Financial life in a big town

U.K. services, manufacturing and construction probably waned this month as Bank of England policy makers prepare to discuss whether they need to extend stimulus after the economy slipped back into recession.

A gauge of factory activity based on a survey of purchasing managers will fall to 51.5 from 52.1 in March, according to the median estimate of 27 forecasts in a Bloomberg News poll. A reading above 50 indicates expansion. An index of services, the largest part of the economy, will decline to 54.1 from 55.3, while a construction measure will also fall, separate surveys of economists show.

U.K. gross domestic product fell in the first quarter, pushing the economy into its first double-dip recession since the 1970s. While Bank of England officials have said that may hurt confidence, they must balance that risk with the threat from faster-than-targeted inflation at their May 9-10 meeting.

Wal-Mart’s stock price dropped Monday, after bribery allegations concerning the retailer’s Mexican operations surfaced over the weekend.

Wal-Mart Stores (, Fortune 500) stock finished 4.7% lower on Monday. On Mexico City’s Bolsa Mexicana de Valores, the stock price for the company’s Mexican division, Wal-Mart de Mexico (), plunged 13%.

The world’s biggest retailer drew attention as a result of a New York Times report about alleged bribery in Mexico. The story, published Saturday online, alleged that top executives at Wal-Mart de Mexico tried to hide a widespread bribery scheme from the company’s headquarters in Bentonville, Ark.

On an earnings call Monday after the bell, Wal-Mart de Mexico CEO Scot Rank and CFO Rafael Matute didn’t address the allegations or take questions.

But John Zolidis, analyst for Buckingham Research, said that the scandal isn’t big enough to bring down the retail giant.

"Although the story gives us pause, we believe the impact on the company’s business will be minimal," wrote Zolidis in a research note. "We would use weakness to buy the stock."

He added that the most likely outcome is that Wal-Mart "pays some kind of fine. Some movement among executives occurs. We doubt there is noticeable impact on the Wal-Mart brand or on the business."

Allegations in the Times story date back to an executive’s e-mail from 2005, which reportedly details how the company paid $24 million in construction-related bribes business

The parent of American Airlines, which went into bankruptcy last year, announced a quarterly net loss of $1.7 billion on Thursday, slammed by reorganization costs and rising fuel prices.

The loss was more than quadruple the carrier’s loss from a year earlier, when AMR Corp. reported a net loss of $405 million in the first quarter of 2011.

AMR said the part of the loss stemmed from $1.4 billion in reorganization costs in the latest quarter. The company said the costs were related to its bankruptcy filing from last Nov. 29.

The largest chunk of those costs — some $1 billion - is related to the rejection of eight aircraft leases and eight aircraft engine leases, and the modification of 158 aircraft leases, the airline said.

Merger hangover continues to pain United

American was also hit by rising fuel prices poor credit personal loans. The company said that it paid $3.24 per gallon of jet fuel in the first quarter of 2012, a 17% increase from $2.76 in the year-earlier quarter. The airline said this equated to an increase in costs of $325 million.

While American Airlines didn’t specifically mention job cuts in its quarterly report, the carrier said in February that it was cutting 13,000 positions from its overall staff of 88,000. Layoffs, especially when they happen en masse, typically cost a lot of money for the company that’s handing out the severance packages.

American is one of the largest U.S. carriers, competing with Delta Air Lines (, Fortune 500) and United Continental Holdings (, Fortune 500). 

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Economists have lots of ideas about what can be done to help jumpstart the still weak economy, but they don’t expect Congress to enact any of them any time soon.

A survey of economists by CNNMoney found most don’t expect Congress to pass any kind of economic assistance anytime in the foreseeable future. Only about a third of the 16 who responded to the survey expect some kind of action early in 2013, after the election. Just one expects action in a lame-duck session after the election but before the end of the year. None of them expect action before the election.

"Two weeks after a sudden freeze in hell," is when Bill Watkins, of the Center for Economic Research and Forecasting at Cal Lutheran University, expects Congress to ride to the rescue.

Watkins and his colleagues are the most concerned of those surveyed about the recent weakness in a number of economic readings, including much weaker-than-expected job growth in the March jobs report. They were the only ones who checked the very concerned box.

Another five economists said they were somewhat concerned, but six said they were only a little concerned, and four said they were not concerned at all.

Policies they would like to see passed include comprehensive tax reform, which was endorsed nearly unanimously. Those surveyed were allowed to endorse as many options as they thought would help the economy.

America’s biggest tax breaks

Tax reform would likely lower tax rates for both corporations and individuals, but eliminate many deductions and loopholes. The concept has been endorsed by everyone from President Obama to his likely Republican opponent Mitt Romney, but working out the details in a partisan atmosphere strikes economists as out of reach.

"Comprehensive tax reform would be great, but highly unlikely," said David Wyss, a fellow at Brown University.

Also getting the support of most economists is some extension of the Bush tax cuts, although they split on whether it should be for all taxpayers or if the extension should exclude high-income taxpayers.

Another third support another extension of the partial payroll tax holiday that has been in effect since the start of 2011 and runs through the end of this year.

"The pace of economic growth is too tepid to allow for the simultaneous expiration of the tax policies at the end of 2012," said Sean Snaith, economics professor at the University of Central Florida.

The survey also found 40% support repealing the health care reform and about a quarter would like to repeal the Dodd-Frank financial services reform.

"The uncertainty imparted on the economy by both Dodd-Frank and health care reforms are black clouds over the private sector and they both need to be reworked into more moderate forms," said Snaith.

Some believe that the economy will be better off if Congress does as little as possible.

How Congress is killing the recovery

"There was a time in this recent period where the economy benefited from the assistance of government actions, but now it is time for the government sector to resume its place on the sidelines," said Russell Price of Ameriprise Financial. Price would like to see an extension of the tax cuts for all but upper income households along with comprehensive tax reform.

The economists surveyed forecast only modest growth and hiring for the rest of this year. 

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After one of the fastest and steepest runups in recent memory, it’s possible gasoline prices may have peaked.

Retail gas prices fell more than half a cent Friday to a nationwide average just above $3.90 a gallon, according to AAA, continuing a decline started late last week that has shaved almost 4 cents off the price of gas.

The decline mirrors a moderate drop in crude oil prices, which account for roughly 70% of the cost of gas.

Crude prices have fallen for a few reasons, but the biggest is Iran’s decision to negotiate over its nuclear program.

Gas spending and prices by state

"All of the bad things we were really worried about don’t look like they will happen," said Kevin Lindemer, an independent energy consultant that has worked for Irving Oil and Cambridge Energy Research Associates. "If we have an uneventful summer, there’s nothing fundamental that should cause prices to go much higher."

But having an uneventful summer is still a big if.

Iran could walk out of the nuclear negotiations — beginning Saturday in Istanbul — at any time. A hurricane could hit the Gulf of Mexico. Protests could again rock the Middle East.

But barring a big event, it appears the world is adequately supplied with crude oil.

"Oil prices should fall," said Chris Lafakis, an economist at Moody’s Analytics. "That should provide a tail wind for the economy."

As tensions ease with Iran, markets become less fearful of a major disruption in oil supplies. Iran, after all, has repeatedly threatened to close the Strait of Hormuz, through which a fifth of the world’s oil passes.

But there are other factors pushing down oil prices as well.

Saudi Arabia: Assurances from Saudi Arabia that the country stands ready to cover any loss of oil from Iran due to tightening sanctions appears to have calmed markets.

The economy: A weaker jobs report from the United Sates last week and growing fears of a slowdown in China are tempering demand projections. High prices and better fuel efficiency in the United States have also been cutting into demand payday loans guaranteed no fax.

Pipeline reversal: Pipeline operator Enbridge plans to reverse the flow of a pipeline in the U.S. Midwest.

The pipeline currently brings oil from the Gulf of Mexico to Cushing, Okla., where there is a bottleneck of supplies. Reversing that flow will add another 400,000 barrels a day to global oil markets.

Return of offline supplies: On Thursday, the International Energy Agency said it expects some of the 1.1 million barrels of oil a day that’s currently offline from places such as Canada, the North Sea, and South Sudan will return to world markets in the second half of the year. IEA expects an additional 700,000 barrels a day in oil production from non-OPEC countries in 2012.

IEA also notes that OPEC production is at 3-1/2-year highs.

"Amid rising actual OPEC production, and a sizeable implied build in global stocks, prices have subsequently eased," the agency said in its report. "For now at least, the earlier tide of remorseless market tightening looks to have turned."

Caution ahead: However, all analysts warn that the situation can turn quickly, and some remain skeptical that Iran will stay out of the headlines throughout the summer.

"The odds of a military conflict are higher than what’s being discounted today," said Robert McNally of the Rapidan Group, an energy consultancy. "I think the market is relatively complacent."

Gasoline prices could also rise as the industry switches over from winter gas to cleaner summer blends.

Tom Kloza, chief oil analyst at the Oil Price Information Service, noted that the switch currently underway in the Chicago region led to a 40 cent spike in prices there.

Despite the recent dip in gas prices nationally, Kloza is sticking to his earlier prediction for a national average of $4.25 a gallon by Memorial Day — which would be a new record high.  

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After botching its debut as a public company last week, BATS Global Markets issued a heartfelt apology Sunday night in a letter to customers.

"Let me get right to the point," said Joe Ratterman, chief executive of BATS, in the letter. "BATS experienced a serious technical failure Friday morning and I want to apologize for not measuring up to the level of excellence that you have come to expect from us."

The technical failure came on the day BATS had hoped to sell its own stock to the public for the first time. BATS, which operates stock exchanges, intended to list the stock on its own trading platform.

But trading in the newly issued BATS stock was halted when the price suddenly plunged almost immediately after it hit the market, triggering a so-called circuit breaker.

The Wall Street multibillion scandal no one is talking about

"On Friday we were under the brightest spotlight imaginable … opening our own stock on our own exchange for the first time ever," said Ratterman. "It doesn’t get much more public than that."

Despite months of preparation and "rigorous" testing, BATS said it experienced a "system problem" that prevented the stock from trading properly payday loans for bad credit.

Ratterman stressed that all companies have technical glitches and that BATS exchanges have run smoothly 99.9% of the time over the last three years.

"It shouldn’t have failed, but it did, and the timing couldn’t have been worse," said Ratterman.

Ratterman suggested the offering could have been salvaged if the problem had been resolved quickly. But it took over two hours to reopen the market and by then the damage had been done.

"We determined that this was a material event that had eroded investor confidence and made the timely resumption of fair and orderly trading unlikely," he wrote. "As a result, we pulled the IPO and unwound all auction executions."

BATS is the third-largest exchange operator in the United States after NYSE Euronext (, Fortune 500) and the NASDAQ OMX Group (), according to the company’s investment prospectus.

The Kansas City-based company is considered one of the largest platforms for high-frequency computer-driven trading. 

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Oil prices rose slightly to near $107 a barrel Monday in Asia as simmering tensions over Iran’s nuclear program kept crude near 10-month highs.

Benchmark oil for April delivery was up 29 cents to $106.99 in electronic trading on the New York Mercantile Exchange. Brent crude was up 15 cents to $123.80 per barrel in London.

Crude jumped to $110.55, the highest since May, late Thursday after an unconfirmed Iranian media report of a pipeline explosion in Saudi Arabia. Saudi officials denied the report, which helped send crude down $2.14 to settle at $106.70 per barrel in New York on Friday.

“The magnitude of the response to the unfounded rumor highlights a tight crude supply situation that will be keeping the entire market highly responsive to even the smallest hint of a supply disruption,” energy consultant Ritterbusch and Associates said in a report.

Crude has risen from $96 last month amid investor fears that growing tension over Iran’s nuclear program will spark an armed conflict and disrupt global crude supplies. Analysts say Saudi Arabia and other oil producers do not have enough spare capacity to quickly make up for Iran’s 4 million barrels a day of crude.

Traders will also be closely watching the latest U.S. economic indicators this week. The economy has been showing signs of gradual improvement in recent months, which has bolstered investor optimism and pushed crude prices up from $75 in October.

Monthly employment data is scheduled to be released on Friday.

In other energy trading, heating oil added 0.2 cent to $3.20 per gallon and gasoline futures were up 0.7 cent at $3.28 per gallon. Natural gas fell 4.9 cents at $2.44 per 1,000 cubic feet.

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President Obama unveiled a $3.8 trillion budget request Monday that hikes taxes on the rich, spends new money on infrastructure and education, but does little to reform the entitlement programs that pose the biggest long-term threat to the federal budget.

"We built this budget around the idea that our country has always done best when everyone gets a fair shot, everyone does their fair share and everyone plays by the same rules," Obama said in his budget message.

But the budget forecasts a deficit for fiscal year 2012 that will top $1.3 trillion, before falling in 2013 to $901 billion, or 5.5% of gross domestic product.

The deficit projections, which have hovered near $1 trillion for each year of the Obama presidency, mean that Obama will not satisfy his 2009 promise to halve the deficit by the end of his first term.

White House officials described the budget as a continuation of two major speeches given recently by the president — one in Kansas where he promised Americans a "fair shot," and last month’s State of the Union.

The budget also offers fresh insight into how the White House plans to comply with last year’s Budget Control Act, which allowed Congress to raise the debt ceiling in exchange for caps on discretionary spending accounts.

Many of the high profile recommendations made in the budget were first floated by the administration last year as part of a deficit reduction plan rolled out in September.

Spending: The administration is proposing a series of investments focused on infrastructure, education and domestic manufacturing, including old favorites like $30 billion to modernize schools and an additional $30 billion to retain and hire teachers and first responders.

One key element of that plan is a six-year proposal to spend $476 billion on surface transportation, a big increase from current levels, and much more than other proposals lawmakers are considering.

At the same time, the White House had to comply with the spending caps enshrined in the Budget Control Act, which total in the neighborhood of $1 trillion in discretionary spending over a decade.

That means many programs will see their funding cut.

"Every department will feel the impact of these reductions as they cut programs or tighten their belts to free up more resources for areas critical to economic growth," Obama wrote.

Discretionary spending is projected to fall from 8.7% of GDP in 2011 to 5.0% in 2022.

The budget details 210 places where programs will be cut or eliminated, for savings of $24 billion in 2013 and $520 billion over a decade.

For example, the budget eliminates an Air Force satellite system that is "no longer needed to meet mission requirements."

And the budget proposes consolidating the Bureau of Public Debt and the Treasury’s Financial Management Service.

The president would also like to cut some mandatory spending, including select farm subsidies and federal employee retirement and health benefits, for savings of $217 billion over a decade.

Military spending will be reduced. The Pentagon plans to spend $487 billion less over 10 years, a course that Secretary of Defense Leon Panetta has already laid out in some detail.

But even with some cuts, annual deficits are still projected to be more than $500 billion every year for the next decade, and the budget would add $7 trillion to the debt held by the public between 2013 and 2022.

Taxes: The budget proposes a tax hike of $1.5 trillion, which includes a provision that will allow the Bush tax cuts to expire for high-income earners, a long-held Obama position 100% free credit score.

Obama would like carried interest to be taxed as ordinary income, which means money managers would pay more than double the rate they currently pay on a portion of their compensation.

‘Dirty Harry’ weighs in on deficit

The budget also incorporates the Buffett Rule, a guideline to ensure that the wealthiest do not pay a lower overall tax rate than those who earn substantially less money.

Specifically, no household making more than $1 million will be a allowed to pay less than 30% of its income in taxes.

It also calls for a year-long extension of the payroll tax cut and unemployment insurance.

In addition, the White House wants to reform the individual tax code in a way that "eliminates inefficient and unfair tax breaks for millionaires while making all tax breaks at least as good for the middle class as for the wealthy."

On corporate taxes, details are scarce, but administration officials said that the president will unveil a plan to reform the corporate tax code later this month.

Entitlements: Because the president’s budget does little to address how to curb the growth in entitlement spending, it’s unlikely to stabilize deficits beyond the next 10 years.

National debt: The five-minute primer

The budget would cut more than $360 billion from Medicare, Medicaid and other health programs over a decade. But that’s a drop in the bucket when compared to the rapid expansion of costs expected for entitlement programs.

"While [Obama’s] budget stabilizes debt over the next decade, the real problem arrives thereafter, as entitlement costs spiral out of control and revenues are inadequate to deal with a wave of retiring baby boomers," Pete Domenici and Alice Rivlin, who led their own debt task force, said in a joint statement.

Of course, proposing significant cuts to Medicare and Social Security during an election year is a politically risky move, but by not saying much on the issue, the White House opened itself to criticism.

House Appropriations Committee Chairman Hal Rogers took Obama to task on Monday, saying the proposal "falls exceptionally short" on entitlement spending reform.

"It is imperative that both the President and Congress put greater focus on addressing the exploding costs of these programs," Rogers said. "Without meaningful action in this area, the nation’s debt and deficit crisis will continue, increasing the risk to our nation’s financial and economic future."

What’s next: Obama’s budget request is essentially a blueprint of his fiscal priorities — the programs he would like to fund or cut, the new investments he would make and how he would pay for it all.

But the request is just that — a request. And it’s one that Congress can accept, reject or modify.

Even if Obama’s budget is adopted — which it won’t be — the estimates for deficit reduction may or may not pan out depending on how close to reality the administration’s forecasts for unemployment, interest rates and economic growth prove to be.

In any case, Obama’s 2013 budget is only the first step in a convoluted process that involves no less than 40 congressional committees, 24 subcommittees, countless hearings and a number of floor votes in the House and Senate.

If all goes well, a formal federal budget for government agencies will be in place by Oct. 1, the start of the 2013 fiscal year. 

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South Africa is planning a

Americans are gaining faith that the economy is on the upswing. The monthly Consumer Confidence Index surged to the highest level since April and is approaching a post-recession peak.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index rose almost 10 points to 64.5, up from a revised 55.2 in November. Analysts had expected 59. The level is close to the post-recession peak of 72, which the index reached in February.

The surge in December builds on another big increase in November, when the index rose almost 15 points from the month before.

One component of the index that measures how shoppers feel now about the economy, rose to 46.7, up from 38.3 in November. The other barometer, which measures how shoppers feel about the next six months, rose to 76.4, up from 66.4.

Improving confidence is in line with retail reports of a decent holiday shopping season.

Economists watch the confidence numbers closely because consumer spending _ including items like health care _ accounts for about 70 percent of U.S. economic activity. Still, the December confidence reading is below the 90 level that indicates an economy on solid footing.

Analysts are cautious about whether the gains are the start of something more sustainable.

“While consumers are ending the year in a somewhat more upbeat mood, it is too soon to tell if this is a rebound from earlier declines or a sustainable shift in attitudes,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.

Even with the increase in confidence, shoppers are still nervous about their jobs and the overall economy according to the preliminary results of the survey, which ran Dec pay day loans. 1-14.

Those claiming jobs are “plentiful” increased to 6.7 percent from 5.6 percent, while those claiming jobs are “hard to get” decreased to 41.8 percent from 43.0 percent. Those anticipating more jobs in the months ahead increased to 13.3 percent from 12.4 percent while those anticipating fewer jobs declined to 20.2 percent from 23.8 percent.

That’s because while the job market is steadily improving, unemployment _ at 8.6 percent _ is still high. And housing remains wobbly. The Standard & Poor’s/Case-Shiller index of home prices, also released Tuesday, dropped in October in 19 of the 20 cities it tracks. It was a second straight declining month, further evidence of a bumpy housing recovery.

Heading into the holiday season, store executives were nervous about consumers’ willingness to spend. Merchants offered big discounts on holiday merchandise and lured shoppers with expanded hours.

After a record spending spree over Thanksgiving weekend, the season’s semi-official start, shoppers retreated for a few weeks. Then stores saw a surge of shopping the week before Christmas as consumers took advantage of better discounts.

The National Retail Federation now expects a 3.8 percent increase in holiday sales, up from its original forecast of 2.8 percent made in September when the economy’s recovery looked more uncertain. More data will be released this week that will offer more clues about stores’ last-minutes sales surge before Christmas.

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