Actual finance blog

Battered by the strong yen and supply disruptions from Thailand’s floods, Honda said Tuesday that its net earnings in the October-December quarter tumbled 41 percent to 47.6 billion yen ($625 million) and projected a sharply lower full-year profit.

The Japanese automobile and motorcycle maker forecast it would earn 215 billion yen for the fiscal year through March, down nearly 60 percent from the 534 billion yen it earned the previous fiscal year.

Honda had scrapped its earnings forecast in October, when it reported its previous quarterly results, because the flooding in Thailand _ a key Asian production hub for Honda and many Japanese companies _ made the outlook too uncertain.

Honda stopped making cars at its automobile assembly plant in Ayutthaya, north of Bangkok, in October after it was damaged in the worst floods to hit Thailand in 50 years. The company said in a statement that it was making progress on draining the plant of flood water and cleaning up equipment, and that production was expected to resume by the end of March.

The flooding also disrupted the output at many Honda suppliers in Thailand, forcing it to reduce production as far away as the U.S. and Canada. Honda said production in neighboring Asian countries interrupted by the problems in Thailand was expected to return to normal by April.

All told, the problems related to flooding in Thailand have cost the company 260,000 vehicles in lost production worldwide, according to Tomohiro Okada, a company spokesman.

Quarterly sales slid 8 percent during the fiscal third quarter to 1.942 trillion yen.

The strong yen, which erodes Japanese exporters’ foreign earned income when repatriated, also ate into the company’s income. Declines due to unfavorable exchange rates accounted for 33.6 billion yen, or nearly half, of the 73.1 billion yen drop in net income before taxes reported the same quarter a year ago, Okada said.

A bright spot for the company was its motorcycle business, amid strong demand in emerging markets. Motorcycle sales rose 6.3 percent during the quarter to nearly 3.1 million units.

(This version CORRECTS Corrects impact from currencies in paragraph 8, adds lost production of vehicles from Thai flooding in paragraph 6, adds details about growth in motorcycle business)

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On the day the Deepwater Horizon sank, BP officials warned in an internal memo that if the well was not protected by the blow-out preventer at the drill site, crude oil could burst into the Gulf of Mexico at a rate of 3.4 million gallons a day, an amount a million gallons higher than what the government later believed spilled daily from the site.

The email conversation, which BP agreed to release Friday as part of federal court proceedings, suggests BP managers recognized the potential of the disaster in its early hours, and company officials sought to make sure that the model-developed information wasn’t shared with outsiders. The emails also suggest BP was having heated discussions with Coast Guard officials over the potential of the oil spill.

The memo was released as part of the court proceedings to determine the division of responsibility for the nation’s worst offshore oil disaster, which began when the BP-leased Deepwater Horizon exploded April 20, 2010, killing 11 men about 50 miles southeast of the Louisiana coast. The first phase of the trial is set to start Feb. 27.

BP officials declined to comment on the emails late Friday.

The official amount of oil that flowed from the well was pegged at 206 million gallons from at least April 22 until the well was capped on July 15, a period of 85 days. That’s a daily flow rate of about 2.4 million gallons _ two-thirds of the way to BP’s projection of what could leak from the well if it was an “open hole.” BP has disputed the government’s estimates.

Having an accurate flow rate estimate is needed to determine how much in civil and criminal penalties BP and the other companies drilling the well face under the Clean Water Act.

In the memo, a BP official urges not to share the flow-rate projections and refers to the “difficult discussions” the company was having at the time with the Coast Guard guaranteed personal loan approval.

Gary Imm, a BP manager, told Rob Marshall, BP’s subsea manager in the Gulf, to tell the modeler doing the estimates “not to communicate to anyone on this.”

“A number of people have been looking at this we already have had difficult discussions with the USCG on the numbers,” Imm said in the email string, referring to the Coast Guard and flow estimates.

On April 23, 2010, the Coast Guard, relying on BP’s remotely operated vehicles, said no oil was leaking from the well a mile under the sea. A day later, Coast Guard Rear Adm. Mary Landry announced that oil was leaking an estimated rate of 42,000 gallons a day. The Coast Guard and BP did not divulge how they reached that figure.

In the second week after the spill, the official flow rate was increased to 210,000 gallons a day, an estimate the government continued to use until May 27.

On May 24, BP informed Congress they used an “undisclosed method to generate much higher figures” than the official estimates, according to a report from a presidential commission investigating the spill. BP estimated that the flow rates were between 210,000 gallons and 1.6 million gallons a day, the January 2011 report said.

As the spill grew into weeks and months, and soiled fishing grounds, beaches and coastal marshes, independent scientists questioned the official flow rates. Eventually, the federal government convened teams of government and independent scientists to determine how much oil leaked out of the well. They came up with an official estimate of about 2.4 million gallons of oil a day on average.

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The U.S. economy is growing at 2-3 percent but still faces big challenges to repair damage wrought by the financial crisis, Treasury Secretary Timothy Geithner said on Friday.

“I think if you look at the Fed’s forecast and the consensus of private forecasters, people are pretty clustered in that area but it is still dependent how the world unfolds. We’re still repairing the damage done by the financial crisis,” Geithner told the World Economic Forum.

“On top of that we face a more challenging world. We have a lot of challenges ahead in the United States.”

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Greece’s prime minister will hold new talks with representatives of the country’s private sector creditors on a crucial euro100 billion ($129 billion) debt writedown.

Lucas Papademos will meet late Thursday with Charles Dallara, managing director of the Institute of International Finance, a banking lobby, and Jean Lemierre, senior adviser to the chairman of French bank BNP Paribas.

Greece is hoping to conclude the negotiations by the end of this week, despite disagreements over the terms of the deal.

An IIF statement Wednesday said the goal is to agree on all outstanding legal and technical issues as soon as possible.

The private debt writedown is a vital part of a new bailout for Greece, which has been surviving on international rescue loans since May 2010.

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Johnson & Johnson said Tuesday that fourth-quarter profit was barely a tenth what it made a year ago as a slew of charges for recalls, litigation and an acquisition dragged down income. But the health care giant’s revenue jumped last year, ending an unprecedented two-year decline.

After two tough years overshadowed by an embarrassing series of product recalls and other problems, the maker of Tylenol, prescription drugs and medical devices managed to beat Wall Street’s forecast for adjusted profit and came in just below its revenue forecast.

The company said net income was $218 million, or 8 cents per share, down from $1.94 billion, or 70 cents a share, a year earlier.

Excluding charges, net income was $3.13 billion, or $1.13 per share.

Revenue totaled $16.26 billion, up from $15.64 billion in 2010’s fourth quarter.

Analysts polled by FactSet, on average, expected earnings per share of $1.09 and revenue of $16.28 billion.

“We delivered solid results for 2011, built on the strong growth of our recently launched pharmaceutical products, and continued the steady momentum of new product approvals across all our businesses,” CEO Bill Weldon said in a statement.

Revenue fell 3.4 percent in the U.S., to $6.99 billion, but jumped 10.2 percent in foreign countries, to $9.27 billion. The U.S. decline was mostly due to an 8 percent drop in sales of prescription drugs.

J&J said it expects 2012 earnings of $5.05 to $5.15 per share, excluding special items. Analysts had expected $5.20 per share.

In morning trading, shares of the company rose 23 cents to $65.23.

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Swedish inflation-linked bonds may be understating the risk of price gains in the largest Nordic economy as most forecasters, including the central bank, predict inflation will outpace market bets.

The breakeven rate on Sweden

President Barack Obama planted his political flag in Florida on Thursday ahead of the state’s Jan. 31 Republican presidential primary, promising a fresh boost to the economy by making it easier for foreign tourists to travel to the U.S.

Obama sought his piece of Florida’s political spotlight with a high-profile appearance at Walt Disney World, where he announced initiatives aimed at making it easier for citizens of China and Brazil to visit the United States.

“America is open for business,” Obama declared against the backdrop of Disney’s Cinderella castle and picture-perfect blue skies. “We want to welcome you.”

From Florida, Obama headed to New York City for four glitzy campaign fundraisers, including an event at the famed Apollo Theater featuring performances by Al Green and India.Arie. Tickets to that fundraiser start at $100.

The president also was to attend a $35,800 per ticket fundraiser at the home of film director Spike Lee, and two small fundraisers at Daniel, an exclusive Manhattan restaurant. Tickets start at $5,000 for the first restaurant fundraiser and $15,000 for the second. Obama raised more than $220 million for his campaign and the Democratic National Committee through the end of 2011.

Beyond offering an opportunity to talk about the economy, Obama’s trip to Florida marked an attempt by the White House and his campaign to steal attention from Republicans vying for the GOP presidential nomination. In recent weeks Obama held a live video conference with Iowa voters during the Republican caucus, Vice President Joe Biden held a similar event with voters in New Hampshire on the night of the state’s first-in-the-nation primary and next week Obama will travel to Nevada, which follows Florida on the primary calendar.

Obama was greeted in the Orlando area by ads from GOP frontrunner Mitt Romney blaming the president for the state’s struggling economy. Romney, the former Massachusetts governor, could take a major step toward securing the Republican nomination with a win in Florida’s Jan. 31 primary contest.

“I have a simple question for you: Where are the jobs?” Romney wrote in an open letter to the president on Thursday running as an ad in the Tampa Bay Times. In a conference call with reporters, Romney said Obama was “speaking from Fantasyland.”

While Obama carried Florida in 2008, the state is a top target for Republicans in the November elections. Florida twice backed Republican George W. Bush, providing the decisive electoral votes in the cliffhanger 2000 election that was decided after a 36-day recount payday loan lenders.

Tourism is a key component to the economy in Florida, which has been battered by 10 percent unemployment and rampant home foreclosures.

The White House said more than 1 million U.S. jobs could be created over the next decade, according to industry projections, if the U.S. increases its share of the international travel market.

The tourism initiative is part of an executive order Obama signed. Its goal is to boost nonimmigrant visa processing capacity in China and Brazil by 40 percent this year; expand a Visa Waiver Program that allows participating nationals to travel to the U.S. for stays of 90 days or less without a visa; appoint a new group of chief executives to the U.S. Travel and Tourism Advisory Board; and direct an interagency task force to develop recommendations for a National Travel and Tourism Strategy, including promoting national parks and other sites.

The efforts to boost tourism were praised by travel and tourism groups, but one lawmaker said the decision to relax tourist visas could undermine national security. Sen. Charles Grassley, R-Iowa, said the administration was “pushing the envelope and using their authority beyond congressional intent,” noting that only two of the 19 hijackers in the 9/11 terrorist attacks were interviewed by consular offices. He said Congress moved to require visa applicants to be interviewed as a result.

The White House says the travel and tourism industry represented 2.7 percent of gross domestic product and 7.5 million jobs in 2010. But the U.S. share of spending by international travelers fell from 17 percent to 11 percent between 2000 and 2010, due to increased competition and changes in global development, as well as security measures imposed after Sept. 11, 2001, according to the White House.

The approach was welcomed by Brazilian tourists Lilian Lara and Lindbergh Souza, who shopped along the resort’s streets hours before the president’s speech. Souza said the visa process was expensive, at $500, and time-consuming for Brazilians who don’t live close to consuls in Rio de Janiero and Sao Paulo. “The whole process took me six months,” Souza said.

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Associated Press writer Mike Schneider contributed to this report.

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Strong corporate earnings reports and the lowest unemployment claims in almost four years gave investors more reasons Thursday to take risks on stocks, and the market continued its quiet but solid January climb.

The Dow Jones industrial average gained 45.03 points to close at 12,623.98. The Standard & Poor’s 500 index added 6.46 points to close at 1,314.50. Both averages are at their highest since July.

Volume was slightly above average. The market has been subdued this year: The S&P has moved up or down 1 percent or more only twice, and the Dow has moved 100 points only once, a 179-point gain on opening day, Jan. 3.

But the gains have been steady. The S&P has closed higher 12 of 14 days, and all three major averages have recorded healthy advances for the young year _ 3.3 percent for the Dow, 4.4 percent for the S&P and 7 percent for the Nasdaq composite index.

Investors appear ready to believe that the economic recovery is for real and getting stronger.

“The market is screaming loud and clear,” said Doug Cote, chief market strategist with ING Investment Management. “Prices have lagged fundamentals, and now they’re catching up.”

After the market closed, Google stock plunged more than 10 percent after its earnings per share badly missed Wall Street expectations. Intel and Microsoft rose slightly in after-hours trading after more encouraging reports.

In a sign of a bigger appetite for risk, investors moved money out of U.S. debt, a haven during the stock market’s volatile second half of 2011. The yield on the 10-year U.S. Treasury note increased to 1.98 percent from 1.90 percent Wednesday.

The market was led by industries that tend to perform best when the economy is getting stronger _ consumer discretionary stocks, financials and industrial companies.

Of the 10 categories of stocks in the S&P 500, the only one that lost considerable ground was utilities _ a safe play for investors during turbulent times and the best-performing category last year.

Cote said the market’s gains could accelerate as investors begin to focus more on economic fundamentals in the United States instead of worries about their exposure to risk.

And the economic news Thursday was good: The number of people seeking unemployment benefits plummeted last week to 352,000, the fewest since April 2008 payday loans guaranteed no fax. The decline added to evidence that the job market is strengthening.

U.S. consumer prices were unchanged last month, a signal inflation is under control. In the housing market, a third straight increase in single-family home building in December was offset by a drop in apartment construction.

France and Spain also held successful bond auctions, easing concerns about the debt crisis in Europe. As global risk factors subside, Cote predicts that markets will see “a strong snap-back rally.”

Bank of America rose 2 percent and Morgan Stanley rose 5 percent after reporting encouraging financial results. Bank of America returned to a profit in the last three months of 2011, while Morgan Stanley’s loss was much less than forecast.

Renewable Energy Group Inc., the nation’s largest producer of biodiesel, edged up 10 cents to $10.10 on its first day of trading. It was the first initial public offering of stock this year.

Trading was halted in shares of Eastman Kodak, the iconic photography company, after it filed for Chapter 11 bankruptcy protection. Kodak could not find a buyer for its trove of 1,100 digital imaging patents.

The Dow’s gain for the day amounted to 0.4 percent. The S&P’s came to 0.5 percent. The Nasdaq added 18.62 points, or 18.62 points, to close at 2,788.33.

Among other stocks in the news:

_ eBay Inc., the online auction company, rose 3.9 percent after it beat Wall Street earnings forecasts and gave a healthy outlook for the year.

_ Southwest Airlines Co. rose 3.1 percent after it said its fourth-quarter net income and revenue jumped. Southwest said it expects strong revenue in the first quarter too, based on passenger-booking trends.

_ Johnson Controls Inc., an auto parts and building equipment maker based in Milwaukee, fell 8.8 percent. Its profit and revenue fell short of Wall Street forecasts. It also cut its forecasts, blaming weaker auto production in Europe, a lower euro and poor demand for batteries.

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Asian stock markets rose Wednesday as expectations that China will loosen its monetary policy to boost growth overcame nervousness sparked by mixed earnings reports from big U.S. banks.

Benchmark oil rose above $101 per barrel while the dollar fell against the euro and the yen.

Japan’s Nikkei 225 index rose 1.4 percent to 8,579.80. Hong Kong’s Hang Seng added 0.3 percent to 19,685.87. South Korea’s Kospi was down 0.2 percent at 1,888.88 while Australia’s S&P/ASX 200 was up 0.2 percent at 4,223.60.

Benchmarks in Singapore, Indonesia and Malaysia rose while mainland China and Taiwan fell.

Investors cheered news out of China on Tuesday when the government said its economy slowed less dramatically in the fourth quarter than feared _ but still enough of a slowdown to persuade investors that Beijing will pursue a pro-growth monetary policy, analysts said.

“People have been buying stocks in anticipation of a relaxation in monetary policy by the Chinese government,” said Derek Cheung, chief investment officer at Neutron INV Partners Ltd. in Hong Kong. “The market expects this around Chinese New Year. If China doesn’t loosen around the new year, the market may come under pressure.” The holiday begins Jan. 23.

China is one of the biggest importers and slower growth could have global repercussions if it cuts demand for iron ore, industrial components and other goods from Australia, Brazil, Southeast Asia and elsewhere.

It would also mean less demand for U.S. and European capital goods for Chinese factories and construction sites, and smaller profits for U.S. and European companies that do business here. The luxury goods industry would also feel a significant pinch, since China is just about the only growth market for those.

Commodities shares jumped on the growth data out of China. Australian miners Fortescue Metals Group jumped 5 percent and Rio Tinto Ltd Low fee payday loans. added 1.5 percent after both companies reported target-beating production figures Tuesday.

But some financial shares came under pressure on weak quarterly earnings from some U.S. banks, including Citigroup Inc., which said its fourth-quarter income fell 11 percent due in part to lower investment banking income and an accounting charge.

Australia & New Zealand Banking Group fell 1.1 percent and Hong Kong-listed Agricultural Bank of China also lost 1.1 percent.

South Korean high-tech shares also slumped. Samsung Electronics Co., the top global manufacturer of flat screen televisions, memory chips and liquid crystal displays, fell 0.9 percent. LG Electronics shed 1.8 percent, and Hynix Semiconductor was 1.2 percent lower.

European shares ended mostly higher Tuesday on the heels of short-term debt auctions by Spain, Greece and Europe’s bailout fund that drew strong investor demand, despite recent credit rating downgrades by Standard & Poor’s.

Many had feared the downgrades would prevent them from obtaining funds and worsen a sovereign debt crisis in Europe.

On Tuesday, the Dow Jones industrial average rose 0.5 percent to close at 12,482.07. The Standard & Poor’s 500 index gained 0.4 percent to 1,293.67. The Nasdaq composite index added 0.6 percent to 2,728.08.

Benchmark crude for February delivery was up 66 cents to $101.37 per barrel in electronic trading on the New York Mercantile Exchange. The contract finished at $100.71 per barrel in New York on Tuesday.

In currency trading, the euro rose to $1.2779 from $1.2722 late Tuesday in New York. The dollar fell to 76.65 yen from 76.82 yen.

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French President Nicolas Sarkozy on Monday shrugged off his country’s loss of its prized AAA debt rating, saying the downgrade by rating agency Standard & Poor’s would change nothing.

The comments, his first since S&P lowered its score on France and eight European other countries on Friday, followed a successful auction by France of euro8.6 billion ($10.9 billion) in short-term debt Monday. The yields, the interest rates charged by investors on the debt, fell _ a sign investors still see the country as a good bet.

France won a further small reprieve Monday, when the Moody’s agency confirmed that it would keep its top rating. However, the S&P decision could seriously impair Sarkozy’s bid for re-election this spring.

Sarkozy told reporters he was unconcerned with the opinions of ratings agencies.

“We have to react to this (the downgrade) with calm, by taking a step back,” he said at a news conference with the new Spanish Prime Minister Mariano Rajoy. “At the core, my conviction is that it changes nothing.”

Sarkozy won support from Rajoy for a new European tax on financial transactions being pushed by France and Germany. Rajoy’s center-right government took power last month, and had not previously stated its position on the tax.

The French president said the ratings agencies’ decisions would not affect his policies, though he did acknowledge that France has work to do, saying that its deficits and spending were too high and that its growth was too slow.

He also noted that two of the three major agencies still rate France at triple-A, the highest rating. Fitch confirmed the rating last week. The S&P move was especially brutal for France, one of the world’s biggest economies and a financier of bailouts for smaller, poorer eurozone countries.

There are more government auctions in Europe this week, including longer-term offerings from France on Thursday, so the European debt crisis will never be too far from investors’ minds.

The news conference began combatively when Sarkozy refused to answer a question about whether France’s downgrade would affect its ability to lead Europe out of the crisis and if it had any connection with the meeting between the French, Italian and German leaders scheduled for next week being postponed.

Sarkozy and German Chancellor Angela Merkel have taken the lead in proposing solutions to the crisis and major decisions are often hashed out at their meetings ahead of European summits.

“You don’t have the latest information,” Sarkozy blithely told the reporter, apparently referring to Moody’s decision on Monday. The reporter rephrased the question two more times, but Sarkozy again refused to answer totally free credit score.

Later on, in response to other questions, he confirmed that the three-way summit would take place in February and spoke about the S&P downgrade.

Earlier, Sarkozy met with Spanish King Juan Carlos, who said he’s confident France and Spain would help Europe find a way out of the crisis.

The king said the two nations were “struggling together for the advance of a unified and prosperous Europe in solidarity that confronts the crisis with strength.”

Rajoy’s Socialist predecessor also supported the financial tax championed by Sarkozy, but was ousted from office by Spaniards angry about the country’s hurting economy and high unemployment.

The European Commission has estimated that the tax could raise as much as euro57 billion ($72.2 billion) a year, funds that could be used to help reduce the substantial budget deficits crippling European economies.

For the tax to be successful, however, it needs to be adopted by as many countries as possible. Sarkozy has said it might be enough to enact it among the 17-nation euro countries. Italian Prime Minister Mario Monti prefers applying it across the full 27-nation European Union, but that would be more difficult because of U.K. opposition.

Part of the reason for the tax would be to raise funds at a time when governments are struggling with high debts.

Moody’s cited France’s economic strength as a reason for affirming its top rating but said bleak growth prospects in France and the region present “risks to the French government’s fiscal consolidation plans.”

“France, like other eurozone sovereigns, may face a number of challenges in the coming months. The need to provide additional support to other European sovereigns or to its own banking system cannot be excluded,” Moody’s warned.

Moody’s said Monday it “will update the market during the first quarter of 2012 as part of the initiative to revisit the overall architecture of our sovereign ratings in the EU.”

Sarkozy’s challengers for the presidency have seized on the S&P downgrade as evidence that his policies are wrong-headed and ineffective.

It will be a bruising election battle for Sarkozy, a dynamic leader who has a strong international profile but is widely disliked at home. Leftists say he has coddled the rich, while many of those who supported him in his 2007 campaign say he hasn’t fulfilled his promises.

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