Finance Blog number 1

DAVOS, Switzerland

Hundreds of people crowded the capital’s main international airport hoping for a flight out on Saturday but Western carriers were canceling, delaying or suspending service after days of violent unrest.

A British airline turned around its Cairo-bound jet in mid-flight.

Between 1,500 and 2,000 people flocked to Cairo Intentional Airport, many without reservations. Officials said that about half were tourists and half Egyptians.

British Midlands International said its flight from London Heathrow to Cairo turned around because a shift in the start of a nighttime curfew from 6 p.m. to 4 p.m. had made it impossible to land in time for passengers to make it out of the airport.

The United States, France and Germany issued warnings to their respective citizens, urging them to cancel nonessential travel to Cairo and to remain indoors and away from flashpoint areas if they were already in the country.

Israeli carrier El Al was trying to arrange a special flight Saturday to take roughly 200 Israeli tourists out of the country, a Cairo International Airport official said, speaking on condition of anonymity because he was not authorized to brief the media. Israel’s embassy in Egypt declined to comment.

British Airways, meanwhile, modified its departure time so flights would not arrive in Cairo during the curfew hours. BA also said it would send a charter plane to Egypt to move passengers wanting to leave.

The flight disruptions threatened to undercut one of Egypt’s key foreign revenue generators _ tourism, which accounts for about 11 percent of Egypt’s gross domestic product. Tourism brought in over $9 billion for Egypt in the first nine months of 2010 and $10.8 billion the year before.

So far, the protests appear to have mainly affected travel plans to Cairo, while the Red Sea resorts favored by the Europeans and Russians who make up the majority of foreign tourists to Egypt were unaffected.

The Polish Foreign Ministry said it had learned that some Polish tourists had rented vehicles to travel to cities where demonstrations were taking place.

“We consider this very irresponsible and urge them not to do that,” ministry spokesman Marcin Bosacki said.

Two of the biggest tourism agencies in Germany, TUI and Thomas Cook, gave their customers the option of either canceling trips to Egypt or choosing a different destination, with no penalties low fee payday loans.

Thomas Cook said that there had not been any requests for cancelations.

TUI also said nobody had asked to return early to Germany and there had been only sporadic cancelations.

Rene-Marc Chikli, president of the CETO association of French tour operators, said the group was suspending all departures this weekend for Egypt. Many travelers who are already in Egypt are being routed away from Cairo to see other destinations, such as Luxor, Aswan or the Red Sea, he told France Info radio.

_ German carrier Lufthansa said it had canceled both of its two scheduled flights to Cairo on Saturday.

_ Air Berlin canceled one flight to Cairo.

_ U.S. carrier Delta Airlines, which flies direct to Cairo from the U.S., said service to and from Cairo would be “indefinitely suspended as a result of civil unrest.”

_ Polish airlines LOT has canceled a flight from Warsaw to Cairo scheduled for Saturday evening, as well as the return flight on Sunday. Future flights will be determined based on whether the unrest in Egypt continues, airline spokesman Jacek Balcer told the Polish news agency PAP.

_ Low-cost Dubai-based carrier FlyDubai, which flies to three Egyptian cities, said it canceled a flight Friday evening to Alexandria because of the curfew, and is delaying other flights scheduled to depart for Egypt Saturday and Sunday.

_ Emirates, the Middle East’s biggest carrier, said its two flights from Cairo on Saturday were delayed, but that it expects to continue flying to and from Cairo.

_ KLM, based in the Netherlands, said it was continuing with its daily flights to Cairo, but in a curfew-driven schedule, according to airline spokeswoman Astrid de Craen.

_ Italy’s Alitalia was also adjusting its schedule to account for the curfew.

_ EgyptAir flights were running late, in some cases because crew were unable to reach the airport, or were worried about the drive to the facility, the Cairo airport official said.

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Looks like the new year brought no change for the Federal Reserve.

In its first meeting of 2011, the central bank said it remains cautious about the economic recovery. It decided to leave interest rates unchanged near historic lows and continue with its $600 billion bond buying program to stimulate the economy.

"This is the same language," said economist Robert Brusca with FAO Economics. "The language of disappointment from the Fed."

The anticlimactic decision was unanimous among all 11 members of the Fed’s voting committee, including the four newest voters.

It’s no shocker that the Fed would stand pat on the fed funds rate, which has remained at historic lows near zero since 2008.

When the central bank first announced its bond buying policy, known as quantitative easing last November, the Fed promised to reevaluate as necessary.

And with a few more hawkish voting members rotating in this year, some had questioned whether the Fed would proceed full speed ahead.

Several of the new voting members are considered inflation hawks, and have publicly spoken out against quantitative easing, fearing that the flood of easy money could lead to rising inflation. Among them, Philadelphia Fed President Charles Plosser and Dallas Fed President Richard Fisher are the most vocal.

Prior to Wednesday’s meeting, Fed watchers speculated as to whether either Fisher or Plosser would take a formal stand, officially dissenting at the meeting.

But neither one did.

"It’s one thing to be vocal, it’s a completely different thing to cast a vote against the chairman," Brusca said.

Perhaps the most vocal inflation hawks decided it wasn’t appropriate to dissent at the first meeting of the year.

"You could lose your credibility and become a clank. Or, you can wait until you really have something to dissent over," Brusca said.

On last year’s voting roster, only one member — Kansas City Fed President Thomas Hoenig — dissented officially, and did so at all eight meetings of the year, speaking against the Fed’s policy of keeping interest rates low for an "extended period."

A delicate balancing act

In moving ahead with quantitative easing, the Fed is attempting to meet both its job responsibilities: to keep prices stable and maximize employment.

While the object of the policy is to get more money into the economy and stimulate growth to create jobs, it comes at the risk of higher prices. But with inflation pressures remaining low, the Fed sees little danger in pursuing more monetary stimulus.

"Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low," the Fed said in its official statement.

Since the recession, the central bank has struggled, however, to significantly bring down the unemployment rate, which currently sits at 9.4%.

Some critics — including some Fed members — have recently warned that accommodative monetary policy could devalue the dollar and fuel inflation at a time when the economy is already improving.

The Federal Reserve’s voting body is currently made up of eleven members: Chairman Ben Bernanke, five Fed governors, the president of the New York branch and four regional bank presidents who rotate each year.

One Fed governor position — which would bring the voting total up to 12 — remains unfilled.  

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Xerox reported its fourth-quarter earnings dipped 5 percent from a year ago, largely due to the costs of restructuring. The company’s shares slid Wednesday on a modest financial outlook.

Xerox has been trimming its work force around the globe after buying outsourcer Affiliated Computer Services last year. Since announcing the $6 billion deal, it has disclosed plans to lay off some 5,000 workers.

In the last three months of 2010, Xerox earned $171 million, or 12 cents per share. That’s down from $180 million, or 20 cents per share, a year earlier.

Stripping out restructuring and other one-time expenses, earnings would have been 29 cents per share, a penny better than analysts surveyed by FactSet expected.

Revenue jumped 42 percent to nearly $6 billion, mainly because of the ACS deal. That was in line with estimates.

Yet Xerox said it expects adjusted earnings of 20 to 22 cents per share for the first quarter, which is a penny shy of estimates faxless pay day loans.

And for the full year, it projected adjusted earnings per share of $1.05 to $1.10. Analysts were looking for the high end of that range, on average.

Shares in Xerox Corp. fell 27 cents, or 2.4 percent, to $11.13 ahead of regular trading.

The company’s full-year earnings came to $606 million, or 43 cents per share, up 25 percent from $485 million, or 55 cents per share, in 2009. Revenue climbed 43 percent to $21.6 billion from $15.2 billion.

Xerox also said Wednesday it is poaching the chief financial officer of Nokia Siemens Networks, a joint venture between Finland’s Nokia Corp. and Siemens AG of Germany. Luca Maestri, 47, will replace Xerox CFO Lawrence A. Zimmerman, 68, when he retires next month.

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Standing before a nation clamoring for jobs, President Barack Obama will call for targeted spending to boost the economy but also for budget cutting in Tuesday night’s State of the Union address, his first in a new era of divided political power.

Though war and other issues bid for attention, Obama will put the economy above everything else.

To a television audience in the tens of millions, Obama will home in on jobs, the issue of most importance to the public and to his hopes for a second term. His address will lean heavily on the economy, with far less emphasis on Afghanistan and Iraq, terrorism and foreign affairs.

Specifically, Obama will focus on improving the education, innovation and infrastructure of the United States as the way to provide a sounder economic base. He will pair that with calls to reduce the government’s debt _ now topping a staggering $14 trillion _ and reforming government. Those five areas will frame the speech, with sprinklings of fresh proposals.

Yet no matter how ambitious Obama’s rhetorical reach, his speech at the halfway point of his term will be viewed in the context of his new political reality.

The midterm elections gave Republicans control of the House and a stronger minority vote in the Senate, meaning he hasn’t the option of pushing through changes over strong GOP objections. The contrast between the two parties’ visions remains stark, and the debate about where to slash spending, and by how much, will drive much of the debate for the rest of 2011.

As if to underscore that point, Obama’s speech will come just hours after the House is to vote on setting spending for the rest of the year at 2008, pre-recession levels. That resolution, largely symbolic, would put Republican lawmakers on record in favor of cutting $100 billion from Obama’s budget for the current year as the party promised in last year’s campaign.

The atmospherics of the State of the Union, always watched with some fascination as a display of political theater, are expected to be more sober and civil than in recent years.

The speech comes less than three weeks after an assassination attempt against Democratic Rep. Gabrielle Giffords in Tucson, Ariz. She is recovering remarkably after being shot in the head during a one-man rampage that left six dead. Among those who will sit with first lady Michelle Obama at the president’s speech will be the family of a 9-year-old girl who was killed, and an aide to Giffords who rushed to help her at the shooting, and trauma surgeons who have treated the wounded lawmaker.

In an attempt at unity following an attack on one of their own, some Democratic and Republican lawmakers will sit together at Obama’s speech. Others have dismissed that idea as superficial. The focus on tone comes a year after Obama’s rebuke of a Supreme Court decision in his State of the Union speech led Justice Samuel Alito to mouth back, “Not true.”

Obama is trying to emphasize economic priorities that can draw both public appeal and enough Republican consideration for at least serious debate.

He will wrap them all under the heading of helping the United States to compete more successfully in the world _ a “win the future” rallying cry that Obama’s aides hopes will resonate with both workers and business executives and bind the political parties. In fact, the theme of competitiveness has been pushed by many presidents, including Obama.

In this same setting one year ago, he declared: “China is not waiting to revamp its economy. Germany is not waiting. India is not waiting. These nations aren’t playing for second place.” Obama has spoken consistently about a need for a new direction in America, an agenda of investing in energy, education, research and public works. Republicans say when Obama speaks of investments, he means spending.

The president’s aides say he will talk about cutting spending, too, although the details are less clear. In the background are the politically explosive recommendations of his bipartisan commission about how to trim the debt. On Social Security alone, ideas include raising the retirement age at which people could receive benefits, reducing those benefits and lowering cost-of-living increases.

In his speech, Obama is expected to mention tax reform, another recommendation from the commission.

But the White House says Obama will not dive deeply into policy or offer a rundown of ideas reading like a laundry list. His goal is for those watching to emerge with more confidence about the economy of the country and more clarity about his vision for it.

It will be a sales job to a skeptical crowd.

In a new Associated Press-GfK poll, more than half of those surveyed disapproved of how Obama has handled the economy, and just 35 percent said it has improved on his watch. Still, the poll revealed a sense of perspective. Three-quarters of those questioned said it is unrealistic to expect noticeable improvements after two years, the length of Obama’s tenure. The recession that began before Obama took office erased 7.3 million jobs. On the rebound, the economy produced 1.1 million jobs last year, and economists think that figure will roughly double this year. Yet unemployment, now at 9.4 percent, is likely to stay high. Economists predict the jobless rate is likely to be just under 9 percent by the end of the year.

On Wednesday, Obama was down to fine-tuning the language of his speech. His radio address over the weekend showed where he was headed

“We’re living in a new and challenging time, in which technology has made competition easier and fiercer than ever before. Countries around the world are upping their game and giving their workers and companies every advantage possible,” the president said. “But that shouldn’t discourage us. Because I know we can win that competition.”

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True or false: States suing to overturn core requirements of President Barack Obama’s health care overhaul are refusing to carry out the law. If you said “true,” you’d be wrong.

Republican state legislators and governors are working on how to deliver coverage to more than 30 million people now uninsured, as the law calls for, even as GOP attorneys general lead the legal battle to overturn the law’s mandate that most Americans have health insurance.

The result? Perhaps the first practical opportunity for the two political parties to work together on an issue that divide them in Washington.

“I can be philosophically opposed and recognize that we can’t be asleep at the switch,” said Alabama state Rep. Greg Wren, a Republican playing a national role.

“I for one have no interest in ceding any regulatory or statutory authority to the federal government in this area and allowing our state to default while we pursue the litigation side,” said Wren, co-chairman of a National Conference of State Legislatures task force on the health care remake.

The debate in the nation’s capital seems headed for a stalemate this year because Senate Democrats have the votes to thwart House Republicans’ efforts to repeal the law. Denying the Obama administration money to carry out the law isn’t a sure strategy either; most of the money was woven tightly into the legislation Congress passed last year.

“We will see a lot of small battles in Congress, but the real center of gravity will shift to the states,” said Mike Leavitt, former Republican governor of Utah and health secretary under President George W. Bush. “Bipartisanship is more vibrant in the states than it is in Washington. That doesn’t mean it’s plentiful, but at least it’s alive.”

States have to be ready to take on major responsibilities when the coverage expansion gets going in 2014. If not, the federal government will come in and run things.

States must set up and operate health insurance markets where an estimated 24 million people eventually will buy private coverage, most with the aid of federal subsidies. Also, states must open their Medicaid programs to a broader segment of low-income people.

The Medicaid expansion worries state officials. They’re already struggling with the costs of the program, draining money from other services from education to law enforcement. Special added Medicaid payments that Washington funneled to the states in the economic downturn will end this year, worsening the crunch.

About 16 million newly eligible people eventually would get Medicaid under the law, and potentially several million more who are eligible today but not signed up could enroll as well. The law says the federal government will pick up the full cost of those newly eligible for the first few years, but doesn’t deal directly with covering the other group.

If state officials are unsure about the Medicaid expansion, they’re intrigued about what they might be able to do with the new insurance markets, known as exchanges.

Consumers will be able to go online and pick a private plan from a range of coverage levels and options. Comparison shopping will be easier because benefits will be standardized.

Nearly every state has applied for an initial round of federal planning grants to explore how to design the markets.

“State exchanges are good from a conservative standpoint because they involve consumer choice and markets,” said former Senate Majority Leader Bill Frist, a Tennessee Republican.

“What I would like to see is more flexibility given to states in the regulations that define how the legislation works,” said Frist. “Each state can develop the exchange that best meets the needs of their people.” Two models already exist: Utah’s, which is light on regulation, and Massachusetts’, where the state government is more directly involved.

Frist, a heart transplant surgeon, has teamed with Democrat Tom Daschle of South Dakota, also a former Senate leader, to try to change the health care debate by stepping back from the repeal fight and using the law as a foundation that can be improved. They expect to direct many of their recommendations to the states.

In New Jersey, Democratic Assemblyman Herb Conaway is hoping to be able to work with Republican Gov. Chris Christie to design their state’s exchange. Conaway, a primary care doctor, heads the health committee and is the Democratic counterpart to Alabama’s Wren in national planning efforts by state legislators.

“There will be tangible benefits that come to states for taking on these problems,” said Conaway. “Done right, there is a benefit that comes to them from getting their people insured. An insured population uses resources more wisely, instead of going to the emergency room and getting treatment that costs four times as much.”

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Online:

National Conference of State Legislatures: http://tinyurl.com/6ca2rad

White House background on the health law: http://tinyurl.com/2dv65w5

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U.K. mortgage approvals fell to the lowest level since March 2009 last month as demand for housing weakened amid cold weather and the prospect of the government’s fiscal squeeze.

The number of home loans fell to 40,000 from 45,000 in November, the Bank of England said in London today, citing data from six banks. The value of loans fell to 8.9 billion pounds ($14.2 billion), with net lending dropping to 800 million pounds, the lowest since records began in January 2009.

Recent data have shown a mixed picture of the U.K. housing market as the government steps up spending cuts and increases the sales-tax rate, undermining consumer confidence. A separate release from the Council of Mortgage Lenders showed gross mortgage lending fell 6 percent in December on the month.

“Lenders reported that housing market activity remained subdued, partly reflecting a weakening of house prices and potential impacts on incomes from fiscal consolidation,” the central bank said in its report. “Lenders expected both housing market activity and gross lending for house purchase to be broadly flat in 2011, with house prices expected to be little changed or to decline slightly.”

The pound was little changed against the dollar today and traded at $1.5903 as of 11:09 a.m. in London. Data from the Office for National Statistics showed retail sales dropped the most ever for a December as snowfall and higher prices undermined Britons’ holiday shopping.

Housing Demand

A British housing-market gauge stayed close to an 18-month low in December as cold weather hurt demand and fewer people put their properties on the market, the Royal Institution of Chartered Surveyors said on Jan. 18. Hometrack Ltd. said on Jan. 12 that banks won’t increase mortgage lending this year as tougher regulation and a lack of funds curb access to credit.

The CML report showed gross mortgage lending was at 11 billion pounds last month, the weakest since 2000. Mortgage approvals are at less than half the level seen at the peak of the market in 2007, according to Bank of England data.

The central bank said today the U.K.’s largest lenders indicated that while the number of home loans granted in December was “little affected” by cold weather, mortgage applications were “affected somewhat.”

Policy makers held the key interest rate at a record low of 0.5 percent this month and bond-purchase program at 200 billion pounds as they assessed signs the economic recovery is slowing.

The mortgage-approvals data published today are based on reports from Banco Santander SA, Barclays Plc, HSBC Holdings Plc, Lloyds Banking Group Plc, Nationwide Building Society and Royal Bank of Scotland Group Plc. The banks accounted for 75 percent of U.K. home loans granted at the end of November.

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Europe’s new risk watchdog probably lacks the teeth to avert the region’s next financial crisis, economists say.

The European Systemic Risk Board, which aims to identify and warn of brewing risks in the financial system, may fail to prevent future imbalances as it doesn’t have any legal power to enforce action, according to economists at ING Group, Barclays Capital and ABN Amro.

The 65-member board meets for the first time in Frankfurt today. Its chairman, European Central Bank President Jean-Claude Trichet, and vice chairman, Bank of England Governor Mervyn King, will give a press conference at 3:30 p.m.

“If you’re looking for an institution that will save us from the next crisis, this is certainly not it,” said Carsten Brzeski, an economist at ING Group in Brussels. “It’s just another talking shop.”

The European Union is trying to avoid a repeat of the financial crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc. and resulted in European governments setting aside more than $5 trillion to support banks. Part of a wider regulatory overhaul, the ESRB is similar to the Financial Stability Oversight Council in the U.S.

“If they come up with a convincing case pointing to deficiencies in any particular market or jurisdiction, it will be very hard for the authorities concerned to ignore that warning,” said Bernhard Speyer, head of financial market regulation research at Deutsche Bank AG in Frankfurt cash advance payday loan. “I am fairly confident as to the quality of the output of the ESRB.”

While the body will monitor macro-prudential risks, it may turn its attention to single institutions deemed systemically important. It has yet to identify those institutions or say what methodology it will use in its risk analysis.

Public Disclosure

The ESRB has been given discretion over whether to inform the public of any warnings it makes on a case-by-case basis. Lawmakers have allowed the body to keep warnings secret if it thinks any judgment would unsettle markets, even though the legislation says that “public disclosure can foster compliance.”

ECB council member Athanasios Orphanides of Cyprus said the ESRB could recommend actions similar to those taken by the Cypriot central bank in 2007, when it tightened the loan-to- value ratios on real estate loans.

“That decision made our system more resilient” and is “an example of the recommendations I foresee the ESRB will consider making,” he said in an interview on Jan. 14.

Still, in the absence of clarity about the ESRB’s powers and activities, banks have reacted with indifference to the arrival of the new body, according to James Nixon, co-chief European economist at Societe Generale in London.

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Authorities with megaphones urged residents of more towns in southern Australia to flee Tuesday as swollen rivers carried deadly floodwaters deeper into another state and worsened a natural disaster the government says may be its costliest ever.

Victoria state is the latest region afflicted in a weekslong flooding crisis that has left 30 people dead and caused once-a-lifetime floods in many areas.

The city of Horsham resembled a lake after the Wimmera River overflowed its banks Tuesday and bisected the community before starting to recede in the afternoon. About 500 homes in the city of 14,000 people were surrounded by water in floods Mayor Michael Ryan said were worse than anything the area had seen in the last 200 years.

Officials sent three emergency alerts overnight to residents in the path of the high water.

“At 5 a.m. they were out on the megaphone just yelling ‘evacuate,’” West Horsham resident Brett Insall said, but he stayed at his home. “I’m not too worried about it. It’s only water.”

State Emergency Service Incident Controller Stephen Warren said the water would slowly recede through the day. “We may even be able to get the (Western) highway open late in the day and actually have some access later tonight,” Warren told reporters.

Across north-central Victoria state, more than 3,500 people have evacuated their homes, with 51 towns and 1,500 properties already affected by rising waters.

The Wimmera River towns of Dimboola and Warracknabeal faced inundation over the coming 24 hours, Victoria officials said payday loans.

An evacuation warning was issued to residents of Kerang, who face isolation for at least three days when the Loddon River peaks. Emergency officials said any resident unable to cope without electricity, water, sewer and telephone connections should leave their homes.

Floodwaters have already left 1,000 households in Victoria’s northwest without power, and thousands more homes are under threat of cuts as substations and low-lying power lines are submerged.

Energy supplier Powercor was building earthen barriers around the substation in Kerang, in a floodplain expected to be inundated by six feet (two meters) of water.

Prime Minister Julia Gillard announced the formation of a business task force to assist with rebuilding devastated infrastructure in Queensland. She said a day earlier that the floods that ravaged Queensland could be the country’s most expensive natural disaster ever.

Most of the 30 people who died in Queensland were killed a flash flood that hit towns west of the state capital, Brisbane. The state’s flooding inundated 30,000 homes and businesses and left 12 people missing.

The price tag from the relentless floods was already at $5 billion before muddy brown waters swamped Brisbane last week.

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Some Australian communities remained isolated by floodwaters and others braced for a new river peak Sunday as the nation’s third-largest city struggled to clean up the putrid sludge left behind by the receding Brisbane River.

More than 12,000 rubber-gloved volunteers hauled sodden debris from soaked homes, shoveled muck and swept and mopped muddy floors in some of the 30,000 homes and businesses that were flooded in Brisbane.

Officials have said the complete cleanup of the Queensland state capital would take months, and reconstruction up to two years.

The floods have caused 27 deaths in Australia’s northeast since late November, and 14 other people are missing, most of them from a flash flood that hit towns west of Brisbane on Monday.

In Grantham, described as the epicenter of the flash flood, 70 percent of the town remained cordoned off Sunday while searchers looked for the bodies of the missing.

“People I hope will understand the pressure that the police are working under in these sorts of circumstances and be patient,” Queensland state Premier Anna Bligh said. “They are working as hard as they can to be in a position to allow people back into Grantham as quickly as possible.”

The wall of water that swept through the town left behind dozens of smashed cars wedged in trees or bogged in fields, houses slipped off their foundations and masses of muddied belongings piled up as debris in the streets.

The engorged rivers that flooded Queensland towns have now swelled south into other states. In New South Wales, nearly 7,000 people have been isolated by floodwaters that overflowed highways and emergency services helicopters air-dropped food and other supplies to residents.

In northern Victoria, a dozen small communities were sandbagging amid fears of high-peaking rivers, and 3,000 people have evacuated.

An economist has estimated the Queensland floods’ cost could be as much as $13 billion, or 1 percent of gross domestic product in Australia’s 1.3 trillion Australian dollar ($1.29 trillion) economy.

Mining companies say they won’t be able to meet contracts for coal, Australia’s biggest export, while Queensland farmers’ crop losses could push up world food prices.

Even more frightening for farmers is the Bureau of Meteorology’s prediction that rain could last through March due to the cool conditions in the central equatorial Pacific Ocean associated with the current La Nina _ a weather system known for producing heavy rains.

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