The World Bank cut its 2008 global growth forecast to 2.7%, citing rising food and oil prices, the bank announced Tuesday.
In January 2008, the bank predicted that global growth would total 3.3% for the year. The global economy grew 3.7% in 2007. Further, the bank now sees 2008 emerging market GDP growth totaling 6.5%, down from its earlier 7.8% forecast.
The bank called high energy and food prices "a major worry" and added that they "are the dominant force behind increased inflation across developing countries."
Also, the World Bank expects the U.S. economy to grow 1.1% in 2008, a downward revision from the bank's earlier 1.9% forecast. Meanwhile, the bank expects Europe's 15-nation euro zone to grow 1.7%, down from the earlier estimate of 2.8%. Japan's economy is expected to grow 1.4%, down from the earlier estimate of 2%.
Further, the World Bank also sees a considerable slowdown in China's economy in 2008, but GDP growth is still expected to remain very strong. The bank now sees China's GDP increasing 9.4%, down from the earlier 11.9% estimate.
A modicum of good economic news, at least on the commodities front: rice prices are headed for their biggest weekly drop in four years, on the prospect that exports from Japan and Pakistan will ease concerns that a global food shortage is worsening, Bloomberg News reported Friday.
Pakistan, the world's fifth-largest rice exporter, will allow shipment of 1 million metric tons because local needs have been met, Bloomberg News reported Friday. India may also ease its ban on rice exports. Rice is a staple for about 50% of the world's population.
Long-term, secular factors, including expanding middle classes (who consume more calories daily than lower-income groups) in Asia and Latin America, rising oil prices (which increase farming costs), have propelled a global rise in commodity, ingredient, and food prices.
Billionaire investor Kirk Kerkorian said he may up his stake in Ford beyond 5.5%, as he follows-through on his intention to purchase additional shares, Bloomberg News reported Friday.
Kerkorian, in a Friday SEC filing, reiterated that his Tracinda Corp. will pay $8.50 per share for 20 million additional shares of Ford (NYSE: F), which will give him a 5.5% stake, Bloomberg News reported. In the filing, Tracinda added that it may "from time to time, propose business strategies and, subsequent to the expiration of the offer, acquire additional shares."
Shares of Ford rose 5 cents to $8.25 in Friday morning trading on the news.
A gold star for Ford
Independent stock analyst C. Leonard Bauer told BloggingStocks Friday Kerkorian's stance is "a definite gold star" for Ford, concerning its turnaround program.
"Kerkorian's decision, because of his investment history and knowledge of the auto sector, will telegraph to other institutional investors that it's time to start moderately adding to your Ford position," Bauer said. "Don't misunderstand, this turnaround story is only about 30% complete, but at this stage you can make a good case for buying a modest share amount." Bauer added that he does not have a rating on Ford nor own the company's shares.
Ford installed former Boeing (NYSE: BA) executive Alan Mulally as part of an effort to re-vamp production and revise its fleet to compete in the global auto marketplace. Ford's legacy cost reduction efforts have gone well; fleet revision progress has been slower, many analysts agree.
In the April 23, Wall Street Journal, Senator Sherrod Brown, (D) Ohio, made a realistic assessment of current government trade policy and how it is diluting the strength of our country. I think that Senator Brown was just a bit gentle with his words, and understandably so when given his position. Suffice it to say that I agree with him for the most part, but he should have just cut to the chase. The American working class has been sold out. He also failed to make one critical point about NAFTA. It was his party and the guidance of Bill Clinton that navigated that document into law.
Partisan politics aside, I believe that current American trade standards are something we need to be ashamed of. As a free market capitalist, I have nothing against the survival of the fittest in the worlds of manufacturing and business. However, we're beholden to good sense to provide a level playing field and to maintain benchmark standards. In that regard, American workers have been shorted. Our trade deficit is a testament to the decline of the American Dream. It's a dream, while not referred to by that name, that resides in the hearts of workers the world over. Every parent wants their children to have a greater degree of opportunity and safety than they had.
Is the U.S. Federal Reserve about ready to pause its monetary-easing course, after next week's widely-expected 25-basis-point cut?
The emerging consensus appears to be that the Fed will, both to allow the world's most powerful central bank to assess the impact of its string of rate cuts over the past year and to save some 'interest rate ammunition,' should the U.S.'s anemic economy not show signs of a recovery in H2 2008.
If the Fed cuts key, short-term interest rates next Wednesday, it will be the Fed's seventh cut in eight months. Reductions to-date have pared a whopping 300 basis points from the Fed Funds rate to 2.25% from 5.25% in September 2007.
Help from Europe?
Given that the slowdown has been U.S.-centric, and caused in large part by the end of the U.S.'s housing boom, economist David H. Wang initially thought the Fed would be left to its own devices to jump-start demand. However, in light of recent data indicating that both German and French business confidence had dropped in March 2008, Reuters reported Thursday, Wang is now inclined to think that the European Central Bank will not stand-pat on interest rates much longer. "We're beginning to see the signs of a slowdown in Europe," Wang said. "I think another month or so of poor data and the ECB will be compelled to cut, despite some inflation pressure."
The ECB has kept its key, short-term rate, the refinance rate, at 4% throughout the Fed's easing cycle. A start of an ECB easing, Wang said, will both stimulate demand from Europe and give the Fed a window to "take a breather" and assess the impact of both monetary and fiscal policy stimulus in the U.S.
Further, the downside from the ECB maintaining a hawkish stance amid a Fed pause is very large for Europe, Wang argued. If the ECB does nothing and Europe's economy slows to a crawl, it will have missed valuable time to stimulate needed demand. Conversely, if the ECB cuts rates and later finds that growth remained adequate, it could always re-raise rates, "to keep the inflation genie back in the bottle," he said.
Despite slower economic growth, the European Central Bank will most likely not lower interest rates soon, due to concerns about rising inflation, according to one key policy maker.
ECB policy maker and Austrian central-bank head Klaus Liebscher said Monday record-high oil prices are starting to push up wages on the continent, Bloomberg News reported Monday.Oil hit a record high $117.60 per barrel Monday before retreating slightly at mid-day.
Liebscher's comments pushed the euro higher in early trading Monday, with the continent's currency rising about 1 cent to $1.5937 versus the dollar, and climbing about seven-tenths of a yen to 164.60 yen versus Japan's yen.
American citizens and corporations, already stung by the more than 200% increase in oil and gasoline prices since 1999, most likely will be confronted with another energy shock in the months and quarters ahead: natural gas.
U.S. natural gas prices have risen an astounding 93% since August 2007 -- this despite a mild winter in much of the nation -- as rising demand from energy-hungry Asian buyers, such as South Korea and Japan, have forced up natural gas' price, The Wall Street Journal reported Friday. (Subscription required.)
Natural gas, which traded Friday morning in the United States at $10.22 per million BTUs, heats 50% of U.S. homes, generates 20% of the nation's electricity, and is intrinsic to making everything from fertilizer to plastic bags.
International natural gas demand rises
Further, with solid international demand, and a U.S. price that's roughly one-half the global price, many analysts argue U.S. natural gas prices are likely to increase substantially, moving forward. That would create another "core inflation" price accelerator to a U.S. economy already experiencing rising core/retail inflation from oil's enormous rise from $25 per barrel in 1999 to more than $110 today.
China let the yuan rise to a record level versus the dollar Friday, Bloomberg News reported, in a sign Beijing may be modifying its currency stance in order to regain control of inflation.
The yuan strengthened to 6.9907 yuan versus the dollar Friday, its strongest level since the Chinese Government moved from a fixed or "dollar pegged" currency rate to a system that limits the yuan's currency appreciation to about 5% per year.
China has kept the yuan artificially low -- or not set by free-market, foreign exchange forces -- in order to stimulate economic growth and protect its young economy. The low yuan keeps the cost of Chinese exports low -- a major factor in both China's record trade surplus with the United States and its surging manufacturing export revenue. Critics charge that the low yuan gives China an unfair advantage versus foreign manufacturers: many of these producers, among others, argue that the yuan would appreciate to 5 or even 4.5 yuan to the dollar if allowed to float freely.
The European Central Bank Thursday kept its key, short-term interest rate -- the refinanced rate -- the same at 4%, the bank announced.
The ECB said its most recent data confirmed the existence of strong, short-term upward pressure on inflation. The bank went on to say that Europe is "experiencing a rather protracted period of temporarily high annual rates of inflation, resulting mainly from increases in energy and food prices." Hence, upside risks to the price stability remain, the ECB added, necessitating the stand-pat monetary stance.
Trichet is resolute
In general, economists and analysts had expected the stand-pat stance, given the acceleration of inflation in the euro-zone. ECB President Jean-Claude Trichet indicated as much in his post-ECB meeting news conference.
"We believe that the current monetary policy stance will contribute'' to bringing inflation under control, Trichet said, according to Bloomberg News. "The firm anchoring of medium- to longer-term inflation expectations is of the highest priority.''
Further, for at least the time being, the ECB does not appear to be concerned about the euro's steady, two-year rise versus the dollar. The euro rose to a record $1.5913 versus the dollar Thursday morning before paring gains to trade around $1.5830 Thursday at mid-day.
The euro is up about 33% versus the dollar since January 2006. A stronger euro makes European exports harder to sell because it raises the cost of exports as European producers increase the price of their goods to compensate for foreign currency depreciation. Some European companies, commercial aerospace giant Airbus among them, have complained that the euro's rise versus the dollar is beginning to affect their competitiveness.
For the second time in four months, the International Monetary Fund has cut its 2008 global growth forecast, citing the worst financial crisis in the United States since the Great Depression of the 1930s.
IMF now expects the global economy to grow 3.7% in 2008, down from its earlier forecast of 4.1% growth, Bloomberg News reported, citing an IMF document it obtained at the meeting of Southeast Asian deputy finance ministers and central bankers in Vietnam. The IMF also said there's a 25% chance global growth will drop below 3% in 2008 and 2009.
In January 2008, the IMF lowered its forecast for global economic growth this year to 4.1%, the lowest since 2003, from 4.4% predicted in October 2007. At that time the IMF said last year's increase in credit costs resulting from defaults on mortgages aimed at borrowers with poor credit histories was hurting the rest of the economy.
The currency of our realm, the US Dollar, has been losing value for many years, but lately the results of this sad state of affairs have become increasingly more evident. Concerns are mounting on a global basis not just in the United States. The euro, once pegged at a buck, is now trading at $1.55, while gold has passed $1,000 and oil has continued its charge, breaking through the $110 per barrel mark.
While a good deal of this problem is home grown, the pain is being felt all around the world. We have read many stories about how the American economy is a smaller part of the global economy and becoming somewhat detached. This is nonsense. What has happened is that the global economy has become infinitely more integrated and like any integrated structure (the architect speaking), what occurs in one place is felt everywhere.
The Federal Reserve Board, led by Chairman Ben Bernanke, has been watching the economy in an extremely measured fashion, bordering on casual. To those who see beyond Bernanke's calm demeanor, one should imagine a stock trader of old, holding the ticker tape up to his eyes and monitoring every change, every blip in the market as the ticker tape machine clicks away, spewing out the latest market activity.
Crude oil jumped $1.85 in early trading Monday morning to touch a record $107 per barrel as investors continued to pour funds into oil futures, Bloomberg News reported Monday.
Oil traded at the record price before pulling back slightly to $106.31 by midday Monday. Heating oil gained 1 cent to $2.96 per gallon, unleaded gasoline was unchanged at $2.69 per gallon.
With U.S. stocks expected to underperform historical averages due to sluggish U.S. economic growth, and with global oil demand still strong, investors are increasing positions in oil, calculating that the world's most vital commodity will outperform other asset classes in 2008. Oil is up about 75% during the past 12 months, and has traded above $90 per barrel for most of 2008.
Further, the weak and falling U.S. dollar is also boosting oil prices. Because oil is priced in dollars, if the dollar falls, oil producers will try to increase the price of the product to maintain their purchasing power. A lower dollar also implies higher U.S. inflation, prompting some investors to buy oil as an inflation hedge, further boosting the commodity's price.
So much for that oil slump. Oil's price pullback lasted all of one day as buyers piled back into oil futures Wednesday, sending oil surging up $5.00 to a new record close of $104.52, after OPEC said it would maintain current production quotas.
The Organization of Petroleum Exporting Countries agreed to maintain production targets at a meeting Tuesday in Vienna, Bloomberg News reported. That price-bullish reality, combined with a surprise report by the U.S. Department of Energy indicating that U.S. crude inventories fell for the first time in eight weeks, was enough to send the oil pits into frenzied buyer mode, once again. Earlier this week oil broke through the previous nominal high of $103.76 set back in 1980.
Gasoline, heating oil prices surge
The other major energy commodities also rocketed higher. Heating oil surged 14 cents to $2.93 per gallon, unleaded gasoline jumped 10 cents to $2.63 per gallon and natural gas climbed 37 cents to $9.72 per million BTUs.
And once again, OPEC repeated its oft-stated rationale that "the markets are well supplied," Bloomberg News reported, arguing that speculators and investors seeking to buy oil as a long-term asset and as an inflation hedge, are primarily behind oil's climb to the stratosphere. And once again, traders and other oil buyers acted as if there won't be enough oil to meet global demand at some point in the months ahead.
First oil traded through and closed above the penultimate psychological resistance -- the incomparable, the dreaded $100 per barrel resistance level.
Now oil has traded above its final resistance -- the all-time nominal high of $103.76 set back in April 1980. Oil traded at $103.95 Monday to break the record, and flirted with it for awhile early Tuesday, before profit-taking sent the world's most vital commodity down $3.25 for the day to close at $99.20. per barrel.
There have been many firsts in the Bush Administration-led United States. And now the administration can add another, but it may not be one they'd like to brag about. In the industrial, modern and now postmodern eras, oil has never cost more than it has in 2008. Oil has no more resistance above it, psychologically or technically: as they say in the trading pits, from here on, the sky's the limit for oil.
Saudi Arabia's Oil Minister Ali al-Naimi said Monday oil prices are unlikely to fall below $60 per barrel, Bloomberg News reported Monday.
Ali al-Naimi, head of the nation with the world's largest oil reserves and highest oil exports, did not indicate whether OPEC was leaning toward maintaining current production quotas in the face of oil's most-recent price rise. Oil has increased about $15 in the past two weeks to more than $100 per barrel, as concerns about underperforming U.S. stocks due to the sluggish U.S. economy, and inflation fears, have prompted investors to pile into oil as an investment and as an inflation hedge. Oil closed Wednesday up 61 cents to $102.45 per barrel.
Last week, OPEC President and Algerian Oil Minister Chakib Khelil told reporters in Algiers that "we don't expect to put more oil in the market."
New oil floor: $60?
Al-Naimi told Bloomberg News yesterday that obtaining energy from harder-to-refine sources, such as tar sands and alternative fuels, costs about $60-70 per barrel "and, therefore, a line has been drawn below which the price cannot fall."
In the April 23, Wall Street Journal, Senator Sherrod Brown, (D) Ohio, made a realistic assessment of 
Despite slower economic growth, the European Central Bank will most likely not lower interest rates soon, due to concerns about rising inflation, according to one key policy maker.
For the second time in four months, the International Monetary Fund has cut its 2008 global growth forecast, citing the worst financial crisis in the United States since the 
The currency of our realm, the US Dollar, has been losing value for many years, but lately the results of this sad state of affairs have become increasingly more evident. Concerns are mounting on a global basis not just in the United States. The euro, once pegged at a buck, is now trading at $1.55, while 
Crude oil jumped $1.85 in early trading Monday morning to touch a record $107 per barrel as investors continued to pour funds into oil futures, 
Saudi Arabia's Oil Minister Ali al-Naimi said Monday oil prices are unlikely to fall below $60 per barrel, 
Earnings preview for Ford
Apple shares rise on report Steve Jobs is free of cancer
Toyota whups GM in the first half of 2008
