Banks round the world have still to reveal about half of their likely losses resulting from the financial and economic crisis, the International Monetary Fund said on Wednesday, warning that there was still a “significant” risk of another downward lurch in the global recession.

The IMF described credit risks as remaining “elevated” even though financial conditions have improved significantly since spring.

It said these risks, alongside weakened banks, were likely to depress the availability of new credit and damp the global economic recovery unless significant additional capital was raised to improve the health and lending capability of banking systems.

In its twice-yearly Global Financial Stability Report, published on Wednesday in Istanbul, the IMF, estimated the ultimate losses in the financial system would total $3,400bn between 2007 and 2010, an improvement from the $4,000bn estimate it published in April.

Source/Full Story: FT.com
Technorati Tags: IMF, recession

A new report on global wealth says that Europe has overtaken the United States to become the richest region in the world. But the Americans still have more millionaires then the EU — and should you want to marry one, you might be better off in Singapore or the Middle East.

From dishwasher to millionaire. If that’s the sort of career you want, then there’s no place like the USA. It is the land of unlimited opportunity. But over the last 12 months many Americans have also come to learn about opportunities that lead in the opposite direction: from millionaire to dishwasher, for instance.

The worst global recession in decades has left its mark on the world’s economic powers, but no nation has been affected quite as badly as the US, wealth dropped by 22 percent — almost double the worldwide average. The “Global Wealth Report” released by the Boston Consulting Group (BCG) on the anniversary of the Lehman Brother’s bank collapse indicates that Europe has overtaken North America to become the world’s wealthiest region.

Source/Full Story:: SPIEGEL ONLINE

General Electric Co predicts that water purification could grow from a drop in the corporate bucket to a major growth driver within years, just as its wind unit did.

The largest U.S. conglomerate has taken about a decade to build its water unit, which focuses on large-scale treatment and purification for municipal and industrial water users, through five takeovers costing about $4 billion.

With an estimated $2.5 billion in revenue, the water business remains a sliver of the $156 billion in sales the world’s largest maker of jet engines and electricity-producing turbines is expected to generate this year.

The unit’s small size has lead some investors to wonder if GE might prefer to sell it to focus on businesses where it can better enjoy the benefits of scale.

But executives with Fairfield, Connecticut-based GE said water has the potential to become a major profit contributor.

“What GE tries to do is to align the company with some of the mega-trends, the mega-challenges of the world. Energy is one, healthcare is the other, and the third one is water,” said Heiner Markhoff, president and chief executive of GE Water & Process Technologies.

While arid areas of the world, from the Middle East to the southwestern United States, have long coped with water shortages, rapid population growth and rising environmental regulations are making water scarcity and purification a more prominent issue in temperate, wetter areas.

GE does not disclose the profits or revenue of its water business, but the unit has been hit by the global recession.

Source/Full Story: Reuters

The world’s most affluent nations will take decades to work off the biggest buildup in debt since World War II. The political costs may be permanent, laid bare at this week’s Group of Eight summit of leading industrial powers.

Bank bailouts and recession-fighting measures will explode the debt of the advanced economies to at least 114 percent of gross domestic product in 2014, more than triple the 35 percent of the main emerging economies including China, the International Monetary Fund forecasts.

The run-up in debt has hastened a power shift that is sapping the industrial world’s authority to impose its economic doctrine, currency arrangements or greenhouse-gas reduction strategies. Even some G-8 officials acknowledge that the group has lost its grip amid the global recession they spawned.

The eight-nation forum that starts tomorrow in L’Aquila, Italy is “a lot less relevant given its makeup and given developments in the world,” French Finance Minister Christine Lagarde said July 5. “Big players, like emerging economies, India, China or Mexico, are invited, but they’re given only a jump seat outside of the main summit.”

The industrial world is beset by the harshest economic conditions in a lifetime: a projected U.S. budget deficit of 13.6 percent of GDP in 2009, unmatched since World War II; an annualized 14.2 percent contraction in Japanese GDP in the first quarter, also the worst since the war; in the first three months of 2009, German exports had their steepest quarterly decline since 1970 when the data were first compiled.

Source/Full Story: Bloomberg.com

Toyota Motor Corp’s new president, the grandson of the group’s founder, warned on Thursday the auto industry faces another two tough years as he outlined his strategy to return the world’s No.1 car company to profit.

Toyota aims to build more autonomous operations in North America and shift its focus to marketing a region-specific vehicle line-up, rather than offering a full line-up in every region, Akio Toyoda told his first media conference in the job.

Most of Toyota’s factories around the world are underused as a global recession hammers car sales, sending two of America’s three big car makers into receivership.

Facing a second year of record losses, Toyota aims to cut costs from its already lean operations so it can be profitable using just 70 percent of its factory capacity.

“We want to do everything possible to avoid a third consecutive year of losses,” Toyoda told reporters.

Toyoda said European efforts would focus on hybrid models.

Source/Full Story: Reuters

Stocks of developing nations fell, dragging the MSCI Emerging Markets Index down 10 percent from its 2009 peak, and oil approached a similar decline, on concern the recovery will be weaker than economists forecast. The yen rose for a third day against the dollar.

The emerging-markets index of 22 countries lost 2 percent, the most in four days, as of 10:34 a.m. in London. Russian stocks, which entered a bear market yesterday after the Micex index sank more than 20 percent, dropped 0.6 percent. Crude fell as much as 1.7 percent to $66.37 a barrel in New York, approaching the 10 percent decline that would mark a so-called correction from this year’s high.

Oil and gasoline futures fell after the World Bank forecast yesterday that the first global recession since World War II will be deeper than it predicted in March. U.S. wealth may take 15 years to rebound, Edmund Phelps, a professor at Columbia University and the winner of the 2006 Nobel Prize for economics, said in a Bloomberg Television interview.

“After the World Bank report yesterday we see more concern about the return of negative growth dynamics,” said Michael Ganske, head of emerging-market research at Commerzbank AG in London. “Investors realize that all the discussions of a sharp, V-shaped recovery are not going to materialize.”

The yen strengthened against all 16 most-traded currencies as investors pulled out of higher-yielding assets. The Japanese currency advanced 0.7 percent against the dollar and 0.5 percent versus the euro.

Source/Full Story: Bloomberg.com

Equities, commodities and emerging market currencies suffered hefty losses on Monday as risk averse investors shifted to the perceived safety of the dollar, the yen and government bonds.

“Risk aversion has resurfaced as market participants take profits on riskier exposures amid the World Bank’s downward revision of its global growth forecast for 2009,” said Samarjit Shankar, director of global strategy at Bank of New York Mellon.

“Renewed concerns about the extent of the ongoing global recession and the sustainability of the green shoots of recovery have combined with the instability unfolding in Iran and North Korea to lend an air of pessimism to investor sentiment.”

The World Bank said it expected the global economy to shrink by 2.9 per cent this year, compared with a previous estimate of a 1.7 per cent contraction.

The cautious mood among investors was intensified by uncertainty ahead of this week’s Federal Reserve policy meeting.

Source/Full Story: FT.com

The best protection for anyone in these matters is to avoid debt entirely.  Debt is a curse.  Debt is bondage…slavery.  There is no protection once you are enslaved by the Corporate State.

President Barack Obama said a new agency he proposed this week as part of an overhaul of U.S. financial regulations will protect consumers from deceptive lending practices.

The Consumer Financial Protection Agency would oversee products from mortgages to credit cards and require companies to plainly state the terms of financial products while banning “the most unfair practices,” Obama said in his weekly address on the radio and Internet.

“We’re going to level the playing field for consumers,” he said.

Obama proposed on June 17 changes to government oversight of the financial industry that he said would correct a “cascade of mistakes” that helped cause the first global recession since World War II.

The changes, much of which must be approved by Congress, would add an additional layer of regulation for the biggest financial firms. Obama’s plan would make the Federal Reserve the overseer of companies deemed too big to fail and bring hedge and private equity funds under federal scrutiny.

“This crisis may have started on Wall Street,” Obama said in his radio address. “But its impacts have been felt by ordinary Americans who rely on credit cards, home loans, and other financial instruments.”

Obama said some consumers bear responsibility for the financial crisis by taking on too much debt and loans they could not afford. More people, though, were misled by financial companies, he said.

Source/Full Story: Bloomberg.com

Airline losses worldwide this year will be wider than expected as the global recession saps demand for travel and business-class fares, the International Air Transport Association said.

The group’s new industry forecast for 2009, to be announced on June 8, will be “substantially worse” than the March estimate of losses of $4.7 billion, IATA Chief Executive Officer Giovanni Bisignani said in Kuala Lumpur today.

“The economy isn’t moving forward despite some optimism in the financial market,” he told reporters in the Malaysian capital, where IATA will hold its annual meeting next week. “The industry is still in a difficult situation. Premium traffic hasn’t improved.”

Airlines, which IATA says lost as much as $8.5 billion in 2008, are shedding jobs, cutting routes and grounding planes to survive a global slowdown that has pushed British Airways Plc, Hong Kong’s Cathay Pacific Airways Ltd. and Japan Airlines Corp. to losses. Cargo demand, the clearest way to gauge the effect of a slowing economy, hasn’t improved either, Bisignani said today.

“The global economy hasn’t started to recover, while more bad things like swine flu are spreading,” said Jack Xu, an analyst at Sinopac Securities Co. in Shanghai. “Meanwhile, oil has started to rise again.” Airlines “are already very weak.”

Source/Full Story: Bloomberg.com

Europe’s economy contracted at the fastest pace in at least 13 years in the first quarter as companies cut output and jobs to survive the worst global slump in more than six decades.

Gross domestic product in the 16-member euro region dropped 2.5 percent from the fourth quarter, when it fell 1.6 percent, the European Union’s statistics office in Luxembourg said today. That’s the biggest drop since the euro-area GDP data were first compiled in 1995 and exceeded the 2 percent decline economists expected in a Bloomberg News survey. Inflation held at 0.6 percent in April, a separate report showed.

The deepest global recession since World War II is curbing European exports and eroding consumer demand, forcing companies to cut spending and jobs. The German and Italian economies also contracted by the most on record in the first quarter. Hong Kong’s economy shrank at the fastest pace since at least 1990, prompting the government to forecast a full-year contraction of as much as 6.5 percent.

“The first quarter will hopefully remain the weakest overall,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. “The economy may continue to shrink through the third before we see some kind of stabilization.”

From a year earlier, the euro-area economy shrank 4.6 percent, also the biggest drop on record, today’s report showed. The statistics office is scheduled to publish a breakdown of first-quarter GDP on June 3. The European Commission on May 4 cut its outlook to project a contraction of 4 percent this year and 0.1 percent in 2010.

Source/Full Story: Bloomberg.com

Google’s revenues in the first three months of this year fell below the preceding quarter for the first time in the company’s history as the global recession brought an end to its unprecedented 11-year growth spurt.

“No company is recession proof, Google is feeling the impact,” said Eric Schmidt, chief executive officer, although he added the latest figures showed that Google was still performing strongly at a difficult time.

Meanwhile, Google announced a redesign of YouTube that it said would add significantly to the video site’s appeal to professional studios. YouTube’s commercial growth has been held back by the lack of formal links with studios, since it only sells advertising against content covered by these types of arrangement. The new arrangements will see a new area added to its site displaying full-length TV shows and movies.

Google also revealed a second switch in the senior management of its sales operations, following the recent departure of Tim Armstrong to run rival AOL, although Mr Schmidt denied that the timing was influenced by recent performance or the effects of the recession.

Source/Full Story@:  FT.com

Source: Bloomberg.com

Stocks in Europe, Brazil and Canada fell on speculation government efforts to shore up the financial industry will fail to stem the deepening global recession.

Royal Bank of Scotland Group Plc slumped 67 percent after saying it expects to post a loss of as much as 28 billion pounds ($41 billion) for 2008 and the government got ready to raise its stake in the lender. BASF SE dropped 4.6 percent as the largest chemical producer said demand deteriorated “significantly.” Futures on the Standard & Poor’s 500 Index decreased 0.8 percent in New York. Stock markets in the U.S. are closed today for the Martin Luther King Jr. holiday.

Europe’s Dow Jones Stoxx 600 Index slid 1.7 percent to 189.72, extending the measure’s 11 percent tumble during the past nine days as companies from Deutsche Bank AG to Alcoa Inc. fueled concern the global recession will wipe out profit growth. The U.K. government said it will guarantee toxic bank assets and gave the Bank of England unprecedented power to buy securities.

“I don’t agree it is addressing the problem,” said Roger Nightingale, who helps oversee about $1.1 billion as London-based strategist at Pointon York Ltd. “I have grave doubts that the policies pursued by this government are going to help in the medium to longer term,” he told Bloomberg Television.

The euro-area economy will shrink 1.9 percent this year, the first time since the currency was introduced a decade ago, the European Commission said today. The European Central Bank last month predicted a 0.5 percent contraction for 2009.

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Technorati Tags: Europe, Brazil , Canada , Stocks

Source: Bloomberg.com

Crude oil fell below $40 in New York on concern production cuts by the Organization of Petroleum Exporting Countries will fail to counter a slump in demand.

Oil consumption will fall by 1 million barrels a day this year while the U.S., Europe and Japan face their first simultaneous recessions since the Second World War, Deutsche Bank AG predicted last week. U.S. stockpiles have climbed in 13 of the past 15 weeks, according to the Energy Department. OPEC members signaled last week that they would be cutting their sales to refiners in February.

“The health of the global economy is the dominant consideration in the short term, and that is weighing down on prices,” said Harry Tchilinguirian, senior market analyst at BNP Paribas SA in London. “OPEC cuts may prove to be supportive in future but it’ll take time for them to take effect.”

Crude oil for February delivery fell as much as $2, or 4.9 percent, to $38.83 a barrel in electronic trading on the New York Mercantile Exchange. It was at $38.93 a barrel at 10:08 a.m. in London.

Prices fell 12 percent last week as economic data showed the economic slump worsening. On Jan. 9, prices in New York dropped 2.1 percent to $40.83 a barrel after the U.S. said it lost 2.589 million jobs last year, the most since 1945.

OPEC, supplier of more than 40 percent of the world’s oil, agreed last month to cut production quotas by 9 percent to revive prices as the global recession erodes demand. Oil has plunged more than $100 in the last six months.

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Technorati Tags: Crude oil

Source: washingtonpost.com

U.S. manufacturing fell sharply in December and reports from abroad showed the same for plants in Europe and Asia, as businesses cut production and slashed product orders in response to the global recession.

The Institute for Supply Management’s index of industrial production slipped by 3.8 percentage points in December compared to the month before, to the lowest level since 1980.

The private group’s survey of purchasing executives provides a rough guide to whether manufacturing companies are expanding output and receiving increased numbers of orders, or seeing their business decline. The index for December stood at 32.4, compared to 36.2 in November. An index above 50 indicates that manufacturing activity is expanding, while a reading below 50 indicates a decline.

It is the fifth consecutive month that the group’s measure of industrial production has stalled, a result consistent with declining consumer demand and economic weakness throughout the United States.

The decline was both deep and broad, the ISM reported: none of the industries covered in the survey reported an expansion in their business, and the drop registered not just in the institute’s index of production, but also in its measures of employment, prices and backlogged orders. The group’s index of new orders and prices were at their lowest levels since the late 1940s.

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Technorati Tags: manufacturing

Source: MarketWatch

Responding to a global recession, Motorola Inc. said Wednesday morning that it will freeze its pension plan and employee salaries, suspend matching 401k contributions and cut the pay of top executives in an effort to reduce costs.

The company has been forced to slash expenses to offset steep losses in its ailing wireless-phone division, whose long-term survival remains in doubt. Motorola’s former flagship business has lost a large chunk of market share in the past few years amid strategic missteps and product snafus.

The Schaumberg, Ill.-based vendor said its latest steps would help it save an unspecified amount of cash on top of $800 million in cost-saving initiatives announced in late October.

“The sustained downturn in the global economy requires that we take these difficult but necessary steps,” said Greg Brown and Sanjay Jha, co-chief executive officers, in a statement.

Both executives have volunteered to accept a 25% salary reduction in 2009. Brown will also forfeit any cash bonus this year and Jha, who joined the company in August, will give up most of his cash bonus. What Jha does receive will be converted to restricted stock options.

Most other company employees, meanwhile, will receive no salary increase in 2009, Motorola said. The company will also suspended matching contributions for workers who put money into their 401(k) retirement plans, starting on Jan. 1.

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Technorati Tags: employment, Motorola