My finance view

European inflation accelerated more than economists forecast in January, keeping pressure on policy makers to monitor price gains that are exceeding the European Central Bank’s limit.

Inflation in the euro region quickened to 2.4 percent from 2.2 percent in December, the European Union’s statistics office in Luxembourg said today in a preliminary estimate without providing a breakdown. That’s the fastest since October 2008 and exceeded the 2.3 percent median estimate of 37 economists in a Bloomberg News survey.

Increasing commodity prices are adding pressure on companies to pass on higher costs. ECB policy makers will discuss the inflation outlook on Feb. 3, a day before European leaders gather in Brussels to advance their response to the sovereign-debt crisis. ECB President Jean-Claude Trichet has said he only expects euro-area inflation to “moderate again” toward the end of the year.

“Inflation looks set to remain under upward pressure in the next few months,” said Martin van Vliet, an economist at ING Group in Amsterdam. “Although we expect hawkish rhetoric from ECB policy makers, they are still unlikely to pull the trigger on interest rates until the fourth quarter.”

The euro extended its gain against the dollar after the inflation figure was published. It rose to as high as $1.3662 and was up 0.3 percent at $1.3651 as of 10:26 a.m. in London.

Oil, Wheat

Inflation in Germany, Europe’s largest economy, accelerated to 2 percent this month from 1.9 percent in December, while import prices jumped 12 percent last month from a year earlier, the most in more than 29 years. Spanish inflation also quickened this month and Italian producer-price inflation accelerated more than economists forecast in December.

Adding to the ECB’s inflation concerns, crude-oil prices have increased 8.4 percent over the past three months, while wheat costs have also surged. Harvard University Professor Kenneth Rogoff said in a Bloomberg Television interview with Erik Schatzker at the World Economic Forum in Davos, Switzerland, on Jan. 28 that “we’re likely to see continuing high commodity prices” as global growth stokes demand.

Faster inflation is already feeding into price expectations. A gauge measuring households’ assessment of price developments over the coming 12 months surged in January, the European Commission said on Jan. 27. An indicator of manufacturers’ selling-price expectations also increased.

‘Very Concerned’

Michael Cawley, chief operating officer at Ryanair Plc, Europe’s largest carrier, told Maryam Nemazee on Bloomberg Television’s “Countdown” from London today that he’s “very concerned” about rising fuel prices cash advance.

While policy makers have said the ECB’s key interest rate remains “appropriate” at a record low of 1 percent, Executive Board member Juergen Stark and council member Guy Quaden said on Jan. 26 that the bank will “act” if needed to counter so- called second-round effects, when workers demand higher wages in compensation for higher living costs.

German chemical workers are seeking up to 7 percent more pay and Volkswagen AG on Jan. 28 proposed to raise pay for 100,000 western German workers by 2.9 percent from June. That’s about half the increase sought by the IG Metall union.

The ECB, which aims to keep annual gains in consumer prices just below 2 percent, has forecast inflation to average around 1.8 percent this year and about 1.5 percent in 2012. Trichet said in an interview on Jan. 26 that the bank will “do what is necessary” to maintain price stability in the euro region.

Price Stability

“The current monetary policy of the ECB is still accommodative,” Stark said. “At the moment, our monetary analysis provides no indications for medium-term inflation pressure. Should our assessment change, however, we’ll act.”

Still, as governments toughen austerity measures to lower budget deficits and unemployment remains at the highest in over a decade, that may damp demand and force companies to keep price increases in check. German retail sales unexpectedly declined for a second month in December, data showed today.

French ECB council member Christian Noyer last week said he’s “confident” that the ECB will be able to keep inflation at bay, while Austria’s Ewald Nowotny said he doesn’t expect the central bank to raise rates in the first half of the year.

Euro-area core inflation, which excludes volatile costs such as energy prices, held at 1.1 percent in December, the statistics office said on Jan. 14. A breakdown of January consumer prices will be released next month.

Estonia this month became the 17th nation to join the euro region.

Source

Exporting Ontario power at prices lower than those paid by Ontario customers makes sense, says energy minister Brad Duguid.

So do the province

British Prime Minister David Cameron is urging other governments to follow his country’s efforts to cut costs and reduce debts, calling sovereign debt an obstacle to trade and growth.

Cameron, whose Conservative-led coalition government has imposed a series of tax hikes and budget caps to reduce the country’s debt, said that building up debts and keeping barriers to money and trade flows has made European countries their own worst enemies.

He is also calling for more deregulation across the continent to help bolster recovery.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

DAVOS, Switzerland (AP) _ In a nod to the post-crisis atmosphere, British Prime Minister David Cameron will tell the World Economic Forum that his country’s austerity measures are starting to bear fruit while U.S. Treasury Secretary Timothy Geithner will lay out his country’s strategy to help the economy.

Friday is setting out to be a decidedly political one for the Forum, with German Chancellor Angela Merkel _ who has been at the heart of the past year’s struggle to save the euro _ giving her own speech, too.

But Cameron, whose Conservative-led coalition government has imposed a series of tough measures _ from tax hikes to budget caps _ to reduce the country’s debt, will have center stage first.

“Already we’re making progress,” he said, in extracts released by his office ahead of the speech Friday to the annual gathering in the Swiss ski resort of Davos. “Not long ago we were heading toward the danger zone where markets start to question your credibility.”

Cameron said Britain’s triple ‘A’ credit rating had been saved and market interest rates had fallen.

“All this has happened not in spite of our plan to cut the deficit, but because of it. That’s why we must stick to the course we have set out.”

Still, unemployment has also risen and thousands will see some form of state benefit cut as the government tightens the belt on spending.

But that is a trade off many other European countries are increasingly resigned to as they try to juggle crippling levels of public debt in the wake of the global financial crisis.

The Davos meeting’s mood has improved since last year, but the 2,500 government and business leaders attending remained wary this week of the possibility that the global recession might return.

For Europe, Greek Prime Minister George Papandreou and Merkel will mark opposing poles on the spectrum of economic recovery when they take the stage in Davos Friday. Bailed-out Greece is still mired in recession whereas Germany has rebounded to expand at the fastest pace since its reunification two decades ago.

The U.S. lies somewhere in between. Geithner will spend an hour talking about priorities for the U.S. economy, which despite a tentative recovery is still trying to reduce the unemployment rate in the wake of the financial crisis.

The woes of wealthy countries will contrast with the more upbeat tones in speeches by leaders of developing economies such as Indonesian President Susilo Bambang Yudhoyono and Mexico’s Felipe Calderon.

Not far from the conference venue social activists are planning to use the occasion of the Forum to name and shame the corporation with the worst social or ecological record in 2011. The same event will see the launch of OpenLeaks, billed as a rival to the secrecy-spilling website WikiLeaks.

Source

Source

Since 1995, the St. Louis Equal Housing Opportunity Council has focused its efforts on investigating fair housing compliance, such as fielding discrimination complaints involving landlord and tenant disputes.

But two years ago, the council suddenly found itself facing a new problem: the inability of many African-Americans to tap local financial institutions.

As the recession deepened, access to credit evaporated for many people, but low-income communities were hit particularly hard. Subprime lenders, which had heavily targeted poor neighborhoods, and informal safety nets, such as short-term loans from relatives, disappeared.

“A lot of subprime and predatory lenders had entered markets where there wasn’t a lot of competition from banks, and there was a vacuum” when those lenders left, said EHOC’s assistant director, Mira Tanna, describing the inability of people who contacted the group to get mortgages and other loans from banks.

So the nonprofit council began prodding local banks to open more branches and provide increased financial services in low-income neighborhoods, a move it believes will help “unbanked” households - those without a checking or savings account.

With the help of federal regulators, EHOC has had some success opening the dialogue with bankers about expanding services. It has also been successful in getting banks to commit to expand loan programs to minorities and in low-income areas.

“They’ve had to push me along a little bit, but I’ve learned a lot from them, and I hope they’ve learned a little about the banking industry from me,” said Rick Bagy, president of First National Bank of St. Louis.

SCRUTINIZING LOANS

The lack of access to banking services in low-income neighborhoods has been a problem plaguing St. Louis and the rest of the country for decades, said Edward Lawrence, professor of finance at the University of Missouri-St. Louis.

“It’s hard to have economic development without access to financial services,” he said. “In some of these areas, there’s a lot of money not being put anywhere. They keep it at home, and that’s a waste.”

The EHOC began to tackle this problem in 2009, when it began looking closely at local banks’ loans to minorities and in low-income areas. The EHOC also brought together more than a dozen other nonprofits, creating the St. Louis Equal Housing and Community Reinvestment Alliance, to begin analyzing banks’ lending histories.

In their analysis, the alliance looked at banks’ lending history through the Home Mortgage Disclosure Act, which requires lending institutions to report public loan data. The EHOC’s four-member staff and the alliance members focused on the lending practices of banks up for review by federal regulators - either the Federal Reserve or the Federal Deposit Insurance Corp., depending on the type of bank - for compliance with the Community Reinvestment Act. The CRA was passed by Congress in 1977 to prohibit red-lining, a practice in which banks once drew lines on a map where they would open branches and offer services, often leaving out low-income areas. Banks with assets of at least $275 million are reviewed for CRA compliance every two years.

The analysis found that in many cases, the number of mortgages and other loans to minorities or in low-income areas was nonexistent or woefully low, prompting the group to file more than a dozen public comment letters with the Fed or the FDIC about banks’ lending practices.

“If we think there are deficiencies, we as a coalition will write a public comment letter to their regulators,” Tanna said.

The alliance’s efforts drew increased attention from regulators and banks after a 2009 FDIC study named St. Louis as the metro area with the highest percentage of unbanked black households in the country, at 31 percent. In contrast, only 1.1 percent of white households locally were unbanked.

Nationwide, 21 percent of black households were unbanked, while 3 percent of white households didn’t have a checking or savings account.

“The (FDIC’s) unbanked study took a lot of us by surprise,” Bagy said. “Frankly, I’m ashamed St. Louis has such a high level of unbanked people.”

OPENING TALKS

Since the study was released, the EHOC’s staff has held dozens of meetings with bank executives to persuade them to increase their investments in low-income and minority communities.

“Banks are not really going to do a lot unless you say something,” said Will Jordan, president of the EHOC. “What our hope is that once the banking community sees not just that we’re going to shine a light on them, but that they’re actually turning a profit.”

Regulators take the letters seriously. Todd Hendrickson, assistant regional director of compliance for the FDIC’s Kansas City region, which includes St. Louis, said as examiners are doing their pre-examination work, they use the information from public comment letters as a springboard for discussion with the bank about compliance with CRA.

And the U.S. Department of Housing and Urban Development relies on groups like EHOC, which HUD provides funding for, in assessing fair housing complaints, said Myrtle Wilson, regional fair housing director for HUD.

The alliance’s work is beginning to pay dividends. Two banks, Midwest BankCentre and First National Bank of St. Louis, each announced in recent weeks that they’ll open new branches in low-income areas.

Midwest BankCentre will open a branch this year in Pagedale in north St. Louis County, and First National Bank of St. Louis will open a branch in a yet-to-be-determined low-income area by mid-2012.

Both banks’ new branch announcements came after EHOC filed complaints with federal agencies in 2009.

Bagy met with Jordan and EHOC’s staff over the past year to try to figure out the root reasons why some people don’t use banks. First National, which has 14 branches, plans to offer $2 million in community development loans and investments in minority areas and $500,000 in discounted mortgage loans. Bagy said he has talked to several other bankers in St. Louis about the possibility of co-locating branches in a single location in a low-income area.

One other complaint EHOC filed with HUD, against Clayton-based Enterprise Bank, is pending. EHOC and Enterprise declined to comment as talks are ongoing.

Removing barriers

The Federal Reserve Bank of St. Louis also is focusing its attention on the unbanked and underbanked in the region. Underbanked individuals are those who have a bank account but also use alternative banking services, such as payday lenders with high interest rates.

The Fed sponsored a study by Washington University in the fall to determine why some people don’t use banks and barriers to accessing bank services. The study’s results were released Friday.

Allen North, the St. Louis Fed’s vice president of Consumer Affairs, said addressing the unbanked issue involves much more than just putting branches in certain places.

The Washington U. study surveyed residents of low-income areas who don’t use banks and found that distrust in traditional banks’ fees can be a deterrent.

The study found that with payday lenders, many thought that they knew what the fees were going to be but were less certain about bank fees, North said.

Also, some banks contend the branch model is an outdated one. As more people turn to online banking, the addition of bricks and mortar locations is less of a focus for some banks.

Meanwhile, the FDIC won’t issue an update on unbanked households until 2012.

Rance Thomas, president of the North County Churches Uniting for Racial Harmony and Justice, one of the alliance’s member organizations, said it’s too early to see a marked change in unbanked households from the group’s efforts. “We hope to see some improvement in the future,” he said. “It’s a slow process.”

Source

Hopes that German growth and new European Union measures will help ease the debt crisis boosted European stocks on Friday, though Asia remained shaken by fears that China will have to take action to cool off its economy.

Another rise in Germany business confidence, as measured by the Ifo Institute’s monthly survey, suggested the country will continue to power Europe’s economy as it enjoys strong exports and sees domestic spending picking up.

Expectations that EU officials are preparing a new, more comprehensive, approach to the debt crisis also helped European stocks this week. Governments are debating giving their euro750 billion ($1 trillion) bailout fund broader powers, such as the ability to buy bonds on the market, which would help ease the pressure on fiscally weak countries like Portugal and Spain.

The improvement in market sentiment has helped the euro make sharp gains, particularly against the dollar _ it traded at $1.3530 from $1.3472 late Thursday in New York.

“Are currency markets looking beyond last year’s story of European peripheral sovereign contagion? The answer appears a tentative ‘yes,’” analysts at Credit Agricole CIB wrote in a note to investors.

They expect the euro to hit $1.37 by the end of March but expect plenty of volatility and warn that EU plans to bolster their bailout fund may take longer than expected, hurting market confidence once again.

Meanwhile, stocks continued to edge higher. Britain’s FTSE 100 was up 0.6 percent to 5,903.39. Germany’s DAX rose 0.4 percent to 7,049.98 and the CAC-40 in Paris was up 0.8 percent to 3,996.18.

Wall Street was set for a more muted open ahead of more earnings reports. Dow futures were off 0.1 percent at 11,764 and broader S&P futures gained less than 0.1 percent to 1,276.

Bank of America Corp. and General Electric, among others, were scheduled to report earnings figures.

In Asia, stocks were still shaken by the previous day’s news that China’s economy grew by 9.8 percent in the fourth quarter and that inflation remained stubbornly high. The numbers triggered worries that the world’s second-largest economy _ and the main driver of global economic growth in recent years _ would force itself to slow down to control prices by raising bank interest rates or reserve requirements.

Chinese inflation has become “a key issue for global markets,” according to a report by Bank of America Merrill Lynch Global Research.

“Manufactured export prices are rising again, as domestic costs _ especially unskilled wages _ are passed down the supply chain,” the report said. “China’s competitiveness is adjusting through cost and wage inflation, rather than currency appreciation.”

Sean Darby, chief Asia strategist at Nomura International in Hong Kong, said wages were also being driven up by shortages of skilled labor _ increasingly in demand as China and other developing nations cater to domestic demand as well as export markets with more sophisticated products.

Markets would be “reasonably cool” early in 2011, Darby said. “People’s attention is going to be on the front-loading of rate hikes” by central banks in China and elsewhere.

Japan’s Nikkei 225 stock average lost 1.6 percent to close at 10,274.52. Trading houses, metals producers and miners declined. Major trading firm Mitsubishi Corp. tumbled 4.5 percent and rival Mitsui & Co. lost 3.2 percent.

Australia’s S&P/ASX 200 dropped 0.6 percent, while Hong Kong’s Hang Seng fell 0.5 percent, South Korea’s Kospi shed 1.7 percent and Singapore’s index declined by 0.6 percent.

Chinese shares _ which took a beating Thursday _ bucked the trend, with the benchmark Shanghai Composite up 1.4 percent to 2,715.29. The Shenzhen Composite Index for China’s smaller, second market rose 0.7 percent to 1,178.16. New Zealand shares also rose.

Notable gainers included Japan’s NEC Corp., which jumped 2.1 percent in Tokyo. The buying was triggered by local media reports that the company is nearing a deal with China’s Lenovo Group Ltd. to form a PC joint venture. NEC said in a statement no decisions had been made. It also declined to comment on whether the two companies are in talks.

In currencies, the dollar dropped to 82.89 yen from 82.98 yen late Thursday.

Benchmark crude for March delivery was up 10 cents to $89.69 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $2.22 to settle at $89.59 on Thursday.

Source

Canada risks losing the scientists and engineers needed to sustain its nuclear industry if the fate of Atomic Energy of Canada Ltd. remains uncertain, says the chief executive of Bruce Power.

Duncan Hawthorne told the Empire Club Thursday that the federal and Ontario governments should make it clear they

Bank of Canada Governor Mark Carney is likely to stress today a strong currency is curbing exports, suggesting domestic and U.S. economic recoveries won’t prompt a quick interest-rate increase, possibly lowering bond yields.

The central bank kept its key interest rate at 1 percent yesterday and reiterated that further boosts would be “carefully considered.” Policy makers also raised their growth forecast, adding the economy won’t return to full output until the end of 2012 because the currency — which hit a 31-month high against the U.S. dollar — is “restraining” sales abroad.

Carney led the Group of Seven nations by raising interest rates three times last year, starting in June. Canada’s currency has appreciated 6.4 percent against the U.S. dollar since then, pressuring exporters.

“While the currency is doing a lot of tightening for the bank, it is very difficult for the bank to add tightening on top of that,” Edward Devlin, a money manager at Pacific Investment Management Co. in Newport Beach, California, said in an interview yesterday with Business News Network. “We see a lot of demand for the Canadian dollar from global institutions, and we think that will continue.”

The yield on the March bankers’ acceptances contract, a barometer of short-term rate expectations, fell to 1.38 percent yesterday from 1.425 percent Jan. 17. Bax contracts, a barometer of short-term interest rate expectations, have settled an average of 18 basis points above the central bank’s rate since 1992, Bloomberg data show.

Bond Sales

Elsewhere in credit markets, Bank of Montreal issued U.S. dollar-denominated covered bonds, RioCan Real Estate Investment Trust sold C$225 million ($227 million) of bonds and Financement Quebec offered C$600 million of its bonds due in December 2017.

Bank of Montreal sold $1.5 billion of covered bonds, according to data compiled by Bloomberg. The five-year securities pay 69.7 basis points more than similar-maturity U.S. Treasuries, Bloomberg data show. The bank issued $2 billion of covered bonds on June 2. The 2.85 percent notes, due in 2015, were priced to yield 72.3 basis points more than Treasuries.

The extra yield investors demand to own the debt of Canadian investment-grade corporations rather than the federal government remained at 133 basis points yesterday, or 1.33 percentage points, according to a Bank of America Merrill Lynch index. Yields rose to 4.01 percent, from 4 percent on Jan 17.

Canadian corporate bonds have lost 0.5 percent since the start of the year, compared with a loss of 0.9 percent for Canadian government bonds, according to Bank of America Merrill Lynch data.

Provincial Spreads

In the provincial bond market, relative yields narrowed to 54 basis points yesterday from 55 on Jan. 17. Yields were unchanged at 3.42 percent. The securities have lost 1.3 percent this month.

Standard & Poor’s raised its debt rating outlook on Saskatchewan to positive from stable, saying it expects the province’s operating results to improve as the economy expands while debt remains “low and stable payday loans no teletrack.” S&P also affirmed its ‘AA+’ long-term issuer rating on the province.

Financement Quebec, which seeks loans on behalf of schools, universities and hospitals in Canada’s second-most populous province, sold C$600 million of bonds due in December 2017. The 3.5 percent notes were priced to yield 71 basis points over comparable government bonds.

RioCan Real Estate Investment Trust sold C$225 million of unsecured notes. The 4.5 percent bonds, which mature in January 2016, were priced to yield 192.5 basis points over comparable government securities.

First Capital

Citing investor demand, First Capital Realty Inc. boosted the size of its senior unsecured debenture sale by 20 percent to C$150 million, citing investor demand. The 5.48 percent bonds, which mature in July 2019, were priced to yield 231.5 basis points over comparable government securities.

Foreign purchases of Canadian securities were headed for a second straight annual record late last year, led by bonds. The January-to-November total net purchase of C$106.7 billion exceeded the C$99.5 billion recorded in the same period of 2009, Statistics Canada said Jan. 17. Foreign purchases were a record C$110.9 billion in 2009.

Bill Gross, manager of the world’s largest bond fund at Pimco, said in a Dec. 22 interview investors should avoid U.S. dollar-denominated government debt weighed down by budget deficits and invest in bonds in Canada, Mexico and Brazil. Higher Canadian interest rates could also boost the dollar by giving another reason to buy the country’s bonds.

Growth Outlook

The Bank of Canada said yesterday that gross domestic product will grow 2.4 percent this year and 2.8 percent in 2012, compared with an October forecast for gains of 2.3 percent and 2.6 percent, respectively. The central bank said U.S. growth is being boosted by the extension of tax cuts and the Federal Reserve’s plan to buy $600 billion of Treasury securities through June.

“Net exports are projected to contribute more to growth going forward, supported by stronger U.S. activity and global demand for commodities,” the bank said in its statement. “However, the cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance are restraining this recovery in net exports.”

The Canadian currency weakened 0.4 percent yesterday to 99.13 cents per U.S. dollar after earlier gaining to 98.38 cents, the strongest level since May 2008. It was the best performer over the past three months in a measure of 10 developed-nation currencies, appreciating 3.27 percent.

Canada’s trade surplus with the U.S., its largest trade partner, was the lowest in September since December 1993 at C$1.55 billion. Canada sends about three-quarters of its exports to the U.S., including factory products such as automobiles and machinery.

“That’s a big issue for the Bank of Canada, they won’t want the dollar to run away,” said Krishen Rangasamy, an economist at CIBC World Markets in Toronto, who predicts a May rate increase.

Source

Billionaire Li Ka-Shing’s Hong Kong conglomerate said Tuesday it is planning to spin off its ports in Hong Kong and southern China and sell shares in the new, separate unit on the Singapore stock exchange.

Hutchison Whampoa Ltd. said it has applied to hold an initial public offering for shares in Hutchison Port Holdings Trust, which will operate and develop container port businesses in southern China’s Guangdong province, Hong Kong and Macau.

The unit’s main assets will be deep-water ports in Hong Kong and nearby Yantian, Guangdong. It did not say how much it would raise from the share sale, except that it would be “significant.”

The new share listing will allow investors to take advantage of economic and trade growth in the region, where seaborne cargo is booming thanks to demand for exports of the electronics, toys, clothing and other goods churned out by China’s factories.

“There is significant potential for economic and trade growth in the Southern China region, which is already the largest trading hub in the world, and the creation of this new public vehicle will enable the group to take full advantage of such opportunities,” Managing Director Canning Fok said in a statement.

Li Ka-Shing’s Hutchison is one of the world’s biggest port operators, with stakes in 51 ports in 25 countries. It will keep its ports in other countries and proposes a non-competition agreement for the two businesses.

The company also has businesses in property, energy and infrastructure, finance and telecommunications.

Shares in the new listing will be in the form of a business trust. The shares will be listed in Singapore because there are no regulations governing such trusts in Hong Kong yet. Hutchison Whampoa will keep a 25 percent stake in the business.

Credit ratings agency Fitch said the sale will generate a significant cash windfall for Hutchison, allowing the conglomerate to reduce debt.

Hutchison shares were down 1.4 percent to $94.40 Hong Kong dollars by late afternoon.

Source