and Information: Find stories about weather in China: TNI CHINA WEATHER BN Finds stories about power generation in China: TNI CHINA ELC BN Most-read stories about China today: MNI CHINA 1D China economic statistics: ECST CH

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Australia Warns of Bushfires as Winter Freeze Grips Much of China, Europe

January 11, 2010

By Bloomberg News Jan. 11 (Bloomberg) — Australia issued “catastrophic” fire warnings amid forecasts for soaring temperatures as snow and freezing weather forced China to evacuate thousands and snarled transportation in Europe. The Australian state of Victoria activated its Code Red fire warning, the highest level, for the first time today as South Australia yesterday issued a statewide “catastrophic” fire danger warning after temperatures soared above 40 degrees Celsius (104 degrees Fahrenheit). The alert system was introduced after the so-called Black Saturday bushfires killed 173 people in Victoria last year. Blizzards in China’s westernmost province of Xinjiang killed one and forced authorities to evacuate more than 5,000 other residents, according to the Ministry of Civil Affairs. More snow is forecast for Xinjiang today and tomorrow, with temperatures in the provincial capital of Urumqi expected to fall to as low as minus-15 degrees Celsius (5 degrees Fahrenheit), the China Meteorological Administration said. Freezing weather in China is also forcing cities including Beijing and Shanghai to ration the use of natural gas and electricity to ensure sufficient energy for heating as temperatures fall. Electricity demand in South Australia is expected to reach a summer record today as the heat wave that started Jan. 5 enters its second week, according to the Australian Energy Market Operator. Flights Cancelled Wintry weather in Europe has snarled transportation as the cold and snow forced airlines in the U.K., France and Germany to cancel flights and Eurostar Group Ltd. cut the number of trains from the continent to London by almost half yesterday. The reduced schedule is expected to continue today, with Eurostar planning 15 trains to London instead of 26 and 15 to the continent instead of 27. Snowfall in France forced Lyon’s airport to shut on the evening of Jan. 9, stranding hundreds of passengers. The national French electrical grid maintained its request that households in the western region of Brittany moderate power use. The region produces only 8 percent of its electricity needs. Urumqi airport in Xinjiang canceled 84 flights from Jan. 6 to Jan. 10 because of snow, according to the local government’s Web site. Blizzards in the Tacheng and Altay regions of Xinjiang also destroyed 799 homes and damaged a further 4,897, according to the Ministry of Civil Affairs. A total 261,800 residents had been affected by the snowfalls that caused power outages and disrupted transportation in Xinjiang as of late Jan. 8, it said. Gas Limits Beijing will limit the supply of natural gas to industrial users to guarantee supplies for residential needs as daily consumption is close to maximum capacity, the official Xinhua News Agency reported yesterday. Temperatures in the Chinese capital are forecast to fall to as low as minus-12 degrees Celsius, according to the weather bureau. The city of Wuhan is also limiting gas supplies, Xinhua reported. Electricity is also being rationed in portions of China including Shanghai and the southwestern municipality of Chongqing. Shanghai may get snow today, with temperatures as low as zero degrees Celsius, according to the weather bureau. More snow is also forecast for today and tomorrow in provinces including Shandong, Jilin, and Liaoning, according to the weather bureau. Temperatures in the state of South Australia touched 43 degrees Celsius in some areas yesterday. The state has closed all national parks and reserves until midnight. Victoria closed parks in the Wimmera region, as temperatures in the western portion of the state rose to 44 degrees Celsius yesterday. Florida Oranges In the U.S., the National Weather Service issued a “hard- freeze warning” for parts of Florida from last night to this morning, which means below-freezing temperatures are “imminent or highly likely,” according to the service. Florida, the world’s biggest orange grower after Brazil, may lose 6 percent to 10 percent of its crop as temperatures plunge, said Alan Reppert , a senior meteorologist at AccuWeather Inc. Freezing temperatures in China have also led to the worst sea ice off the coast of the eastern province of Shandong in three decades, Xinhua reported , citing Guo Kecai, deputy general engineer of the State Oceanic Administration’s North China Sea branch. Temperatures on the Bohai Sea and Yellow Sea have fallen to minus-10 degrees Celsius, Xinhua reported. More than 200 fishing boats were frozen at a port in Dongying with the ice sheet as thick as 30 centimeters, Xinhua reported. China increased monitoring of the situation and sent warnings to local residents and governments, it said. For Related News and Information: Find stories about weather in China: TNI CHINA WEATHER BN Finds stories about power generation in China: TNI CHINA ELC BN Most-read stories about China today: MNI CHINA 1D China economic statistics: ECST CH

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China Braces for More Snow as Freezing Weather Grips Much of U.S., Europe

January 8, 2010

By Christopher Martin and Whitney McFerron Jan. 8 (Bloomberg) — China braced for more snow today as wintry weather swept across the Northern Hemisphere, tightening supplies of coal as electricity use surged in the U.S. and farmers in Florida worked to protect their orange crops. Snowfall was forecast today for Beijing, the neighboring municipality of Tianjin and provinces including Hebei, Shandong, and Gansu, according to the China Meteorological Administration. The Chinese capital received the heaviest snowfall in almost six decades on Jan. 3, with temperatures falling to the lowest since 1971 this week. Average temperatures for cities including Chicago, New York, Seoul, Beijing, Berlin and London this winter are on track to be the lowest in more than 30 years, said Joe Bastardi , the chief meteorologist at AccuWeather Inc. The freezing weather and snowfall is snarling transportation, threatening crops and forcing the rationing of electricity. Temperatures in Beijing are forecast to fall to as low as minus-12 degrees Celsius today, according to China’s weather bureau. Heavy snow may hit portions of the nation’s westernmost Xinjiang province, the bureau said. In the U.S., snow from the Midwest headed for the Northeast, with flurries expected in the New York City area by late yesterday. Milwaukee and Chicago may see as much as a foot of snow by this morning, according to the Weather Channel , and more arctic air is bound for Florida, where growers have been working around the clock to protect citrus and berry fields. ‘Hard Freeze’ The National Weather Service issued a “hard freeze” warning from Houston along the Gulf Coast to Tampa, Florida, through the weekend, and Dallas is on alert for winds that could make it feel like 5 degrees below zero Fahrenheit (minus-20 Celsius). Winter storm warnings are in effect from Nebraska to West Virginia. “In the U.S. so far, it’s the coldest start to winter since 2000,” said AccuWeather’s Bastardi . “It’s already snowed four times in Dallas. It may end up letting up and then it should come back gangbusters at the end of January and in February.” The U.K.’s longest cold snap since 1981 persisted yesterday as temperatures fell as low as minus 18 degrees Celsius (0 Fahrenheit) in Benson. Up to 28 centimeters (11 inches) of snow fell in southern England, while German forecasters warned of a “powerful” snowstorm with blizzard conditions starting today. The cold weather in North America and Europe is connected by an Arctic high pressure system, said Martin Jonas , a meteorologist at the German Meteorological Service. Warmer air coming from the Atlantic and the Mediterranean Sea is causing snowfall when it hits the cold Arctic front. Electricity Prices Wholesale electricity and natural gas prices jumped from the U.S. Southeast to the West as cold weather spurred record demand in Texas and parts of Florida. More than 400 flights at Chicago-area airports were canceled yesterday as the latest snowstorm moved through, the Chicago Department of Aviation reported. Grain loading on Illinois River barges was disrupted by heavy snow and ice floes as thick as 10 inches (25 centimeters), the U.S. Army Corps of Engineers reported. Minimal damage was reported yesterday from the freeze in Florida’s groves, said Rusty Wiygul, the director of grower affairs at Florida Citrus Mutual, a trade organization in Lakeland. “It’s been a long cold snap,” said Andrew Meadows , a spokesman for Florida Citrus Mutual. “It’s starting to fray on everybody’s nerves.” Florida is the world’s second-biggest producer of oranges, after Brazil. ‘Especially Dangerous’ “This weekend remains looking especially dangerous to the agriculture industry across Florida, with hard freezes likely again” in the north, said Jim Rouiller , the senior meteorologist with Planalytics Inc . of Wayne, Pennsylvania. A blast of cold following today’s snow will bring the coldest temperatures of the season to the Northeast and Mid- Atlantic, Rouiller said in an e-mail. Combined with gusty winds, that may mean “dangerously cold” wind chills over large parts of the Northeast, he said. Snowfall in China is forecast for this weekend in the provinces of Henan, Shaanxi, Gansu, and Xinjiang, according the nation’s weather bureau. Temperatures in Beijing are expected to be as low as minus-10 degrees Celsius, the bureau said. China Curbs China’s Shanxi province, the nation’s largest coal production area, has ramped up output since December as falling temperatures have spurred demand for electricity, the official Xinhua News Agency reported. Shanghai, Chongqing and other regions of China are limiting power consumption after snowfalls restricted coal deliveries to power plants. Progress Energy Florida, the Florida utility owned by Raleigh, North Carolina-based Progress Energy Inc., saw electricity use Jan. 6 hit 90 percent above normal, said a spokeswoman, Suzanne Grant. Heating demand in the Southeast today will rise to 58 percent above normal for this time of year, compared with yesterday’s 34 percent, said forecaster Weather Derivatives. Natural gas fuels more than 40 percent of Florida’s electricity and also provides most of the state’s residential and industrial heating. The unusually cold weather created record seasonal electricity demand for FPL Corp. ’s Florida Power & Light Co. utility. Texas expected to break its winter record for electricity demand yesterday and possibly today because of cold, according to the state’s power grid operator. To contact the reporters on this story: Christopher Martin in New York at cmartin11@bloomberg.net ; Whitney McFerron in Chicago at wmcferron1@bloomberg.net .

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El Nino May Curb Philippine Rice Harvest Damaged by Storms, Official Says

January 7, 2010

By Luzi Ann Javier Jan. 8 (Bloomberg) — Rice output in the Philippines, the world’s biggest importer, may decline this quarter as El Nino reduces rainfall in major producing regions, an official said. “The shortfall will naturally increase because production will be lower compared to last year,” Agriculture Undersecretary Emmanuel Paras said in an interview yesterday. “We are still assessing just how much the volume will drop.” The Philippines, which lost 1.3 million metric tons of rice in storms last quarter, may remain in the import market as it faces El Nino after securing more than 2 million tons of rice from overseas suppliers since November. The nation lost 2.36 million tons when a moderate El Nino hit in 1998, Paras said. “This time, the impact may not be as severe,” Paras said. “We’re monitoring the water levels in dams because that will determine how much water is available to the crop on the ground.” El Nino, the weather pattern that creates a warming of the Pacific Ocean, can reduce rainfall or prolong the dry season in parts of Asia, damaging agricultural output. Twenty provinces, including Nueva Ecija, Bulacan, Pampanga and Sultan Kudarat, received between 20 percent to 59 percent below-normal rainfall in the past three months, Daisy Ortega, senior weather specialist at the Philippine Atmospheric Geophysical and Astronomical Services Administration said in a phone interview from Manila yesterday. Prices Jump Central Luzon, home to the nation’s biggest producing provinces including Nueva Ecija, Pampanga and Bulacan, accounted for 18 percent of output in 2008, according to the Bureau of Agricultural Statistics Web site. Rice futures jumped 34 percent from last year’s low of $11.195 per 100 pounds in Chicago, as the Philippines accelerated imports, and on concern India, the world’s second- largest grower and consumer, may become a net importer this year, after drought parched crops in the South Asian nation last year. Philippine rice imports may expand to a record 3 million tons in 2010, from 1.78 million tons last year, “in a worst case scenario,” if El Nino damages crops, Rex Estoperez , spokesman of the National Food Authority, said Nov. 23. Rice farmers in the Philippines collect their first harvest of the calendar year between March and May. Nueva Ecija is the nation’s largest rice producing province, according to Paras. To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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Winter Weather Threatens Livestock, Disrupts Travel From China to Europe

January 5, 2010

By Margot Habiby and Whitney McFerron Jan. 6 (Bloomberg) — Crude oil traded near its highest level in 14 months, citrus growers in Florida fought to protect their crops and Beijing had its coldest morning for almost four decades as winter weather gripped the U.S., China and Europe. London’s Gatwick and Luton airports and Birmingham airport in the Midlands suspended all inbound and outbound flights because of snow and severe weather, the airports said. At least four deaths on American highways have been blamed on the weather, according to the Associated Press, while seven people were killed in an avalanche in Switzerland. Temperatures in northern China may drop as low as minus-32 degrees Celsius from this evening to tomorrow night, the China Meteorological Administration said. AccuWeather.com predicted the worst U.S. winter in 25 years. “People have just forgotten what winter is,” Mike Halpert , the deputy director of the U.S. National Weather Service’s Climate Prediction Center , said by telephone yesterday from Camp Springs, Maryland. Temperatures in December “were below average, but they weren’t like the record-breaking cold that you see back in November and December 2000.” Overnight temperatures in the U.S. were forecast to be 15 to 35 degrees below average, dropping into the teens, in some areas along the U.S. Gulf Coast, said Jim Rouiller , a senior energy meteorologist for Planalytics Inc. of Wayne, Pennsylvania. Oil, Orange Juice Crude oil traded at $81.60 a barrel on the New York Mercantile Exchange, near the $81.77 settlement yesterday, which was the highest since October 2008. Temperatures in the U.S. Northeast, the area responsible for four-fifths of the country’s heating oil use, are forecast to remain below normal through Jan. 15, according to the National Weather Service. Orange-juice futures jumped by the most allowed by ICE Futures U.S. for a second straight day on concern that freezing weather may damage citrus groves in Florida, the world’s largest producer of the fruit after Brazil. The contract for March delivery climbed 10 cents, or 7.5 percent, to $1.4355 a pound. Andrew Meadows , a spokesman for Florida Citrus Mutual, a trade organization based in Lakeland, said in an interview yesterday it would be “a nerve-wracking night” for growers. “I would expect fruit damage to occur in colder areas” by early today, said Pete Spyke, owner of Arapaho Citrus Management Inc. , a farming company with about 300 acres (121 hectares) of oranges, grapefruit and tangerines. Four-Decade Low The temperature in Orlando, Florida, is forecast to reach 27 degrees Fahrenheit, breaking the record low of 31 degrees for the day set in 1999, according to Accuweather.com, based in State College, Pennsylvania. A cold front in China will move south today, lowering temperatures by as much as 8 degrees Celsius, the China Meteorological Administration said. Temperatures in Beijing dropped as low as minus-20 degrees Celsius last night and the weather this morning was the coldest for this time of year since 1971, according to the agency. Snowstorms in the north have disrupted coal transportation on roads and at ports, causing coal stockpiles at power plants to dwindle, China Business News said. State Grid Corp. of China, the biggest grid operator, is limiting electricity use in the center of the country because of low coal inventories, the newspaper said. Vegetable prices in Beijing jumped as much as 40 percent because of transport disruptions, it said. Still, supply overall is enough to meet demand, it added. U.K. Freeze London’s Gatwick and Luton airports, Birmingham airport in the Midlands and Southampton airport suspended flights, they said in statements. “The runway at Gatwick Airport is currently closed for snow clearance,” the airport said. London’s Luton airport canceled all flights until 4:30 a.m. Heathrow airport is warning passengers to check with airlines before travelling. The U.K. is experiencing its longest period of “widespread” freezing and snowy conditions since December 1981, Sarah Holland, a spokeswoman for the Met Office, said. Overnight, more than 30 centimeters (12 inches) of snow may fall in parts of southern England as the office issued severe weather warnings. In the U.S., the northern Great Plains and upper Midwest may receive 4 to 8 inches (10 to 20 centimeters) of snow through today, said Mike Tannura , the president of T-Storm Weather in Chicago. Omaha, Nebraska, has received 27 inches since Dec. 1, he said. Another “big Arctic blast” may occur from Jan. 8 to Jan. 9, Tannura said. Possible Reprieve The Climate Prediction Center of the National Weather Service forecast a reprieve from the cold for the U.S. Midwest in the next six to 10 days, with normal to above-normal temperatures from Michigan to Nebraska. The outlook calls for below-normal temperatures east of the Mississippi, with the southeastern U.S. getting the brunt of it. Temperatures will also remain below normal in Oklahoma and Texas, according to the agency. “The intensely cold weather pattern experience across the country will essentially peak this week, then begin losing its grip from west to east across the country next week,” Rouiller from Planalytics said in an e-mail. To contact the reporters on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net ; Whitney McFerron in Chicago at wmcferron1@bloomberg.net .

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Freezing Weather From China to Florida Disrupts Travel, Boosts Juice Costs

January 5, 2010

By Margot Habiby and Whitney McFerron Jan. 5 (Bloomberg) — Record snows and cold stretching from China to the U.K. to Florida are threatening crops and disrupting travel while sending futures prices higher for orange juice, cattle and hogs. At least four deaths on U.S. highways have been blamed on the winter weather streaming into the Midwest and South, according to the Associated Press. Seven people were killed in an avalanche in Switzerland. AccuWeather.com , based in State College, Pennsylvania, predicted the worst U.S. winter in 25 years. “It’ll be like the great winters of the ‘60s and ‘70s,” Joe Bastardi , the chief meteorologist for AccuWeather, said in a statement yesterday. He compared the temperature forecast with January 1985, when readings below zero Fahrenheit (minus-18 Celsius) were seen from Chicago to Georgia. The U.K. is suffering its longest period of widespread snow and cold since December 1981, Sarah Holland, a spokeswoman for the government weather service, said in a telephone interview today. The cold has lasted 18 days and could last “for the next couple of weeks,” she said, with as much as a foot of snow expected in parts of southern England tonight. In China, air traffic and coal deliveries were hampered by heavy snows and the lowest temperatures in 50 years. Beijing readings are forecast to drop as low as minus 16 degrees Celsius tonight, according to the China Meteorological Administration . Wheat and Citrus For U.S. agriculture “the main story is that the cold could cause problems for central Plains wheat and widespread frost for Florida citrus,” Matt Rogers , a forecaster at Commodity Weather Group, said in a note to clients. In citrus-growing areas of Florida and Texas, the lows hovered just above freezing in most areas last night, sparing the crops, AccuWeather said. Orange-juice futures rose for a second day today on concern for citrus yields in Florida, the world’s largest orange grower after Brazil. Futures for March delivery rose 10 cents, the most permitted by the ICE Futures U.S. exchange in New York, or 7.5 percent, to $1.4355 a pound at 1:42 p.m. Damage is possible from Tampa and Orlando northward as temperatures may drop below freezing by tomorrow, and more cold weather will return this weekend, said Bob Tarr, an agricultural meteorologist at AccuWeather. Northeast Cold Temperatures in New York City and Boston are forecast to be as much as 12 degrees below average by Jan. 10, according to MDA Federal Inc.’s EarthSat Energy Weather of Rockville, Maryland. The U.S. Northeast is responsible for about four-fifths of the country’s heating oil use. In the central U.S., temperatures will be 25 degrees below average in Houston on Jan. 8 and 16 degrees below normal in Cincinnati on Jan. 9, according to EarthSat. About 72 percent of households in the Midwest use natural gas for heat. “This is a big deal as far as the cash basis or local markets are concerned, especially heating oil,” said Jim Rouiller , a senior meteorologist at Planalytics Inc. in Wayne, Pennsylvania. “As far as the Nymex is concerned, I think people have already written in the intense cold for the next few days. They did lift prices for the past few days.” Heating oil for prompt delivery at New York Harbor has risen 14 percent in the past nine days, the longest rally since July, according to Bloomberg data. The fuel gained 1.17 cents, or 0.5 percent, to $2.2010 a gallon today, the highest since October 2008. Crude Oil Crude oil for February delivery rose for a ninth day, up 26 cents, or 0.3 percent, to $81.77 a barrel on the New York Mercantile Exchange. Natural gas for February delivery fell 24.7 cents, or 4.2 percent, to $5.637 per million Btu on the Nymex amid forecasts the cold will break starting Jan. 15. “The main excitement for the next several days is definitely covering all of your main hubs east of the Rockies with a lot of cold weather,” said Michael Schlacter , the chief meteorologist at Weather 2000 Inc. in New York. “On a national scale, it’ll probably be the coldest if not the most impactful week we’ve seen since early December.” Natural gas priced for prompt delivery at Henry Hub in Erath, Louisiana, rose to a 13-month high of $6.08 per million British thermal units yesterday, according to Bloomberg data. Natural Gas Hogs increased today and cattle futures rose for the second time in three sessions and on speculation that cold weather in the northern U.S. Great Plains will reduce animal-weight gains and stall shipments to slaughterhouses. Cattle futures for February delivery rose 0.95 cent, or 1.1 percent, to 86.325 cents a pound on the Chicago Mercantile Exchange. The price gained 1.3 percent on Dec. 31. Hog futures for February settlement climbed 1.75 cents, or 2.7 percent, to 67.6 cents a pound in Chicago. Earlier, the most-active contract touched 67.8 cents, the highest price since Dec. 3. Temperatures in parts of Nebraska, the second-largest cattle-producing state, may touch minus 20 degrees Fahrenheit this week, according to the National Weather Service . Average steer weights at slaughter fell 2.3 percent in the past three weeks as animals used more energy to keep warm. The National Weather Service’s Climate Prediction Center forecast a reprieve from the cold for the U.S. Midwest in the next six to 10 days, with normal to above-normal temperatures from Michigan to Nebraska. Temperature Outlook The forecast calls for below-normal temperatures east of the Mississippi, with southeastern U.S. getting the brunt of it. Temperatures will also remain below normal in Oklahoma and Texas, according to the National Weather Service. While snow can help insulate the ground in the North, cold tends to seep into the snowless Southern farmland and “cause more damage to crop root systems,” Schlacter said. “This kind of winter appears for the South maybe once a decade,” Schlacter said. “This is what people with energy or commodities bookkeeping are trying to keep up with. We’ve had colder months and patterns in Chicago and the Northeast, but the real headline is the southern half.” To contact the reporters on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net ; Whitney McFerron in Chicago at wmcferron1@bloomberg.net .

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Aiful Credit-Default Swap Sellers May Pay $975 Million to Settle Contracts

December 30, 2009

By Abigail Moses Dec. 31 (Bloomberg) — Sellers of default insurance on Aiful Corp. debt may have to pay out about $975 million to settle contracts on Japan’s third-biggest consumer lender, according to CMA DataVision prices. Aiful triggered a settlement auction of credit-default swaps when it agreed to extend the maturity of loans to avoid bankruptcy, the International Swaps & Derivatives Association’s Japan Determinations Committee ruled yesterday. The cost of Aiful swaps implies that sellers of protection on $1.3 billion of the company’s debt will pay 75 cents on the dollar to settle contracts, CMA prices show . The ruling ends a three-month dispute that threatened to undermine confidence in Japan’s default swaps market. The committee previously rejected three requests to trigger the contracts, citing a lack of publicly available information on which to make a judgment, even though Aozora Bank Ltd. said it hadn’t been paid by Kyoto-based Aiful. “This is significant in Japan’s credit-default swaps history,” said Junichi Shimizu , an analyst at Deutsche Bank AG in Tokyo. “It will be a precedent.” The dispute over Aiful swaps helped expose flaws in Wall Street’s system for determining payments on derivatives linked to the debt of defaulted companies less than a year after securities firms changed practices to avoid overreaching regulation. Policy makers demanded more transparency after the meltdowns 15 months ago of Lehman Brothers Holdings Inc. and American International Group Inc., two of the largest traders, froze credit markets. Goldman Demand Aiful faced possible failure after Goldman Sachs Group Inc. this month demanded that its 3.7 billion yen in loans be repaid. The company offered to settle the borrowing at a discount to win the New York-based lender’s support for its restructuring proposal, two people familiar with the matter said on Dec. 11. The company said last week it would delay payments on 280 billion yen ($3 billion) of debt until Sept. 30 next year and ISDA’s Japan committee ruled the delay constituted a so-called restructuring credit event. Credit-default swaps are derivatives, contracts with values derived from assets or events, including stocks, bonds, commodities, currencies, interest rates or the weather. Banks, hedge funds and insurance companies use the swaps to insure bonds and loans against default or to speculate on the creditworthiness of countries and companies. Japan Auction It’s the first time swaps on a Japanese company will be settled at auction and may set a model for future events. Japan Airlines Corp. plunged to a record in Tokyo trading yesterday on speculation the company may seek bankruptcy protection. A total 2,780 contracts were outstanding on Aiful debt as of Dec. 25, making it the second-most insured Japanese borrower after the government, according to Depository Trust & Clearing Corp. in New York, which runs a central registry that captures most trading. Credit-default swaps on Aiful cost $6.4 million in advance and $500,000 a year to protect $10 million of debt from default for five years, according to London-based CMA prices on Dec. 15, the last day data was available. Run by founder and Chief Executive Officer Yoshitaka Fukuda , Aiful hasn’t sold bonds in public markets since March 2007 and reported a record first-half loss of 282.3 billion yen in November. It struggled with debt after a crackdown by authorities on excessive interest rates made Japan’s consumer lenders liable to pay billions of dollars of refunds. Aiful said Dec. 24 it will have repaid 76 billion yen by June 10, 2014. It also said 2,095 employees will retire by Feb. 28, helping reduce annual staff costs by 13 billion yen, and that it took a one-time charge of 5.8 billion yen for the cuts. To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net

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Last-Minute Shopping May Counter U.S. Snowstorm; Sales Forecast Unchanged

December 21, 2009

By Allison Abell Schwartz Dec. 21 (Bloomberg) — Last-minute shopping in the days leading up to Christmas may make up for lost weekend sales on the U.S. East Coast after record snowfalls shut stores early and kept shoppers at home, the National Retail Federation said. The weather wasn’t enough to prompt the trade group to revise its forecast for a 1 percent drop in holiday sales, said Ellen Davis , a spokeswoman for the NRF. Some retailers may extend promotions into Monday and Tuesday to attract shoppers they had hoped to get during the last weekend before Christmas, she said yesterday. “There are more than enough shopping days to make up any challenges due to weather in the east,” Matt Rubel , chief executive officer of Collective Brands Inc. , said in an e-mail yesterday. Collective Brands, based in Topeka, Kansas, is the owner of the Stride Rite and Payless ShoeSource chains. Retailers in the Washington area closed early on Dec. 19 and opened to fewer shoppers yesterday than is typical for the last weekend before Christmas. As much as 24 inches of snow fell on Bethesda, Maryland, while 16 inches were measured at the National Mall in Washington and 23.2 inches were recorded at Philadelphia International Airport, the National Weather Service said. Shopping during the past weekend probably trailed the one following Thanksgiving, said Aaron Martin, a spokesman for researcher ShopperTrak RCT Corp., in an e-mail yesterday. The firm had anticipated the weekend would be the best of the season and in October forecast a 1.6 percent increase in total holiday sales. Extended Hours Target Corp., the second-biggest U.S. discount chain, said yesterday that the majority of its stores in areas affected by the snowstorm will extend their hours to close at midnight Dec. 21 through Dec. 23. Wal-Mart Stores Inc. and Toys “R” Us Inc. will also keep stores open longer than they did last year. Target , based in Minneapolis, rose 74 cents to $48.24 Dec. 18 in New York Stock Exchange composite trading. Bentonville, Arkansas-based Walmart rose 9 cents to $52.85. Macerich’s Tysons Corner Center, the Washington area’s largest shopping mall with about 300 stores, closed early at 4 p.m. on Dec. 19, according to spokeswoman Rebecca Stenholm. Tysons Corner opened at its normal time of 9 a.m. on Dec. 20. “Certainly the crowds are quiet this morning but we expect them to grow,” she said in an interview yesterday. Maryland, Virginia Malls Simon Property Group Inc. and Westfield Group closed malls early in Maryland and Virginia on Dec. 19. All of Westfield Group’s malls and shopping centers opened on time yesterday, said spokeswoman Katy Dickey . Historically, the 10 days before Christmas have made up 40 percent of total holiday sales for November and December, according to Joseph Feldman , a managing director at Telsey Advisory Group in New York. The Washington-based National Retail Federation said last week that consumers had completed less than half of their holiday shopping, the lowest level since 2004, according to a survey by BIGresearch. The luxury shopping section of Washington’s Dupont Circle neighborhood was nearly deserted on Dec. 19. A family of three skied down the middle of 18th Street. At 2 p.m. the AnnTaylor , Johnston & Murphy and Godiva stores on Connecticut Avenue were shut. Brooks Brothers closed at 1 p.m. instead of 6 p.m. “due to inclement weather!!” its sign said. Act of God “This is kind of an act of God,” Jim Rosenheim, chief executive officer of Tiny Jewel Box Inc., a family-owned single- location jewelry business on Connecticut Avenue. “There’s not a damn thing I can do about it. This is happening to every retailer up and down the East Coast.” Rosenheim, 67, said he hopes to recover on Monday through Thursday some of what otherwise would have been “hundreds of thousands” in sales, he said. The Strand bookstore in Manhattan was on pace for a record sales day on Dec. 19 until the snowstorm worsened. The store had about $125,000 in sales that day, compared with about $137,000 on the Saturday before Christmas last year, said co-owner Nancy Bass Wyden. “Up until 6:30 at night, we were headed to have the busiest day at the Strand, and then the weather definitely caught us,” Wyden said in a telephone interview yesterday. “I guess people got scared away by the storm.” Earlier in the day on Dec. 19, shoppers rushed out to beat the accumulating snow. Angel Stallings, a 27-year-old from Brooklyn, made her way to the 42nd Street Toys “R” Us in Manhattan before returning to the Atlantic Terminal Target in Brooklyn to shop for her 6-year-old son and 1-year-old daughter. New York Shopping “I heard about the snow and I wanted to be done shopping before it got too bad,” Stallings said. Charles White, 30, of Alexandria, Virginia braved the winter weather to finish holiday shopping for his girlfriend at the Fashion Centre at Pentagon City in Arlington, Virginia. “I couldn’t worry about the weather. This is the last weekend before Christmas and I have to do what I have to do,” he said. To contact the reporter on this story: Allison Abell Schwartz in New York at aabell@bloomberg.net

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East Coast Snow Storm May Damp TJX, Kohl’s Sales, Stifel Nicolaus Says

December 18, 2009

By Chris Burritt Dec. 18 (Bloomberg) — TJX Cos. , Kohl’s Corp. and other strip shopping-center retailers may be hurt the last weekend before Christmas if an East Coast snowstorm prompts consumers to stay home and buy more online, Stifel Nicolaus & Co. said. Companies with popular Web sites, such as Urban Outfitters Inc. and J.Crew Group Inc., may counter sales declines at their stores with higher online revenue, Richard Jaffe , a Stifel analyst in New York, wrote today in a note. Internet sales probably won’t overcome lower store revenue “during what historically has been the busiest weekend of the year,” he said. A storm moving north from North Carolina to New England may dump as much as 16 inches in the Washington-Baltimore corridor and 6 inches to 12 inches in New York, according to the National Weather Service. The storm is likely to hit all large Eastern Seaboard cities hard, said Tom Kines , a senior meteorologist at private forecaster AccuWeather.com in State College, Pennsylvania. “If the storm comes to fruition,” or if the media continues reporting about it, “consumers will likely stay home,” according to the note by Jaffe and fellow New York-based Stifel analysts Megan Roesch and Beth Stewart. “If consumers venture out in the storm, they will likely travel to malls, where they can shop indoors and have numerous retail options.” Chains with stores in strip shopping centers will suffer the most as people avoid outlets exposed to the weather, according to the analysts. They rate TJX and Urban Outfitters “buy” and Kohl’s and J.Crew “hold.” Waiting Game Sherry Lang , a spokeswoman for Framingham, Massachusetts- based TJX, which operates the T.J. Maxx and Marshalls clothing- store chains, didn’t immediately return a telephone call seeking comment. Nor did Jen Johnson, a spokeswoman for Menomonee Falls, Wisconsin-based Kohl’s. Urban Outfitters, based in Philadelphia, and J.Crew, based in New York, didn’t return calls for comment. More consumers are waiting until the last minute to complete gift purchases this year, prompting the National Retail Federation to repeat its forecast for a 1 percent drop in holiday sales. Consumers on average had completed 46.7 percent of their shopping by the second week in December. That’s the lowest level since 2004, according to a survey by BIGresearch released Dec. 16 by the National Retail Federation. The projected 1 percent slide in sales in November and December compares with last year’s decline of 3.4 percent, the first drop since the Washington-based group started tracking holiday sales in 1995. To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net .

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U.S. Industrial Production Climbs More Than Forecast, Producer Costs Rise

December 15, 2009

By Bob Willis Dec. 15 (Bloomberg) — Industries in the U.S. boosted production in November by the most in three months, showing the world’s largest economy is gaining speed heading into 2010. Output at factories, mines and utilities climbed 0.8 percent, after no change in October, the Federal Reserve said today in Washington. Manufacturing and mining rose, while warmer weather restrained utility demand. Capacity utilization, which measures the proportion of plants in use, increased. Improving global sales and leaner inventories are prompting companies such as Ford Motor Co. to rev up assembly lines, giving the expansion a lift. The pickup has yet to boost hiring, one reason why Fed policy makers tomorrow may reiterate a pledge to keep lending rates near zero for “an extended period.” “We’ll continue to see growth in manufacturing output, given strong exports and that consumers are spending,” said Michael Feroli , an economist at JPMorgan Chase & Co. in New York, who forecast a production gain of 0.9 percent. “You’re seeing a decent amount of breadth in terms of the increases.” Stock futures were lower after the report and separate releases that showed higher producer prices and slower growth at New York-area factories. The contract on the Standard & Poor’s 500 Index was down 0.4 percent to 1,104 at 9:24 a.m. in New York. A report from the Labor Department earlier today showed prices paid to producers rose 1.8 percent last month. Excluding fuel and food, prices increased 0.5 percent. New York Manufacturing Factories in the New York region expanded less than anticipated this month, figures from the Fed Bank of New York also showed. The bank’s general economic gauge, known as the Empire State Index , fell to a five-month low of 2.6 from 23.5 in November. Readings greater than zero signal expansion. Industrial production was forecast to increase 0.5 percent after a previously reported 0.1 percent gain in October, according to the median estimate of 78 economists surveyed by Bloomberg News. Projections ranged from no change to a gain of 0.9 percent. Capacity use rose to 71.3 percent last month from 70.6 percent in October. It was forecast to rise to 71.2 percent, according to the Bloomberg survey median. The rate averaged 80 percent over the past two decades. Excess capacity is one reason economists anticipate inflation will remain low. The Fed’s report showed production at manufacturers increased 1.1 percent in November, the most in three months, after a 0.2 percent decline in October. Production of business equipment rose 0.4 percent, while output of computers and electronics also increased 0.4 percent. Warmer Weather Utility production declined 1.8 percent after a 1.7 percent rise. Last month was the third-warmest November in 115 years in the U.S., according to the National Climatic Data Center. Mining output, which includes oil drilling, increased 2.1 percent. Motor vehicle and parts production rose 1.8 percent following a 1.8 percent decrease the prior month. Automobile production is moderating after surging in the three months through September as “cash-for-clunkers” incentives to purchase cars expired in late August. Auto sales are climbing again after plunging in September. General Motors Co., Toyota Motor Corp., Ford and Chrysler Group LLC all posted November sales that beat analysts’ estimates. The seasonally adjusted annual sales rate was 10.9 million vehicles, up from 10.45 million in October, according to industry figures released this month. Ford, the only major U.S. automaker to avoid bankruptcy, plans to boost first-quarter North American production by 58 percent from a year earlier to 550,000 vehicles. Excluding Auto Production Excluding automobiles, manufacturing output increased 1.1 percent, the most in three months. Consumer durable goods output, which includes automobiles, furniture and electronics, rose 1.5 percent. Production of industrial materials rose 1.3 percent in November, the most in three months. Deere & Co., the world’s largest maker of farm equipment, last week said early-order combine sales in North America, those for equipment that won’t be used until the middle of next year, topped its estimates and November demand was better than anticipated. “Bottom line — business has strengthened a bit from what we were expecting,” Marie Ziegler , vice president of investor relations, said at a presentation Dec. 10. Global Growth Manufacturers are benefiting from rising demand overseas as the global economy recovers from the worst slump since World War II. A 12 percent drop in the value of the dollar from a four- year high on March 3 against its major trading partners is making American goods more competitive. Exports have risen for six consecutive months since reaching a three-year low in April. Even so, the economy has lost 7.2 million jobs since the recession began two years ago, the worst employment slump in the post-war era. The jobless rate reached a 26-year high of 10.2 percent in October before falling to 10 percent last month. Fed Chairman Ben S. Bernanke last week said the economy faces “formidable headwinds,” signaling policy makers tomorrow will keep the benchmark interest rate near zero following their last meeting of the year. In comments Dec. 7 at the Economic Club of Washington, he cited a weak labor market and tight credit as ongoing drags “likely to keep the pace of expansion moderate.” After shrinking an estimated 2.5 percent this year, the economy is set to grow 2.6 percent pace next year, according to economists surveyed by Bloomberg early this month. The year after the 1981-82 recession, the last time unemployment was this high, the economy grew 4.5 percent. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net .

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Factory Output in U.S. Expands More Than Estimated; Wholesale Prices Jump

December 15, 2009

By Bob Willis Dec. 15 (Bloomberg) — Industries in the U.S. boosted production in November by the most in three months, showing the world’s largest economy is gaining speed heading into 2010. Output at factories, mines and utilities climbed 0.8 percent, after no change in October, the Federal Reserve said today in Washington. Manufacturing and mining rose, while warmer weather restrained utility demand. Capacity utilization, which measures the proportion of plants in use, increased. Improving global sales and leaner inventories are prompting companies such as Ford Motor Co. to rev up assembly lines, giving the expansion a lift. The pickup has yet to boost hiring, one reason why Fed policy makers tomorrow may reiterate a pledge to keep lending rates near zero for “an extended period.” “We’ll continue to see growth in manufacturing output, given strong exports and that consumers are spending,” said Michael Feroli , an economist at JPMorgan Chase & Co. in New York, who forecast a production gain of 0.9 percent. “You’re seeing a decent amount of breadth in terms of the increases.” Stock futures were lower after the report and separate releases that showed higher producer prices and slower growth at New York-area factories. The contract on the Standard & Poor’s 500 Index was down 0.4 percent to 1,104 at 9:24 a.m. in New York. A report from the Labor Department earlier today showed prices paid to producers rose 1.8 percent last month. Excluding fuel and food, prices increased 0.5 percent. New York Manufacturing Factories in the New York region expanded less than anticipated this month, figures from the Fed Bank of New York also showed. The bank’s general economic gauge, known as the Empire State Index , fell to a five-month low of 2.6 from 23.5 in November. Readings greater than zero signal expansion. Industrial production was forecast to increase 0.5 percent after a previously reported 0.1 percent gain in October, according to the median estimate of 78 economists surveyed by Bloomberg News. Projections ranged from no change to a gain of 0.9 percent. Capacity use rose to 71.3 percent last month from 70.6 percent in October. It was forecast to rise to 71.2 percent, according to the Bloomberg survey median. The rate averaged 80 percent over the past two decades. Excess capacity is one reason economists anticipate inflation will remain low. The Fed’s report showed production at manufacturers increased 1.1 percent in November, the most in three months, after a 0.2 percent decline in October. Production of business equipment rose 0.4 percent, while output of computers and electronics also increased 0.4 percent. Warmer Weather Utility production declined 1.8 percent after a 1.7 percent rise. Last month was the third-warmest November in 115 years in the U.S., according to the National Climatic Data Center. Mining output, which includes oil drilling, increased 2.1 percent. Motor vehicle and parts production rose 1.8 percent following a 1.8 percent decrease the prior month. Automobile production is moderating after surging in the three months through September as “cash-for-clunkers” incentives to purchase cars expired in late August. Auto sales are climbing again after plunging in September. General Motors Co., Toyota Motor Corp., Ford and Chrysler Group LLC all posted November sales that beat analysts’ estimates. The seasonally adjusted annual sales rate was 10.9 million vehicles, up from 10.45 million in October, according to industry figures released this month. Ford, the only major U.S. automaker to avoid bankruptcy, plans to boost first-quarter North American production by 58 percent from a year earlier to 550,000 vehicles. Excluding Auto Production Excluding automobiles, manufacturing output increased 1.1 percent, the most in three months. Consumer durable goods output, which includes automobiles, furniture and electronics, rose 1.5 percent. Production of industrial materials rose 1.3 percent in November, the most in three months. Deere & Co., the world’s largest maker of farm equipment, last week said early-order combine sales in North America, those for equipment that won’t be used until the middle of next year, topped its estimates and November demand was better than anticipated. “Bottom line — business has strengthened a bit from what we were expecting,” Marie Ziegler , vice president of investor relations, said at a presentation Dec. 10. Global Growth Manufacturers are benefiting from rising demand overseas as the global economy recovers from the worst slump since World War II. A 12 percent drop in the value of the dollar from a four- year high on March 3 against its major trading partners is making American goods more competitive. Exports have risen for six consecutive months since reaching a three-year low in April. Even so, the economy has lost 7.2 million jobs since the recession began two years ago, the worst employment slump in the post-war era. The jobless rate reached a 26-year high of 10.2 percent in October before falling to 10 percent last month. Fed Chairman Ben S. Bernanke last week said the economy faces “formidable headwinds,” signaling policy makers tomorrow will keep the benchmark interest rate near zero following their last meeting of the year. In comments Dec. 7 at the Economic Club of Washington, he cited a weak labor market and tight credit as ongoing drags “likely to keep the pace of expansion moderate.” After shrinking an estimated 2.5 percent this year, the economy is set to grow 2.6 percent pace next year, according to economists surveyed by Bloomberg early this month. The year after the 1981-82 recession, the last time unemployment was this high, the economy grew 4.5 percent. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net .

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Locust Plague Spurs Argentine Wheat Prices as Demand From Brazil Increases

November 30, 2009

By Rodrigo Orihuela Nov. 30 (Bloomberg) — Wheat farmers in Argentina are racing to spray fields and avert what may be the biggest plague of locusts in 30 years from attacking their harvest. “We’re already running behind on fumigation in some areas, so it’s crucial to fumigate next week to save crops,” Pablo Cornago , a manager at the Argentine Agrarian Federation , said in a Nov. 26 phone interview from 9 de Julio, Buenos Aires. Locust damage may cause wheat prices in Argentina to rise, said Ricardo Baccarin , president of Buenos Aires grains brokerage Panagricola Safici. Grain supplies are already tight after a two-year drought led the country’s wheat farmers to plant the lowest area on record, and demand from Brazil is rising after rains damaged that nation’s harvest, he said. “Markets will react to the locust issue if the situation gets worse and locusts start attacking crops” Baccarin, 54, said in a Nov. 26 telephone interview. Local prices have already gained about $5 a ton over the past week, compared with a 3.3 percent decline for the benchmark wheat contract in Chicago. The world’s fourth-largest wheat exporter in 2008, Argentina will drop to 10th in 2010, when most shipments from the current harvest will be made, according to the U.S. Department of Agriculture in Washington. The Buenos Aires Cereals Exchange estimated on Nov. 26 that, because of the reduction in planted area and dry weather at sowing time, output will fall to 7.5 million metric tons in the crop year that ends next June, from 8.4 million the previous season and 16.4 million in 2007-2008. Dry Weather The crop-devouring variety of locust, known by local farmers as “tucuras,” have thrived in the dry weather of the past two years, according to Pablo Urdapilleta, 58, the Agricultural Ministry’s director for agricultural production. Fungus and parasites that kill developing insects have been absent because of the lack of humidity, Urdapilleta, who is heading the federal administration’s locust control program, said in a Nov. 25 telephone interview from Buenos Aires. Agriculture Minister Julian Dominguez, 46, said on Nov. 24 two air force planes would help fumigate fields in southern Buenos Aires province. The previous week, the government promised to send 15 million pesos ($3.95 million) to municipal governments to help destroy the insects. Diego Raimundi , an agronomist at the Buenos Aires-based Regional Agricultural Experimentation Consortium, said the federal aid falls far short of the 50 million pesos farmers need to eliminate the bugs. About 2.1 million hectares (5.2 million acres), including wheat, corn and cattle grazing lands, are threatened by the plague, Raimundi, 29, said in a Nov. 24 phone interview from Coronel Pringles, a town in Buenos Aires province. Aerial Fumigation The Argentina Rural Society, one of the country’s biggest farm groups, said in an e-mail statement that 2.56 million hectares are at risk. The Buenos Aires-based group said aerial fumigation costs about 23 pesos per hectare, meaning 58 million pesos is needed to treat the area under threat. Buenos Aires province accounts for more than half of the 2.8 million hectares planted to wheat in Argentina this season. The southeastern part of the province alone has 1.03 million hectares sown with the grain, according to the cereals exchange. Last season, locusts damaged about 320,000 hectares of farmland in the province. A shortage of funds to fumigate at the time led to the current increase in the locust population, said Cornago, 48, of the Buenos Aires-based Agrarian Federation. Plagues of tucura were a serious problem for farmers until the late 1970s, said the Agriculture Ministry’s Urdapilleta. An increase in rain and humidity curbed them from the 1980s until the onset of dry weather in 2007. “Because of this, young farmers don’t know how to control it,” said Urdapilleta. Survival Rates Each female locust lays about 100 eggs during the winter and if the season is rainy only about 40 reach adulthood, Urdapilleta said. In dry seasons, about 90 to 95 become adults, he said. There are about 200 varieties of tucuras in Argentina, with about 40 present in Buenos Aires province, Raimundi said. Four of the 40 cause damage to crops, he said. Markets Last Week The average yield spread on Argentine dollar bonds over Treasuries fell nine basis points, or 0.09 percentage point, last week to 7.01 percentage points, according to JPMorgan. The peso fell 0.18 percent to 3.8077 per U.S. dollar from 3.8010 on Nov. 20. The Merval stock index fell 1.9 percent to 2188.58. The following is a list of events in Argentina this week: To contact the reporter on this story: Rodrigo Orihuela in Buenos Aires at rorihuela@bloomberg.net .

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Heaviest Snow in 54 Years Covers Beijing, Blocking Roads, Delaying Flights

November 12, 2009

By Bloomberg News Nov. 12 (Bloomberg) — Beijing’s airport delayed more than 100 flights and canceled 59 others today, as the heaviest snowfall in the Chinese capital in 54 years blanketed the city for the third day this month. Tens of thousands of vehicles and people were stranded on highways linking the city with the surrounding provinces of Shanxi, Hebei, Liaoning and Inner Mongolia, according to state news agency Xinhua. As many as 124 train services were delayed as 16 centimeters (6.3 inches) of snow covered the city, while temperatures plunged to minus 6 degrees Celsius (21 degrees Fahrenheit.) “I don’t want to get stuck out there,” said Cristina Zanni, chief representative of Loro Piana (HK) Ltd., who postponed a trip to Inner Mongolia province in northern China. The airfield of Yinchuan near Inner Mongolia was shut after visibility fell to less than 500 meters. Disruptions to travel may continue next week when Beijing goes on security alert before U.S. President Barack Obama’s first state visit to America’s second-largest trading partner after Canada. Food prices including fresh vegetables and daily supplies may climb, as the city restricts non-Beijing registered trucks from entering the capital from Nov. 15. China suffered an estimated 151.65 billion yuan ($21 billion) in direct economic losses almost 20 months ago when the country’s south was covered by the most severe snowstorms in five decades. Power grids were knocked out and drinking water was disrupted. Millions of travelers were stranded during the annual Lunar New Year celebrations, forcing thousands of factories to suspend work and causing China’s industrial production to expand at the slowest pace in more than a year. Last year’s snowstorm destroyed 11.9 million hectares of cropland, forcing the government to hand out 63.3 billion yuan of subsidies to farmers. Snow is likely to continue for another two days in northern and northeastern China, according to the China Meteorological Administration . Shijiazhuang, the provincial capital of Hebei near Beijing, received 55 centimeters of snow, the weather service said. To contact the reporter on this story: Eugene Tang in Beijing at eugenetang@bloomberg.net

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New Zealand captain Nelsen hoping for stormy weather

November 11, 2009

New Zealand captain Nelsen hoping for stormy weather

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David Gray: Flu Season Shows the Need for Workplace Flexibility

October 12, 2009

The month of October is National Work Family Month . Families and workers are trying to succeed and survive in this challenging economy. Going into the Fall, the country is focused on health care. Everywhere we go we hear about it. The primary policy debates in Washington focus around health care reform. Throughout the country health care dominates town hall meetings. Layered on top of this health care debate are the national preparations this month for a possible swine flu pandemic. Schools are setting up quarantine rooms. The government is preparing for the largest inoculation campaign in a generation. Public health officials are engaging in a public education campaign designed to minimize the potential impact of swine flu. The U.S. Department of Health and Human Services has been issuing advice for how we all can reduce the likelihood of contracting swine flu. However, the Centers for Disease Control estimate that up to 40% of the U.S. workforce could be directly affected. The swine flu outbreak has potential to create great disruptions for businesses, school, government offices and employers all throughout the nation. There are many people who are used to going to work when they are a bit under the weather. However, swine flu is changing that equation. Even those who have traditionally prided themselves on going to work while a bit sick are having to rethink their plans and will be staying home now because there is a social price to be paid for going to work “sick” that wasn’t there before. More people will notice and react negatively. So many more workers will be staying home. Millions of businesses are developing contingency plans and continuity of operation plans to keep their businesses and operations going if and when critical employees are out. In just a few weeks, a significant number of American businesses could have their operations negatively affected by swine flu. The swine flu draws attention for the critical need for more workplace flexibility for American businesses. Workplace flexibility is a concept that gives workers flexibility in the how, where and the quantity of hours they work. Now is the time for a national conversation and effort to increase that flexibility. Flexible work arrangements such as telework can allow workers to be productive when they are not able to be in the office. During the swine flu epidemic, it is likely that many workers will be sick enough that they will need to stay away from work, if only to keep their coworkers from being impacted, but they will be well enough to complete substantive work. Or many will be healthy themselves, but they will be needed at home to help care for a family member or a child. Schools across the nation will identify potentially sick children and many will have to stay at home for a week or more, so their working parents will be stuck at home. During National Work & Family Month , our nation needs to recognize that putting in place legislation that meets the needs of workers and businesses by enhancing the flexibility of workplaces can make an important contribution during these months where the flu poses a risk to the American economy. The H1N1 virus highlights in dramatic form the need for workplace flexibility in America. Americans need flexibility throughout the year and throughout their lives. Whether meeting the needs of families, caring for children, staying balanced or working longer in life, workplace flexibility is good for America during this flu season and beyond. We should act now to help support the economy during this time.

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