Posted by: Harry Maurer on September 28
Consumer confidence may have dropped like a stone in August, but that doesn’t seem to have stopped Americans from shopping. The Commerce Dept . says consumer spending jumped 0.6% last month, more than the expected 0.4%. Many observers have predicted that such spending, which makes up 70% of the economy, will slow given the housing slump and high energy prices.
The other bit of cheery data comes from the personal consumption expenditures deflator, the Fed’s favorite inflation gauge. It rose just 0.1% in August and was up only 1.8% over the previous August, within the Fed’s comfort zone of 1% to 2%.
Former Finance Minister Dominique Strauss-Kahn was appointed head of the International Monetary Fund, a foregone conclusion after US Treasury Secretary Hank Paulson endorsed his candidacy last week. The fund has been short of cash of late and is suffering a crisis of relevance as more countries shun its lines of credit in favor of borrowing on global bond markets. Strauss-Kahn has pledged to push sweeping reforms, including giving more clout to developing nations, but whether he’ll be able to carry them out remains to be seen.
Source: Financial Times
The credit crunch hasn’t completely shut dealmaking down. Network equipment maker3Com agreed to be acquired by Bain Capital for $2.2 billion, with former joint venture partner Huawei taking a minority stake.
Even if the US economy manages to avoid slipping into recession, the outlook for corporate profits has deteriorated. Third-quarter profits among companies in the S&P 500 are expected to grow at their slowest pace in five years as the housing slump crimps earnings at builders, banks, retailers and a host of other businesses. Companies that derive a significant proportion of their profit from overseas operations could be insulated somewhat from the slowdown, since global growth overall remains much stronger than in the US.
The new contract between General Motors and the United Auto Workers will allow the biggest US automaker to pay some newly-hired workers half what existing employees earn for the same jobs., And with a substantial portion of its workforce due to retire in coming years, the company may be able to reduce its overall wage and benefits costs more rapidly than analysts had expected.
Source: Wall Street Journal
The country’s biggest fund manager will try to meld its retirement plan and individual savings operations into one cohesive unit under the direction of Abigail Johnson, daughter of company chairman Ned Johnson and a possible heir to the 77-year-old’s job. Fidelity’s growth has faltered lately though its funds’ overall performance still exceeds the industry average.
Source: Boston Globe
Having already turned itself into a regional transportation and shopping hub, the oil-poor emirate has its eyes set on becoming the preeminent financial center in the Gulf.
Source: Business Week
Europe’s third-largest carrier ordered 12 A380s, the world’s biggest commercial jetliner, and 24 Boeing 787 ‘Dreamliners’. The order makes BA the first new customer in two years for Airbus’ troubled A380, while further cementing the Chicago-based planemaker’s seemingly unassailable lead over its European rival in the market for a new long-haul jumbo jet.
The two amigos, Nasdaq and Borse Dubai, boosted their bid for Scandinavian exchange OSX to $4.9 billion and said they already hold sway over nearly half its shares. They’re looking to trump the Qatar Investment Authority, which recently snapped up about 10% of OSX.
Microsoft is in talks to acquire a 5% stake in fast-growing social-networking site Facebook for $300 million to $500 million, a deal that would value the three-year-old start-up at more than $10 billion. Arch-rival Google is also interested in a tie-up. The actual money is pocket change for the software behemoth, but the valuation is so high as to be fanciful, given that Facebook may earn $30 million this year on revenues of $150 million. That’s a multiple reminiscent of the days of the internet bubble of the late 1990s. Indeed, Microsoft’s interest in Facebook says more about its own failure to keep pace with Google in the online advertising business than it does about the real prospects for Facebook, whose ability to lure advertising dollars remains mostly hypothetical.
Source: Wall Street Journal
NRG Energy today will seek Nuclear Regulatory Commission approval to build two nuclear power plants in Texas, marking the first time a utility has sought permission to build a nuclear plant in the US since the 1970s. The NRG move, which is expected to be followed by other operators, reflects renewed optimism that nuclear power can stage a comeback in an era of high oil prices and concern over global warming.
Source: New York Times
Microsoft’s newest online game seeks to harness the attraction of social-networking to build sales. With more and more game players being lured away by such sites as Facebook and MySpace, the industry is scrambling to find ways to hang on to—and build—its core audience.
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