Ben S. Bernanke, chairman of the U.S. Federal Reserve. Photographer: Brendan Hoffman/Bloomberg

May 10 (Bloomberg) -- Russ Koesterich, global chief investment strategist at BlackRock Inc.'s iShares unit, discusses his asset allocation strategy. He talks with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)

Ben S. Bernanke’s $600 billion strike against deflation is paying off, as stock and debt markets rise, bank lending grows and economists forecast faster growth.

The Standard & Poor’s 500 Index has gained 13.5 percent since the Federal Reserve chairman announced on Nov. 3 the plan to buy Treasuries through its so-called quantitative easing policy. Government bond yields show investors expect consumer prices to rise in line with historical averages. The riskiest companies are obtaining credit at the cheapest borrowing costs ever and Fed data show that commercial and industrial loans outstanding are rising for the first time since 2008.

“Looking at market indicators, you have to be convinced it’s been a success,” said Bradley Tank, chief investment officer for fixed-income in Chicago at Neuberger Berman Fixed Income LLC, which oversees about $83 billion. “When you get into periods of aggressive central bank easing, and we’re clearly in the most aggressive period of easing that we’ve ever seen, the markets tend to lead the real economy.”

The Fed said last month it won’t need to extend the $600 billion buying program beyond its scheduled end next month. Payrolls expanded by 244,000 in April, the biggest gain since May 2010, after a revised 221,000 increase the prior month, the Labor Department said May 6. The jobless rate climbed to 9 percent, the first increase since November, a separate survey of households showed.

‘Stopped the Hemorrhaging’

“We are starting to see the impact, albeit slowly,” said Jim Sarni, managing principal in Los Angeles at Payden & Rygel, which oversees more than $55 billion in fixed-income assets. “The unemployment rate has slowly started to come down. We have a long way to go, but at least it stopped the hemorrhaging.”

Bernanke’s quantitative easing program, dubbed QE2 by analysts and investors because it followed an earlier round of $1.7 trillion in bond purchases in 2009 and the first quarter of 2010, was criticized by officials around the world.

Chinese Premier Wen Jiabao said that the policy would foster financial instability and asset bubbles. Six days after the Fed suggested at its Sept. 21 meeting that it was ready to start buying Treasuries, Brazilian Finance Minister Guido Mantega said governments were engaging in a “currency war.” German Finance Minister Wolfgang Schaeuble called the asset- purchase program “clueless” on Nov. 5 and suggested it was designed to erode the value of the U.S. dollar.

Fighting Deflation

Back in November, the biggest concern for the Fed was preventing a general decline in prices, which can paralyze an economy by hindering investment, as the jobless rate held at 9.5 percent or higher for 14 months. Core consumer prices rose 0.6 percent in October from a year earlier, the smallest gain since records began in 1958, government data at the time showed.

“Measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate” of promoting full employment and containing consumer prices gains, the central bank’s Federal Open Market Committee said in a Nov. 3 statement.

Since reaching a 20-month low of 2.18 percent in August, a bond market measure of inflation expectations the Fed uses to help determine monetary policy has risen to 2.87 percent. The five-year forward breakeven rate projects what consumer price increases may be beginning in 2016, smoothing blips in inflation expectations from swings in oil prices and other temporary events.

Controlling Inflation

The gauge is down from 3.28 percent in December even with energy and food costs reaching record highs in a sign that investors expect Bernanke will be able to withdraw the unprecedented stimulus before inflation gets out of hand. The current level compares with the average of 2.71 percent in the five years before credit markets seized up in 2008. The core inflation rate has increased to 1.2 percent.

“We’ve seen a bit of a lift in breakeven inflation rates, but it’s not dramatic,” Tank of Neuberger Berman said.

The Fed’s policy of pumping cash into the financial markets risks longer term damage, according to Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., which oversees $85 billion. He compared the Fed’s current policy to the one it adopted following recession of 2001-2002, when policy makers slashed its target rate to 1 percent in 2003 to spark the housing market and the economy.

“It was a failure,” Bittles said. “I don’t think it’s very healthy to artificially boost stock prices. What are the long-term consequences of that? We don’t know. The Fed did this with housing back in the last decade, and the unintended consequences were a disaster.”

Dollar Depreciation

QE2 has contributed to an 11.9 percent decline since August in the dollar based on Bloomberg Correlation-Weighted Indexes, which measure its performance against nine of the most-traded currencies in the world, including the euro, yen and pound.

Gold and silver reached records in April as investors sought to hedge financial assets against the weakening dollar and accelerating inflation. Gold advanced 25.8 percent in the past year, while silver more than doubled as investors increased their holdings in exchange-traded products to a record 15,518 metric tons on April 26.

Rising commodities may be restraining the economy. The Commerce Department said April 28 that the gross domestic product rose at a 1.8 percent annual rate in the first quarter after a 3.1 percent pace in the final three months of 2010. The Bloomberg Consumer Comfort Index fell to minus 46.2 in the week ended May 1, the lowest level since the end of March, as the highest gasoline prices in almost three years soured Americans’ views of the buying climate.

‘Fed’s Ventilator’

“What’s important for people to understand is the Fed is simply stepping in to create some credit in a situation where the banking system apparently is unable to create credit,” said Paul Kasriel, chief economist at Northern Trust Corp. in Chicago. “The patient right now is incapable of breathing on its own, and it needs the help of the Fed’s ventilator.”

Credit provided by the Fed, commercial lenders, savings and loans, and credit unions increased 1.67 percent in the last three months of 2010, according to a Northern Trust report. That compares with a long-term average of 4.58 percent since 1953. Treasury yields may fall after QE2 ends as investors seek to protect themselves from a worsening economy, Kasriel said.

Yields on 10-year Treasuries, which are a benchmark for everything from home mortgages to corporate bonds, have fallen to 3.16 percent from this year’s high of 3.74 percent on Feb. 8, according to Bloomberg Bond Trader prices. Treasuries of all maturities have returned 1.76 percent this year, while corporate bonds have gained 4.1 percent, including reinvested interest, Bank of America Merrill Lynch indexes show.

‘Improving Gradually’

In deciding to end QE2 as scheduled in June policy makers are betting that economy will rebound. The median estimate of 73 economists surveyed by Bloomberg is for GDP to exceed 3 percent in the remaining three quarters of the year.

“The labor market is improving gradually,” Bernanke said at a press conference after the Fed’s two-day meeting ended April 27. “The longer it goes on, the more confident we are.”

Bernanke said the Fed would initially hold its balance sheet, currently with $2.723 trillion in assets, steady after completing the purchases by reinvesting the proceeds of maturing Treasuries and mortgage bonds it during QE1.

The Fed has bought about $470 billion of government debt under the program, said David Ader, head of government bond strategy at Stamford, Connecticut-based CRT Capital Group LLC. That money has encouraged investors to wade into riskier assets.

Record Pace

Speculative-grade companies have sold $130.7 billion of junk bonds this year, compared with $106.3 billion at this time last year, when sales set a record $287.6 billion, according to data compiled by Bloomberg. Yields on debt rated below Baa3 by Moody’s Investors Service and less than BBB- at S&P average 7.23 percent, down from 8.88 percent a year ago and 14.7 percent in 2009, according to Bank of America Merrill Lynch indexes.

Banks eased lending terms in the first quarter as they forecast improvement in the U.S. economy and companies sought more loans, a Fed survey released this week of loan officers at 55 domestic banks and 22 U.S. branches and agencies of foreign banks conducted from March 29 to April 12 showed.

Fifty-five percent of domestic banks surveyed reported improvements in the credit quality of large and middle-sized loan applicants, the Fed said. About 35 percent reported improvements in small firms, according to the survey.

Commercial and industrial loans totaled $1.25 trillion as of April 20, according to the Fed. While that’s down from the peak of $1.62 trillion in October 2008, it’s up from last year’s low of $1.21 trillion in September, marking the longest sustained increase since 2008.

Household credit limits rose about $30 billion in the first three months of this year from the previous period, the first increase since the third quarter of 2008, the New York Fed Bank said May 9 in a report. Foreclosures declined 17.7 percent and bankruptcies fell 13.3 percent.

QE2 “slowed the pace of deleveraging, and it clearly helped to mitigate the risk of deflation,” said William Cunningham, co-head of global active fixed income in Boston at State Street Global Advisors, which oversees $2.1 trillion. “It had a positive impact on net.”

via bloomberg.com

Workers construct temporary housing units for survivors of the March 11 earthquake and tsunami in Minamisanriku, Miyagi prefecture, Japan. Photographer: Kimimasa Mayama/Bloomberg

 

April 14 (Bloomberg) -- Bloomberg's Mariko Ishikawa reports on liquefaction in Tokyo's bayside neighborhoods. While most of Tokyo avoided major damage in the March 11 earthquake, the magnitude-9.0 temblor triggered ground liquefaction in some parts of Tokyo Bay, a phenomenon where soil loses its strength after violent shaking. The most affected suburb was Urayasu in Chiba Prefecture. (Source: Bloomberg)

Sekisui House Ltd. (1928), Japan’s second- largest home builder, will focus on the local market after expanding overseas as it expects the nation’s biggest housing boom in at least 15 years after the March 11 earthquake.

Housing starts, which dipped below 1 million units in 2009 and 2010 for the first time in four decades, may rebound as homeowners rebuild after the nation’s strongest temblor, Isami Wada, chairman of the Osaka-based company, said in an interview.

“We had to expand overseas because signs of a slowdown in Japan’s housing demand were alarming,” Wada said in Tokyo. “Unexpectedly, the earthquake struck. I now anticipate annual housing demand to reach the 1 million-unit level again due to revival efforts and reconstruction demand.”

Sekisui, which expanded into markets including Australia and China in the past three years, is predicting demand will exceed that of 1996, a year after the Great Hanshin Earthquake that hit cities including Kobe, when 1.6 million new homes were built. Prime Minister Naoto Kan has proposed a 4 trillion yen extra budget that is likely to be the first of several packages to rebuild areas devastated by March’s magnitude-9 temblor and tsunami that destroyed and damaged almost 350,000 homes.

Housing starts rose for 10 months through December 1996, after the 7.3-magnitude Hanshin earthquake hit parts of western Japan on Jan. 17, 1995, according to government data. Apartments put up for sale in Osaka and its surrounding areas rose 15 percent to 44,430 units that year, according to the Real Estate Economic Research Institute.

Greater Need

Prior to the housing boom in 1996, housing starts rose for 21 months ended February 1994, according to Bloomberg data. New homes built in Japan peaked at 1.7 million in 1990, according to data from the Land Ministry.

Shares of Sekisui House, which gained as much as 1.2 percent earlier, before closing 0.7 percent lower at 766 yen as of 3 p.m. on the Tokyo Stock Exchange.

New home starts fell to 788,410 units two years ago, the lowest since 1964, and remained below 1 million last year as falling wages and mounting job losses sapped demand.

“This time, the earthquake damaged a much wider area,” said Wada, who is also chief executive officer. “The need for revival is greater than the Hanshin earthquake. With so many aftershocks, I expect more home owners will seek to rebuild.”

About 90 percent of the country’s 30.3 million homes haven’t been assessed for quake resistance, according to Japan’s Statistics Bureau.

U.S., Singapore

Sekisui had expected revenue from its overseas operations to reach as high as 200 billion yen ($2.5 billion) by January 2014. That’s about 13 percent of sales in the past year. Sekisui and bigger rival Daiwa House Industry Co. have sought revenue growth overseas because of a decline in Japan’s population and the slowing economic growth.

Sekisui entered real estate markets in Singapore and the U.S. by forming alliance with local partners after it established an overseas division in August 2008. The company is targeting higher profitability from countries with increasing population, economic growth and rich in resources, Wada said.

Japan’s extra budget and spending that may benefit the housing market is putting pressure on the government to raise taxes, a move that Wada said would hurt the economy, jeopardizing the revival plan.

“A housing boom can only take place as long as the consumption tax is left alone and the government sells more debt to boost growth,” Sekisui’s Wada said.

Only 0.4 percent of 29,692 homes built by Sekisui and located in quake-affected areas were destroyed during the Hanshin quake, while 9.3 percent of those homes were slightly damaged, according to the company’s website.

“We are in the business of protecting people’s life and assets,” said Wada. “I started to think we are also in the business of guarding people’s sense of security, providing a peace of mind by continuing building more quake-resistant homes.”

via bloomberg.com

Oil tankers are anchored near the Port of Long Beach, California. Energy suppliers in the S&P 500 have earned $481.1 billion since 2006, more than the 2010 gross domestic product of Argentina, according to data compiled by Bloomberg. Photographer: Tim Rue/Bloomberg

 

May 2 (Bloomberg) -- Thomas Lee, chief U.S. equity strategist for JPMorgan Chase & Co., talks about the impact of the death of Al-Qaeda leader Osama Bin Laden on the stock market. Lee, speaking with Betty Liu, Dominic Chu, Jon Erlichman and Michael McKee on Bloomberg Television's "In the Loop," also discusses investment strategy and the outlook for the oil market. Michael Gurka, a trader for BruinHill Partners LLC, also speaks. (Source: Bloomberg)

An Exxon Mobile refinery stands in Rotterdam, The Netherlands. Photographer: Jock Fistick/Bloomberg

U.S. oil companies’ profits have grown so fast that they’ve become the cheapest equities in the Standard & Poor’s 500 Index, just as the debate about taxing crude producers heats up.

Energy suppliers in the S&P 500 have earned $481.1 billion since 2006, more than last year’s gross domestic product of Argentina, according to data compiled by Bloomberg. The 41 drillers, refiners and oilfield service providers may generate another $134.8 billion in 2011, based on analyst estimates that jumped 8.5 percent in April. The growth reduced valuations to 11.5 times projected income from 13.7 in March.

Civil strife in the Middle East and northern Africa combined with forecasts for the fastest U.S. economic growth in seven years sent oil prices up 26 percent to $97.18 a barrel in the past year, even after last week’s 15 percent plunge. With gasoline prices up 64 percent since August and the unemployment rate 1.1 percentage point below the 26-year high reached in 2009, profits for companies such as Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) are spurring calls for higher taxes.

“Multiples on energy stocks are very low and the investment opportunity remains pretty good,” said Brian Barish, who oversees $8 billion, including Chevron shares, as president of Denver-based Cambiar Investors LLC. His Cambiar Aggressive Value fund beat 99 percent of peers in the past year.

“The risk of a change in tax policy is unlikely, and $100 dollar oil is here to stay despite the recent price volatility,” Barish said. “If you look at these companies’ valuations at $100 oil, you have to ask why they’re trading at these relatively discounted levels.”

Weekly Decline

The S&P 500 fell 1.7 percent to 1,340.20 last week after the biggest decline in oil since December 2008 drove Houston- based Baker Hughes Inc. and Pioneer Natural Resources Co. in Irving, Texas, down more than 10 percent. The index has risen 6.6 percent in 2011, less than energy shares, whose 9.8 percent gain is the biggest year-to-date gain through May 6 since 2006, data compiled by Bloomberg show. The S&P 500 climbed 0.2 percent to 1,342.15 at 11:21 a.m. in New York today.

After a loss of $28.4 billion in the last quarter of 2008 and the start of 2009, U.S. energy industry profits rebounded to $22.3 billion in the three months ended last December, data compiled Bloomberg show. The companies probably earned $31 billion in the first quarter, based on analysts’ forecasts for 41 percent growth from a year earlier, Bloomberg data show.

Total net income since 2006 compares with last year’s $351 billion in economic output for Argentina, South America’s second-biggest economy, according to data compiled by the U.S. Central Intelligence Agency.

Tax Breaks

President Barack Obama advocated ending tax breaks for oil companies in a radio and Internet address on April 30. His 2012 budget would repeal an estimated $46.2 billion of tax breaks for oil and gas producers over 10 years and instead invest in alternative energy. The proposal would generate $18.3 billion in a decade by blocking oil and gas companies from receiving a manufacturing deduction for drilling, among other proposals.

The legislation probably won’t pass because Republicans controlling the House will vote against higher taxes, said Andrew Laperriere, senior managing director of the International Strategy and Investment Group in Washington.

‘Every Time’

“That’s the routine we go through every time the price of oil and gas goes up,” said Laperriere, who is head of policy research at ISI Group. “The industry will remain on the defensive and under attack, but the odds remain relatively low of any kind of adverse policy action affecting the industry. It’s just as likely that with the Republicans in charge of the House that higher gas prices and pressure to do something about it will result in more opportunities for domestic production than higher taxes.”

Energy is the cheapest industry in the S&P 500 after the stocks failed to keep up with estimates from analysts such as Jefferies Group Inc.’s Iain Reid in London, who pushed up his forecast for Exxon Mobil’s 2011 earnings by 36 percent to $9.13 a share over the past six months. Analysts’ forecasts for energy industry profit in the next year jumped to $50.33 a share in April in the biggest monthly increase since records began in 2006, according to data compiled by Bloomberg.

Energy companies are cheap because investors doubt earnings will grow as fast as predicted, according to Brian Jacobsen of San Francisco-based Wells Fargo Asset Management. Industry revenue is forecast to jump 26 percent this year, more than twice as fast as the S&P 500’s, analyst estimates compiled by Bloomberg show.

Bearish Bets

Short sellers have cut bearish bets on energy companies to 0.6 percent of the industry’s market value, compared with 2 percent in March 2008, according to Data Explorers, a New York- based research provider. Shares borrowed and sold to profit from declines total about 2 percent of the S&P 500’s market value.

“When everybody is buying into the story that we’re going to have high gas prices and they’re going to go up forever, that’s when I get increasingly incredulous,” said Jacobsen, chief portfolio strategist for the mutual-fund division of Wells Fargo Asset Management, which oversees more than $480 billion in San Francisco. “There’s uncertainty about the sustainability of oil prices and about whether the energy companies are going to be the favorite political whipping boy.”

Oil rallied amid increased optimism about the economic recovery as companies reported better-than-estimated earnings and U.S. job growth accelerated. Earnings beat analyst estimates at 72 percent of the 417 companies in the S&P 500 that reported results since April 11, according to data compiled by Bloomberg. Employers created more jobs than forecast in April as payrolls increased by 244,000 workers last month, the biggest gain since May 2010, the Labor Department said.

Oil Stockpiles

That contrasts with a weaker-than-estimated report on U.S. service industries and higher American oil stockpiles, which may limit crude increases this year. The Institute for Supply Management’s index of non-manufacturing companies expanded at the slowest pace in eight months in April, while crude stockpiles rose to the highest level since October in the week ended April 29, according to the U.S. Energy Department.

Crude for June delivery fell $16.75 to $97.18 a barrel last week, the lowest settlement on the New York Mercantile Exchange since March 15. Futures tumbled 15 percent for the biggest weekly decline since December 2008. Gasoline fell 8.9 percent to $3.05 a gallon last week after rallying 65 percent from its 2010 low in May. Refining margins measured by first-month crack spreads have widened 142 percent in a year, data compiled by Bloomberg show.

Largest Company

Exxon, the world’s largest company by market value, is valued at 9.6 times projected 2011 earnings, less than its 23- year median of 15.5 using reported profit, according to data compiled by Bloomberg. First-quarter earnings for the Irving, Texas-based company jumped 69 percent to an almost three-year high of $10.7 billion, helping send the shares up 13 percent this year.

“We’ve paid a total of $59 billion in taxes over the past five years, and that’s a significant part of government revenue as well as more than we’ve earned through our U.S. operations,” Alan Jeffers, an Exxon spokesman, said in an interview. “Any claim that we’re not paying our fair share of taxes is inaccurate.”

Chevron, the second-largest U.S. energy company, trades at 8.1 times estimated income even after a 13 percent advance this year. The San Ramon, California-based company beat analysts’ first-quarter profit estimates on April 29 and said sales rose 25 percent to $60.3 billion.

Competitive Hurdle

“Discriminatory taxes would put U.S.-based energy companies at a competitive disadvantage around the world and discourage development of domestic oil and gas resources,” Lloyd Avram, a Chevron spokesman, wrote in an e-mail.

The last time profit forecasts rose this much, in May 2008, the shares peaked that month and began a 54 percent plunge as the recession deepened. Oil reached an intraday record of $147.27 a barrel in July 2008, during the worst financial crisis since the 1930s, only to tumble 78 percent to $32.40 a barrel in December 2008, six months before the recession ended.

“The outlook was very bleak, the economy was on much weaker footing and we were losing jobs,” said New York-based Priya Hariani, a U.S. equity strategist at BofA Merrill Lynch Global Research, which has an “equal weight” rating on energy stocks. “Oil came back when China and the U.S. started to grease the world economy through stimulus packages. As long as the increase in oil prices is demand-driven, then it’s going to continue to be positive for energy stocks.”

Trucks, Trains

In China, the world’s second-largest oil market after the U.S., electricity consumption has risen 14 percent from a year ago, an indicator of economic expansion that will require more crude to fuel trucks, trains and airplanes, Lawrence Eagles, an analyst at JPMorgan Chase & Co., said in a May 5 note.

“I see no deceleration in the demand story,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees $48 billion. “The energy sector remains a good long-term investment and if we get some pullback in here, then my take is that you let the stocks pull back and buy on weakness.”

Google Inc. (GOOG) lost an attempt to overturn a Belgian ruling that blocked it from publishing links to local newspapers on its online news service.

The Court of Appeal in Brussels on May 5 upheld a 2007 lower court ruling that forced Google to remove links and snippets of articles from French- and German-language Belgian newspapers from Google.com and Google.be. Google, the owner of the world’s most-used search engine, faced a 25,000-euro ($36,300) daily fine for any delay in implementing the judgment.

Copiepresse, the group that filed the suit on behalf of the newspapers, said the snippets generated revenue for the search engines and that publishers should be paid for the content. The publications have a second suit pending in which they seek as much as 49.1 million euros for the period in which their content was visible on Google News.

“This case sets a precedent,” said Flip Petillion, a Brussels-based partner with Crowell & Moring LLP, who wasn’t involved with the case. “Google has every interest in taking the debate to the highest level, they have no choice” other than to appeal, he said.

Google said it remains committed to further collaborate with publishers in finding “new ways for them to make money from online news.” Google has the option to appeal the ruling to the Cour de Cassation, Belgium’s highest court.

‘Fully Compliant’

“We believe Google News to be fully compliant with copyright law and we’ll review the decision to decide our next course of action,” Mountain View, California-based Google said in an e-mailed statement. “We believe that referencing information with short headlines and direct links to the source -- as it is practiced by search engines, Google News and just about everyone on the web -- is not only legal but also encourages web users to read newspapers online.”

Copiepresse said in a statement it is pleased with the decision and “hopes Google will have the intelligence to look for a fair solution to end this situation.”

“This case will have serious consequences to the way information is searched and managed” on the Internet, Erik Valgaeren, a lawyer for Google, told the Court of Appeal at a Feb. 23 hearing. A negative ruling “would put at risk all referencing services, or even cause them to disappear.”

More jobs and rising wages may give households, whose spending accounts for 70 percent of the economy, the means to overcome the highest gasoline prices in almost three years. Photographer: Jim R. Bounds/Bloomberg

 

May 6 (Bloomberg) -- U.S. Labor Secretary Hilda Solis talks about the April U.S. jobs report released today and the outlook for the economy. Payrolls increased by 244,000 workers last month, the biggest gain since May 2010, the Labor Department said. The jobless rate climbed to 9 percent. Solis speaks with Betty Liu on Bloomberg Television's "In the Loop." Richard Grasso, former chairman and chief executive officer of the New York Stock Exchange, also speaks. (Source: Bloomberg)

 

May 6 (Bloomberg) -- Christina Romer, former chairman of President Barack Obama's Council of Economic Advisers and a Bloomberg contributing editor, discusses the April U.S. jobs report released today. The U.S. economy added 244,000 workers last month, more than forecast, after a revised 221,000 gain the prior month, the Labor Department said. The unemployment rate climbed to 9 percent. Romer speaks with Scarlet Fu on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)

 

May 6 (Bloomberg) -- John Silvia, chief economist at Wells Fargo Securities LLC, discusses today's U.S. jobs report for April. The U.S. economy added 244,000 workers in April, more than forecast, while the unemployment rate climbed to 9 percent, according to Labor Department figures. Silvia speaks with Lisa Murphy on Bloomberg Television's "Fast Forward." (Source: Bloomberg)

 

May 6 (Bloomberg) -- Maury Harris, chief economist at UBS Securities, talks about the U.S. economy and job market. The U.S. economy added 244,000 workers in April, more than forecast, while the unemployment rate climbed to 9 percent, according to Labor Department figures. Harris speaks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)

 

May 6 (Bloomberg) -- Christian Thwaites, chief executive officer of Sentinel Investments, David Semmens, U.S. economist at Standard Chartered Bank, and Jeanne Branthover, managing director of Boyden Global Executive Search, talk about today's report showing American employers in April added more jobs that forecast. Thwaites, Semmens and Branthover also discuss speculation that Greece may withdraw from the euro. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

 

May 6 (Bloomberg) -- Al Hunt, executive editor at Bloomberg News, discusses the political reaction to the U.S. April employment report and previews his interview with Indiana Governor Mitch Daniels, which airs this weekend on "Political Capital With Al Hunt." Hunt speaks with Scarlet Fu on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)

 

May 6 (Bloomberg) -- Michael Englund, chief economist at Action Economics LLC, talks about April payrolls data released today by the Labor Department and outlook for the economic recovery. Payrolls expanded by 244,000 last month, the biggest gain since May 2010, after a revised 221,000 increase the prior month. The jobless rate climbed to 9 percent, the first increase since November, a separate survey of households showed. Englund speaks with Betty Liu on Bloomberg Television's "In the Loop." Richard Grasso, former chairman and chief executive officer of the New York Stock Exchange, also speaks. (Source: Bloomberg)

 

April 27 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke speaks about the outlook for Fed monetary policy, the impact of ending the central bank's $600 billion bond-buying program on financial markets and the U.S. economy. Bernanke's remarks were made at his first news conference following a meeting of the Federal Open Market Committee. (Excerpts. Source: Bloomberg)

American employers in April added more jobs than forecast and the labor market in the prior two months was stronger than initially estimated, indicating the world’s largest economy is weathering the impact of higher fuel prices.

Payrolls expanded by 244,000 last month, the biggest gain since May 2010, after a revised 221,000 increase the prior month, the Labor Department said today in Washington. The jobless rate climbed to 9 percent, the first increase since November, a separate survey of households showed. Employment was forecast to grow by 185,000 last month, according to the median estimate of economists surveyed by Bloomberg News.

Stocks jumped after four days of losses and the dollar rallied as the report eased concern that the economic recovery is cooling. The figures bolster Federal Reserve Chairman Ben S. Bernanke’s forecast for a labor market that is “improving gradually.”

“This is good news, and it’s getting better,” James Glassman, senior economist at JPMorgan Chase & Co. in New York, said in a radio interview on “Bloomberg Surveillance” with Tom Keene. “People increasingly are becoming more confident that we are on a recovery track.”

March payrolls were revised up from a previously reported gain of 216,000, and February employment increased 235,000 after a prior estimate of 194,000. April payroll projections in the Bloomberg survey of 86 economists ranged from gains of 118,000 to 325,000, while the jobless rate was projected to hold at 8.8 percent.

Shares Rally

The Standard & Poor’s 500 Index advanced 0.4 percent to 1,340.2 at the 4 p.m. close in New York. IntercontinentalExchange Inc.’s Dollar Index, used to track the greenback against the currencies of trading partners including the euro and yen, rose 0.8 percent to 74.785.

The economy has generated 760,000 private jobs in the past three months, the report showed. Overall, companies added 2.1 million jobs since last February, after the loss of 8.8 million as a result of the 18-month recession that ended in June 2009.

“So much for the headwinds of higher gasoline prices the economy is facing,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.

Private hiring, which excludes government agencies, rose by 268,000 in April, more than the 200,000 median forecast in the Bloomberg survey and the most since February 2006, after a 231,000 increase in March.

Railroad Hiring

Among companies adding workers is Norfolk Southern Corp. (NSC) The fourth-biggest U.S. railroad is expanding payrolls as it benefits from higher shipping volumes. First-quarter profit excluding some items was $1 a share, topping the 90-cent average estimate from 27 analysts surveyed by Bloomberg.

“We still have a need for additional employees for the business that we’ve got out there,” Mark Manion, chief operating officer of Norfolk Southern, said in an April 27 teleconference. “There is a need to hire for our current business as well as hiring for the growth that’s anticipated in the first -- this year and on into 2012.”

The separate survey of households showed the size of the labor force was little changed in April and employment shrank by 190,000. That pushed the share of the population in the labor force down to 58.4 percent from 58.5 percent a month earlier.

“The labor market has shown further improvement,” William C. Dudley, president of the Federal Reserve Bank of New York, said in a speech after today’s report. “Yet the recovery remains moderate and we still have a considerable way to go to meet the Fed’s dual mandate of full employment and price stability.”

Obama Ratings

The report is a boost for President Barack Obama, whose administration is locked in negotiations with Republican leaders in Congress to reduce record budget deficits. The president’s approval ratings got a lift in public opinion polls after the killing of al-Qaeda leader Osama bin Laden.

Americans remained concerned about the economy, which is likely to be the top issue in the 2012 presidential election. In a New York Times/CBS poll conducted May 2-3, 57 percent of those surveyed said they approved of the job Obama is doing, up from 46 percent who approved last month. Thirty-four percent approved of how Obama is handling the economy and 55 percent disapproved.

The jobs report “is obviously good news,” White House press secretary Jay Carney said aboard Air Force One as Obama traveled to an event in Indianapolis, adding, “We obviously have a lot more work to do.”

Government payrolls decreased by 24,000 in April, the sixth straight decline. Local-government employment dropped by 14,000.

Manufacturing Jobs

Factory payrolls increased by 29,000 last month, exceeding the survey forecast of a 20,000 gain, after a 22,000 rise in March.

“We are going to be hiring and growing employment in Puget Sound and in South Carolina over the foreseeable future,” Jim McNerney, chief executive officer of Chicago-based plane maker Boeing Co., said on an April 27 teleconference. “Production rates are fueling really an unprecedented growth for commercial airplanes.”

Employment at service-providers rose 200,000 in April after a 184,000 gain the prior month. The health care industry added 37,300 workers in April. Construction payrolls increased on a pickup in heavy and civil engineering employment.

Retail trade employment increased by 57,100 last month, which may have reflected the effects of an Easter holiday that occurred later this year than last, making seasonal adjustment difficult for the Labor Department.

Jobs Recovery ‘Slow’

While payrolls have grown each month since October, Bernanke said on April 27 that central bankers would like to see more strength in the U.S. job market, noting that a recovery has been “quite slow.”

“The labor market is improving gradually,” Bernanke said to reporters during the first-ever press conference following a Federal Open Market Committee meeting. “We would like to make sure that that is sustainable.”

Fed policy makers last week decided to complete their program to buy $600 billion in Treasuries through June to boost the economy. At the same time, Bernanke said the Fed would maintain record monetary stimulus and keep its balance sheet steady by reinvesting proceeds of maturing securities.

Economic growth slowed to a 1.8 percent annual rate in the first quarter after expanding at a 3.1 percent pace in the last three months of 2010, according to Commerce Department figures.

Food, Fuel

Rising fuel and grocery bills are squeezing the budgets of households whose spending makes up 70 percent of the economy and damping consumer confidence. The Bloomberg Consumer Comfort Index decreased to minus 46.2 in the week ended May 1, the lowest level since the end of March, from minus 45.1 the prior period.

Regular gasoline was $3.99 a gallon on May 4, the highest since July 2008, according to AAA, the nation’s biggest motoring organization. Food costs rose 0.8 percent in March, also the most since July 2008, consumer-price index data from the Labor Department showed last month.

Higher incomes are helping make up for the price increases. Average hourly earnings climbed by 3 cents to $22.95 in April, today’s report showed, while the average work week for all employees held at 34.3 hours.

The data also showed a decrease in long-term unemployed Americans. The number of people unemployed for 27 weeks or more fell to 43.4 percent of all job-seekers from 45.5 percent a month earlier.

NEW YORK (MarketWatch) — Investors trying to figure out how a U.S. federal deficit-cutting plan will affect their portfolios may want to reconsider stock holdings and buy Treasury bonds after a look at British markets since the government there put an austerity plan together.

Worries that the U.K. plan would slow economic growth have dragged on British stocks, which some analysts say may also be the outcome for the U.S. equity market.

 

The benchmark index for U.K. stocks have done a little better than one for the U.S. benchmark this year.

 

British debt has held its ground, which could bode well for U.S. debt. And the effect of deficit cutting on the British pound could ultimately slow its gains.

“Markets will try to find some kind of road map” for U.S. assets from the experience in U.K. markets, said Kevin Flanagan, chief fixed-income strategist for Morgan Stanley Smith Barney.

Lessons from British markets under government belt-tightening only go so far because of notable differences in how the U.S. and U.K. make budgets and the magnitude of cuts under consideration.

   

As gold, silver drop, seek out bonds

As gold and silver tank, assets besides commodities can hedge against inflation, according to David Goerz of HighMark Capital Management, who recommends high-quality stocks with a dividend yield, as well as small caps.

But they are worth considering as a strategy on cutting the deficit moves to the front burner for U.S. lawmakers, and the government approaches its federal debt limit. The ceiling, expected to be reached on May 16, would need to be raised by Congress. 

Analysts say any plan agreed on by the U.S. Congress and President Barack Obama could be a game changer for the Federal Reserve and dictate the reaction of U.S. markets.

British stock gains have slowed since the government announced its austerity measures last fall, with commodity-price increases supporting the market. It’s also been helped by a rising British pound. which is up 5.3% this year.

For British stocks, “the only reason we’re in the neutral camp is the austerity measures,” said Alec Young, international equity strategist at Standard & Poor’s Equity Research said. “That’s keeping me from being too positive.”

Gains in U.K. stocks have mostly benefitted investors outside the country because of a major jump in the currency, he said.

 

 

 

In local terms, the MSCI U.K. Index, a benchmark for many fund managers, has gained 1.6% this year, including gross dividends. In dollar terms, it’s up 7.3%.

The iShares MSCI United Kingdom Index Fund   has risen close to its strongest levels since September 2008, when the credit crisis sent markets reeling, though its pace cooled since the fall. It rose 3.1% in the first quarter, half of its returns from the fourth quarter and much slower than the 21% rise in the third quarter of 2010.

The FTSE 100   has gained 1.4% this year.

Stocks have posted such tepid gains mostly before the government’s austerity measures kicked in, since the fiscal year just started in early April. But investors and consumers have known about the plan since last autumn and adjusted accordingly, which has kept valuations low, Young said.

“The growth outlook is challenged by austerity measures, but it’s priced into the market,” Young said.

U.S. stocks have outpaced their British counterparts. The Standard & Poor’s 500 Index , a benchmark for U.S. stocks, has gained 7% this year, and the SDPR S&P 500 ETF  has returned 7.1%.

The effects of spending cuts or tax increases, and the volatility that will surround those, has not been priced into U.S. equities yet, said John Canally, an economist for LPL Financial.

In the three months to the end of March, Alcatel-Lucent posted a net loss of 10 million euros ($14.6 million) compared to a loss of €515 million recorded in the year-earlier quarter.

   

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Adjusted operating profit, the figure most closely tracked by the financial community, came in at €13 million compared to a loss of €195 million a year earlier, beating consensus expectations of a €68 million loss, according to a poll of six analysts surveyed by Dow Jones Newswires.

Revenue rose 15% to €3.74 billion, led by a 40% surge in North America, where Alcatel-Lucent is working on faster fourth-generation networks for the likes of Verizon Communications Inc.  VZ -1.46% . Sales rose 1.7% in Asia and slipped 1.8% in Europe.

The company continued to do particularly well in its wireless business as operators around the world upgraded their networks to be better able to cope with the surge in data traffic triggered by more widespread adoption of smartphones like Apple Inc’s iPhone.

“We have started this year the way we ended the last, increasing growth, profit and global strength, and to do so in the first quarter is particularly pleasing,” Chief Executive Ben Verwaayen said in a statement.

The company reiterated its goal of a “significant increase in profitability” in 2011 and an adjusted operating margin of more than 5%.

Alcatel-Lucent initially rose as much as 4% in early trading in Paris. They were last down 6%. Shares of the company have enjoyed a solid rally since its fourth-quarter results, when an unexpected surge in profit sent its shares up nearly 19% in a single session.

Alcatel-Lucent was formed five years ago from the merger of France’s Alcatel and Lucent of the U.S. Over the following years, it struggled to iron out cultural differences and streamline its portfolio at a time of intense price competition from Chinese rivals like Huawei Technologies and ZTE Corp. 

When Verwaayen took over in 2008, he promised to make Alcatel-Lucent a “normal company” again. Unfortunately the financial crisis led operators to freeze spending and thus delayed the company’s recovery.

On Friday Alcatel-Lucent said that although it sources some of its components in Japan and faces “some difficulties” with its supply chain, it believes those challenges will have a “limited impact” on business performance thanks to rapid actions taken.

The earthquake and ensuing tsunami that took place in Japan in early March have disrupted the global technology supply chain as many high-end and chip-related components are manufactured in the country.

Rival Ericsson AB  last month reported a tripling of first-quarter profit and a 17% increase in revenue

Dunkin' Brands has more than 16,000 outlets worldwide

Dunkin' Brands Group, owner of Dunkin' Donuts and Baskin Robbins ice cream, is to sell shares on Nasdaq to raise up to $400m (£240m).

But the regulatory filing did not say how many shares it would offer or how much they would cost.

Dunkin' Brands was part of Allied Domecq until 2005, when the parent company was taken over by Pernod Ricard.

Pernod sold Dunkin' Brands to a group of private equity firms for $2.4bn.

The owners include Bain Capital, Carlyle Group and Thomas H. Lee Partners.

Dunkin' Brands has more than 16,000 outlets in 57 countries.

The company said it sees a "significant opportunity" to expand further into foreign markets and parts of the US outside the north-east where it is currently concentrated.