Actual finance blog

Asian stock markets rose Monday after a Chinese survey showed that manufacturers in the world’s No. 2 economy boosted production for a fourth straight month.

Japan’s Nikkei 225 index gained 0.8 percent to 10,163.59 despite businesses remaining pessimistic in the central bank’s latest “tankan” survey.

South Korea’s Kospi added 0.2 percent to 2,017.89 and Australia’s S&P/ASX 200 gained 0.1 percent to 4,341.20. Benchmarks in Indonesia and Singapore also rose.

Hong Kong’s Hang Seng fell 0.7 percent to 20,419.84. Markets in mainland China are closed for a public holiday.

Chinese manufacturing gained momentum for a fourth straight month in March, helped by a recovery in the auto, tobacco and electronics sectors, though analysts said conflicting data suggest lingering weakness.

The state-affiliated China Federation of Logistics and Purchasing said Sunday that its purchasing managers index, or PMI, rose 2.1 points to 53.1 in March, up from February’s 51.0 and January’s 50.5. A reading above 50 signifies expansion.

A rise in new factory orders suggests a recovery in some industries, though a second set of data, from HSBC, said that after adjusting for seasonal factors, its PMI index for China for March was 48.3, down from 49.6.

HSBC’S index, which tends to reflect trends in the export sector more strongly than the official index, has remained below 50 for five straight months, and recorded its lowest average reading in three years in the first quarter, HSBC said.

Analysts at Credit Agricole CIB in Hong Kong said called the official reading on China manufacturing “surprisingly upbeat” and said set the stage for a strong week in stock markets fast cash advance.

“Investors will watch PMI readings from other regional economies, including Korea, Taiwan and India. If they also improve, the story of Asia regaining momentum … would provide more lasting support for markets,” Credit Agricole said in a report.

The data from China boosted Australia’s raw materials sector, whose fortunes are largely tied to Chinese demand. BHP Billiton, the world’s largest mining company, jumped 2.3 percent. Fortescue Metals Group gained 1.7 percent. Rio Tinto Ltd. rose 1.6 percent.

Rising consumer spending boosted U.S. stocks on Friday, and Wall Street closed its best first quarter since 1998.

The Dow Jones industrial average rose 0.5 percent to close at 13,212.04. The Standard & Poor’s 500 index rose 0.4 percent to close at 1,408.47. The Nasdaq composite fell 0.1 percent to 3,091.57.

For the quarter, the Dow posted an 8 percent gain and the S&P a 12 percent gain, the best for those indexes in 14 years. The gain was 19 percent for the Nasdaq, its best since 1991.

Benchmark oil for May delivery was up 31 cents to $103.33 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 24 cents to settle at $103.02 per barrel in New York on Friday.

In currencies, the euro rose to $1.3341 from $1.3334 late Friday in New York. The dollar fell to 83.15 yen from 82.86 yen.

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Did you ever wonder how people in Japan connect to websites hosted in San Francisco? Or how a New Yorker can Skype with a friend in Sydney?

It sounds crazy, but Earth’s continents are physically linked to one another through a vast network of subsea, fiber-optic cables that circumnavigate the globe. Cords no thicker than your home’s broadband connection stretch along the bottom of the Pacific, Atlantic, and Indian Oceans; through the Suez canal; across the Mediterranean Sea and around the coasts of Africa and South America.

Indian telecom giant Tata, one of the world’s largest subsea cable providers, manages 130,500 miles of fiber sitting at the bottom of the ocean floor. That’s enough to circle the planet five times. It takes a ship six weeks just to load the cable for a cross-ocean voyage.

Why is all that underwater cable necessary? It’s a matter of speed, and laying in enough safeguards to ensure that the Internet won’t suddenly go down.

Subsea fiber-optic cables can tie two giant centers of commerce together, reducing data traffic delays. Three companies are in the process of building cable networks that link London directly to Tokyo — through the polar ice cap — with cables capable of 10 gigabit-per-second speeds. (That’s 2,000 times faster than your home Internet connection).

Those cables could reduce the Internet’s latency by about 60 milliseconds between those two points.

That’s an imperceptible lag for the average Internet user, but it’s an eternity for high-speed stock traders. They can make or lose millions of dollars in that span of time.

It’s not just financial institutions, which make up a very small portion of total Internet usage, that are interested in faster speeds. Internet service providers like Comcast (, Fortune 500) and Time Warner Cable (, Fortune 500) like to go zoom as well, because it gives them capacity to meet the growing demands on their networks.

Subsea cables have the added benefit of being shielded from wind, trees, storms and other destructive forces. They don’t require massive towers to carry them, like over-the-land cables do.

They’re literally just laid on the bottom of the sea, and once placed there, they can more or less be left untouched for a quarter century.

But sometimes cables get cut, particularly in shallow water. They get accidentally clipped by ship anchors about twice a year.

It happened most recently a month ago, when a ship dropped anchor off the coast of Kenya and cut Internet service for much of the country. Google noticed a steep drop in availability of its services in Kenya on Feb. 25.

That’s why cables are outfitted with GPS, so ships can find and patch them when they break. There are outsourced companies on the clock 24/7 to do repairs at a moment’s notice.

Having multiple cables connecting continents from many different locations means the Internet is less likely to be massively disrupted when a cable is snapped.

That’s why Tata says it was critical to build the final leg in the world’s first round-the-planet network, which it completed last week. The final cable connects Mumbai to Marseille, France. Tata’s other links tie the United Kingdom to New Jersey, Spain to Africa and Japan to Australia.

Together, those pipes handle 25% of the world’s Internet traffic. Tata wouldn’t put a price tag on the project, but an under-construction arctic cable linking Asia, North America and Europe has an estimated cost of $1.5 billion.

The upshot of all that investment is that if one cable snaps, you’ll still be able to play "Words with Friends" with a partner 10,000 miles away.  

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The economy in the U.S. grew at a 3 percent annual rate in the last three months of 2011, the same as previously estimated, while corporate profits climbed at the slowest pace in three years, raising the risk that business investment and hiring will cool.

The increase in gross domestic product was the biggest in more than a year and followed a 1.8 percent gain in the prior period, revised figures from the Commerce Department showed today in Washington. Company earnings were up 0.9 percent from the third quarter, the smallest advance since the last three months of 2008.

While the report showed business spending on new equipment and software climbed more the previously estimated, figures this month indicate outlays are slowing following the expiration of a government tax credit. Consumers may be poised to take a leading role in the expansion as the biggest increase in employment since 2006 gives households the confidence and means to spend.

The average cell phone customer now switches carriers as soon as his or her second two-year contract is up. That startling decline in loyalty is causing wireless companies to rethink the way they do business, according to a new study released Monday.

The average length of relationships between carriers and their under-contract customers fell to an all-time low of 48 months last year, PricewaterhouseCoopers’ found in the latest edition of its North American wireless industry survey. The comprehensive annual study includes data from all of the region’s major carriers.

The trend has building for a few years. What’s shocking is how quickly it accelerated. In 2010, the average customer-carrier relationship was 59 months — nearly a full year longer.

The most precipitous decline came among smaller cell phone companies, but large carriers like Verizon (, Fortune 500), AT&T (, Fortune 500) and Sprint (, Fortune 500) didn’t fare much better. Their average relationships with customers under contract lasted just 51 months.

"Competition is fierce, and pricing is a key element," said Pierre-Alain Sur, global communications industry leader at PwC. "That accelerates the jump from one carrier to another at the end of a contract period."

If customers are going to cut and run frequently, carriers will need to rethink their pricing models — particularly when it comes to expensive smartphones.

They’ve been encouraging customers to upgrade to smartphones because the devices bring in a new revenue stream. Most providers charge smartphone customers a premium for data usage, with plans averaging about $25 per month.

But what carriers didn’t anticipate were the incredible costs of keeping smartphone customers satisfied.

To get smartphones down to the magic price point of $200, carriers pay an average subsidy of $280 for each device — four times as much as the $70 average subsidy on a feature phone. Plus, smartphone customers are data hogs, requiring wireless companies to spend tens of billions of dollars each year improving their 3G network capacity and building out their 4G networks.

Meanwhile, average revenue per smartphone user is actually declining.

As data use grows, people are talking on their phones less easy payday loans. The average subscriber used just 638 voice minutes per month in 2011, down from 720 minutes in 2010. Customers are cutting back their voice plans, sending carriers’ average revenue per smartphone user down to $83 per month last year. That’s a drop from $86 in 2010 and $93 from 2009.

Less loyalty, growing subsidies, higher infrastructure costs and declining revenues have created an unsustainable dynamic for carriers. Profit margins are falling, and analysts expect the trend to get worse.

The iPhone is a nightmare for carriers

That means sweeping changes are coming.

"The business model is shifting, so they have to find a solution," Sur said.

Carriers have a few options.

First, they can increase prices on their phones. That’s already started to happen. Verizon and AT&T now offer a small selection of 4G phones for more than $200, with some as high as $300.

Another tactic is for them to pressure handset manufacturers to reduce device costs. Some may bargain, but the maker of the single most popular smartphone — Apple’s (, Fortune 500) iPhone — is no pushover.

Carriers could also try to find alternative sources of revenue. Right now, most are "dumb pipes," taking no revenue from the content that travels over their networks. If carriers could nab a slice of app store sales or video purchases, that might reverse their fortunes.

Finally, cell phone companies could switch to the "bring your own device" model that is popular overseas.

North American carriers have embraced the subsidy model for decades for two reasons: incompatible technologies presented steep obstacles to switching, and the subsidy model seemed to build customer loyalty.

Now, the whole industry is migrating to the 4G-LTE standard. With loyalty going out the window, carriers may drop subsidies and contracts altogether. Some may even try leasing handsets to customers.

Whichever option carriers choose, they will have to act fast, Sur thinks.

"They are going to have to determine what’s going to be the business model of the future," he said. "Carriers are at an inflection point." 

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Two prominent liberal politicians have pulled out from a panel tasked with drafting a new constitution after Islamists won a majority of seats on the body.

The 100-member panel selected over the weekend includes nearly 60 Islamists and only six women and six minority Christians. The members were chosen by parliament’s two chambers, where Islamists have a majority.

The two pulling out are independent lawmaker Amr Hamzawy and veteran Christian activist Mona Makram Obeid paperless payday loans.

They announced they were quitting the panel on Monday on their Twitter accounts.

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The number of first-time filers for unemployment benefits fell to a four-year low last week, hinting that solid job growth likely continued in March.

About 348,000 people filed for initial jobless claims in the week ended March 17, down from the previous week’s 353,000 claims, the Labor Department reported Thursday.

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Obama battles job crisis

Before Obama even took office, America had lost 4.4 million jobs. Track his progress since then.

Economists surveyed by Briefing.com had predicted the newly unemployed would file 355,000 claims payday loans for bad credit.

Unemployment claims are considered a key indicator of the job market’s strength, and recently they have fallen back to levels consistent with a healthier labor market.

Check the unemployment rate in your state

Even when the economy was stronger in 2005 and 2006, it was not uncommon to see Americans file around 350,000 new claims a week, due to usual turnover.

Employers have now added more than 200,000 jobs each month since December, and a decline in unemployment claims suggests job growth may have continued at that pace in March, said Jennifer Lee, senior economist with BMO Capital Markets.

Since the initial claims number can be volatile from week to week, economists often look to the four-week moving average as a broader gauge of the labor market’s health. Lately, that figure has also been on a gradual decline.

Meanwhile, continuing claims fell. About 3.35 million people filed for their second week of unemployment benefits or more in the week ended March 3, the most recent data available. That’s down 9,000 from the previous week.  

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An Iraqi police official says 17 detainees have broken out of prison in a northern city.

Police spokesman in Kirkuk city Brig. Gen. Sarhat Qadir said Friday that 10 of those who escaped from an interior ministry detention center were al-Qaida-affiliated detainees.

Qadir said the detainees escaped at dawn from a small window using rope made of blankets. Police started a manhunt to find them, he said.

Kirkuk, which is 180 miles (290 kilometers) north of Baghdad, is the main oil hub in northern Iraq. It’s been the scene of sporadic insurgent violence and ongoing tensions between the region’s three main groups _ Kurds, Arabs and Turkomen.

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U.S. sales of previously occupied home dipped last month but the sales pace for the winter was the best in five years.

The National Association of Realtors said Wednesday that home sales fell 0.9 percent last month to a seasonally adjusted annual rate of 4.59 million. That’s down from a revised 4.63 million sold in January _ the highest level since May 2010.

The last three months have been the best for winter sales in five years. A mild winter and a stronger job market have helped boost sales ahead of the all-important spring buying season.

Even with the gains, sales remain below the 6 million that economists equate with healthy markets. And the makeup of those sales still signals a troubled market.

Sales among first-time buyers, who are critical to a housing recovery, fell slightly to 32 percent of all purchases. That’s down from 33 percent in January. In healthy markets, first-time buyers make up at least 40 percent.

And homes at risk of foreclosure made up 34 percent of sales, down only slightly from 35 percent in January. In more stable markets, foreclosures make up less than 10 percent of sales.

There have been other signs of improvement in the depressed housing market.

Homebuilders have grown more confident in the past six months after seeing more people express interest in buying a home. In February, they requested the most permits to build homes since October 2008.

Mortgage rates are near record lows. And the supply of homes has fallen to its lowest level in seven years.

A lower supply helps push up prices, which lures more sellers onto the market and generally improves the quality of homes for sale. Rising prices also boost sales because buyers want to invest in homes that are appreciating in value.

For the past few years, the market has been saturated for years with foreclosures. That has put downward pressure on prices and driven away buyers.

A key reason for the brighter housing outlook is the job market has strengthened. From December through February, employers added an average of 245,000 jobs a month. The unemployment rate has fallen to 8.3 percent, the lowest in three years.

Still, economists caution that the damage from the housing bust is deep and the industry is years away from fully recovering.

Fewer first-time buyers, who are critical to a housing recovery, are in the market for a home. They made up roughly one-third of sales last year. In healthy markets, the percentage is at least 40 percent.

Many can’t qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling.

Sales are measured when buyers close on homes. Some deals have been scuttled before the closing after banks declined mortgage applications, home inspectors found problems, appraisals showed a home was worth less than the bid, or a buyer lost a job.

The high rate of foreclosures has made resold homes cheaper than new ones. The median price of a new home is roughly 30 percent above the price of one that’s been occupied before _ twice the normal markup. Investors are taking advantage of the discounts.

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Lawmakers on Friday were handed the official score card on President Obama’s proposed budget for 2013.

The Congressional Budget Office concluded that the president’s budget would add less to the country’s debt than if lawmakers simply extend a number of favored policies, such as the Bush-era tax cuts. It would also shrink annual deficits to the point where they no longer are growing faster than the economy.

And yet debt levels at the end of the decade under Obama’s budget would still remain too high for comfort.

The president’s budget would add $6.4 trillion in deficits between 2013 and 2022, the CBO said.

Under the so-called alternative fiscal scenario, where Congress simply extends a number of favored policies, cumulative deficits would reach nearly $11 trillion.

The president’s proposals would bring debt held by the public to 76% of GDP at the end of the period measured, up from 68% last year.

Debt held by the public includes U.S. bonds bought by investors, but excludes money owed to government trust funds, such as Social Security and Medicare.

Independent deficit watchdogs have been urging lawmakers to put in place a debt-reduction plan to lower public debt to at least 60% by the end of the decade.

Obama’s unveil’s $3.8 trillion budget

One reason why Obama’s budget fails to do so is because it doesn’t adequately address entitlement costs, such as Medicare.

The president has publicly advocated striking a "grand bargain" — which would involve entitlement and other spending cuts as well as tax increases — to reduce the country’s long-term debt burden. But fraught negotiations with House Republicans fell apart over the summer.

The CBO analysis shows that the president’s budget would end up stabilizing the debt — meaning the country’s deficits stop growing faster than the economy. The annual deficit in his proposal would fall to 2.5% of GDP by 2017 — well below the 8.1% projected for this year. But they would climb back to 3% by 2022. And barring any more significant debt-reduction plans, deficits thereafter would continue on a northward trek.

Obama: Slash corporate tax rates and breaks

Annual spending levels in Obama’s fiscal blueprint average 22.5% of GDP, above the 20.7% historical average. But his budget would put discretionary spending on a downward trajectory, from 8.4% of GDP this year to 5.2% at the end of the decade.

Under the president’s budget, the government’s revenue intake would climb to an average of 19.4%, above the 18.1% historical norm and well above the 60-year lows reached during the recession.

Part of the reason for the increase is due to a strengthening economy. But partly it’s due to the estimated $950 billion in new revenue he’d raise from a host of proposals, the largest of which is his call to limit the value of itemized deductions for high-income households, which alone is estimated to raise $520 billion over a decade.

At the same time, he puts forth a number of measures that would shrink tax receipts significantly relative to where they would otherwise be. The most costly is his oft-repeated proposal to make permanent the Bush-era tax cuts for the majority of Americans, followed by a proposal to index the Alternative Minimum Tax to inflation, and expanding stimulus measures and creating new tax cuts for families.

While no president’s budget is ever adopted by Congress wholesale or even in large part, this year there isn’t likely to be any real action on anyone’s budget proposal — including one expected next week from House Budget Chairman Paul Ryan — until after the presidential election in November.

That’s when Congress will face a number of fateful fiscal decisions, such as whether to extend the Bush-era tax cuts and whether to replace nearly $1 trillion in automatic spending cuts that nobody wants but which are scheduled to take effect in January 2013. 

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Confidence among U.S. consumers unexpectedly dropped in March as this year