Finance Blog number 1

French business confidence unexpectedly climbed in December to its highest level since March 2008 as Europe’s third-largest economy extended its recovery from the recession.

The Bank of France’s Business Sentiment Indicator for manufacturing advanced to 101 from 99 in November, according to an e-mailed statement today. Economists had expected the measure to remain unchanged, according to the median of five forecasts gathered by Bloomberg News.

The Paris-based central bank said the data suggest economic expansion of 0.5 percent in the fourth quarter, a decrease of 0.1 percentage point from its previous estimate. Declines in gauges for capacity utilization, total orders and production countered an improvement in order books, the central bank said.

“Businesses still remain skeptical and want to see what happens in the economy,” said Laurence Boone, chief French economist at Barclays Capital in Paris.

Finance Minister Christine Lagarde said last week that the government hopes to raise its growth forecast to at least 1 percent for 2010 from 0.75 percent as the recovery gains pace.

Industrial production grew more than twice what economists expected in November, gaining 1.1 percent from the previous month, statistics agency Insee said yesterday.

French businesses are benefiting from the economy’s return to growth in the second quarter of 2009 as well as government stimulus programs, even as increases in the euro and unemployment threaten the expansion.

On Jan. 6, Sodexo, the world’s second-biggest catering company, reported a smaller first-quarter revenue decline than some analysts expected and confirmed its annual profit target.

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Home price gains earlier this year flattened out in October, according to a report issued Tuesday.

The S&P/Case Shiller Home Price index, covering 20 of the largest metropolitan areas in the nation, was unchanged in October, after four consecutive months of gains. The index is down 7.3% from 12 months earlier.

"The turnaround in home prices seen in the spring and summer has faded," said David Blitzer, chairman of the Index Committee at Standard & Poor’s, in a statement. "Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip," he said.

Just seven of the 20 cities recorded gains from a month earlier.

The modest gains earlier this year were in part propped up by government initiatives.

"We’ve seen recent stability because of low interest rates and the impact of the first-time homebuyers tax credit," said Pat Newport, a real estate analyst with IHS Global Insight.

Prices are down from their all-time highs set in 2006 by 29% for the 20-city index.

Among the 20 cities, the worst tumble was taken by Tampa during the month. Prices fell 1.6% from September. Chicago and Atlanta recorded 1% losses.

The biggest gainers were Phoenix, up 1.3%, and San Francisco, up 1.2%.

Las Vegas sellers continued to bleed. Prices there fell just 0.1% but that marked the 38th straight monthly decline. The market in Sin City is off 55.4% from its peak. You can buy a home in Las Vegas for the same price it sold for in October of 2000.

"In most of the hardest-hit markets, price declines are moderating," said Mike Larson, an analyst with Weiss Research.

Los Angeles recorded a rise of 0.3% and San Diego prices gained 0.4%. Miami, however, declined by 0.4%.

According to Larson, falling supplies of homes on the market are helping to stabilize conditions. "Inventories are plunging on the new-home side and going down for existing homes," he said.

Not that he’s ready to break out the champagne, even with the New Year close at hand. "The market is recovering but it will be an anemic recovery," he said. 

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The cities of the mountain West have felt the recession as deeply as any in the nation, although the pain has not been spread evenly, according to a report Tuesday.

Denver emerged as one of the strongest cities in the six-state region on a number of measures, according to the report by Brookings Mountain West, a partnership between the Brookings Institution and the University of Nevada.

“Phoenix, Boise, and Las Vegas… remained three of the most troubled metropolitan areas in the entire nation in the third quarter, with all residing in the weakest quintile of metros on a combined measure of overall economic performance,” researchers wrote. “Still, metros like Colorado Springs, Albuquerque, and Denver have only been moderately affected by the recession and seem poised to renew their upward trajectory as the pace of recovery quickens.”

Denver’s unemployment rate averaged 7 payday loan.1 percent in the third quarter, below the 100-city average of 9.6 percent. It ranked 14th of the 100 cities in terms of unemployment rate — with 1 signifying the strongest-performing metro and 100 the weakest-performing — and ninth in terms of change in the unemployment rate over the 12 months ending in September.

The city also fared well on housing prices: over the 12 months through September, Denver house prices were up 1.6 percent, compared with an average drop of 3 percent.

But foreclosures remained a problem, with the city ranking 76th out of 100 in terms of real-estate-owned properties per 1,000 mortgageable properties.

Denver ranked 70th for gross metropolitan product, and 57th for employment growth.

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The initial lineup has been announced for the annual Country Thunder concert in Florence, scheduled for April 14-17:

• April 14: The Grascals, Eric Church and Neal McCoy.
• April 15: Collin Raye, Jo Dee Messina, Gary Allan and Miranda Lambert.
• April 16: Love & Theft, Trailer Choir, Randy Houser, Big Kenny, Kevin Costner & Modern West and Keith Urban.
• April 17: Jason Jones, Kate & Kacey, Gloriana, Luke Bryan, Willie Nelson and Kid Rock Faxless payday loans.

For a limited time, general admission seats are being sold for $99 for all four days. VIP and reserved seats range from $200 to $500.

Camping sites range from $89 to $159.

For more and to purchase tickets: www.countrythunder.com.

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Opportunities for Nordic bank mergers will emerge as new capital rules expose weaker players in a post-crisis world, but big-scale tie-ups are doubtful in 2010 as lenders focus on loan losses and curbing risk.

Analysts say that the one possible big deal — between Nordea and Swedbank — is unlikely in the near term due to uncertainty over bad loans, adding that Swedbank’s shares do not fully discount the lender’s exposure to the troubled Baltics.

Consolidation in Nordic banking would make sense: markets are mature, growth opportunities limited and players too small to compete on a pan-European scale. The banks are good targets for foreign players because they are efficient and have been — at least until recently — highly profitable.

Add the new capital requirements that add to costs and eat into profits, and the need for scale is more acute than ever.

But the crisis has made banks shy of risk-taking and left the developments in the regulatory environment uncertain.

“Never say never, but I think all the Nordic players, or financial institutions, are quite busy running their own shops at the moment,” Nils-Fredrik Nyblaeus, senior advisor to SEB chief executive Annika Falkengren, told Reuters.

“The main owners of each of the banks have to be convinced that the synergies are by far outweighing the risk with it, and that’s obviously not the case at this moment.”

Predictions that Europe could see a wave of consolidation as a result of the crisis have so far not come true as most of the bigger players tread carefully.

But there have been rumblings.

The top executive of Nordea, which, with a $46 billion market capitalization, is on par in size with Deutsche Bank, recently said Swedish rival Swedbank made a good fit for his group.

Christian Clausen said the financial crisis had spurred the long-term need for strategic tie-ups, although he added that he expected little would happen in the near future.

SWEDBANK-NORDEA A HOT TIE-UP?

While the recent crisis has not led to any major bank failures or nationalizations in the region, lenders are still smarting from the worst downturn in decades.

Heavy exposure to the Baltics and Ukraine — economies among the worst hit by the recent downturn — and Ireland has left several Nordic players facing very painful loan losses.

The tough climate has made Swedbank — the biggest lender in the Baltics — the hottest tip for a tie-up, with Nordea seen as the main candidate. Some have put potential synergies at 400 million euros ($600 million) a year. 

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Thailand’s economy probably contracted the least in a year last quarter as a nascent global recovery and government spending began to pull the nation out of its first recession in a decade.

Gross domestic product fell 3.2 percent in the third quarter from a year earlier, after contracting 4.9 percent in the previous three months, according to the median estimate of 16 economists surveyed by Bloomberg News. The government will release the data on Nov. 23 at 9:30 a.m. in Bangkok.

The benchmark stock index has risen two straight quarters since the start of April and the baht gained 4.5 percent against the U.S. dollar this year as companies including Hana Microelectronics Pcl report rising orders. Prime Minister Abhisit Vejjajiva said yesterday the government will pursue its stimulus spending plans amid lingering “political problems.”

“A gradual global recovery, fiscal stimulus packages and easy money policy are resulting in improved GDP performance,” said Luz Lorenzo, an economist at ATR-Kim Eng Securities Inc. in Manila. “The improvement will be gradual. This is barring any grave political developments.”

Singapore, which raised its 2009 GDP estimate in October, said yesterday its economy will grow 3 percent to 5 percent in 2010 after shrinking as much as 2.5 percent this year. Malaysia may report today that its recession eased last quarter, according to a Bloomberg News survey.

Interest Rates

The Bank of Thailand said last month Southeast Asia’s second-largest economy is “out of recession”, citing improving employment and quarter-on-quarter GDP expansion. Still, the central bank refrained from raising borrowing costs for a fourth straight meeting on Oct. 21 as it judged the nation’s economic recovery to be at “an early stage.”

There may be cause to keep interest rates low for a while as economists including Morgan Stanley Asia Chairman Stephen Roach say the global recovery faces risks.

“My outlook remains extremely cautious although we can see the worst is over” for the global economy, Roach said in Singapore today. Asian economies are still too export dependent, he said.

Thailand’s consumer confidence fell for the first time in five months in October on concern that the economic recovery may be derailed by rising oil prices, politics and a court case that has stalled 76 government-approved projects on pollution complaints.

Political Risk

At least five people were injured after a bomb exploded at a Nov. 15 protest against former Prime Minister Thaksin Shinawatra, the Nation newspaper reported this week. Power in Thailand has shifted between parties allied to Thaksin and his opponents since the 2006 coup that ousted him, with protests and leadership changes hurting successive governments’ ability to implement spending plans.

Abhisit’s government has managed to stay in power for almost a year and implemented a 116.7 billion-baht stimulus package in the first half of 2009. It plans to spend 1.3 trillion baht on transportation, logistics, health and education projects over three years to help revive the economy.

The fiscal spending helped “stop the economic contraction” and prevented unemployment from jumping, Abhisit said Nov. 16.

“Our only concern is politics,” said Santi Vilassakdanont, chairman of the Federation of Thai Industries. “If the political stability continues like this, the economy can move ahead. If not, things may turn bad again.”

Return to Growth

The government expects the Thai economy to return to growth this quarter. Thailand’s exports dropped the least in 11 months in September as more than $2 trillion in stimulus by governments worldwide helped revive global demand.

Hana Microelectronics, which makes parts for computers and mobile phones including Apple Inc.’s iPhone, has restored its workforce to “pre-crisis” levels and will spend about $20 million by March 31 to expand capacity and meet rising demand, Chief Executive Officer Richard Han said.

“We continue to see robust demand,” said Han. “We expect the fourth-quarter performance to be an improvement over last year.”

The central bank has kept its benchmark interest rate unchanged at 1.25 percent since cutting it by 2.5 percentage points from December to April. Thai consumer prices rose for the first time in October after falling for nine consecutive months.

“The recovering global economy will lead to improving exports and tourism,” Abhisit said yesterday. “The government is also committed to spend money under our stimulus plan. Everything still goes as planned despite political problems” that may persist into next year, he said.

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Stimulus may have created or saved 640,000 jobs so far, but many of those positions were never intended to last.

The American Recovery and Reinvestment Act was designed to put millions of people to work, mainly for "shovel-ready" projects. By their very nature, most of those projects last only until the work is completed or the funding runs out.

That means millions of workers hired with stimulus funding are left looking for a job after the stimulus-funded program is completed.

Of the nearly $500 billion in stimulus funds allocated to stimulus projects, $100 billion is set to go towards long-term programs, like health research and green energy projects, according Elizabeth Oxhorn, spokeswoman for the Obama administration Recovery Act. But the vast majority of that funding — the other $400 billion — will go to short-term contracts.

A prime example was the work needed by the Federal Communications Commission to help the nation transition to digital television last spring. Congress allowed the FCC to extend the deadline for the transition by five months to help some 3 million people make the switch.

An FCC spokeswoman said there were hundreds of thousands of consumers’ calls coming in as the original deadline approached, overwhelming their in-house call center. The agency decided to outsource its call center for the second go-around and awarded a stimulus-funded contract to TeleTech (TTEC), a call-center company based out of Englewood, Colo.

Over the course of the five-month contract, TeleTech hired and trained 4,231 people in call centers across nine states. More than 1.2 million consumer calls were handled by those workers in centers in Arizona, Alabama, California, Colorado, Florida, Kentucky, New York, Pennsylvania, and West Virginia.

TeleTech ramped up its hiring as the June deadline approached, so most of those 4,231 jobs lasted for just a month or less, said TeleTech spokesman Bob Livingstone. The company began winding down the call-centers after June, and when the contract ended in August, all of the jobs that TeleTech created were terminated.

Livingstone said all of the temporary employees who were hired for the DTV contract were eligible for rehire at TeleTech, and a small handful remain with the company after applying for work on other projects. Because the jobs were so spread out geographically, Livingstone said the company was unable to determine which current employees had actually worked on the DTV contract.

Though none of those stimulus-created jobs exist anymore, TeleTech reported that it had created 635 full-time jobs — a number it reached based on a government formula for reporting stimulus jobs creation. The formula calculates the economic impact of jobs saved or created based on hours worked at an annualized rate. A spokeswoman for the FCC confirmed that the number was reported correctly.

Stop-gap or big bet? The DTV stimulus jobs example underscores the difficulty in both reporting the number of jobs created and the ability to create long-lasting, high-impact jobs during an economic downturn.

Economists say that a majority of the jobs created by stimulus projects are likely to end the same way that the DTV call center positions did, lasting only as long as the funding.

"The bottom line is these are meant to be stop-gap measures," said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com. "This is fairly typical in stimulus plans. It’s the same as it was in the 1930s: to put people back to work, the government looks at all of the stuff that was on its to-do list."

Roberts said the idea behind temporary, "shovel-ready" stimulus jobs, is to help the labor market ride out the storm: When the money runs out, hopefully the economy will have bounced back, and those temporary workers will be able to find full-time employment.

But others say the economy won’t be healthy enough to support job growth when stimulus funding runs out, and most businesses have indicated that they will not be hiring in the coming quarters.

"Unless they pass another stimulus bill, you’ll get an economic uptick, but not much job growth, and then another downturn," said Al Angrisani, head of hiring consultancy Angrisani Turnarounds and former assistant secretary of labor under President Reagan. "Hoping that jobs will be there when the money runs out is like betting on animal spirits. The businesses that they’re betting on are all deleveraging."

Do you have a job because of the $787 billion stimulus package? We want to hear from people whose jobs have been created or saved by the American Recovery and Reinvestment Act. Please e-mail your stories to CNNMoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here. 

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Sales of newly built homes fell unexpectedly in September after rising for five straight months, according to government figures released Wednesday.

The Commerce Department said new home sales fell 3.6% to a seasonally-adjusted annual rate of 402,000 last month, from a downwardly revised rate of 417,000 in August. It was the first time new home sales declined since March.

Economists surveyed by Briefing.com had expected September new home sales to rise to a rate of 440,000 units.

"We’re attributing most of the decline to the potential expiration of the new home-buyer tax credit," said Adam York, an economist at Wells Fargo. "It’s getting harder to buy a house and no one wants to close after the credit expires," he added.

In addition to relatively low prices and attractive mortgage rates, the housing market has been supported in recent months by a temporary government tax credit for first-time homebuyers.

The tax break. The credit can be worth up to $8,000 for eligible buyers,but is set to expire at the end of November. Congress is expected to extend the credit, but the terms are still being debated.

Most economists believe that the drop in September’s new home sales was driven primarily by the tax credit’s timetable — but not all of them agree.

Mark Zandi, chief economist at Moody’s Economy.com, contends that first-time homebuyers are more likely to buy an existing home than a new home, which suggests that the tax credit is less of an issue for new home sales.

Zandi attributed the increase in new home sales over the past five months to low interest rates and more aggressive FHA lending. And he adds that these recent increases haven’t been spectacular. "All we can say is the new home market is stabilized."

Foreclosures still loom best payday advance. Wednesday’s report highlighted concerns about the long-term outlook for the housing market, which remains challenged by rising unemployment and a glut of foreclosed properties on the market.

A separate report showed Wednesday that applications for home loans, considered a leading indicator of sales, fell for the third week in a row last week.

The Commerce Department report showed the median sales price jumped to $204,800 in September from $195,200 the month before. The average sales price rose to $282,600.

The price increase echoed an industry report released Tuesday that showed home prices in 20 major markets rose for the fourth month in a row during August.

Meanwhile, the estimated number of new homes for sale at the end of last month fell to 251,000 units on a seasonally adjusted basis. That’s down from 262,000 unsold homes last month and was the lowest level since November 1982.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the drop in housing inventory means the market is moving towards a better balance of supply and demand. "But the tax credit story is the key element right now," he added.

He said that the credit’s looming expiration will probably mean that home sales will fall again in October and, depending upon where the legislation stands, in November as well.

At the current sales pace, it would take 7.5 months to sell through existing inventory, according to the report. That’s up from the previous month, when the there was about 7.3 months of inventory on the market.

– CNN senior writer Jeanne Sahadi contributed to this report.  

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Wolfgang Schaeuble, who headed talks that led to German reunification and was forced out as Christian Democratic Union party chairman in a bribery scandal a decade later, was named finance minister in Chancellor Angela Merkel’s new government.

Merkel kept control of the coffers away from her Free Democratic allies, who advocated more aggressive tax cuts than the chancellor. Schaeuble, 67, will have to rein in a record post-World War II budget deficit, warding off calls for ever- lower taxes and increased spending as the economy recovers from the deepest slump since the Great Depression.

“He has the strength to drive things through,” Stefan Bielmeier, an economist at Deutsche Bank AG, said in an interview from Frankfurt.

The Finance Ministry was the most disputed post in coalition talks between the CDU, its Christian Social Union Bavarian sister party and the Free Democratic Party. FDP leader Guido Westerwelle, 47, who has never held a government post, will become foreign minister. Karl-Theodor zu Guttenberg, 37, will take over the defense ministry and will be replaced as economy minister by the FDP’s Rainer Bruederle.

Merkel and her allies completed a coalition deal in the early hours today to set up a second-term government that points Germany toward tax cuts and a reprieve for nuclear energy.

Wheelchair-bound Schaeuble, who was paralyzed from the chest down by a deranged gunman at a political rally in 1990, served as interior minister for four years under Merkel. Schaeuble aided Merkel’s ascent in politics. She toppled him from the party chairmanship in 2000 because of his links to a party-financing scandal under former Chancellor Helmut Kohl.

West German Veteran

As Kohl’s chief of staff in the mid-1980s, Schaeuble (pronounced SHOY-blah) is the only minister to have held a government post in pre-unification West Germany. He was chief negotiator for the West for the 1990 treaty that merged communist East Germany into the federal republic. He has served in parliament since 1972.

A native of the southwestern city of Freiburg, Schaeuble was assailed as interior minister by civil-liberties and privacy advocates who blasted plans to search personal computers, monitor online activity and deploy the military for domestic security.

He may make more enemies as he tries to rein in spending for a government that’s accumulated record debt.

Schaeuble has previously involved himself in finance issues. He championed a CDU plan to simplify the tax system in the late 1990s as leader of the party’s parliamentary group. Last year he pilloried executives earning inflated salaries soon after the financial system nearly collapsed.

Correcting ‘Excesses’

“It wouldn’t be bad if this crisis led to a correction of excesses,” Schaeuble said in an interview with Stern magazine last November. He cited “self-serving attitudes — a clique of managers endorses three-digit-million checks in a closed system that nobody can leave once he’s inside it.”

Schaeuble’s most testing time came when he became embroiled in the CDU funding scandal. He admitted to accepting 100,000 marks ($77,000) in cash from arms dealer Karlheinz Schreiber without ensuring it was registered in the party accounts. Pressure on Schaeuble to resign as CDU chairman mounted after he admitted he had lied by denying a second meeting with Schreiber. That cleared the way for Merkel’s ascent.

The CDU’s seizure of the finance ministry was a blow to the FDP’s Hermann Otto Solms, who had been touted by some analysts as a candidate. Solms advocates replacing the progressive income tax and its multitude of exemptions with three fixed brackets.

International Posts

The highest FDP post went to Westerwelle, whose lack of experience in foreign affairs has led to doubts about his credentials for the post, which traditionally goes to the leader of the junior party in a governing coalition.

The FDP will also take over the Economy Ministry with the appointment of Rainer Bruederle. He’ll succeed Guttenberg, who will now oversee the presence of more than 4,300 German troops in Afghanistan. The post would give an international profile to a CSU politician who previously focused on domestic affairs.

The youngest minister will be Philipp Roesler, 36, at the health ministry. He’d been deputy premier of the state of Lower Saxony.

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The U.K. inflation rate dropped in September by more than economists forecast to the lowest in five years as the worst recession in a generation purged cost pressures throughout the economy.

Consumer prices rose 1.1 percent from a year earlier, compared with 1.6 percent the previous month, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 31 economists was 1.3 percent. On the month, prices were unchanged for the first time in a September since records began in 1996.

Bank of England policy makers this month stuck to their plan to spend 175 billion pounds ($276 billion) of newly created money on assets to foster economic growth after five quarters of contraction. The U.K. may not have escaped recession in the third quarter, and the bank should consider buying more bonds to secure the recovery, the British Chambers of Commerce said today.

“Given high unemployment, inflation pressures are subdued,” said Alan Clarke, an economist at BNP Paribas SA in London. “The bank will probably expand quantitative easing, and if they’re going to do it, it will probably be in chunks of 50 billion pounds.”

The pound weakened to 94 pence per euro for the first time since March 27 after the inflation data. It was trading at 93.94 pence at 10:10 a.m. in London. The U.K. currency weakened 0.5 percent to $1.5726.

Utility Bills, Food

The main contributors to slower inflation were utility bills, food prices, and restaurant and recreation, the statistics office said. The 7.3 percent annual drop in prices for electricity, gas and other fuels was the biggest since records began. Transport and clothing costs rose on the year.

J Sainsbury Plc, the U.K.’s third-biggest supermarket owner, reported decelerating sales on Oct. 7 and said revenue growth will become more difficult to achieve as food inflation eases. Tesco Plc, the world’s third-largest retailer, said Oct. 6 that sales growth cooled due to slower food-price inflation low fee pay day loans.

Bank of England policy makers said in the minutes of the September meeting that “inflation would probably be higher in the short-term than the committee had thought a month ago, though it was still likely to be extremely volatile.”

Core inflation, which strips out the cost of tobacco, alcohol, food and energy, was 1.7 percent in September compared with 1.8 percent in August, the statistics office said.

Retail Prices

The retail price index, a cost-of-living measure used in wage bargaining, showed a 1.4 percent annual drop, compared with a 1.3 percent decline in August, the statistics office said. Excluding mortgage interest payments, retail prices rose 1.3 percent on the year.

The Bank of England last week left the key interest rate at a record low of 0.5 percent and said it will spend the remainder of its planned bond purchases. The bank’s forecasts show inflation will probably drop below 1 percent later this year and miss its 2 percent goal in three years.

The BCC said today that the economy may not have exited the recession in the third quarter and that the central bank has room to expand asset purchases to 200 billion pounds next month. The Bank of England’s next decision is Nov. 5.

Quantitative easing may not be enough to revive demand for credit in the U.K., according to Howard Davies, formerly chairman of the Financial Services Authority and deputy governor of the Bank of England.

“The supply is there, the problem is demand,” Davies, now the chairman of the London School of Economics, said in an interview on Bloomberg Television in London today. “The economy is still flat on its back. Business demand for lending is actually quite low. I’m not convinced that keeping on pumping in from the bank side is going to solve that problem.”

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