DoubleLine launches stock management division

NEW YORK (Reuters) – DoubleLine Capital LP, the $ 53 billion firm run by star bond investor Jeffrey Gundlach, said on Wednesday it is now managing stock portfolios in a new division called DoubleLine Equity LP.

The firm, which surpassed $ 50 billion in bond assets last year after launching in 2009, said in a news release that it has tapped former TCW Group Inc portfolio managers Brendt Stallings and Husam Nazer to expand its stock division.

In an interview on Wednesday, Gundlach, DoubleLine‘s chief executive officer and chief investment officer, said stock mutual fund strategies suffer from a lack of new ideas.

“We think the equity business is ripe for creative thinking,” he said.

Gundlach said he plans to start with one or two mutual funds that offer a strategy focusing on U.S. stocks, and quickly follow with a hedge fund whose strategy would focus on “best ideas” in international stock investing.

“We’re really not prepared to do a lot of individual stock selection outside of the United States,” he said.

Gundlach had hinted at the firm’s move into stocks in a webcast on September 11, citing the broad disinterest in equities and their potential as a hedge against inflation.

He said on Wednesday that some of the stock funds he plans to offer will have a strategy that focuses on specific sectors among small and mid-cap stocks, while others will have a broader strategy that could vary widely in its stock selection.

Gundlach said DoubleLine’s business plan had been to build the firm’s bond management side to between $ 50 billion and $ 60 billion in assets before diversifying into areas such as stocks, a goal it has achieved.

“This is our first move to diversify. There’s very likely to be one if not two more over the course of 2013,” Gundlach said. He said he is seeking to reach a maximum of about $ 10 billion in assets within DoubleLine’s equity division.

Gundlach has made pointed calls on stocks in the past, including one at the Ira Sohn investing conference in May to buy natural gas while betting on a decline in the shares of Apple Inc, the world’s most valuable technology company.

On Wednesday, Gundlach recommended trading the volatility in Apple’s stock price.

“Apple’s flopping around like a fish in a boat. When it has a big rally, you should probably sell it. When it goes down a lot, you should probably buy it,” he said, and reiterated a call he on CNBC in November that its stock price may drop to $ 425 a share. Apple’s stock was up 3.2 percent to $ 549.03 at the close of trading on Wednesday.

DoubleLine Total Return Bond Fund, the firm’s flagship, earned a return of 9.2 percent in 2012, beating 97 percent of other U.S. mortgage-focused funds, according to Lipper. The fund, which oversees $ 37.1 billion, took in $ 19.7 billion last year, making it the most popular mutual fund by asset growth.

Pacific Investment Management Co, the world’s largest bond fund manager with $ 1.92 trillion in assets as of September 30, 2012, began moving into equities when it launched its first actively managed stock mutual fund in 2010.

Gundlach told Reuters that his foray into stock investing could also come with a downturn in the stock market, which he said he could overcome through active management.

“There’s a really good argument that you could have a major correction in the S&P 500 in 2013,” he said. He cited the heavy influence of U.S. policymakers on markets.

Stallings and Nazer were previously group managing directors at TCW, the highest title for managers at the firm, where they oversaw $ 5 billion in assets in stock portfolios.

Gundlach founded DoubleLine after a nasty split with TCW, where he was fired as chief investment officer in December 2009. The two sued one another in 2010, but settled in December of that year without disclosing terms.

Private equity firm Carlyle Group struck a deal in August to buy a 60 percent stake in TCW from French bank Societe Generale. TCW management and employees will own the remaining 40 percent stake in the Los Angeles-based investment firm, which has $ 135 billion in assets.

DoubleLine, which is also based in Los Angeles, employs more than 80 people. Stallings and Nazer plan to hire at least five investment professionals this year, the news release said.

Nazer said in an interview on Wednesday that dividend-paying stocks in general and consumer staple stocks are particular bright spots.

(Reporting by Sam Forgione; Editing by Kenneth Barry and Mohammad Zargham)

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World stocks jump as US staves off ‘fiscal cliff’

BANGKOK (AP) — World markets registered relief Wednesday over the U.S. congressional vote to stop hundreds of billions of dollars in automatic tax increases and spending cuts that risked plunging the world’s biggest economy into recession.

Benchmarks in Australia and Hong Kong boomeranged on the first trading day of the year, just before Congress passed an emergency measure to avert much of the impact of tax-and-spending changes that were so steep they were dubbed the “fiscal cliff.” Asian markets had slipped on Monday, fearing that negotiations over the measure might collapse.

Economists have been warning that the tax increases and spending cuts could take a chunk out of the U.S. economy; some experts predicted financial markets would plunge unless a clear-cut deal was reached.

Instead, markets in Asia and Europe blessed the stopgap measure approved late Tuesday in Washington to retroactively counter some of the “fiscal cliff” effects. The bill Congress passed awaits President Barack Obama‘s signature.

Hong Kong’s Hang Seng index shot up 2.9 percent to close at 23,311.89, its highest finish since June 1, 2011. Australia‘s S&P/ASX 200 surged 1.2 percent to close at 4,705.90, its strongest finish in 19 months. South Korea’s Kospi jumped 1.7 percent to 2,031.10.

European stocks jumped shortly after opening. Britain’s FTSE 100 rose 1.6 percent to 5,989.24. Germany’s DAX advanced 1.7 percent to 7,740.12 and France’s CAC-40 also gained 1.7 percent at 3,701.90.

“People are very relieved this morning because the U.S. is very likely to fix its own problems in the next few days, so investors in Hong Kong are pretty optimistic,” said Jackson Wong, vice president of Tanrich Securities in Hong Kong.

But some analysts said that expectations for a compromise were so low that any deal was viewed as positive.

“Among business leaders, I’m gonna say this deal isn’t enough to move the needle on confidence. It may improve consumer confidence a little, investors obviously are celebrating a tentative deal but you know how transitory investor confidence can become,” said Jack Ablin, chief investment officer at BMO Group.

Benchmarks in Singapore, Taiwan, India, the Philippines, Thailand and Indonesia posted solid gains. Markets in Japan and mainland China reopen Friday.

Uncertainty about the outcome of negotiations drove down Asian regional stocks Monday, the last trading day of 2012.

Australia’s S&P/ASX 200 fell 0.5 percent to close at 4,648.90, as investors sold off stocks to lock in profits. Hong Kong’s Hang Seng closed marginally lower. Singapore, New Zealand and India also declined. Japan and South Korea were closed.

The bill that Congress approved calls for higher taxes on incomes over $ 400,000 for individuals and $ 450,000 for couples, a victory for Obama. Earnings above those amounts would be taxed at a rate of 39.6 percent, up from the current 35 percent. It also delays for two months $ 109 billion worth of across-the-board spending cuts that had been set to start affecting the Pentagon and domestic agencies this week.

Lorraine Tan, director at Standard & Poor’s equity research in Singapore, said she believes U.S. growth in 2013 will be able to offset the impact of the tax increases and that companies would feel freer to spend now that the U.S. has taken a step back from the edge of the cliff.

Companies “can start to move ahead with any expansion plans they may have,” Tan said. “You’ll see some of that pent-up spending in 2013. And I think there’s a lot of relief related to that.”

Even if Washington bypasses the fiscal cliff, the next crisis is just around the corner, in late February or early March, when the government reaches a $ 16.4 trillion ceiling on the amount of money it can borrow.

Republicans say they won’t go along with raising the limit on government borrowing unless the increase is matched by spending cuts to help attack long-term debt. Failing to raise the debt ceiling could lead to a first-ever U.S. default that could roil financial markets and shake worldwide confidence in the United States.

“Republicans vow not to raise the limit without sharp cuts in spending and Obama vows not to cut spending without further tax hikes. Two more months of shenanigans and waffling / seasick markets? It certainly looks that way,” analysts at DBS Bank Ltd. in Singapore said in a market commentary.

U.S. stocks shot higher Monday on the belief that lawmakers would work out a deal. The Dow Jones industrial average rose 1.3 percent to 13,104.14. The Standard & Poor’s 500 rose 1.7 percent to 1,426.19. The Nasdaq composite index rose 2 percent to 3,019.51.

Political gridlock has been rattling U.S. markets and shaking consumer and business confidence the past two years.

To end a 2011 standoff over raising the federal debt limit, lawmakers agreed to a Jan. 1, 2013 deadline to reach a deal over taxes and spending. If there was no agreement, more than $ 500 billion in tax increases would hit the economy in 2013 alone, along with $ 109 billion in cuts from the military and domestic spending programs — hence the fiscal cliff.

After a fight over raising the debt limit last year, the credit rating agency Standard & Poor’s took the unprecedented step of lowering the U.S. government’s AAA bond rating because of the lack of a credible plan to reduce the federal government’s debt.

___

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Insight: How Colombian drug traffickers used HSBC to launder money

(Reuters) – When several Colombian men were indicted in January 2010 on money-laundering charges, the case in Brooklyn federal court drew little attention.

It looked like a bust of another nexus of drug traffickers and money launderers, with mainly small-time operatives paying the price for their crimes.

One of the men was Julio Chaparro, a 48-year-old father of four who owned three factories that made children’s clothing in Colombia.

But to U.S. authorities the case was anything but ordinary. Chaparro, prosecutors alleged, helped run a money-laundering ring for drug traffickers that took advantage of lax controls at UK-based international banking group HSBC Holdings Plc. It was one of the most important leads for U.S. investigators pursuing a case against the bank that eventually led to a $ 1.9 billion settlement on December 11.

Chaparro was “basically putting the orchestra together” and investigators saw “him as a major player in terms of cleaning a lot of money,” said James Hayes, special agent in charge of Homeland Security Investigations at U.S. Immigration and Customs Enforcement in New York. Known as ICE, the agency and its task force led the probe.

The Colombian’s lawyer, Ephraim Savitt, said Chaparro was a middleman in the operation, but disputed the extent of his client’s role, saying he was the “page turner of sheet music for the conductor.”

Chaparro, who was arrested in Colombia in 2010 and extradited to the United States in 2011, pleaded guilty to a money-laundering conspiracy count in May and is awaiting sentencing in 2013.

An HSBC spokesman declined comment.

Much about the trail that drug traffickers used to move U.S. dollars – the proceeds from drug sales – through HSBC and other banks remains unclear. By design, the process is layered to evade detection.

But a review of confidential investigative records that originate from two U.S. Attorney office probes and federal court filings in New York and California, as well as interviews with senior law-enforcement officials, shows how investigators tracing the activities of people who allegedly worked with Chaparro were able to expose large-scale money laundering at one of the world’s biggest banks.

The federal law-enforcement task force – named after El Dorado, the mythical city of gold in South America – used wire taps, email and computer searches, information from at least one inside source, and old-fashioned surveillance, to piece together the ring’s operations.

SMUGGLED ACROSS BORDER

Drug cartels sold narcotics in the United States and routed the cash to Mexico, often using couriers to smuggle it across the border. That cash would then be put into bank accounts at HSBC‘s Mexico unit, where large deposits could be made without arousing suspicion, according to U.S. Department of Justice documents.

In one filing, U.S. prosecutors said, Chaparro and others allegedly utilized accounts at HSBC Mexico to deposit “drug dollars and then wire those funds to … businesses located in the United States and elsewhere. The funds were then used to purchase consumer goods, which were exported to South America and resold to generate ‘clean’ cash.”

In a typical transaction, a middleman in a drug cartel would offer to deliver consumer goods, such as computers or washing machines, to Colombian businesses on favorable terms. Another person in the United States would buy the goods from firms using funds from drug trafficking, and fulfill those orders.

Money launderers exploited the laxness of HSBC in policing shadowy money flows, the Department of Justice said earlier this month. Failures included not conducting due diligence on customers, not adequately monitoring wire transfers or cash shipments and not having enough employees to run anti-money laundering systems. U.S. Assistant Attorney General Lanny Breuer called the lapses “stunning failures of oversight.”

The situation was so bad, according to the Department of Justice, that in 2008, the head of HSBC‘s Mexican operations was told by Mexican regulators that a local drug lord described the bank as “the place to launder money.”

The Chaparro probe, led by ICE and the Justice Department, converged over the past two years with two other investigations – led by federal prosecutors and investigators in West Virginia and by the Manhattan district attorney – resulting in this month’s settlement with HSBC.

HSBC and its employees avoided criminal indictments, as the bank agreed instead to a deferred-prosecution deal that forces it to strengthen controls and accept a compliance monitor.

Today, Chaparro sits in a federal detention center in Brooklyn, reading the Bible and awaiting sentencing, said Savitt, a former U.S. prosecutor in Brooklyn, who submitted a list of questions to Chaparro for Reuters.

“He is contrite, regretful and ashamed about his crimes,” Savitt said. “He wants to serve his time and rejoin his family. He understands that a prison term could prevent that from happening for many years.”

Under federal guidelines, he could face 15 to 18 years in prison.

ON CHAPARRO’S TRAIL

The El Dorado federal task force, based in a building on the west side of Manhattan near Chelsea Piers, serves as an umbrella organization for some 250 law-enforcement officials from state, local and federal agencies.

One of the task-force supervisors is Lieutenant Frank DiGregorio, a former New York detective who spent years tracking the so-called Black Market Peso Exchange, which is used to convert dollars to Colombian pesos through trading in goods. DiGregorio along with two younger investigators – Graham Klein and Carmelo Lana – led the HSBC case.

The overall probe began in 2007 when investigators analyzed how courier companies ferried cash through airports in Miami and Houston, a person familiar with the case said. They ultimately tracked that to HSBC‘s operations in Mexico and then connected it to funds moving through New York.

A tipping point in the investigation came in 2009 when El Dorado agents arrested a man named Fernando Sanclemente. Two sources familiar with the case say Sanclemente was an operative in Chaparro’s network.

Sanclemente, who was charged with allegedly conducting financial transactions tied to narcotics trafficking, is free on bail with a $ 200,000 bond, according to the latest court docket entry, which dates to January 2012. His lawyer, James Neville, declined to discuss the status of the case.

According to a criminal complaint filed against him by Lana, the El Dorado agent, on June 30, 2009, task force agents followed Sanclemente for more than two hours as he drove around Queens in New York to ferry cash from drug sales.

Sanclemente first met with a person for about “30 seconds” on one street corner, and left with a yellow plastic bag. Later that night, he drove to a Dunkin’ Donuts near LaGuardia Airport, where a black livery cab pulled up and the driver handed him a black bag.

The El Dorado team followed Sanclemente to Laurel Hollow, New York, some 40 minutes away, where the investigators stopped and searched him, finding about $ 153,000 in the two bags. At Sanclemente’s apartment, investigators said they found ledgers and documents consistent with money laundering.

With the arrest, investigators gained insight into Chaparro’s alleged transactions. At one point, investigators set up undercover bank accounts where they were able to get Chaparro’s network to wire proceeds that could be traced back to HSBC‘s Mexico operations, according to people familiar with the situation and a Department of Justice filing in the HSBC case.

Federal agents would ultimately home in on $ 500 million that had moved from HSBC Mexico to HSBC‘s operations in the United States, according to the confidential investigative records.

Between October 6, 2008 and April 13, 2009, Chaparro and others conducted money laundering transactions totaling $ 1.1 million tied to narcotics trafficking, the indictment against Chaparro alleged.

(Reporting By Carrick Mollenkamp and Brett Wolf of the Compliance Complete service of Thomson Reuters Accelus; Additional reporting by Tomas Sarmiento Cordero in Mexico City and Aruna Viswanatha in Washington; Editing by Paritosh Bansal and Martin Howell)

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Publisher Tribune to emerge from bankruptcy on December 31

(Reuters) – U.S. media giant The Tribune Co, owner of the Los Angeles Times and the Chicago Tribune, said late on Sunday it will emerge from bankruptcy on December 31, ending four years of Chapter 11 reorganization.

Chicago-based Tribune said it will emerge from the Chapter 11 process with a portfolio of profitable assets that will include eight major daily newspapers and 23 TV stations. The company will also have a new board of directors.

“Tribune will emerge as a dynamic multi-media company with a great mix of profitable assets, powerful brands in major markets, sufficient liquidity for operations and investments and significantly less debt,” Eddy Hartenstein, Tribune’s chief executive officer, said in an email to employees. “In short, Tribune is far stronger than it was when we began the Chapter 11 process.”

As part of the Chapter 11 exit, the company will close on a new $ 1.1 billion senior secured term loan and a new $ 300 million asset-based revolving credit facility.

The term loan will be used to fund certain payments under the plan of reorganization and the revolving credit facility will be used to fund ongoing operations, the company said.

Upon exiting bankruptcy, Tribune will have issued to former creditors a mix of about 100 million shares of new class A common stock and new class B common stock and new warrants to purchase shares of new class A or class B common stock.

The current chief executive officer, Eddy Hartenstein, will remain in his role until the new board ratifies the company’s executive officers.

The company announced a seven-person board that includes Hartenstein, former Fox Entertainment chairman Peter Liguori, former Yahoo interim CEO Ross Levinshohn and Peter Murphy, Walt Disney’s former top strategic planning executive.

Liquori is expected to be named Tribune’s new chief executive officer.

In November, Tribune received regulatory approval from the Federal Communications Commission (FCC) to transfer its broadcast licenses to the owners who will take over the company when it emerges from bankruptcy.

The company’s plan of reorganization was confirmed by the Delaware bankruptcy court in July. Tribune’s emergence from bankruptcy was conditional on the FCC approving the transfer of the broadcast licenses to new owners.

The case is In re: Tribune Co et al, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.

(Reporting by Sakthi Prasad in Bangalore; Editing by Matt Driskill)

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Sudan’s oil production rises to almost 140,000 bpd: minister

KHARTOUM (Reuters) – Sudan has managed to boost oil production to almost 140,000 barrels per day and plans to add another 10,000 bpd next year, its oil minister said on Saturday after the African country launched a new oilfield.

Sudan has been stepping up oil and gas exploration after losing three-quarters of its former output, or 350,000 bpd, when South Sudan seceded last year. The loss of oil revenue, the main source of state income and the hard currency needed to fund imports, has thrown the economy into turmoil.

“Our current production is between 136,000 and 140,000,” Awad al-Jaz told reporters, adding that new discoveries had been made. Sudan last put its output in October at 120,000 bpd.

Chinese-owned Petro Energy E&P recently launched production at the Hadida oilfield in western Sudan with a daily output of 10,000 bpd.

For next year, Sudan plans to reach 150,000 bpd, Jaz said. “This is our budget (plan),” he said.

Initially Sudan had planned 180,000 bpd by the end of this year but missed the target after fighting with South Sudan in April damaged the key Heglig oilfield and its central processing plant on the Sudan side of their disputed border.

In July, Sudan signed oil exploration and production-sharing deals with Canadian company Statesman Resources Ltd as well as with Chinese, Nigerian, Australian, Brazilian and French companies.

Jaz said Sudan wanted to boost oil cooperation with Brazilian firms, especially to explore for oil and gas in the Red Sea.

Norway is helping Sudan improve its pumping recovery rate, but analysts are skeptical about any big output jump soon because new fields need first to be explored. A scarcity of the dollars is hampering efforts to bring in better equipment.

The minister also said South Sudan’s oil exports could resume once both sides reach an agreement on border security. “There is no problem,” he said, when asked whether from a technical point of view exports could flow.

South Sudan, which has no export pipelines or access to the sea, needs to export its oil through Sudan. It shut down its output of 350,000 in January after failing to agree with Sudan on fees.

In September both countries agreed to resume oil exports, but they have failed so far to set up a demilitarized zone at the disputed border, a condition for crude flows.

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Fewer US banks failing as industry strengthens

WASHINGTON (AP) — U.S. banks are ending the year with their best profits since 2006 and fewer failures than at any time since the financial crisis struck in 2008. They’re helping support an economy slowed by high unemployment, flat pay, sluggish manufacturing and anxious consumers.

As the economy heals from the worst financial crisis since the Great Depression, more people and businesses are taking out — and repaying — loans.

And for the first time since 2009, banks’ earnings growth is being driven by higher revenue — a healthy trend. Banks had previously managed to boost earnings by putting aside less money for possible losses.

Signs of the industry’s gains:

— Banks are earning more. In the July-September quarter, the industry’s earnings reached $ 37.6 billion, up from $ 35.3 billion a year earlier. It was the best showing since the July-September quarter of 2006, long before the financial meltdown. By contrast, at the depth of the Great Recession in the last quarter of 2008, the industry lost $ 32 billion.

— Banks are lending a bit more freely. The value of loans to consumers rose 3.2 percent in the 12 months that ended Sept. 30 compared with the previous 12 months, according to data from the Federal Deposit Insurance Corp. More lending fuels more consumer spending, which drives about 70 percent of economic activity. At the same time, overall lending remains well below levels considered healthy over the long run.

— Fewer banks are considered at risk of failure. In July through September, the number of banks on the FDIC‘s confidential “problem list” fell for a sixth straight quarter. These banks numbered 694 as of Sept. 30 — about 9.6 percent of all federally insured banks. At its peak in the first quarter of 2011, the number of troubled banks was 888, or 11.7 percent of all federally insured institutions.

— Bank failures have declined. In 2009, 140 failed. In 2010, more banks failed — 157 — than in any year since the savings and loan crisis of the early 1990s. In 2011, regulators closed 92. This year, the number of failures has trickled to 51. That’s still more than normal. In a strong economy, an average of only four or five banks close annually. But the sharply reduced pace of closings shows sustained improvement.

— Less threat of loan losses. The money banks had to set aside for possible losses fell 15 percent in the July-September quarter from a year earlier. Loan portfolios have strengthened as more customers have repaid on time. Losses have fallen for nine straight quarters. And the proportion of loans with payments overdue by 90 days or more has dropped for 10 straight quarters.

“We are definitely on the back end of this crisis,” says Josh Siegel, chief executive of Stonecastle Partners, a firm that invests in banks.

The biggest boost for banks is the gradually strengthening economy. Employers added nearly 1.7 million jobs in the first 11 months of 2012. More people employed mean more people and businesses can repay loans. And after better-than-expected economic news last week, some analysts said the economy could end up growing faster in the October-December quarter — and next year — than previously thought.

That assumes Congress and the White House can strike a budget deal to avert the “fiscal cliff” — the steep tax increases and spending cuts that are set to kick in Jan. 1. If they don’t reach a deal, those measures would significantly weaken the economy.

Banks have also been bolstered by higher capital, their cushion against risk. Banks boosted capital 3.8 percent in the third quarter, FDIC data show. And the industry’s average ratio of capital to assets reached a record high.

On the other hand, many banks are no longer benefiting from record-low interest rates. They still pay almost nothing to depositors and on money borrowed from other banks or the government. But steadily lower rates on loans other than credit cards have reduced how much banks earn.

“This interest-rate pressure on the banks becomes very difficult to overcome,” says Fred Cannon, chief equity strategist and director of research at Keefe, Bruyette & Woods. “It’s a big headwind for banks.”

Many banks have reported lower net interest margin — the difference between the income they receive from loans and the interest they pay depositors and other lenders. It’s a key measure of a bank’s profitability.

The industry’s average net interest margin fell to 3.43 percent in the third quarter from 3.56 percent a year earlier.

Some big banks have also cautioned that their earnings are up mainly because they’ve shed jobs, bad loans and weak businesses rather than because of an improved economy. They include JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. All managed to recover from the financial crisis in part because of federal aid.

Small and midsize banks have taken longer to rebound. They held risky commercial real estate loans used to develop malls, industrial sites and apartment buildings. Many such loans weren’t repaid. But as the economy has strengthened, fewer such loans have soured, and many small and medium-size banks have recovered.

For example, at M&T Bank Corp., a regional institution based in Buffalo, N.Y., net income soared in the third quarter. M&T attributed its gain to reduced loan losses and higher mortgage revenue. The bank repaid the remaining $ 381 million of the $ 600 million in bailout aid it had received during the crisis.

Yet analysts say regional banks are still feeling squeezed from reduced borrowing by companies.

Many banks complain they’ve been hampered by new regulations, especially stricter requirements for the capital they must hold to protect against unexpected losses. Rules enacted after the crisis have compelled some banks to move more capital into reserves and reduce the amount available to lend.

Some of the biggest banks say their customers have held off on borrowing in part because of slower global growth and concern about the “fiscal cliff.”

To avoid a collapse, some weak banks have sought mergers with larger institutions. In the July-September quarter, 49 banks were absorbed in mergers, up from 45 in the April-June quarter, FDIC data show.

The torrent of failures after the crisis and the increased mergers have thinned the number of banks to 7,181 with about 2.1 million employees as of Sept. 30. That compares with 8,451 banks with 2.2 million employees in the second quarter of 2008.

“The pressure is on to consolidate the industry,” says Siegel of Stonecastle Partners. He thinks more than 1,000 banks will be absorbed within five to seven years.

Consider BancTrust Financial Group Inc., based in Mobile, Ala., with around $ 1.3 billion in assets. Burdened with bad loans tied to Florida real estate, the bank couldn’t repay $ 50 million in federal bailout aid it received during the meltdown, and it struggled to stay profitable. So it decided to put itself up for sale.

It’s now being acquired by Trustmark Corp in Mississippi, which has about $ 9.9 billion in assets. The acquisition will help Trustmark expand in Florida and Alabama.

“Some of the smaller (banks) are just throwing up the flag,” says Cornelius Hurley, a former counsel to the Federal Reserve Board who heads Boston University’s Center for Finance, Law and Policy.

___

To see a list of Bank failures in 2012, view this interactive: http://hosted.ap.org/interactives/2012/banks/

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Global shares rise before U.S. budget talks, yen at two-year low

LONDON (Reuters) – World shares and the euro edged higher on Friday as U.S. lawmakers prepared to resume negotiations on avoiding a fiscal crisis, while the yen hit a two-year low on the prospect of drastic monetary easing in Japan.

U.S. President Barack Obama and lawmakers are set to have a last round of talks before a New Year deadline to reach a deal on averting major tax increases and spending cuts which could drag the economy and others around the world into recession.

Obama and Vice President Joe Biden will meet congressional leaders from the Republican and Democrat parties at the White House at 2000 GMT.

The MSCI all world share index was up 0.15 percent shortly after trading opened in Europe. With London’s FTSE 100 <.ftse>, Paris’s CAC-40 <.fchi> and Frankfurt’s DAX <.gdaxi> all just in positive territory, the regional FTSEurofirst 300 <.fteu3> was up just over 0.1 percent and moving towards last week’s 19-month high.</.fteu3></.gdaxi></.fchi></.ftse>

Members of Congress were divided on the odds of success at the budget talks, but IG strategist Stan Shamu noted some hope in the markets. “There is growing optimism that a deal can be knocked (together) before the deadline,” IG strategist Stan Shamu wrote in a note.

In Asia, Japan’s benchmark Nikkei index hit a 21-month high as markets priced in a huge injection of stimulus by the Bank of Japan following the election of a new government. The expectations also pushed the yen to a new two-year low versus the dollar.

The yen has now fallen roughly 10.5 percent versus the dollar in 2012, its biggest annual drop since 2005. At the same time Japan’s benchmark Nikkei is up 22 percent for the year.

“The Japanese equity market has turned positive, providing good sentiment for global investors, with many making money and putting the money into commodity markets such as the oil market,” said Tetsu Emori, a commodity fund manager at Astmax in Tokyo.

The euro edged up past $ 1.325 as trading remained thin as Christmas holidays continued for many investors. It came as France reported its economy had grown 0.1 percent in the third quarter.

European bond markets were largely quiet. German Bund futures rose on concerns that a U.S. budget deal will, after all, remain elusive.

(editing by David Stamp)

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Brent holds near $111 on US fiscal uncertainty; Japan supports

SINGAPORE (Reuters) – Brent crude held near $ 111 per barrel on Thursday as jittery investors stayed on the sidelines with a deadline to avert a U.S. fiscal crisis approaching, while hopes the new Japanese government’s policies will spur demand supported prices.

U.S. President Barack Obama and Republican lawmakers resumed talks on Wednesday over the so-called fiscal cliff – tax hikes and spending cuts slated to take effect next week that could push the economy back into recession.

“There is no easy way to resolve the U.S. fiscal cliff, but there should be a compromise at some point and that’s what the market is looking for,” said Tetsu Emori, a commodity fund manager at Astmax in Tokyo.

Front-month Brent futures slipped 16 cents to $ 110.91 per barrel at 0501 GMT, giving up some of the previous session’s 2 percent gain.

Brent may face some resistance between $ 112 and $ 113 before falling towards $ 102.7 over the next three months, according to Wang Tao, Reuters market analyst for commodities and energy technicals.

U.S. crude dropped from a nine-week high reached on Wednesday, shedding 6 cents to $ 90.92.

Oil futures rose in early Asian trade, taking a cue from Japanese stocks, which were at an 18-month high after the country’s new prime minister said beating deflation in the world’s No. 3 oil consumer and taming a strong yen were his top priorities.

“There are hopes that the aggressive fiscal policies will help Japan get out of deflation and, as it is an importer of commodities, that’s a positive for oil markets,” Emori said.

The government will pursue bold monetary policy, flexible fiscal policy and a growth strategy to encourage private investment, Prime Minister Shinzo Abe said on Wednesday .

CLIFFHANGER

The White House and Republicans are still far apart, as hopes for legislation to prevent the U.S. economy from tumbling off the fiscal cliff switch to the Senate.

Democrats control a majority in that chamber but still need some support from Republicans across the aisle for a likely attempt to raise taxes on the wealthy.

Obama will try to revive budget crisis talks – which stalled last week – when he returns to Washington on Thursday after cutting short his Christmas holiday in Hawaii.

“While markets have vacillated between optimism and pessimism over the prospects for a compromise, we expect a deal only at the last minute, with lots of decisions delayed into the New Year and austerity of roughly 2 percent of GDP,” Bank of America-Merril Lynch analysts said in their weekly report.

Worries about supplies from the Middle East rose once more after security forces in the United Arab Emirates arrested a cell of UAE and Saudi Arabian citizens which they said was planning to carry out militant attacks in both countries and other states.

The region holds some of the world’s largest oil fields and as a result any unrest in the area triggers supply concerns.

Oil futures may rise in the first quarter of 2013 with the global economy showing early signs of a pick-up, and on expectations that the fiscal crisis will be resolved.

Encouraging economic data from China, aggressive action by the European Central Bank to help its economies, and quantitative easing by the U.S. Federal Reserve together brighten the outlook for oil in the near-term.

U.S. crude could rise to $ 100 per barrel and Brent may test $ 120 by the end of March, said Emori.

Also supporting prices are expectations that U.S. crude stockpiles may have decreased last week as refiners kept inventory low for year-end tax purposes.

Crude stocks may have dropped by 1.9 million barrels in the week ended Dec 21, a Reuters poll showed on Wednesday.

Inventory data from the American Petroleum Institute will be released on Thursday, while numbers from the Energy Information Administration will be out on Friday, a day later than usual, because of the Christmas holiday.

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Japan’s policy veteran Motegi likely to serve as trade minister: media

TOKYO (Reuters) – Incoming Japan Prime Minister Shinzo Abe is likely to pick policy veteran Toshimitsu Motegi as trade minister, who will also take charge of energy and other key economic policies, media reported on Tuesday.

Motegi, 57, a former policy affairs chief for the Liberal Democratic Party (LDP), will tackle energy problems after last year’s Fukushima nuclear crisis, as well as issues such as the U.S.-led Trans-Pacific Partnership (TPP) free trade pact, public broadcaster NHK said.

Motegi was a leading member of the LDP’s panel tasked with drafting an economic revival plan aimed at tackling the strong yen, deflation and preventing Japanese firms from shifting overseas.

The LDP returned to power in the December 16 election for the lower house, calling for radical monetary easing and big spending on public works.

First elected to parliament in 1993 as a member of a small opposition party, Motegi joined the LDP shortly thereafter and has served posts including parliamentary vice-minister for the trade ministry and senior vice-minister for foreign affairs.

Motegi’s formal appointment is likely to be made on December 26, when Abe is expected to be elected as prime minister in parliament and form a new cabinet.

(Reporting by Tetsushi Kajimoto)

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For a Great Stocking Stuffer, Give a Kid a Vaccine

If you are looking for the perfect present to give kids this holiday season, what about immunity from a range of deadly communicable diseases? It is cheap and widely available at any good pediatricians’ office or vaccination clinic. Even so, this wonderful present is spurned by a growing number of parents in America and Europe.

A big reason that more children than ever will be around to enjoy the holiday season worldwide this year is because vaccination rates for a range of diseases have shot up over the last few decades. In the case of measles, the World Health Organization suggests 16 percent of infants were vaccinated against the disease in 1980 compared with 85 percent in 2010. The results speak for themselves: In 1980, measles killed 2.6 million people a year; that number was down to 139,000 in 2010. And that’s thanks not least to the efforts of the Global Alliance for Vaccines & Immunizations, which buys vaccines at bulk and sells them on to developing countries using a sliding price scale that depends on the country’s income. GAVI has helped improve vaccination rates significantly even in some of the world’s most challenging countries. Yemen, for example, started a rotavarius vaccination campaign with GAVI support in 2012.

But for all that Western aid has helped in increasing global coverage, vaccination rates are going the opposite direction in the West itself. Amanda Glassman and colleagues at the Center for Global Development developed a measure of global performance looking at the sustained level of vaccination against diphtheria, whooping cough, and tetanus (the DPT shot) over the 1980-2010 period. On that ranking, the U.S. came in No. 24 behind countries that include Slovakia, Hungary, and Albania. France ranked No. 31, and the U.K. No. 91—behind Gambia and Eritrea.

Unvaccinated kids are concentrated within those countries, which considerably increases the risk of outbreaks. A lot of rich Californians with kids in private schools have managed to clump together with enough like-minded fellow thinkers to create large reservoirs of unvaccinated kids. The opt-out rate in private schools in the state doubled from 2004 to 2011. There are now 110 private schools across California where more than half of the kids skipped some or all vaccinations, and 247 private schools saw vaccination rates below 90 percent, the threshold critical to minimizing the potential for disease outbreak.

Declining vaccination rates have had the inevitable result. In 2011, according to health economist Victoria Fan, France had more than 14,000 cases of measles—the highest since 2000 and considerably more than the total number of cases in all of the Americas that year. Latin America eliminated measles in 2002, but because of dropping vaccination coverage in the North, the U.S. is importing measles cases from Europe and threatens to reexport them to South America. The U.S. has also seen outbreaks of meningitis despite the availability of an infant vaccine since 1987. And in the first nine months of 2012, the U.S. suffered more cases of whooping cough than it had in decades, with 25,000 cases and 13 deaths.

Parents who don’t vaccinate risk their own children’s lives—but also those of newborns too young for vaccination, kids of other vaccine-deniers, and older people for whom vaccines have proven ineffective. And they slow efforts to wipe out diseases completely, so that no one has to go to the bother and expense of getting the vaccines that these selfish, misguided, or ignorant parents are already leaving on the shelf. Think smallpox—it killed 300 million-plus people last century, but no one is vaccinated against it today because a global campaign succeeded in wiping it out.

Insanely, in a country that mandates car seats for all kids, parents in 20 states, including California, are allowed to opt out of vaccination programs for “philosophical reasons.” And the situation is the same across much of Europe.  Whereas a child out of a car seat who gets involved in a crash is only a danger to herself, an unvaccinated kid is a danger to others. The public policy case for mandating vaccination is far stronger than that for car seats.

Meanwhile, no child whose parents have shown the practical love of turning up at the clinic and no vaccine worker who has braved the struggle to set up that clinic should be thwarted for lack of a few dollars to finance the vaccines. (For an example of that bravery, look no further than the eight polio vaccination workers murdered last week in Pakistan, where the Taliban has opposed the campaign.)

So if you’ve already got your kids vaccinated, why not help a kid in another country get his or her full set? Donate to child vaccination efforts through Unicef or such groups as the Lions and Rotary clubs that have been longtime supporters of global vaccination efforts. Meanwhile, if you haven’t got your own kids vaccinated, here’s hoping an elf repeatedly whacks you with the lump of coal in your stocking until you repent.

Kenny is a fellow at the Center for Global Development and the New America Foundation.

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Hurting Spaniards celebrate Christmas lottery wins

MADRID (AP) — Winners of Spain‘s cherished Christmas lottery — the world’s richest — celebrated Saturday in more than a dozen locations where the top lucky tickets were sold, a moment of uplift for a country enduring another brutal year of economic hardship.

The lottery sprinkled a treasure chest of €2.5 billion ($ 3.3 billion) in prize money around the country. Champagne corks popped and festive cheer broke out in 15 towns or cities where tickets yielding the maximum prize of €400,000 ($ 530,000), known as “El Gordo” (“The Fat One,)” had been bought.

A total of €520 million ($ 687 million) was won in the eastern Madrid suburb of Alcala de Henares alone. Among the top-prize winners were 50 former workers at metal parts factory Cametal who had formed a pool to buy tickets. Their company had filed for bankruptcy and ceased paying wages five months ago.

“I’m bursting with joy, I haven’t fully taken it in yet,” said local resident Josefina Ortega. “When others win you think to yourself it’ll never happen to you, but it has.”

Unlike lotteries that generate a few big winners, Spain’s version — now celebrating its 200th anniversary — has always shared the wealth more evenly instead of concentrating on vast jackpots, so thousands of tickets yield some kind of return.

Almost all of Spain’s 46 million inhabitants traditionally watch at least some part of the live TV coverage showing school children singing out winning numbers for the lottery

It is so popular that frequently three €20 ($ 26) tickets are sold for every Spaniard and many consider lottery day as the unofficial kickoff of the holiday season.

Before Spain’s property-led economic boom collapsed in 2008 ticket buyers often yearned to win so they could buy a small apartment by the beach or a new car. Now people said they needed money just to get by, or to avoid being evicted from their homes.

Though ticket sales were down 8.3 percent on last year, according to the National Lottery, in the days preceding the draw hundreds of people lined up to buy tickets outside outlets that have sold winning tickets before.

Dolores Perez and Teresa Palacio, two lottery outlet workers in north Madrid who sold a top-prize ticket celebrated with sparkling wine as curious neighbors gathered. The fortunate winner had yet to make an appearance.

“I had never sold a Christmas ‘Gordo’ before; I almost thought it didn’t exist,” said Perez, smiling broadly. “I’m so happy, I’ve worked here for 30 years and never before sold a ‘Gordo,’ until now.”

Since so many people chip in to buy tickets in groups, top prizes frequently end up being handed out in the same small town or in one city neighborhood.

Last year’s top winning number hit for 1,800 tickets in the northern town of Granen, population 2,000. Townspeople shared about €700 million ($ 925 million), and the rest of the €1.8 billion ($ 2.4 billion) was doled out in smaller prizes around Spain.

Spain holds another big lottery Jan. 6 to mark the Feast of the Epiphany. It is known as “El Nino” (The Child), in reference to the baby Jesus.

But the crisis will hit El Nino and all lotteries going forward. Until now, lottery winnings have been free from taxation, but now prizes above €2,000 ($ 2,640) will be liable to a 20 percent tax in 2013.

The government has imposed stinging austerity measures this year in a bid to prevent Spain from asking for a full-blown bailout like those granted to Greece, Ireland, Portugal and Cyprus. Spain’s unemployment stands at 25 percent and its economy is sinking into a double-dip recession.

___

Associated Press correspondent Alan Clendenning in Madrid contributed to this report.

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Nike shares jump 6.2% on results

21 December 2012 Last updated at 16:56 ET

Sportswear giant Nike shares closed with a sharp gain on Friday after it reported a strong rise in demand in its home North American market.

Shares rose 6.2% after the company’s third quarter figures suggested steady demand for its products around the world.

Orders for delivery of its shoes and clothing for the coming months were up 14% in the home market.

Worldwide orders for the December-April period were up 6%,

Nike’s chief executive, Mark Parker, said the level of home demand was a welcome boost: “In North America, we created great momentum. This is somewhat counterintuitive to some, given this market size and assumed maturity.

“But I see tremendous growth potential in North America.”

The company’s past reported orders were lower than expected.

Profit margins were down by 30 basis points on the second quarter, but Nike said it expects margins to grow in the fourth quarter.

The company made profits of $ 384m in the third quarter, 14% higher than analysts were expecting with revenue up 7%.

Despite the positive figure, Nike’s global performance was weak in certain areas, such as China, where it had excess stock and faces strong competition from local brands.

However, the picture there is improving with inventory levels rising 9% in the quarter, a far smaller build-up of excess stock than the 35% it saw in the same quarter a year ago.

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Asian shares slide as U.S. budget impasse creates anxiety

TOKYO (Reuters) – Asian shares slid on Friday after a Republican proposal to deal with a U.S. fiscal crunch failed to get enough support, deepening uncertainty over the U.S. can avert the “fiscal cliff” of automatic spending cuts and tax increases set to start January 1.

“Markets disliked signs of further delay in talks, with the risk that a deal may not be reached by the end of the year deadline,” said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. “It clearly hit risk sentiment.”

The U.S. House of Representatives will adjourn until after Christmas, Republican Representative Peter Roskam said on Thursday, after House Speaker John Boehner‘s proposed tax bill designed to avert the fiscal cliff failed to pass.

U.S. stock index futures fell sharply. S&P 500 stock futures slipped 1.7 percent, while Dow Jones stock futures and Nasdaq futures both lost 1.5 percent.

European shares will likely drop also, with financial spreadbetters predicting London’s FTSE 100 <.ftse>, Paris’s CAC-40 <.fchi> and Frankfurt’s DAX <.gdaxi> will open down as much as 0.6 percent. <.l><.eu></.eu></.l></.gdaxi></.fchi></.ftse>

The worrying U.S. political news sparked selling in Asian shares, with MSCI’s broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> wiping out earlier gains to tumble 0.7 percent. The index was on track to end the week down 0.6 percent, the first weekly loss in five weeks.</.miapj0000pus>

Markets broadly had been supported by optimism that U.S. lawmakers would avoid the fiscal cliff, which threatens to derail the U.S. economy and drag down global growth with it.

Boehner’s proposal was aimed at extracting concessions from the White House, which had threatened to veto it, and advance talks closer to a deal.

The Republican-led U.S. House of Representatives, which abruptly recessed on late Thursday, may return as soon as December 27 with a yet-to-be-decided new plan, said a senior party aide.

“This is a major setback for a Fiscal Deal compromise between the two parties. I would say that chances of a deal are down to maybe 40 percent from 65 percent — despite the dysfunction in Washington D.C,” said Douglas A. Kass, founder of hedge fund Seabreeze Partners Management Inc.

Risk assets were sold off, from shares, oil to currencies such as the Australian dollar and the euro. The yen firmed slightly, though it was pinned near multi-month lows versus the dollar and the euro on expectations for more aggressive Bank of Japan easing next year to drive the economy out of deflation.

“The delay in resolving the U.S. fiscal cliff problem is raising concern as the market expected some sort of positive direction out of the talks by the end of the year,” said Fujio Ando, a senior managing director at Chibagin Asset Management.

Safe-haven government bond prices rose, with U.S. 10-year Treasury yields moving away from an 8-week high hit this week, falling about 6 basis points to 1.74 percent. Benchmark 10-year Japanese government bond yields also ticked down half a basis point to 0.765 percent.

Inflows into U.S. Treasuries underpinned the U.S. dollar, which inched up 0.1 percent against a basket of major currencies <.dxy>.</.dxy>

Jim Barnes, senior fixed income manager at National Penn Investors Trust Co. in Wyomissing, Pennsylvania, saw Treasuries continuing to gain once U.S. markets open later, but expected a correction by the end of the day.

“Treasury yields will likely fall Friday morning and will begin to reverse course in the afternoon as investors become more optimistic a deal will be reached,” Barnes said.

“So far, the market has been handling setbacks in negotiation talks very well. With still a little bit of time left on the clock, this time around will be no different.”

Asset performance in 2012: http://link.reuters.com/muc46s

U.S. GDP: http://link.reuters.com/guw34t

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Along with uncertainties surrounding the future of U.S. budget talks, a firmer dollar also weighed on dollar-based commodities.

The euro fell 0.3 percent to $ 1.3206, off an 8-1/2-month high of $ 1.33085 touched on Wednesday.

U.S. crude futures dropped more than $ 1 to $ 89.10 a barrel, but oil was still on track for its biggest weekly gain since August.

Spot gold extended losses to near a four-month low touched on Thursday, and was last down 0.1 percent to $ 1,644.90 an ounce. Gold remained on course for a 12th annual growth on rock-bottom interest rates, concerns over the euro zone financial stability and diversification into bullion by central banks.

YEN GAINS SLIGHTLY

Anxieties over the U.S. budget negotiations also took their toll on Japan’s Nikkei average <.n225>, which had been supported by a weaker yen. The Nikkei gave up all of earlier gains to close down 1 percent and below the key 10,000 mark it reclaimed for the first time since early April on Wednesday. <.t></.t></.n225>

The dollar was down 0.4 percent to 84.02 yen, moving away from a 20-month high of 84.62 yen hit on Wednesday.

The euro slumped 0.7 percent to 110.91 yen also off a 16-month high of 112.59 yen reached on Wednesday.

The yen was kept under pressure after the Bank of Japan further eased monetary policy as expected on Thursday, with investors anticipating that the central bank will be persuaded to pursue more drastic measures next year.

The incoming prime minister, Shinzo Abe, has called for bolder action by the central bank to help bring Japan out of decades-long deflation.

For all the fears of a fiscal cliff debacle to come, several data series showed the United States remained on a recovery track, helping to underpin the dollar.

(Additional reporting by Masayuki Kitano in Singapore, Jennifer Ablan in New York and Ayai Tomisawa in Tokyo; Editing by Richard Borsuk)

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The $60 Billion Federal Bailout Named Sandy

In the immediate aftermath of Hurricane Sandy, federal lawmakers from both parties were quick to heap words of compassion upon the storm victims. Now those politicians are debating how much taxpayer money to put behind their rhetoric. The Federal Emergency Management Agency’s disaster relief fund barely adds up to $ 6 billion. So the Senate and the White House are each proposing to give New York, New Jersey, and Connecticut a combined $ 60.4 billion in emergency funding for disaster aid, about $ 20 billion less than what the states have requested.

The money in the Senate’s bill, being debated this week, would pay for everything from FEMA trailers to reconstruction of U.S. Coast Guard facilities. The U.S. Department of Veterans Affairs would get $ 236 million to renovate the flood-damaged Manhattan Medical Center, and another $ 1 million to fix up three national cemeteries in New York and New Jersey. There’s $ 412 million for restoring coastal ecosystems and a pot of money to help disaster victims pay for child care. People with damaged homes or businesses would be able to apply for $ 812 million in loans for rebuilding their properties. Senator Chuck Schumer (D-N.Y.) estimates that Sandy damaged or destroyed 305,000 homes and that 270,000 small businesses were shuttered in New York alone.

In some cases, the Senate wants to be a lot more generous than the Obama administration. Senate Democrats would give $ 336 million to Amtrak. Schumer says that’s how much the perennially cash-strapped railway needs to repair damage wrought by Sandy. It’s 10 times as much as the White House is requesting. For road and bridge repairs, the amount of money the Senate wants to set aside is three times the White House’s ask.

Some conservative groups are crying pork. They say the federal government risks a repeat of what happened after Hurricane Katrina, when public funds fell into the wrong hands. President Obama’s aid request is an “act of willful fiscal negligence,” reads a post on the website of Heritage Action for America. “Much of the funding goes toward superfluous programs that have no direct relation to Hurricane Sandy.” According to the group, the majority of the emergency funds being requested aren’t going to be spent until 2014.

While there’s certainly an opportunity for waste and abuse in an aid package as big as this one, it’s worth noting that not all the taxpayer money would be spent just to put things back the way they were before disaster struck—which is actually the standard under current rules for receiving FEMA funding. Democrats want to spend billions of dollars upgrading infrastructure so it can withstand a future superstorm. The Senate proposes $ 3.5 billion, an amount disaster experts say is a fraction of what it would take to hurricane-proof a large metropolitan area. The debate over these particular funds could be the most difficult for lawmakers, and its outcome the most lasting.

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After Ghana vote, investors turn to economy

JOHANNESBURG (Reuters) – A closely fought but peaceful election in Ghana this month has burnished the international image of the west African oil, gold and cocoa producer as “the Switzerland of Africa.”

But to win economic bragging rights too, Ghana’s new government will have to convince investors that it can tame a swelling fiscal deficit, stabilize a volatile currency and rebuild foreign exchange reserves that have declined this year while those of other African economies have grown.

Elected President John Dramani Mahama‘s administration will have to confront these challenges while economic growth slows – albeit to a robust 7.8 percent projected for 2013, from a blistering 14.5 percent last year.

Then there is the pressure of high expectations from ordinary Ghanaians impatient to see the benefits of oil production, which started in 2010.

Investors say they would also like more opportunities to participate in Ghana’s capital markets, but the main constraints are a bond yield curve that ends at five years and a small and illiquid stock market with just 34 listed companies.

“Ghana is one of our favorite places,” said Sven Richter, head of frontier markets at Renaissance Asset Managers. “We would have more in Ghana if there was more liquidity. We have less than one percent of our fund there and we’d quite happily have 10 percent.”

Despite a legal challenge by the opposition to Mahama’s narrow victory earlier this month, the largely incident-free election in a region known for coups and civil wars has given foreign investors comfort.

“Someone described Ghana to us as the Switzerland of Africa. I think that’s an apt description,” said Ayo Salami, chief investment officer of asset manager Duet Group’s Africa Opportunities Fund. “There seems to be a continuing commitment on the part of the government to institutional reform, to embedding democratic culture. All these are things we like.”

But the government has to show it is serious about cutting Ghana’s twin deficits – on its budget and current account – which are putting pressure on the currency, Salami said, echoing the concerns of credit rating agencies.

Continuing an election year trend, heavy public spending forced the government to revise its 2012 budget deficit target to 6.7 percent of gross domestic product (GDP), from the original 4.8 percent. Some analysts think it could end up in double digits when figures are published next year.

Fitch, which affirmed Ghana’s B+ rating in September, said the gap reflects a combination of repayment of arrears, public sector wage increases and higher energy subsidies.

OIL HOPES

Finance Minister Kwabena Duffuor said last week the country would pursue a fourth year of fiscal consolidation in 2013, expecting oil, agriculture and an infrastructure program to underpin economic growth.

Salami at Duet Group warns, however, against relying too much on oil, even if output is set to increase to 120,000 barrels per day next year, from around 90,000 bpd now.

“I know the government is hoping or waiting for oil revenues to come as the cavalry over the hill to sort this out for them,” he said. “What usually happens is that when governments get a new source of revenue they find a new way to spend it.”

Ghana’s current account deficit is likely to hit 14 percent this year, from 11 percent last year, due to infrastructure spending and demand for imports from local businesses and a growing middle class.

The deficit contributed to a near 20 percent depreciation in the local cedi currency in the first half of the year before the central bank intervened.

But its efforts to shore up the cedi have hit Ghana’s foreign exchange reserves, now at $ 5.2 billion or 2.9 months of imports, just below the traditional 3-month benchmark. Ghana also bucks a sub-Saharan African trend as Nigeria, Kenya, Mozambique and others have built up their reserves this year.

DEBT CONCERNS

While the smooth elections may have allowed investors “to cut the country a bit more slack”, the worsening fiscal picture means they will not do so for long, said Giulia Pellegrini, JP Morgan strategist for sub-Saharan Africa.

She expects the cedi to lose another 5-8 percent in the new year. “Investors will increasingly be monitoring the fiscal and current account situation,” she said.

“People are taking in the full picture rather than simply saying ‘it’s stable, it’s looking good, let’s just go for it’. They’re becoming more discerning if anything.”

The country’s rapid accumulation of debt since debt relief is also a cause for concern, Pellegrini said, with external debt currently at $ 7.8 billion, nearly double its 2008 levels.

Finance Minister Duffuor said Ghana would issue a second Eurobond next year, which should help to lower borrowing costs. Ghana’s 2017 bond is trading at a yield of 4.9 percent, much lower than the 21 percent investors demanded for a 3-year domestic bond sold in October.

Given high liquidity globally and the success of previous Eurobonds from African sovereigns, the issue should do well. But investors could make Ghana pay if it does not work on its budget. “Investors would still show quite a bit of interest but would want to be compensated for that,” Pellegrini said.

(Reporting by Tosin Sulaiman; Editing by Pascal Fletcher/Ruth Pitchford)

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Sweden cuts main interest rate to 1 percent

STOCKHOLM (AP) — Sweden‘s central bank has cut its key interest rate by a quarter of a percentage point to 1 percent as inflationary pressures remain benign and problems in Europe weigh on the Scandinavian country’s economy.

Tuesday’s decision was widely expected.

The Riksbank also says that its main interest rate will likely “remain at this low level for the coming year” due to the economic slowdown, rising unemployment and subdued inflation.

By the end of 2013, it expects inflation to start edging up as the global economic recovery gathers steam, partly on the back of recent measures taken by the 17 EU countries that use the euro to get a grip on their 3-year debt crisis.

The Riksbank says the weaker European economy has so far had “a clear effect” on Sweden.

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After landslide, Abe says Japan has difficult road

TOKYO (AP) — After leading his conservative party to a landslide victory that will bring it back to power after a three-year hiatus, Shinzo Abe stressed Monday that the road ahead will not be easy as he tries to revive Japan‘s sputtering economy and bolster its national security amid deteriorating relations with China.

The Liberal Democratic Party, which led Japan for most of the post-World War II era until it was dumped in 2009, won 294 seats in the 480-seat lower house of parliament in Sunday’s nationwide elections, the party said.

With the elections over, a vote among the members of parliament to install the new prime minister is expected on Dec. 26. Abe, who was prime minister for a year in 2006-2007, is almost certain of winning that vote because the LDP now holds the majority in the lower house.

Abe, who would be Japan’s seventh prime minister in 6 1/2 years, will likely push for increased public works spending and lobby for stronger moves by the central bank to break Japan out of its deflationary trap.

Stock prices soared Monday to their highest level since April, reflecting hopes in the business world that the LDP will be more effective in its economic policies than the outgoing Democrats were.

Abe told a packed news conference Monday that Japan is facing a series of crises — from the weak economy to security issues to reconstruction after the tsunami disaster.

“Our mission is to overcome these crises,” he said.

He said his party’s victory was less a vote of confidence from voters and more a repudiation of the “mistaken leadership” of the Democrats.

“The public will be scrutinizing us.”

He said he would like to meet with President Barack Obama in late January or early February to strengthen the Japan-U.S. alliance.

Chinese bloggers, meanwhile, reacted with scorn to the LDP’s victory, with many concentrating their fire on Abe, a China hawk. Chinese micro-blog sites Monday were full of anti-Abe comments, with some calling for a boycott of Japanese goods.

The countries are embroiled in a territorial dispute over a cluster of uninhabited islands in the East China Sea controlled by Japan but also claimed by China and Taiwan. During the two-week campaign leading up to the election, Abe took a rather tough line toward China, promising to defend Japan’s “territory and beautiful ocean.”

On Monday, Abe called for improved ties with Beijing while stressing the islands are an integral part of Japan’s territory and that there was “no room for talks” over their sovereignty.

“As with many cases, issues arise with countries that share borders, and what is important is how each nation keeps these issues under control. I feel we need wisdom so that the political issues or problems do not extend to economic problems,” he said.

“Although we are not in a situation where I can immediately visit China or have bilateral talks, first and foremost, we will persistently continue with our dialogue with China and hope to improve relations between the two countries,” he said.

Outgoing Prime Minister Yoshihiko Noda announced his resignation as party chief late Sunday, calling the election results “severe” and acknowledging his party failed to live up to the nation’s high expectations.

His Democratic Party of Japan said it won only 57 seats. Among its casualties were eight Cabinet ministers — the most to lose in an election since World War II.

Although the election was the first since the March 11, 2011, earthquake, tsunami and nuclear disasters, atomic energy — which the LDP conditionally supports — ended up being a side issue, though polls showed that about 80 percent of Japanese want to phase it out completely.

The LDP will stick with its longtime partner New Komeito, backed by a large Buddhist organization, to form a coalition government, party officials said. Together, they now control 325 seats, securing a two-thirds majority that would make it easier for the government to pass legislation.

A dizzying array of more than 12 parties, including several news ones, contested in the election, some with vague policy goals.

The most significant new force is the right-leaning, populist Japan Restoration Party, which won 54 seats.

The party is led by the bombastic nationalist former Tokyo Gov. Shintaro Ishihara and lawyer-turned Osaka Mayor Toru Hashimoto — polarizing figures with forceful leadership styles. Ishihara is another hawk on China, having stirred up the latest dispute with Beijing by proposing Tokyo buy the islands from their private Japanese owners and develop them.

The anti-nuclear Tomorrow Party — formed just three weeks ago — captured only nine seats. Party head Yukiko Kada said she was very disappointed to see the LDP, the original promoter of Japan’s nuclear energy policy, make such a big comeback.

Economy News Headlines – Yahoo! News

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Greek economy may start to grow in 2014, minister says

ATHENS (Reuters) – Greece’s economy, expected to slump for a sixth straight year in 2013, may begin to recover in 2014, the country’s finance minister said on Saturday.

“I believe that after the second half of 2013 we will be able to see growth, with positive rates of change in GDP on a quarterly basis or month-by-month,” Finance Minister Yannis Stournaras told Imerisia newspaper on Saturday.

Wage cuts and tax increases will keep the economy in a sixth consecutive year recession in 2013, with national output projected to shrink by 4.5 percent, based on official estimates.

The economy has contracted by a cumulative 24 percent since 2008, according to the country’s central bank.

“Whatever positive we achieve henceforth will be like rain falling in the desert, given that the country will be waking up from a recession of unprecedented duration,” Stournaras said.

In a separate speech to a medical conference, Stournaras said Greece would use 16 billion euros to recapitalize banks next week, and another 7.2 billion in the first quarter, after international lenders said they would resume aid payments on Thursday.

Euro zone partners and the International Monetary Fund agreed to unlock 49.1 billion euros in aid by the end of March. The decision to release the long-delayed installment came after Athens passed austerity measures and completed a debt buyback.

Greek banks will get the capital injection from the Hellenic Financial Stability Fund (HFSF), which has already provided 18.5 billion euros to the country’s four biggest lenders.

“Banks will be able to boost their portfolios with new, strong bonds from the EFSF (European Financial Stability Facility), without accessing the (central bank‘s) ELA (emergency liquidity assistance) mechanism,” Stournaras told the conference.

Athens is aiming at a primary budget surplus next year.

(Reporting by George Georgiopoulos; editing by Jason Webb)

Economy News Headlines – Yahoo! News

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After Connecticut: Guns, Gun Control, and Gun Culture

Bucolic Newtown, Conn., where a gunman killed 26 people, 20 of them children between ages 5 and 10, is also the headquarters of the American firearm industry. A short distance from Sandy Hook Elementary School, the National Shooting Sports Foundation, the country’s premier gun trade association, has its offices in a dignified white building on a gentle hill.

Like its better-known sister, the National Rifle Association, which represents gun owners, the NSSF promotes the arming of America—for hunting, shooting sports, self-defense, and the cultural significance that many Americans invest in firearms. The Sandy Hook massacre is the worst in the United States since the April 2007 rampage at Virginia Tech, which took place not too far from the NRA’s headquarters in Fairfax, Va.

Painful geographic juxtaposition of pointless slaughter and a marketing association doesn’t suggest anything profound. These are awful coincidences.

Or maybe there is something significant in the proximity.

The NSSF happens to be in Connecticut because that state, along with Massachusetts, has a gun-making tradition going back to the 18th century. In modern times, though, the unremarkable headquarters of the gun industry, or the gun owners’ lobby, could be in any pleasant exurban town: Aurora, Colo., for example, site of July’s movie theater bloodshed, or the community near Milwaukee where a gunman took six innocent lives at a Sikh temple in August.

The horror in Newtown is just the latest reminder that America is a gun culture. Firearms are both ordinary and, in many parts of the country, hallowed. They permeate our society. Private citizens own some 300 million pistols, revolvers, rifles, and shotguns. And the manufacturers and distributors that pay dues to the NSSF and make contributions to the NRA are selling more every day. This will not change.

If recent history serves as a guide, in fact, gun sales will rise in coming days. Fear of new gun control laws will send tens of thousands of consumers to Main Street shops and firearm websites. It happened after the January 2011 shopping mall massacre in Tucson, Ariz., in which former Rep. Gabby Giffords was maimed, and after most of the other recent mass public shootings.

Then Democrats in Congress will probably propose a piece of legislation or two that would tinker with the rules for legally acquiring firearms. These potential adjustments may make sense (e.g., restricting obscenely large ammunition magazines) or they may be utterly pointless (banning “assault weapons” that in terms of lethality are no different from grandpa’s wooden-stock deer hunting rifle). Either way, enacting such laws—which remains unlikely, given Republican control of the House of Representatives—would do little or nothing to stop mass shootings or common street crime.

Why? Because no politician, not President Barack Obama, not House Democratic Leader Nancy Pelosi—no one in mainstream Washington—is going to propose confiscating any of the millions of firearms or magazines already in private hands. Imagine being the police chief or sheriff given the task of forcibly collecting people’s guns or mags. It ain’t happening. We are too far down the road.

So prohibit 50-round drum magazines, if you like. In my view, that would not endanger the Second Amendment. Neither would it stop the next determined whack job from packing two 30-round magazines, or three 15-round magazines. The hardware is out there. Fiddling with the rules governing how new guns or mags are sold won’t stop the mass murders.

What, then, is to be done? First, we should acknowledge that some humans are sick and evil. In a heavily armed society, the existence of sick, evil people will, from time to time, lead to disaster.

If I were running a school or a movie theater or a house of worship, I would hire the highest-quality licensed, armed security available. No Second Amendment issue there. If there had been an armed guard at the Newtown school, it’s at least possible he would have brought down the killer and saved a lot of lives. Security guards are not a panacea. Yet we have them at sports stadiums and airports. In Israel, a guy with a gun on his hip stands in front of every elementary school.

Another thought on the gun massacre front: We must seriously rethink how we deal with extreme mental illness. Current laws make it almost impossible to get dangerously ill individuals involuntarily committed until they have their fingers on the triggers. More imaginative, flexible rules in this regard would allow us to medicate more dangerous people and separate them from firearms. (As a side benefit, this approach might also keep hundreds of thousands of mentally ill individuals from violating criminal laws and landing behind bars. More aggressive civil commitment offers a humane alternative to our current de facto policy of housing the mentally ill in prison.)

In terms of more ordinary street crime, we ought to study the factors that have made cities like New York much safer over the past 20 years. Gun control laws did not accomplish that improvement. Gun control laws in New York have remained the same, while homicide rates have plummeted. Why have bad guys in New York, and many other big cities, been leaving their guns at home, rather than bringing them with them on their rounds? How can we replicate that achievement?

While we mourn the dead in Newtown, those are questions worth exploring.

Businessweek.com — Top News

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