Financial life in a big town

Polish central bank monetary policy makers accused Governor Slawomir Skrzypek of involving the rate- setting body in his dispute with the government, a move that may dent their credibility as members of an independent panel.

Skrzypek called on the government to overhaul public finances, cooperate with the central bank in fighting inflation and prepare a program to adopt the euro during a press conference on June 25. The comments were not agreed to by the council beforehand, policy maker Dariusz Filar said in a phone interview in Warsaw today.

“I was totally surprised as I found out about the governor's address from the media,'' he said. “It was a blunder as it happened during a press conference to explain the council's rate decision. These two things should not have been combined as they involve policy makers in a political conflict.''

The central bank chief and the Cabinet blame each other for accelerating inflation that has led to higher borrowing costs and concerns that faster wage growth and employment will boost price growth even more. The inflation rate, at 4.4 percent in May, will remain above 3.5 percent upper limit of the central bank's target until 2010, the institution said yesterday.

Prime Minister Donald Tusk said on June 22 that the Monetary Policy Council waited too long before raising interest rates as inflation accelerated. That assessment was echoed by Finance Minister Jacek Rostowski.

Rate Increases

Policy makers raised borrowing costs four times this year to curb demand that has been derived from wage growth and employment pay day loans.

“The governor has defended the Monetary Policy Council, but the views of its members vary so it should have been earlier agreed to with us,'' Filar added.

Fellow policy maker Halina Wasilewska-Trenkner agreed.

“The cooperation with the government would be needed, and appealing for that through the media is inappropriate,'' she said in a phone interview. “The escalation of a conflict with the government won't help this issue. As long as there is no consensus between two parties, it should not be publicized.''

She added that even though the substance of Skrzypek's appeal is justified, it's not the way to resolve the problem.

The clash marks a fresh conflict between policy makers and the governor. The nine rate setters earlier this year criticized changes in the central bank's structure, prompting Deputy Governor Jerzy Pruski to quit. Policy makers asked the parliament's top official and the Constitutional Tribune to clear up the issue.

“Mutual relations now require serious discussion with Governor Skrzypek to clarify some things,'' said Filar. “It's a pity that we have to talk about it'' after the fact and not before.

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NYSE Euronext said Tuesday it will pay $250 million for a 25% stake in Qatar’s Doha stock market, as the operator of the New York Stock Exchange moves to build a financial hub in the Middle East.

Established in 1995, the Doha Securities Market (DSM) began operations in May 1997, and currently has 43 listed companies. Its market capitalization has climbed to $136 billion from $5.2 billion in 2000.

The deal, which represents NYSE Euronext’s largest investment ever in a foreign exchange, is expected to close early in the fourth quarter.

NYSE Euronext will receive three of 11 seats on the DSM’s board. It will be the technology provider for both the cash equities and derivatives markets, and will manage the new exchange’s operations, including naming senior management.

"This represents a hugely significant development for Doha’s financial markets," said Sheikh Hamad bin Jassim bin Jabor Al-Thani, Prime Minister and Minister of Foreign Affairs of Qatar no fax payday advances. "It’s a significant endorsement of Qatar’s importance in the world’s capital markets and will provide considerable opportunities for our future generations."

NYSE Euronext (NYX) said it will base a number of its growing Middle East region operational and technology support functions in Doha, growing its financial hub there.

Qatar is retaining a 75% stake in the DSM, but said it plans to sell a minority share of the DSM in a domestic initial public offering within the next three years. 

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The U.S. Federal Reserve began a two-day policy meeting on Tuesday that was expected to end with benchmark interest rates on hold and little evidence the central bank is going to raise borrowing costs soon.

The Fed began its policy-setting meeting at around 2 p.m. EDT as scheduled, an official said. A decision on rates is expected to be announced about 2:15 p.m. EDT on Wednesday.

Fed Chairman Ben Bernanke and his colleagues confront a deepening housing market slump that looks set to be a drag on growth for months to come, and surging oil and commodity prices that threaten to ignite broader inflation.

While inflation risks have edged up and the economy has seemingly steered clear of the risk of a deep recession, policy-makers at the central bank have not fully set aside concerns about economic weakness.

The U.S. central bank lowered the interbank federal funds target rate to 2 percent at its last meeting on April 29-30, and has indicated it hopes rate reductions of 3.25 percentage points since mid-September will suffice to help the economy recover from the housing collapse and credit crunch.

“For now, policy seems well positioned to promote moderate growth and price stability,” Bernanke said on June 3.

Fed officials are in a bind bad credit payday advance. Raising interest rates to quell inflation would put a further brake on an already weak economy, while more rate reductions to buffer against a further stumble in output could add to price pressures.

Recent data highlights that dilemma. U.S. consumer sentiment slid to a 16-year low in June, while house prices continued their downward slide, reports showed on Tuesday. 

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U.S. lawmakers are appalled at a foreign takeover bid for an American beer icon. The truth is Anheuser-Busch (BUD.N: Quote, Profile, Research, Stock Buzz) was a sitting duck — a lesson in poor strategy that wise managers would do well to learn.

The St Louis-based brewer of Budweiser, now a takeover target of European brewer InBev (INTB.BR: Quote, Profile, Research, Stock Buzz), failed to expand abroad in a meaningful way, so its share price went nowhere over the last five years as it missed growth opportunities.

Missouri senator Claire McCaskill vowed on Tuesday to do everything possible to “stop the sale” of Anheuser which is based in her state.

InBev Chief Executive Carlos Brito promised this week to keep the home of Budweiser, America’s “King of Beers” in St Louis. What he did not say was that Anheuser’s lack of ambition abroad had made it vulnerable.

Anheuser missed chances to expand in South America with AmBev in 2004 and then Bavaria in 2005, and also into the fast-growing Russian beer market faxless payday loans. It only announced plans to build its first brewery outside the U.S. from scratch last year.

“There has been no effective international strategy at all and its expansion abroad has not made a material difference to Anheuser and left it open to a bid,” said one banker who did not want to be named.

Belgian-based InBev, brewer of Stella Artois and Beck’s, launched a $65 a share bid for Anheuser last week, valuing the biggest U.S. brewer at $46.3 billion. The Budweiser and Bud Light brewer has only said it will evaluate the InBev proposal carefully.

SALES STAGNANT, COMPETITORS GEAR UP 

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Just six weeks ago the U.S. Federal Reserve was in interest rate-cutting mode. Now, Fed officials have hauled out rhetoric that suggests rates could rise within a few months.

The U.S. central bank’s sudden shift to more aggressive anti-inflation language reflects both an easing of worries on financial market conditions and concerns over signs that inflation expectations are escalating.

Fed Chairman Ben Bernanke staked out the new position last week with an eye-catching defense of the downtrodden U.S. dollar.

This week, Bernanke, Vice Chairman Donald Kohn and St. Louis Federal Reserve Bank President James Bullard were among officials who said they were watching for any sign a self-feeding inflationary psychology could take hold.

“The latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations,” Bernanke said. “The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations.”

While some Fed officials have been sounding the alarm about higher inflation for months, the harsher tone from Bernanke and Kohn marks an important shift away from an emphasis on the risk that financial turmoil, tighter credit and a deep housing contraction could tip the economy into a deep recession.

On April 30, the central bank lowered benchmark borrowing costs by a quarter-percentage point to 2 percent, the seventh reduction in a series dating to mid-September that has taken rates down by a cumulative 3.25 points.

Not all those reductions, however, were unanimous advance america cash advance. Dallas Federal Reserve President Richard Fisher dissented at each of the Fed’s last three meetings, and he was joined in opposition at the last two by Philadelphia Fed chief Charles Plosser. 

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CALGARY–Fertilizer producer Agrium Inc. says it is looking forward to record profits as "unprecedented demand for crop inputs."

The Calgary-based company said it expects second-quarter earnings of US$2.80 to $3 per share, up from previous guidance of $1.92 to $2.22, "due to very strong results from both our retail and wholesale operations."

Agrium's results are "particularly impressive given that the North American spring application season has been hampered by excessively cold and wet weather this year," president and CEO Mike Wilson said in a release.

"Continued strong global crop prices have created unprecedented demand for crop inputs and we foresee an extended demand-driven cycle."

The company said its forecast assumes there is no unfavourable financial impact from its Egyptian nitrogen facility EAgrium, at which construction was halted in April“due to permitting and other delays created by the Egyptian government."

A syndicate of banks providing financing for the project has requested the suspension of future draws on a credit facility and says the loan is in default no qualifying payday advance.

Agrium said it expects government approval but has "concerns these issues may not be resolved in the near term, in which event EAgrium's shareholders would be exposed to the loss of their total equity commitment."

Agrium has $165 million invested in the project with a total equity commitment of $280 million.

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Hewlett-Packard, the world’s biggest computer maker, launched a new generation of touchscreen PCs designed to lift user-friendly computing out of its expensive niche and bring it to a wider market.

The TouchSmart All-in-One allows users to work with photos, music, video, the Internet and television by tapping or swiping the screen, and will be priced at $1,299, HP said at the launch in Berlin on Tuesday.

HP’s Personal Systems group of PCs, notebooks, workstations and handheld devices has transformed itself over the past few years from a largely commoditized volume business to a far more successful one that emphasizes product design.

The group’s executive vice president, Todd Bradley, told Reuters he aimed to set a trend and create a new market.

“We don’t think about this as a niche no fax payday loans. We think about it as a global product that will inspire demand and drive desirability,” Bradley said in a telephone interview.

“Our ability to lead is very important,” he added, declining to speculate on what size the market for such PCs might reach.

HP’s announcement came a day after Apple announced a new version of its ground-breaking iPhone, the original version of which brought touchscreens to public attention and sparked a host of imitators.

Bradley denied that HP was following Apple, pointing out that HP had been developing touch technology for some time. But analyst Crawford del Prete of research firm IDC said: “I don’t think Apple’s impact can be underestimated.” 

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WASHINGTON–Worker productivity increased at a faster pace in the first three months of this year than previously estimated, while wage pressures moderated.

The Labor Department reported Wednesday that productivity rose at an annual rate of 2.6 per cent in the January-March period, faster than the government's initial estimate of 2.2 per cent made a month ago.

Wage pressures, meanwhile, moderated from the final three months of last year with unit labor costs rising at an annual rate of 2.2 per cent in the first quarter. That was a marked slowdown from a 4.7 per cent surge in labor costs in the final three months of last year.

While rising wages and benefits are good for employees, those increases can lead to higher inflation if businesses are forced to boost the cost of their products to cover the higher payroll costs. However, if productivity is increasing, it allows businesses to finance higher wages out of the increased output.

The Federal Reserve, always on guard about the threat of inflation, closely monitors developments in productivity since wage pressures are often the main way inflation gets out of control.

The 2.6 per cent rate of growth in productivity was a significant improvement from a 1.8 per cent increase in the final four months of last year. The 2.2 per cent rise in labor costs, unchanged from the initial estimate a month ago, marked a sharp slowdown from a 4.7 per cent rate of growth in labor costs in the fourth quarter of last year.

Those developments should be welcomed by the Fed, which has started to worry more about inflation pressures in the face of a relentless surge in energy and food costs payday loans. The Fed cut rates for a seventh time on April 30, but the reduction was a smaller quarter-point move. The central bank indicated the rate cuts could be drawing to a close as the attention shifted from worrying about keeping the country out of a steep recession to concerns about inflation.

Fed Chairman Ben Bernanke discussed his inflation concerns in a speech on Tuesday, worrying that a rapid rise in prices, if sustained, "might lead the public to expect higher long-term inflation rates, an expectation that ultimately could become self-confirming.''

Bernanke's remarks were seen as a strong signal that the Fed is through cutting interest rates and may start raising rates later this year as a way to battle inflation pressures.

The Fed wants to make sure that soaring energy costs don't produce higher wage pressures that could trigger a disastrous wage-price spiral like the country experienced in the 1970s.

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The country’s highest court has agreed to weigh in on the $52 billion privatization of phone giant BCE Inc., a transaction that appeared close to imploding after a lower court effectively ruled the phone company’s bondholders had been treated unfairly.

In a victory yesterday for BCE and its buyers, the Supreme Court of Canada said it has agreed to review last month’s unanimous decision by the Quebec Court of Appeal, a ruling that several observers said could have far-reaching implications for future corporate takeovers in Canada.

BCE, which owns Bell Canada, now has one last chance to complete what is being billed as the biggest leveraged buyout ever.

At issue is whether BCE’s board erred in its duties by failing to consider the interests of BCE bondholders when directors accepted a $42.75 per share takeover offer.

The bid was made by the Ontario Teachers’ Pension Plan and United States private-equity firms Providence Equity Partners Inc., Madison Dearborn Partners LLC and Merrill Lynch Global Private Equity.

The current legal thinking on Bay Street has held that a board’s duty is to maximize shareholder value. The appeal court, however, said that the interests of other stakeholders must also be considered in such a transaction.

The bondholders have complained that a leveraged buyout of BCE would load up the telephone company’s balance sheet with too much debt.

That would probably make the investments of the bondholders less valuable.

Both BCE and lawyers representing the bondholders declined to comment on yesterday’s decision, which was released after the markets closed.

"We’re pleased that the Supreme Court granted leave and will hear the case on June 17," said Deborah Allan, a Teachers’ spokesperson.

The court had already decided to fast track the process if permission to appeal was granted payday loan.

The timing is important.

BCE investors have been speculating for months that the banks backing the deal – and possibly the buyout consortium itself – are eager to find an excuse to walk away from their commitments, and are therefore unlikely to agree to an extension.

The purchasers have until June 30 to conclude the purchase, which can be delayed only with approval from both sides.

The ongoing credit crunch has raised the cost of borrowing money.

That has made the price of completing the transaction significantly higher than when the deal was inked last June.

Shares of BCE closed at $34.65, down 40 cents, on the Toronto Stock Exchange yesterday, before the court’s decision was made public.

BCE had argued in its submissions to the Supreme Court that a failure to hear the case threatened to destroy billions of dollars of value for the company and its shareholders.

Bondholders, on the other hand, had urged the court not to be swayed by the deal’s size when making a decision on whether to grant a leave to appeal.

With files from The Canadian Press

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