(BN) Jobless Rate in U.S. Drops to 9% Amid ‘Frustratingly Slow’ Payroll Gains

Bloomberg News, sent from my iPad.

U.S. Economy: Job Gains Signal 'Frustratingly Slow' Growth

Nov. 4 (Bloomberg) -- The U.S. jobless rate unexpectedly fell in October while employers added fewer workers than forecast, illustrating the "frustratingly slow" progress cited by Federal Reserve Chairman Ben S. Bernanke this week.

The unemployment rate fell to a six-month low of 9 percent from 9.1 percent, even as the labor force grew. The 80,000 increase in payrolls followed gains in the prior two months that were revised up by 102,000, Labor Department figures showed today in Washington.

"We're making progress at a very slow pace," said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, whose forecast for a gain of 85,000 jobs was among those that came closest to the result. "It indicates continued consumer spending, getting a little better over time."

The report shows the world's largest economy is maintaining its expansion in the face of risks such as the European debt crisis and political wrangling on reducing the U.S. budget deficit. Fed policy makers are forecasting "moderate" growth that won't push unemployment below 8 percent until 2013 at the earliest, one reason why they are considering further steps to boost the economy.

Stocks fell as the decline in the jobless rate was overshadowed by a disagreement on boosting the International Monetary Fund's resources to fight Europe's debt crisis. The Standard & Poor's 500 Index dropped 0.6 percent to 1,253.23 at the close of trading in New York. The yield on the benchmark 10- year Treasury note declined to 2.03 percent from 2.07 percent late yesterday.

Economists' Forecasts

The unemployment rate was forecast to hold at 9.1 percent, according to the median of 87 forecasts in a Bloomberg News survey of economists. Payrolls were forecast to rise by 95,000.

Sustained payroll increases of around 150,000 a month are needed to bring unemployment down about half a percentage point over a year, according to Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.

Even so, "this labor market recovery is for real despite the economy having everything but the kitchen sink thrown its way," Rupkey said.

Faster hiring would spur bigger gains in incomes and bolster confidence, helping cushion against declines in home prices and allowing households to sustain their spending. Household purchases grew at a 2.4 percent annual rate in the third quarter and the economy expanded at a 2.5 percent pace, the Commerce Department reported last week.

Jobs Plan

President Barack Obama used the employment report to call on Congress to approve his $447 billion jobs plan, which includes tax cuts and spending on infrastructure.

The U.S. economy is "underperforming," Obama said at a news conference in Cannes, France, where he attended a meeting of leaders from the Group of 20 nations. The Labor Department's figures "were positive but indicate once again that the economy's growing way too slow."

Retailers like Macy's Inc. are adding staff, while companies such as Whirlpool Corp. plan to cut workers, evidence of an uneven economic recovery.

Macy's is among those betting last quarter's gain in spending will be sustained during the November-December holiday shopping season. The second-biggest U.S. department-store chain is stepping up hiring of mostly part-time employees by 4 percent for the period.

Whirlpool Plans Cuts

Whirlpool, the world's largest maker of household appliances, said it planned to cut more than 5,000 jobs and trimmed its earnings forecast. The reductions will be primarily within North America and Europe and include the closure of the refrigeration manufacturing site in Fort Smith, Arkansas, by mid-2012.

"We are taking necessary actions to address a much more challenging global economic environment," Chief Executive Officer Jeff Fettig said in a statement on Oct. 28.

The payroll revisions for September and August put those numbers closer to the bigger gains in hiring seen in the separate survey of households. The latter showed a 277,000 increase in employment for October.

"The good news is the report, in relative terms, was better than expected, mainly because of the revisions to August and September," Mohamed El-Erian, chief executive officer at Pacific Investment Management Co. in Newport Beach, California, said in an interview on Bloomberg Television. "The bad news is that we're still in this unemployment crisis. It doesn't do enough to remove the risk of stall speed, which is growth but not fast enough growth."

Private Hiring

Private hiring, which excludes government agencies, rose by 104,000 after a revised gain of 191,000. It was projected to advance by 125,000, the survey showed.

Factory payrolls rose by 5,000, the first increase in three months, and construction companies cut 20,000 jobs.

Employment at service-providers increased 90,000 after a 129,000 gain. Retailers added 17,800 employees, the most in three months.

Government payrolls decreased by 24,000. State and local governments cut employment by 22,000, while the federal government trimmed 2,000 workers.

Average hourly earnings rose 0.2 percent to $23.19, while the workweek held at 34.3 hours, today's report showed.

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 -- dropped to 16.2 percent from 16.5 percent.

Long-Term Jobless

The report also showed a decrease in long-term unemployed Americans. The number of people jobless for 27 weeks or more fell to 42.4 percent as a share of all those without work from 44.6 percent. It was last lower in November 2010.

The number of temporary workers increased 15,000 after rising 21,100 the prior month. Payrolls at temporary-help agencies often slow as companies seeing a steady increase in demand take on permanent staff.

Uncertainty over the amount and speed of reductions in government spending is weighing on businesses as the Nov. 23 deadline looms for the congressional supercommittee charged with finding at least $1.2 trillion in deficit savings. In the fiscal year ended Sept. 30, the government reported the second-highest annual deficit on record, $1.3 trillion.

'Downside Risks'

Fed policy makers, who refrained from taking additional steps to ease monetary policy at their meeting this week, said in a statement that there are "significant downside risks to the economic outlook."

The central bank's latest forecasts showed less optimism about the economy and employment. Policy makers project growth next year of 2.5 percent to 2.9 percent, with unemployment in the 8.5 percent to 8.7 percent range. Joblessness in 2013 is forecast at 7.8 percent to 8.2 percent.

Additional stimulus "remains on the table," Bernanke said at a Nov. 2 press conference in Washington, declining to specify conditions that would prompt a move. "While we still expect that economic activity and labor market conditions will improve gradually over time, the pace of progress is likely to be frustratingly slow."

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Obama’s G-20 Appeals Seek to Safeguard Growth Still Unmet at Home, Abroad

Bloomberg News, sent from my iPad.

Obama's Appeals to Safeguard Growth Unmet at Home and Abroad

Nov. 5 (Bloomberg) -- President Barack Obama ended a two- day summit of world economic leaders with his appeals for more ambitious action to safeguard economic growth unmet by congressional leaders at home or his counterparts abroad.

World leaders at meeting of the Group of 20 nations in Cannes, France, balked at committing new funds to help bail out the euro-area, demanding the continent's own governments first do more to fix the two-year-old debt crisis. In the U.S., Obama's plan to revive hiring remained stalled in Congress.

Obama's stay in Cannes was capped by a Labor Department report yesterday that job growth fell to 80,000 in October even as the unemployment rate unexpectedly dropped to 9 percent from 9.1 percent in September.

At a closing news conference dominated by domestic concerns, Obama called the drop in the jobless rate "positive," even as he conceded that the U.S. economy's progress is "way too slow." He said hopes the unemployment report prompts Congress to act on his proposals, including tax cuts and spending.

"There's no excuse for inaction," he said. "That's true globally and it's certainly true back home right now."

The debt crisis in Europe and the struggle to come up with a rescue plan for Greece overshadowed efforts by the Group of 20 nations to promote global growth. Stocks, the euro and Italian bonds slid as a disagreement emerged at the meeting on boosting the International Monetary Fund's resources.

Greece and Italy

The reluctance of the leaders of the world's biggest economies to immediately channel funds to the euro area reflects frustration with Europe's failure to end a crisis that sparked again this week, with Greece's government lurching toward collapse and Italy facing intensifying pressure to restore fiscal order.

European leaders face 'more hard work ahead and more difficult choices to make," Obama said.

He also said he got "a crash course in European politics" while in Cannes.

In individual and group meetings Obama sought to keep the focus on the steps needed to stem the debt crisis and beyond the political pressures in individual countries, said an administration official who wasn't authorized to discuss the matter publicly.

U.S. actions in the aftermath of collapse of Lehman Brothers Holdings Inc. in September 2008 repeatedly came up as examples of the tools that can be used, the official said.

Market Signals

"What we've seen is all the elements for dealing with the crisis put in place," Obama said. Financial markets are looking for a "strong signal" from European governments that they are standing firmly behind the euro.

The Standard & Poor's 500 Index lost 0.6 percent to close at 1,253.23 at 4 p.m. in New York, paring a drop of as much as 1.8 percent. The Stoxx Europe 600 Index retreated 1 percent as the euro weakened 0.3 percent to $1.3777. Ten-year Italian bond yields rose to a euro-era high, while rates on 10-year German debt capped the biggest weekly drop on record.

"The European political leadership, understands how much of a stake they have in making sure that this crisis is resolved, that the euro zone remains intact," Obama said.

While in Cannes, Obama met separately with German Chancellor Angela Merkel and French President Nicolas Sarkozy, leaders of Europe's two biggest economies and the drivers of attempts to win agreement on a rescue plan.

Economy and Currency

The G-20 also moved toward goals for "rebalancing" the global economy, including on China's valuation of its currency, Obama said. In its final communique, the G-20 beefed up language on exchange rates by vowing to "move more rapidly toward market-determined." In an appendix they highlighted China's "determination" to increase the yuan's flexibility.

China is showing increased willingness to let the yuan appreciate, Obama said. "This is something we've been calling for for some time, and it will be a critical step in boosting growth," he said.

The yuan reached a 17-year high yesterday rising 0.19 percent to close at 6.3392 per dollar in Shanghai, according to the China Foreign Exchange Trade System.

Even with Europe's debt crisis weighing on global growth, Obama said that the U.S. as the world's largest economy will play a key role in driving expansion. He used a question on U.S. economic leadership to promote his jobs plan and defend his record.

Economic Growth

Obama, who faces re-election next year, offered "a simple way of thinking about" his track record.

"When I came into office, the U.S. economy had contracted by 9 percent, the largest contraction since the Great Depression," he said. "A little over a year later, the economy was growing by 4 percent, and it's been growing ever since."

The economy has grown at an average pace of 1.4 percent during the first nine months of this year.

"We're going to keep on pushing," he said of his campaign to press Congress to act on his proposals and his vow to use executive authority wherever possible to promote hiring and growth.

"But if we're going to do something big to jumpstart the economy at a time when it's stabilized but unemployment is way too high, Congress is going to need to act," he said.

Republican opposition to tax increases on the nation's wealthiest individuals and spending more on infrastructure and aid to states has blocked passage of the $447 billion jobs plan Obama unveiled in September.

Infrastructure Bank

The administration and congressional Democrats since have tried pushing through individual components of the proposal. The Senate this week blocked a measure to provide $60 billion for work on the nation's transportation system and create an "infrastructure bank" to leverage capital for more such projects.

Before leaving France, Obama joined with Sarkozy to honor members of both nations' armed services who took part in the campaign that helped drive Muammar Qaddafi from power in Libya. He also participated in a joint interview with Sarkozy for French television. Sarkozy, like Obama, faces re-election next year.

"We need the United States of America to achieve growth," Sarkozy said in the interview, "and they need a stable Europe."

To contact the reporters on this story: Mike Dorning in Cannes, France, at mdorning@bloomberg.net Roger Runningen in Cannes, France, at rrunningen@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Stocks, Euro, Italian Bonds Retreat Amid G-20’s Disagreement Over IMF Role

Bloomberg News, sent from my iPad.

Stocks, Euro, Italian Bonds Retreat Amid G-20's IMF Disagreement

Nov. 4 (Bloomberg) -- Stocks, the euro and Italian bonds fell as a disagreement on boosting the International Monetary Fund's resources to fight Europe's debt crisis overshadowed a drop in the U.S. jobless rate. Treasuries erased early declines.

The Standard & Poor's 500 Index lost 0.6 percent to close at 1,253.23 at 4 p.m. in New York, paring a drop of as much as 1.8 percent. The Stoxx Europe 600 Index retreated 1 percent as the euro weakened 0.3 percent to $1.3777. Ten-year Italian bond yields rose to a euro-era high, while rates on 10-year German debt capped the biggest weekly drop on record. Oil completed its longest streak of weekly gains since 2009. Treasury 10-year yields lost four basis points to 2.04 percent.

Equities headed lower as G-20 leaders failed to agree on increasing the IMF's resources, fueling concern European leaders won't be able to tap more foreign aid to tame their debt crisis. The U.S. jobless rate unexpectedly fell to a six-month low of 9 percent, the Labor Department said, as slower-than-forecast jobs growth in October was overshadowed by larger gains in the prior two months.

"We're still held hostage to Europe," Jim Dunigan, who helps oversee $103 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. "It's a fragile environment and the effort to make progress there is two steps forward, one step back."

Weekly Loss

The S&P 500 lost 2.5 percent over five days, its first weekly drop since September, as Greece's delay in accepting a European bailout fueled concern the nation would be forced to default and debt crisis will worsen. Financial shares fell 1.4 percent as a group to lead losses among all 10 of the main industries in the index today.

Bank of America Corp. sank 6.1 percent as the company's plan to bolster its balance sheet renewed concern that shareholders may see their stakes diluted. Berkshire Hathaway Inc., expected to report earnings after markets close today, also paced losses with a 2 percent drop.

Jefferies Group Inc. closed up 0.5 percent, rebounding from a slide of as much as 7.4 percent, as the investment said it will increase disclosure of European holdings to counter investor concern.

Groupon Inc. shares surged 31 percent in the first day of trading after the biggest online-coupon provider raised $700 million in its initial public offering, 30 percent more than it sought. LinkedIn Corp. slumped 5.9 percent after the biggest professional-networking website reported a third-quarter loss.

Jobs Data

The 80,000 increase in payrolls last month trailed the median forecast of economists for a gain of 95,000. Growth in the prior two months was revised up by 102,000 jobs, Labor Department figures showed.

The S&P 500 has rallied 14 percent since Oct. 3 after concern that Europe's debt crisis would trigger another recession dragged it down 19 percent from a three-year high on April 29. The rebound was spurred by better-than-estimated earnings and economic data and growing confidence that leaders would help Greece avoid default. The S&P GSCI Index of commodities had climbed 11 percent from its 2011 low on Oct. 4, while the 10-year Treasury yield increased from a record low of 1.67 percent set on Sept. 23.

Per-share earnings beat estimates at about three-quarters of the companies in the S&P 500 that released results since Oct. 11, data compiled by Bloomberg show. Net income grew 15 percent for the group on a 11 percent increase in sales.

'Glacial Improvement'

The Citigroup Economic Surprise Index for the U.S., which measures the rate at which data is beating or trailing economists' forecasts, rose to a six-month high of 18.7 today. The index has rebounded from minus 117.2 on June 3, when it showed economic data was trailing estimates by the most since January 2009.

"We see glacial improvement in the economic data," Stephen Wood, who helps oversee about $163 billion as the New York-based chief market strategist for Russell Investments, said in a telephone interview. "There's improvement, but the pace is very slow."

Nickel and coffee climbed at least 1.5 percent to help lead the S&P GSCI Index up 0.4 percent today. Crude oil for December delivery rose 19 cents, or 0.2 percent, to $94.26 a barrel on the New York Mercantile Exchange, the highest settlement level since Aug. 1. Prices are up 1 percent since Oct. 28. Oil has risen for five consecutive weeks.

The Stoxx 600 declined 3.7 percent over the past five days, snapping a five-week winning streak. Banks were the biggest drag on the index today, with BNP Paribas losing 3.3 percent and UniCredit Spa down 6.6 percent. The two banks as well as Deutsche Bank AG, Goldman Sachs Group Inc., Wells Fargo & Co. and Credit Suisse Group AG are among 29 lenders that must hold additional capital buffers ranging from 1 to 2.5 percentage points under plans approved today by the G-20.

Alcatel-Lucent SA sank 17 percent as France's largest telecommunications equipment supplier cut its earnings forecast.

Italy Bonds

Italy's 10-year bond yield climbed as much as 21 basis points to 6.40 percent. Italy invited the IMF to monitor implementation of its austerity measures in order to bolster their credibility, European Commission President Jose Barroso said. Prime Minister Silvio Berlusconi said he still has a parliamentary majority as he dismissed reports that more members of his party have defected.

Bunds Rally

German 10-year yields slipped nine basis points to 1.82 percent, capping a 35 basis-point weekly drop, the most since Bloomberg began collecting the data in 1989. Spain's yield increased eight basis points to 5.58 percent. Two-year Greek yields decreased 433 basis points to 97.97 percent after surging to as high as 105 percent earlier.

The cost of insuring against default on European sovereign debt rose, reversing an earlier decline, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 7.6 basis points to a mid- price of 325.3.

World leaders meeting at the G-20 summit in Cannes, France, balked at spending more money to help bail out the euro-area, demanding the region's own governments first do more to fix the two-year-old debt crisis. Governments are awaiting further details of Europe's own week-old rescue package before they commit cash, German Chancellor Angela Merkel said on the final day of a Group of 20 summit in Cannes, France.

Confidence Vote

Greek Prime Minister George Papandreou triggered a two-day rout in stocks at the beginning of this week after saying he wanted voters to decide if the nation should accept another bailout brokered by European leaders last week. Ruling party lawmakers today urged Papandreou to step down and allow the formation of a new government that can approve a European Union aid package needed to avert default. A confidence vote was scheduled for tonight in Athens.

The MSCI Emerging Markets Index rose 1.6 percent, the most in a week, after the Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong jumped 3.8 percent and South Korea's Kospi Index rose 3.1 percent. Funds investing in developing-nation stocks attracted $3.5 billion in the week ended Nov. 2, the most since April, according to a Citigroup Inc. report, citing figures compiled by EPFR Global.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Papandreou Struggles to Hold on To Power Before Vote (1)

Bloomberg News, sent from my iPad.

Papandreou Struggles to Hold on To Power Before Vote

Nov. 4 (Bloomberg) -- Prime Minister George Papandreou struggled to hold on to power after Greece's largest opposition party rebuffed his overtures to form a national government, raising the prospect of elections that could delay aid needed to prevent default.

Opposition leader Antonis Samaras rejected sharing power with Papandreou and called on the premier to quit. Papandreou, 59, scrapped a referendum on an accord with the European Union to avert a split in his party before a confidence vote scheduled for midnight tonight.

"I never excluded any topic from the discussion, not even my own position," Papandreou told lawmakers in Parliament. "I am not tied to a particular post. I repeat I am not interested in being re-elected but just in saving the country."

Papandreou's inability to resolve the political gridlock pushes the country closer to the first default by a European Union nation even as his scrapping of the referendum averted potential ejection from the 17-member euro zone. European Commission President Jose Barroso said he expected a government of national unity will conclude the EU agreement before Greece runs out of funds.

"There's a real danger of a disorderly default," billionaire investor George Soros said in a speech in Budapest. Without support for Greek lenders, "you're liable to have a run on the banks in other countries as well. That's the danger of a meltdown."

Unified Approach

The euro fell against the dollar, gold declined and European stocks gave up earlier gains. Papandreou's hope for a unified approach to tackle the financial crisis disintegrated last night as Samaras rejected his overtures before leading deputies of his New Democracy party out of parliament.

Papandreou's Pasok party controls 152 seats in the 300- member legislature after one lawmaker switched to an independent this week.

If the premier loses the confidence vote, President Karolos Papoulias could try to bring parties together to form a national administration under a new premier or invite opposition parties to form a government. Under Greek law, an election could be held within three weeks.

Unexpected Announcement

The unexpected announcement by Papandreou Oct. 31 that the country would hold a referendum triggered the biggest two-day slide in the MSCI World Index in almost three years and sent spreads on French, Greek and Italian bonds over bunds to euro- era records. Greek two-year bond yields climbed above 100 percent for the first time yesterday after the EU blocked aid.

"With the announcement of a referendum the entire loan accord was up in the air," Samaras told lawmakers. "This in turn caused a wave of speculative pressure on other vulnerable countries of the union, such as Italy, and this in turn prompted a wave of panic across international markets."

Papandreou said Greece's continued participation in the euro was at risk and any rejection of the accord reached in Brussels last week would force Greece to exit the currency.

The Minnesota-born lawmaker has led his party since 2004, three decades after it was founded by his father Andreas at the end of Greece's military rule.

`Unprecedented'

"It is unprecedented for an elected prime minister of Greece to cast doubt over the only two great achievements since the fall of the military dictatorship -- Greece's membership of the European Union and of the euro area, in just 72 hours," said Dora Bakoyannis, a former foreign minister and lawmaker who supported Papandreou in the first bailout vote in 2010 and was expelled from the main opposition party. "The only things we have to be proud of are directly at threat today because of Mr. Papandreou's brilliant referendum idea."

The premier has struck a deal to step down after tonight's confidence vote and hand power to a negotiated government, Reuters reported yesterday.

Papandreou said Greece cannot have a political vacuum at this critical time and that it would be irresponsible for the government to resign.

A nationwide vote would hold up disbursement of Greece's next aid package that was frozen by German Chancellor Angela Merkel and French President Nicolas Sarkozy in the wake of Papandreou's unexpected decision to hold the plebiscite.

"One option I consider catastrophic would be to go to elections, Parliament would shut down, we would sink into conflict and polarizations," Papandreou said. "Its doubtful we would reach the end of elections without going bankrupt and having lost time."

Boost Firepower

European leaders Oct. 26 agreed to boost the European Financial Stability Facility's firepower to 1 trillion euros ($1.4 trillion), set aside 100 billion euros for Greece and provide 30 billion euros in collateral for a debt swap that will give Greece's investors new, lower-risk bonds at 50 percent off the existing debt's face value.

Banks, Greek authorities and other officials continued to work on a proposed bond exchange even as the political turmoil cast doubt on Greece's next rescue package.

"We assume that the agreement reached on Oct. 26 and 27 would remain in operation," Hung Tran, deputy managing director of the Institute of International Finance, a Washington-based banking trade group that negotiated the bond exchange, said yesterday.

Endanger Package

Finance Minister Evangelos Venizelos said early elections would endanger the financing package and the sixth tranche of loans from last year's bailout.

"The country needs the constitutional instrument of a government, it can't be ungoverned, unable to negotiate, sign things, get the money from the European Union and International Monetary Fund," Venizelos told lawmakers.

The European Central Bank unexpectedly cut interest rates yesterday after fallout from Greece pushed up borrowing costs and forced Europe's rescue fund to cancel a bond issue for the first time.

Canadian Prime Minister Stephen Harper said Greece's possible exit from the euro currency block was discussed by the world leaders at the Group of 20 summit in Cannes, adding he expected "cooler heads will prevail."

Barroso said the EU wants to keep Greece in the euro and that the country's exit from the monetary union would risk setting a precedent for investors.

"They're really on the verge of being unable to pay for their schools and hospitals," Barroso said on Europe 1 radio. "Obviously this is the type of situation that requires national unity. We're saying, 'Please, agree on the essentials. It's you the Greeks who have to be united'."

To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) G-20 Failed to Agree on Use of IMF Resources in Debt Crises, Merkel Says

Bloomberg News, sent from my iPad.

G-20 Failed to Agree on IMF Resources, Merkel Says

Nov. 4 (Bloomberg) -- Group of 20 leaders meeting in the French resport of Cannes failed to agree on International Monetary Fund resources, German Chancellor Angela Merkel told reporters today.

To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net

To contact the editor responsible for this story: Alan Crawford at acrawford6@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) European Chiefs Pressed for Debt-Crisis Action by G-20 Leaders

Bloomberg News, sent from my iPad.

European Chiefs Pressed for Debt-Crisis Action by G-20 Leaders

Nov. 3 (Bloomberg) -- Europe's debt crisis dominated and distracted a summit of world leaders as Greece's government veered towards collapse and Italy came under renewed pressure to prove its credit-worthiness.

As Group of 20 chiefs began talks in the French resort of Cannes, their focus was on Athens where Prime Minister George Papandreou was clinging to power after abandoning a referendum that triggered a suspension of European aid. Amid concern Italy may be the next domino to fall as its bond yields jumped to an euro-era record, Prime Minister Silvio Berlusconi was pushed by Germany and France to accelerate an austerity drive.

Europe's failure to fix two years of turmoil drew rebukes from foreign leaders concerned global economic growth is under threat. The European Central Bank offered relief with an unexpected interest-rate cut although its new president, Mario Draghi, said a euro-area recession is looming.

"Our partners should be acting significantly more actively and decisively," Russian President Dmitry Medvedev said in Cannes. "If this doesn't happen, we will be hostage to this situation for a long time to come."

Even with the decision by Greek Prime Minister George Papandreou to scrap a December ballot on the terms of last week's bailout package, German Chancellor Angela Merkel and French President Nicolas Sarkozy kept aid for Europe's most- indebted nation on ice until it delivers deeper budget cuts.

Action Counts

"What counts for us is actions," Merkel said. "So far, I don't really see those actions."

Whether Greece will need to leave the currency bloc was discussed by the G-20, according to Canadian Prime Minister Stephen Harper, who added he expected "cooler heads will prevail."

On a day of political sparring in Athens, Papandreou squared off with rebels in his own party -- including Finance Minister Evangelos Venizelos -- over the referendum that European officials yesterday insisted would determine whether Greece stays in the euro. Greek lawmakers hold a confidence vote tomorrow on whether to support his administration.

Heightening the confusion, Greek opposition chief Antonis Samaras said Papandreou misunderstand a proposal for a transitional government. Samaras, leader of the New Democracy party, called on the incumbent to quit as his party's lawmakers walked out of the parliamentary chamber.

Europe and the International Monetary Fund made cross-party support for budget cuts a condition for paying the next 8 billion euros ($11 billion) of Greek aid, the sixth installment in the 110 billion-euro package awarded at the outbreak of the crisis in May 2010.

No Way Out

Breaking with the doctrine that there is no way out of the euro, Merkel and Sarkozy cornered the Greek leader last night in Cannes and transformed the since-cancelled referendum into an up-or-down decision on Greece's euro membership.

"The euro zone must absolutely send a message of credibility to the whole world," Sarkozy told reporters today. "When we take decisions they must be applied, when we set rules they must be respected."

Europe's chiefs pledged to speed up a plan to more than double the heft of their 440 billion-euro rescue fund to stop Greece's travails from spreading to other cash-strapped economies such as Italy.

Italian Debt

Italy was in the spotlight amid an increase in its 10-year bond yield to 6.3 percent, more than triple Germany's. The euro area's third-biggest economy has its second-largest debt burden after Greece and has grown more slowly than the region average in each of the last 10 years.

Berlusconi was told by Merkel and Sarkozy to press ahead with budget-balancing measures, a day after his Cabinet agreed to include emergency measures in a bill set for passage by Nov. 15. Investors want Berlusconi to go further than the steps proposed so far, which include raising the retirement age and selling more state assets.

As politicians clashed, Europe's economy and markets received a surprise boost from the ECB as Draghi marked his first week as its president by overseeing a rate cut. The bank's Governing Council voted unanimously to reduce their benchmark by 25 basis points to 1.25 percent in a shift forecast by four of 55 economists surveyed by Bloomberg News.

'Mild Recession'

"What we're observing now is slow growth heading toward a mild recession," Draghi said.

The former Bank of Italy governor signaled central bankers have no intention of bailing out profligate nations. While it's not illegitimate to question Greece's place in the euro area, the bloc's founding treaty doesn't allow for a country leaving and it would be hard to imagine it happening, he said.

Europe's mess overshadowed the G-20 talks which conclude tomorrow. U.K. officials said throughout the meetings, government heads monitored their Blackberry devices to keep up to speed with fast-changing events in Greece.

"The most important aspect of our task over the next two days is to resolve the financial crisis here in Europe," U.S. President Barack Obama said. Europe needs to "flesh out more of the details" of its bailout blueprint, he said.

The leaders discussed a bigger role for the IMF with the U.K. joining Brazil and Russia in supporting an increase in the lender's $391 billion war chest. In a draft of a statement to be released tomorrow, they also urged the IMF to "expedite" a new liquidity line for countries "with strong policies and fundamentals facing exogenous, including system, shocks."

"When the world is in crisis, it's right that you consider boosting the IMF," U.K. Prime Minister David Cameron told reporters.

To contact the reporters on this story: Theophilos Argitis in Cannes at targitis@bloomberg.net Robert Hutton in Cannes at rhutton1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Stocks, Commodities Rise as U.S. Treasuries Decline on Greek Bailout Plan

Bloomberg News, sent from my iPad.

Stocks, Oil Rise, Treasuries Drop on Greece-Bailout Speculation

Nov. 3 (Bloomberg) -- Stocks and commodities rose, while Treasuries slid, as speculation grew that Greece was moving closer to accepting a bailout and the European Central Bank unexpectedly cut interest rates to bolster economies reeling from the region's debt crisis.

The Standard & Poor's 500 Index added 0.5 percent to 1,244.59 at 11:06 a.m. in New York, resuming gains after turning lower following data on service industries that trailed estimates and a prediction by the ECB president that Europe was heading for a mild recession. The Stoxx Europe 600 Index climbed 1.6 percent, while the euro fluctuated. Oil rose 0.9 percent to $93.38 a barrel and the S&P GSCI Index of materials rose 0.7 percent. Ten-year Treasury yields gained six basis points.

Stocks extended gains as the Associated Press reported that Greek Prime Minister George Papandreou has canceled plans to hold a referendum on the latest bailout after the main opposition leader said he would back it, according to two unnamed officials. ECB President Mario Draghi cut the benchmark rate by 25 basis points to 1.25 percent as he chaired a meeting of the governing council for the first time. Papandreou triggered a two-day rout in global stocks earlier this week after saying he wanted voters to decide on the bailout.

"The question is -- is Greece in or out?" Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, said in a telephone interview. "Greece falling out of the euro would be the first clog in a machine that might be broken. It does matter if Greece is there," he said. "You have the ECB giving you a sign that growth issues have the premier emphasis. This is a drama quite frankly."

Market Leaders

Energy, industrial and telephone companies led gains in eight of ten industry groups in the S&P 500. Qualcomm Inc. jumped 6.8 percent as the maker of mobile-phone chips forecast higher sales than analysts predicted. Kraft Foods Inc., the food company planning to split in two next year, added 3.7 percent after raising its earnings forecast. Estee Lauder Cos. gained 14 percent after the cosmetics maker increased its dividend and announced a 2-for-1 split.

Jefferies Group Inc. tumbled as much as 20 percent, triggering a stock-exchange circuit breaker, after Egan-Jones Ratings Co. cut its credit rating to BBB- from BBB. The shares recovered, paring their decline to 7.8 percent, after the investment bank said in a statement that it has no "meaningful net exposure" to European sovereign debt.

Almost six shares gained for every one that fell in the Stoxx 600. Swiss Re Ltd., the world's second-biggest reinsurer, jumped 5.6 percent after reporting better-than-estimated earnings. Cable & Wireless Communications Plc jumped 9 percent after first-half profit rose.

In European bond markets, Greek two-year yields climbed to 107 percent. Yields on 10-year French debt increased five basis points, German rates rose nine points and Italian 10-year debt yields decreased five points.

German and French leaders holding emergency talks before today's G-20 summit withheld 8 billion euros ($11 billion) of assistance for Greece. European leaders yesterday warned Greece will surrender all European aid if it votes against a bailout package agreed last week to contain the crisis.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net Michael P. Regan in New York at mregan12@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) ECB Unexpectedly Lowers Interest Rates as Draghi Signals No Debt Bailouts

Bloomberg News, sent from my iPad.

ECB Unexpectedly Cuts Rates as Draghi Rules Out Debt Bailouts

Nov. 3 (Bloomberg) -- The European Central Bank unexpectedly cut interest rates at Mario Draghi's first meeting in charge as the new ECB head signaled officials have no plans to help bail out cash-strapped nations facing an escalating debt crisis that threatens to splinter the euro region.

"What makes you think that becoming the lender of last resort for governments is what you need to keep the euro region together?" Draghi told reporters in Frankfurt today. "That is not really in the remit of the ECB. The remit of the ECB is maintaining price stability in the medium term."

ECB officials unanimously lowered the benchmark interest rate by 25 basis points to 1.25 percent, confounding 51 of 55 economists in a Bloomberg News survey. Four predicted a quarter- point move and two expected a half-point reduction. Italian bonds fell after Draghi's comments and the euro extended declines, dropping as much as 0.8 percent to $1.3657.

European leaders last night raised the prospect of the 17- member area breaking apart, with France and Germany saying they would treat Greece's surprise referendum on a second bailout as a vote on its euro membership. With the region's economic slowdown deepening and investors growing increasingly concerned, the ECB was under pressure to reverse this year's two rate increases.

'Wall of Money'

The ECB needs to "go into the market and say 'We have a wall of money here and no matter how much speculation there is, we're going to keep buying Italian bonds or any other euro bonds that are threatened'," Irish Finance Minister Michael Noonan told Dublin-based RTE Radio yesterday.

Draghi rebuffed those calls, sticking to the line adopted by his predecessor, Jean-Claude Trichet. The bond purchase program is "temporary, it's limited in the amount and it's justified on the basis of restoring the functioning of monetary policy transmission channels," he said.

The yield on Italy's 10-year government bond rose 2 basis point to 6.21 percent. Earlier, it touched a record of 6.35 percent before falling to 6.13 percent in the hours leading up to Draghi's press conference. Spain's 10-year yield climbed 4 basis point to 5.46 percent.

The ECB cut rates partly because "what we're observing now is slow growth heading toward a mild recession," Draghi said.

"It's a bold move by Draghi," said Howard Archer, chief European economist at IHS Global Insight in London, who predicted a quarter-point cut. "He's not going to be afraid of making bold moves, which is what's needed in the current environment."

Nearing Recession

Recent data indicate the euro region is edging toward a recession.

Unemployment in Germany, Europe's largest economy, unexpectedly rose for the first time in more than two years in October and Europe's manufacturing industry contracted for a third month.

While the current inflation rate of 3 percent is well above the ECB's 2 percent limit, weaker growth and demand may drive down oil prices. The ECB currently forecasts inflation will slow to 1.7 percent in 2012.

The Organization for Economic Cooperation and Development on Oct. 31 lowered its growth forecast for the U.S. and the euro area. The U.S. economy, the world's largest, will expand 1.7 percent this year and 1.8 percent next, the Paris-based OECD said. By contrast, the euro area's will grow 1.6 percent in 2011 and just 0.3 percent in 2012, it said.

To contact the reporters on this story: Gabi Thesing in London at gthesing@bloomberg.net Jeff Black in Frankfurt at jblack25@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Stocks, Commodities Rise on ECB Rate Cut as Leaders Press Greece

Bloomberg News, sent from my iPad.

Stocks, Commodities Rise on ECB Rate Cut as Leaders Press Greece

Nov. 3 (Bloomberg) -- Stocks and commodities rallied, while Treasuries and the dollar slid, after the European Central Bank unexpectedly cut interest rates and the region's leaders ratcheted up pressure on Greece to accept a bailout.

The Stoxx Europe 600 Index added 2 percent at 9:30 a.m. in New York and the Standard & Poor's 500 Index gained 0.7 percent. The euro was little changed against the dollar, after gaining as much as 0.6 percent. Greek two-year yields climbed to 107 percent. Oil gained 1.2 percent to $93.62 a barrel, and copper rebounded.

ECB President Mario Draghi, chairing a meeting of the bank's governing council for the first time, cut the benchmark rate by 25 basis points to 1.25 percent. Greek Prime Minister George Papandreou, who triggered a two-day rout in global stocks after saying he wanted the nation's voters to decide on the bailout in a referendum, won't resign his post and plans to speak in Parliament today, two officials with the ruling Pasok party said, after European Union officials raised the prospect of Greece exiting the euro currency union.

"Market participants are speculating that the Greek prime minister has lost the majority and this could lead to a cancellation of the referendum and Papandreou's possible resignation," said Stephane Ekolo, chief European strategist at Market Securities in London. "From a market perspective, it seems to be good news. It somehow reduces uncertainty and may pave the way for the implementation of the austerity measures."

Beating Estimates

More than ten shares gained for every one that fell in the Stoxx 600. Swiss Re Ltd., the world's second-biggest reinsurer, jumped 6.1 percent after reporting better-than-estimated earnings. Cable & Wireless Communications Plc jumped 11 percent after first-half profit rose.

German and French leaders holding emergency talks on the eve of a Group of 20 summit today in Cannes, France, withheld 8 billion euros ($11 billion) of assistance for Greece. European leaders yesterday warned Greece will surrender all European aid if it votes against a bailout package agreed last week to contain the crisis.

To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net

To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Euro’s Leaders Question Greek Membership, Cornering Papandreou

Bloomberg News, sent from my iPad.

Euro's Leaders Question Greek Membership, Cornering Papandreou

Nov. 3 (Bloomberg) -- European leaders for the first time raised the prospect of the euro area splintering, forcing debt- stricken Greece to decide whether it's in or out when it holds a referendum on a bailout package next month.

Led by Germany and France, Europe's economic and political anchors, the euro's guardians yesterday cut off financial aid for Greece until an early December vote determines whether it deserves a fresh batch of loans needed to stave off default.

"The referendum will revolve around nothing less than the question: does Greece want to stay in the euro, yes or no?" German Chancellor Angela Merkel told reporters after crisis talks hours before a Group of 20 summit set to begin today in Cannes, France. French President Nicolas Sarkozy said Prime Minister George Papandreou's government won't get a "single cent" of assistance if voters reject the plan.

The hardball tactics opened a split in the Athens government and broke with the doctrine that the euro is designed to last forever. European stocks fell and Italian bond yields rose to a euro-era record, as the 17-nation currency hurtled into uncharted territory.

"Europe's policy makers are going to tell the Greeks 'go now' if they must and 'we will survive' if they leave," said Kit Juckes, head of foreign exchange research at Societe Generale SA in London. "We get one month of uncertainty during which I can't see much that helps the euro."

Euro, Stocks

The euro fell as much as 0.7 percent before erasing the loss and trading up 0.1 percent to $1.3756 at 10:30 a.m. in Cannes. The Euro Stoxx 50 Index fell 0.5 percent.

The currency's fate hung over the G-20 summit, promoted by the host French government with banners declaring "history is being written in Cannes." European governments had planned to use it as a showcase for a revamped crisis-fighting strategy unveiled after all-night talks in Brussels last week.

Instead, Merkel and Sarkozy met again early today with the leaders of Italy and Spain and European Union officials to work out how to prevent the shock of Greece's unilateral referendum call from reverberating across the $13 trillion currency zone.

European officials pledged to step up work to prevent Greece's travails, now exacerbated by a month-long political campaign, from hammering other at-risk economies.

Struggling to restore Italy's credibility, the cabinet of Prime Minister Silvio Berlusconi last night agreed to include emergency measures in a budget bill set for passage by Nov. 15. Steps including a higher retirement age and more state-asset sales failed to convince the markets, which pushed up Italy's 10-year yield to 6.3 percent, more than triple Germany's.

Revamped Rescue

Euro finance ministers will accelerate plans to boost the firepower of the 440 billion-euro rescue fund, Merkel and Sarkozy said. On Oct. 27 euro leaders agreed to use leverage to get the fund's clout up to 1 trillion euros and told banks to raise 106 billion euros by the end of June to fortify their capital.

Papandreou, meanwhile, sought to squelch opponents in his own party to the Oct. 31 decision to put the terms of the next aid package to voters weary of two years of budget cuts and tax increases.

Finance Minister Evangelos Venizelos openly broke with his boss, challenging the idea that the referendum on Dec. 4 or 5 might lead to a euro exit. Papandreou "is history," Dimitris Lintzeris, a ruling party lawmaker, said on NET TV.

Until the ballot, an already delayed aid installment of 8 billion euros will remain on hold, Merkel and Sarkozy said in a late-night appearance in an auditorium better known as the home of the Cannes film festival.

Backing Euro

Polls show most Greeks object to the austerity required for aid, yet more than seven in 10 favor remaining in the euro, a survey last week of 1,009 people published in To Vima newspaper showed.

EU treaties make no provision for a country to exit the currency, feted at its setup in 1999 as the capstone in Europe's half-century progression from war to prosperity. In a December 2009 legal opinion, the European Central Bank said an expulsion "would be so challenging, conceptually, legally and practically, that its likelihood is close to zero."

A decade since Greece fudged fiscal data to win entry to the euro and two years after it triggered the crisis by revising its budget numbers, wave after wave of austerity has deepened a recession now in its fourth year. The economy will contract 5.5 percent this year and 2.5 percent next, according to its 2012 budget. Unemployment reached 16.5 percent in July.

Exit Costs

While leaving the euro would allow Greece to regain control of exchange and interest rates, a September report by economists at UBS AG said its new currency would drop 60 percent, and local borrowing costs would jump at least 7 percentage points, imperiling the balance sheets of banks and companies. The cost would be as much as 11,500 euros a person in the first year outside the euro and 4,000 euros in following years, according to UBS.

"We would like Greece to remain a member but we're not saying Greece has to stay a member at all costs," Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of euro finance ministers, said today on ZDF German television.

To contact the reporters on this story: Simon Kennedy in Cannes at skennedy4@bloomberg.net James G. Neuger in Cannes at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Productivity in U.S. Climbed at a 3.1% Pace in Third Quarter on Cost Cuts

Bloomberg News, sent from my iPad.

U.S. Productivity Climbed at a 3.1% Pace in Third Quarter

Nov. 3 (Bloomberg) -- The productivity of U.S. workers rose in the third quarter for the first time this year as companies tried to cut costs following a slowdown in growth.

The measure of employee output per hour increased at a 3.1 percent annual rate, following declines in each of the previous two quarters, figures from the Labor Department showed today in Washington. Expenses per employee fell at a 2.4 percent rate after a 2.8 percent gain in the second quarter.

Employers sought to cut costs by keeping payrolls down and squeezing more output from existing staff. Lower labor expenses, which account for about two-thirds of the cost of producing a good or service, may help hold down inflation, giving Federal Reserve leeway to take additional steps if needed to spur the world's largest economy.

"The bigger-than-expected drop in unit labor costs temporarily arrests the upward move in compensation, which is very positive for profit margins," said Eric Green, chief market economist at TD Securities Inc. in New York. The reversal in labor costs "suggests there is more room as opposed to less room for profit expansion and corporate profitability."

Third-quarter productivity was projected to rise 3 percent, according to the median forecast of 63 economists surveyed by Bloomberg News. Estimates ranged from gains of 1.2 percent to 4.3 percent. Last quarter's gain was the biggest since the first three months of 2010.

Efficiency in the second quarter decreased at a 0.1 percent pace following a 0.6 percent decline in the first quarter, marking the first back-to-back drop since the third and fourth quarters of 2008.

Costs Forecast

Unit labor costs, which are adjusted for efficiency gains, were forecast to fall 1 percent, the survey median showed.

The bigger-than-projected drop in labor expenses showed companies were holding the line on worker pay. Hourly compensation rose at a 0.6 percent pace in the third quarter. After adjusting for inflation, it dropped at a 2.4 percent rate, the biggest decrease since the third quarter of 2008.

Fewer Americans filed applications for unemployment benefits last week, signaling limited progress in the labor market, another report today from the Labor Department showed.

Jobless claims fell by 9,000 to 397,000 in the week ended Oct. 29, the fewest in a month. The median forecast of 49 economists in a Bloomberg News survey called for a drop to 400,000. The total number of people on unemployment benefit rolls decreased to a six-month low.

Stock Futures

Stock-index futures extended gains and Treasuries fell after the reports. The contract on the Standard & Poor's 500 Index expiring next month climbed 1.2 percent to 1,249.1 at 8:48 a.m. in New York. The yield on the benchmark 10-year note rose to 2.06 percent from 1.99 percent late yesterday.

Compared with the third quarter of 2010, productivity increased 1.1 percent. Labor costs climbed 1.2 percent from the year-earlier period, down from a 1.8 percent gain in the prior 12 months.

Labor costs dropped 2 percent in 2010, the biggest decrease since data began in 1948.

Among manufacturers, productivity increased at a 5.4 percent rate in the third quarter. Unit labor costs for factories dropped at a 4.6 percent annual rate last quarter.

Companies are keeping a tight rein on hiring amid concern the European debt crisis will restrain global growth. The economy generated 95,000 payrolls in October, down from 103,000 the prior month, economists surveyed by Bloomberg forecast the Labor Department will report tomorrow. Unemployment was 9.1 percent for a fourth month, according to the forecasts.

Whirlpool Cuts

Benton Harbor, Michigan-based Whirlpool Corp., the world's largest maker of household appliances, last week said it will cut more than 5,000 jobs and reduce capacity by six million units after lowering its earnings targets as consumers rein in spending. Whirlpool said reductions in Europe and North America account for about 10 percent of all employees in those regions.

"Our results were negatively impacted by recessionary demand levels in developed countries, a slowdown in emerging markets and high levels of inflation in material costs," Chief Executive Officer Jeff M. Fettig said in the statement.

Gross domestic product in the U.S. expanded at a 2.5 percent annual pace from July through September, up from a 1.3 percent prior estimate, the Commerce Department reported last week. That followed 0.4 percent growth in the first three months of this year that was the weakest since the second quarter of 2009, during the recession.

Fed Forecast

Fed officials lowered their outlook for U.S. economic growth in 2012 and forecast that unemployment will average from 8.5 percent to 8.7 percent in the final three months of next year. The forecasts were released after the Federal Open Market Committee yesterday acknowledged economic growth "strengthened somewhat" in the third quarter while also citing "continuing weakness" in labor markets and "significant downside risks" to the economic outlook.

The productivity surge that helped boost U.S. economic growth since 1997 has probably ended, according to a researcher at the Federal Reserve Bank of New York.

There is a 90 percent chance gains in worker output per hour have fallen to levels consistent with the quarter-century of slow growth that spanned 1973 to 1997, New York Fed economist Robert Rich wrote in a report in September on the bank's Liberty Street Economics blog.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Initial Jobless Claims in U.S. Fell Last Week to One-Month Low of 397,000

Bloomberg News, sent from my iPad.

Jobless Claims in U.S. Fell to a One-Month Low Last Week

Nov. 3 (Bloomberg) -- Fewer Americans filed applications for unemployment benefits last week, signaling limited progress in the labor market.

Jobless claims fell by 9,000 to 397,000 in the week ended Oct. 29, the fewest in a month, Labor Department figures showed today in Washington. The median forecast of 49 economists in a Bloomberg News survey called for a drop to 400,000. The total number of people on unemployment benefit rolls decreased to a six-month low.

Fewer dismissals, a precursor to bigger gains in payrolls, may help sustain the spending by households that accounts for about 70 percent of the economy. Federal Reserve officials yesterday projected that it will be 2013 before the jobless rate drops below 8 percent.

"The trend remains very constructive," said Eric Green, chief market economist at TD Securities Inc. in New York, who forecast 395,000 claims. "It's back below 400,000, which seems to be the pivot point in terms of a strengthening labor market as opposed to a weakening one."

Stock-index futures extended gains and Treasuries fell after the report. The contract on the Standard & Poor's 500 Index expiring next month climbed 0.8 percent to 1,243.5 at 8:44 a.m. in New York. The yield on the benchmark 10-year note rose to 2.04 percent from 1.99 percent late yesterday.

Workers productivity rose in the third quarter for the first time this year as companies tried to cut costs following a slowdown in growth, another Labor Department report today showed. The measure of employee output per hour increased at a 3.1 percent annual rate following declines in each of the previous two quarters. Expenses per employee fell at a 2.4 percent rate after a 2.8 percent gain in the second quarter of the year.

Claims Forecasts

Jobless benefits applications were projected to decline from 402,000 initially reported for the prior week. Estimates in the Bloomberg survey ranged from 395,000 to 415,000. The Labor Department revised the prior week's figure to 406,000.

A Labor Department spokesman said there was nothing unusual in the state data last week. Claims for two states, Connecticut and Oklahoma, were estimated.

Today's data showed the four-week moving average, a less volatile measure than the weekly figures, fell to 404,500 last week from 406,500.

The number of people continuing to receive jobless benefits dropped by 15,000 in the week ended Oct. 22 to 3.68 million.

Extended Benefits

The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.

Those who've used up their traditional benefits and are now collecting emergency and extended payments increased by about 39,300 to 3.49 million in the week ended Oct. 15.

Fed policy makers, who refrained from taking any additional steps to ease monetary policy at their two-day meeting ended yesterday, said there are "significant downside risks to the economic outlook."

"The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually," the central bank said in a statement.

The Fed's latest forecasts, also released yesterday, showed less optimism about the economy and employment in 2012 and 2013. Policy makers project growth next year of 2.5 percent to 2.9 percent, with unemployment in the 8.5 percent to 8.7 percent range. Joblessness in 2013 is forecast at 7.8 percent to 8.2 percent.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 2.9 percent, today's report showed.

States, Territories

Thirty-six states and territories reported an increase in claims, while 17 reported a decrease. These data are reported with a one-week lag.

Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates.

A report tomorrow may show employers added 95,000 workers to payrolls in October, following a 103,000 gain in September, according to the Bloomberg survey median.

Businesses paring their workforce include Motorola Mobility Holdings Inc., the mobile-phone maker that agreed to be bought by Google Inc. The Libertyville, Illinois-based company is cutting 800 jobs and closing some facilities, according to its regulatory filing last week.

To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Stocks, Commodities Advance on ECB Rate Cut as Greece Pressured on Bailout

Bloomberg News, sent from my iPad.

Stocks, Commodities Rise on ECB Rate Cut as Leaders Press Greece

Nov. 3 (Bloomberg) -- Stocks and commodities rallied, while Treasuries and the dollar slid, after the European Central Bank unexpectedly cut interest rates and the region's leaders ratcheted up pressure on Greece to accept a bailout.

The Stoxx Europe 600 Index added 2 percent at 9:30 a.m. in New York and the Standard & Poor's 500 Index gained 0.7 percent. The euro was little changed against the dollar, after gaining as much as 0.6 percent. Greek two-year yields climbed to 107 percent. Oil gained 1.2 percent to $93.62 a barrel, and copper rebounded.

ECB President Mario Draghi, chairing a meeting of the bank's governing council for the first time, cut the benchmark rate by 25 basis points to 1.25 percent. Greek Prime Minister George Papandreou, who triggered a two-day rout in global stocks after saying he wanted the nation's voters to decide on the bailout in a referendum, won't resign his post and plans to speak in Parliament today, two officials with the ruling Pasok party said, after European Union officials raised the prospect of Greece exiting the euro currency union.

"Market participants are speculating that the Greek prime minister has lost the majority and this could lead to a cancellation of the referendum and Papandreou's possible resignation," said Stephane Ekolo, chief European strategist at Market Securities in London. "From a market perspective, it seems to be good news. It somehow reduces uncertainty and may pave the way for the implementation of the austerity measures."

Beating Estimates

More than ten shares gained for every one that fell in the Stoxx 600. Swiss Re Ltd., the world's second-biggest reinsurer, jumped 6.1 percent after reporting better-than-estimated earnings. Cable & Wireless Communications Plc jumped 11 percent after first-half profit rose.

German and French leaders holding emergency talks on the eve of a Group of 20 summit today in Cannes, France, withheld 8 billion euros ($11 billion) of assistance for Greece. European leaders yesterday warned Greece will surrender all European aid if it votes against a bailout package agreed last week to contain the crisis.

To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net

To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) ECB Cuts Interest Rates as Draghi Delivers Surprise in Presidential Debut

Bloomberg News, sent from my iPad.

ECB Unexpectedly Cuts Rates as Risk of Greek Euro Exit Grows

Nov. 3 (Bloomberg) -- The European Central Bank unexpectedly cut interest rates at President Mario Draghi's first meeting in charge after euro-area leaders raised the prospect of Greece exiting the monetary union, sending bond yields soaring in Italy and Spain.

ECB officials lowered the benchmark interest rate by 25 basis points to 1.25 percent, confounding 51 of 55 economists in a Bloomberg News survey. Four predicted a quarter-point move and two expected a half-point reduction.

"Super Mario jumps ahead of the curve," said Carsten Brzeski, senior economist at ING Group in Brussels. "What a starter. Now the big question for the press conference is whether the ECB is also willing to do everything to prevent a further escalation of the sovereign-debt crisis."

Draghi holds a press briefing at 2:30 p.m. in Frankfurt to explain today's decision. He is also under pressure to increase the central bank's commitment to buying the bonds of distressed euro states.

European leaders last night raised the prospect of the 17- member area splintering, with France and Germany saying they would treat Greece's surprise referendum on a second bailout as a vote on its euro membership. With the region's economic slowdown deepening and investors growing increasingly concerned, the ECB was under pressure to reverse this year's two rate increases.

The euro fell almost a cent on the ECB rate cut to $1.3732 and yields on Italian and Spanish bonds retreated.

Italian Yields

Italian bond yields had surged to euro-era records earlier today on concern the debt crisis will engulf other highly- indebted nations in the 17-nation currency bloc.

Italy's 10-year yield jumped to as high as 6.39 percent, a euro-era record, widening the spread over benchmark German bunds to 462 basis points. The yield retreated to 6.14 percent after the ECB's decision.

"It's a bold move by Draghi," said Howard Archer, chief European economist at IHS Global Insight in London, who predicted a quarter-point cut. "He's not going to be afraid of making bold moves, which is what's needed in the current environment."

Irish Finance Minister Michael Noonan yesterday called on the ECB to step up its bond purchases to lower borrowing costs in countries like Italy and stop the crisis from spreading.

'Wall of Money'

The ECB needs to "go into the market and say 'We have a wall of money here and no matter how much speculation there is, we're going to keep buying Italian bonds or any other euro bonds that are threatened'," he told Dublin-based RTE Radio.

Draghi, 64, has to try to forge consensus on a 23-member Governing Council already split over the ECB's bond purchases, which now amount to 173.5 billion euros ($239.4 billion).

The U.S. Federal Reserve yesterday refrained from taking any additional policy steps while saying there are still "significant downside risks" to the economic outlook.

Recent data indicate the euro region is edging toward a recession.

Unemployment in Germany, Europe's largest economy, unexpectedly rose for the first time in more than two years in October and Europe's manufacturing industry contracted for a third month.

While the current inflation rate of 3 percent is well above the ECB's 2 percent limit, weaker growth and demand may drive down oil prices. The ECB currently forecasts inflation will slow to 1.7 percent in 2012.

The Organization for Economic Cooperation and Development on Oct. 31 lowered its growth forecast for the U.S. and the euro area. The U.S. economy, the world's largest, will expand 1.7 percent this year and 1.8 percent next, the Paris-based OECD said. By contrast, the euro area's will grow 1.6 percent in 2011 and just 0.3 percent in 2012, it said.

To contact the reporters on this story: Gabi Thesing in London at gthesing@bloomberg.net Jeff Black in Frankfurt at jblack25@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) Stocks, Euro Decline as European Leaders Withhold Greek Aid

Bloomberg News, sent from my iPad.

Stocks, Euro Decline as European Leaders Withhold Greek Aid

Nov. 3 (Bloomberg) -- Stocks fell, the euro weakened to near a three-week low against the dollar, while Treasury 10-year notes rose for a fifth day after European leaders cut off aid payments to Greece before a referendum on a bailout deal.

The MSCI World Index dropped 0.9 percent as of 8:01 a.m. in London and the Stoxx Europe 600 Index sank 1.4 percent. Standard & Poor's 500 Index futures retreated 1.4 percent. The 17-nation euro lost 0.5 percent to $1.3676, while New Zealand's dollar slid 1 percent after the nation's jobless rate gained. Treasury 10-year yields decreased three basis points to 1.96 percent. Oil, copper and silver dipped at least 1.5 percent.

German and French leaders holding emergency talks on the eve of a Group of 20 summit in Cannes, France, withheld 8 billion euros ($11 billion) of assistance. They warned Greece will surrender all European aid if it votes against a bailout package agreed last week to contain the crisis. European Central Bank President Mario Draghi will chair later today a meeting of the bank's governing council for the first time.

"The market is eventually going to send Greece an incremental message about the jeopardy and hazards of going it alone and punching out of Europe," Erik Ristuben, the New York- based chief investment officer at Russell Investments, told Bloomberg Television. "It will be a very negative event in our minds, economically, for Greece even more so than the austerity measures that core Europe is pushing on them."

About 33 shares declined for every one that gained on the Stoxx 600, which was set for the lowest level since Oct. 20. BNP Paribas SA dropped 6.3 percent after France's biggest bank said quarterly profit sank 72 percent because of a writedown on Greek sovereign debt and losses from selling European government bonds.

'Wider Consensus'

The euro weakened 0.5 percent to 106.72 yen after European leaders said a referendum in five weeks will determine whether Greece becomes the first to exit the 17-nation currency bloc. German bonds rose, driving 10-year yields down five basis points to 1.78 percent.

Greek Prime Minister George Papandreou, who faces a confidence vote tomorrow, defended his decision to call a referendum, telling reporters at a separate press briefing that the country "needs a wider consensus" for the bailout terms and expressing confidence it will back staying in the euro.

"We've become more bearish on the economy because of the hijinks going on in Europe," said Marc Fovinci, who helps oversee $2.7 billion as head of fixed income at Ferguson Wellman Capital Management Inc. in Portland, Oregon. "We took risk off the table by reducing our equity position and bringing our bond allocations up."

Kiwi, Yuan

The kiwi depreciated to 78.36 U.S. cents after Statistics New Zealand said the jobless rate rose to 6.6 percent in the third quarter from 6.5 percent in the prior three months. Australia's dollar declined 1.3 percent to $1.0216 and South Korea's won retreated 0.7 percent to 1,129.90 per dollar, a fourth day of losses.

The yuan advanced 0.09 percent to 6.3514 Shanghai, the biggest increase in a week, as China's central bank set a record daily reference rate and signaled before the G-20 summit it will increase moves in the exchange rate. The government remains open to increased flexibility of the yuan, Zhang Tao, director general of the international department of the People's Bank of China, said yesterday.

The MSCI Asia Pacific ex-Japan Index retreated 2.3 percent. Japanese financial markets are closed for a holiday. Hong Kong's Hang Seng Index declined 2.5 percent, South Korea's Kospi Index sank 1.5 percent, and Taiwan's Taiex dropped 1.8 percent.

Bank Earnings

Australia & New Zealand Banking Group Ltd. decreased 2 percent in Sydney after second-half profit missed analyst forecasts. United Overseas Bank Ltd. dropped 3.8 percent in Singapore after the bank's third-quarter net income fell more than analysts had predicted. LG Electronics Inc. tumbled 14 percent as South Korea's exchange asked the company to address speculation that the company may sell shares.

S&P 500 futures signal the gauge may snap yesterday's 1.6 percent advance. Shares rose after Federal Reserve Chairman Ben S. Bernanke said yesterday unemployment is still "far too high" and the Fed may take more steps to boost growth. Figures tomorrow may show non-farm payrolls increased 95,000 in October, less than the 103,000 jobs added the previous month, economists surveyed by Bloomberg News said.

The cost of protecting Asia-Pacific corporate and sovereign bonds from default increased, with the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbing nine basis points to 207.5 basis points, Royal Bank of Scotland Group Plc prices show. The index is headed for its highest close since Oct. 20, after closing down 0.3 basis points yesterday, according to data provider CMA.

Oil for December delivery dropped 1.5 percent to $91.17 a barrel in New York. U.S. crude supplies rose 1.83 million barrels in the week ended Oct. 28, the Energy Department said yesterday, more than the 1 million barrels forecast by analysts in a Bloomberg News survey. Copper futures retreated 2.5 percent to $7,687 a metric ton in London, while immediate-delivery silver sank 2.3 percent to $33.4975 an ounce.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad

(BN) European Union Bank Recapitalization Plan Has ‘Serious Problems,’ IIF Says

Bloomberg News, sent from my iPad.

EU's Bank Capital Plan Has 'Serious Problems,' IIF Says

Nov. 2 (Bloomberg) -- The European Union's plan for recapitalizing banks has "serious problems" that will hurt economic growth and make it harder for some nations to borrow, the Institute of International Finance said.

There is a "clear need" to restore confidence in Europe's banks, IIF Managing Director Charles Dallara said today in a letter to the Group of 20 nations on the eve of a summit in Cannes, France. Yet the extra capital requirements at the center of the EU's strategy will come with "considerable cost" because of a flawed scope and approach, he said.

European leaders are gathering today before the Nov. 3-4 summit to prevent their crisis-fighting plans from unraveling less than a week after they were hammered out. The euro area's debt crisis will likely take center stage at the G-20, raising the stakes for banks poised to play a greater role in Greece's next bailout.

The EU plan calls for Greece to adopt further austerity measures in exchange for a new infusion of official funds and a subsidized bond exchange. It also increases the firepower of the EU's main rescue fund in a bid to limit contagion to Spain, Italy and other euro-area nations.

Banks would not consider providing debt relief to other countries such as Portugal caught up in the crisis, Dallara said on a conference call with reporters today. Greece's circumstances justify a "unique approach" that should not apply to other sovereigns.

No Need

"We do not see the need, nor would we be willing to be involved in or engaged in, discussions of debt reduction for other countries," Dallara said, speaking from Washington. He said the debt swap and official rescue program for Greece is needed to give Greece a chance to adjust its economy more gradually and ease the hardships on Greek citizens.

Portugal is on a "path of adjustment" and making changes that will lead to renewed growth and investment, he said. Dallara also was optimistic that Spain's new government "will be able to build on the progress that has been made, particularly over the last year" after the Nov. 20 elections.

The People's Party, which has pledged deeper austerity measures without specifying where it will axe spending, is set to win the largest majority any Spanish government has secured since 1982, a poll in El Mundo showed yesterday. Prime Minister Jose Luis Rodriguez Zapatero isn't seeking re-election.

'Grim' Outlook

Dallara called on the G-20 to look for ways to promote economic growth, noting a "grim" unemployment outlook in the U.S. and Europe. He also urged the European Central Bank and others to provide more liquidity support for Greek banks, who he said have helped to finance Greece's economy through bond purchases and private-sector lending.

The bank-recapitalization accord sets a June 30, 2012, deadline for lenders to reach core capital reserves of 9 percent after writing down their sovereign-debt holdings. Banks below that target would face "constraints" on paying dividends and awarding bonuses.

Banks are likely to decide that the costs of raising capital are "prohibitive," Dallara said in his letter to the G-20. Rather than accept forced injections, banks are more likely to sell risky assets and cut back on lending, which will make it harder for countries on Europe's periphery to access capital markets.

"The market value of the debt of the countries most under scrutiny is likely to decline further as banks unload sovereign bonds," Dallara said. "This is contrary to the goal of stabilizing and underpinning the outlook for sovereign debt in Europe."

New Requirements

If banks acted to meet the new requirements relying only on retained earnings and a reduction in credit supply, "overall credit exposure to the euro-area private sector would need to decline by at least 5 percent," he said. "It is essential that the higher European capital requirements are a temporary measure as intended, not sustained over time and not seen as a new standard to be imposed more widely."

BusinessEurope, a federation of European employers, today endorsed last week's bank plan as well as the EU's overall crisis-fighting strategy. The group also said the plan is the "best opportunity" for Greece to right its economy.

"We continue to believe the agreements regarding bank recapitalisation, extending the EFSF and improving the sustainability of Greek borrowing alongside commitments from all member states to implement recommendations regarding budgetary policy and structural reform, represent essential steps," wrote Jürgen Thumann, president of the employers' group, in a joint letter with Laurence Parisot, president of the business lobby Medef.

'New Investment Capital'

The IIF renewed its call to continue work on the debt swap, even as Greek Prime Minister George Papandreou seeks to put the new rescue program to a parliamentary vote and a popular referendum. The debt swap, combined with Greece's budget reforms and more EU and International Monetary Fund money, would help Greece return to a more sustainable and independent debt path.

"This would also help bring in new investment capital and unlock market access -- possibly as early as 2015," Dallara said. "This would greatly reduce the burden on the official sector and the European taxpayer of providing perpetual support for Greece."

The outline of the bond exchange calls for banks and other investors to exchange their holdings at 50 percent of their face value. The new bonds would be partially backed by collateral guaranteed by the European Financial Stability Facility or another AAA rated lender. Details on timing, eligible maturities and coupon rates haven't been decided.

'Significant' Risk

As Europe proceeds with its crisis-fighting efforts, the European Central Bank needs to continue its secondary-market purchases of government bonds so markets and the economy can recover , Dallara said. The IIF said the ECB should consider lower interest rates as Europe faces a "significant" risk of recession that could spill over to the world economy.

"It is essential that all parties come together behind the continued active role of the ECB in the secondary government bond market," Dallara said. "We would also emphasize that lower ECB policy rates at this point would enhance market stability as well as help bolster faltering regional economic growth."

The U.S. budget debate is an area of "significant concern," and some major emerging-market nations face slower growth and more inflation, the IIF said. The G-20 will need to coordinate its economic and regulatory policy objectives to put the world on sounder economic footing.

"It is essential for the official sector to begin viewing the banking system as an indispensible partner in fostering recovery, rather than an adversary on which it is necessary to impose ever more punitive measures," Dallara said.

To contact the reporter on this story: Rebecca Christie in Cannes at rchristie4@bloomberg.net Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/

Sent from my Money Making iPad