Actual finance blog

A military convoy escorting Yemen’s defense minister on Tuesday set off an explosive device that killed two soldiers, an official said, in a brazen attack on security forces fighting al-Qaida-linked militants.

The minister, Mohammed Nasser Ahmed, was not injured.

Tuesday’s attack took place in the area of Wadi Dufas in the southern province of Abyan, where al-Qaida-linked militants have been establishing a strong power base in recent months.

The security official said it was not immediately known who planted the explosive or when. He declined to characterize it as an assassination attempt on the minister.

The official, who spoke on condition of anonymity because he was not authorized to speak to reporters, said Ahmed was in Abyan visiting troops on the first day of the three-day Muslim Eid al-Fitr holiday.

Security forces have been battling al-Qaida-linked fighters in Abyan for months. The militants have been taking advantage of political turmoil in Yemen around large demonstrations demanding the resignation of longtime President Ali Abdullah Saleh.

In June, Saleh was wounded in a bomb attack on his palace and departed for Saudi Arabia for treatment. He is still there, but he insists he will return home, defying international demands that he step down.

Near daily anti-Saleh protests and growing political disarray have created a security vacuum in southern Yemen, where al-Qaida-linked militants are battling the military for control no fax payday loans.

The West views al-Qaida’s branch in Yemen as one of the group’s most violent and dangerous.

The defense minister is a longtime ally of Saleh and has openly pledged the military’s support to him, though the army’s powerful 1st Armored Division is backing the protesters.

The swift takeover of Abyan’s capital city of Zinjibar by al-Qaida-linked militants in June sent tens of thousands of residents fleeing for safety elsewhere.

Also Tuesday, a Yemeni medical official said six suspected al-Qaida militants were killed in clashes in Wadi Dufas. The official spoke on condition of anonymity because he was not authorized to brief reporters.

An official statement by Yemen’s Interior Ministry said 300 militants have been killed since May.

Abyan Governor Saleh al-Azari said that the Yemeni army has dealt a heavy blow to the al-Qaida-linked militants in the province over the past few days.

The army has also suffered losses. At least nine soldiers and an army colonel have been killed since Sunday in battles near Wadi Dufas, according to security officials.

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China will appeal a World Trade Organization rejection of its curbs on exports of industrial raw materials, the government said Wednesday, in a case that Washington and Europe hope will lead to an easing of its restrictions on rare earths sales.

“We still consider that China practice and China’s policies do not violate WTO rules,” Ministry of Commerce spokesman Shen Danyang at a regular news briefing. “We will appeal,” he said. Shen gave no details of when the appeal would be filed or on what specific grounds.

A WTO panel ruled July 5 that Beijing was improperly protecting its companies by limiting exports of nine materials used in the steel, aluminum and chemical industries.

The case did not mention rare earths, a group of 17 minerals used in mobile phones and other high-tech products. But the United States and the 27-nation European Union say they want China to apply its principles to rare earths and lift export restrictions.

China accounts for 97 percent of rare earths production and has alarmed foreign manufacturers by reducing exports while it tries to develop its own manufacturers of magnets and other products made with the minerals.

A European Union trade envoy, Karel De Gucht, said in July that Chinese officials indicated they might change their rare earths curbs due to the ruling easy payday loans. Chinese officials have not confirmed that.

The WTO ruling in a case brought by the United States, the EU and Mexico, applied to Chinese quotas and taxes on exports of materials including coke, bauxite, zinc and fluorspar. It rejected China’s argument that it was trying to protect the environment and said export restrictions should be removed.

China has about 30 percent of the world’s reserves of rare earths, which also are used in some weapons, flat-screen TVs, batteries for electric cars and wind turbines.

The United States, Canada and Australia have rare earths but stopped mining them in the 1990s as lower-cost Chinese ores flooded the market. Companies are developing mines in North America and elsewhere but the Chinese restrictions have pushed up global prices.

Beijing says it restricted exports to conserve scarce supplies and curb environmental damage caused by mining. But foreign governments complain similar limits were not applied to domestic manufacturers that use rare earths.

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The eurozone’s hard-won deal overhauling its rescue fund and extending Greece a euro109 billion bailout is not in doubt, Greece’s finance minister insisted Friday.

Evangelos Venizelos’ comments come as five countries are demanding collateral in exchange for their contributions. The Netherlands, Slovenia, Austria and Slovakia said Thursday they wanted hundreds of millions of euros in collateral like Finland, which struck a deal with the Greek government earlier in the week to receive cash as security for their part of the bailout.

Although the amount of cash being demanded by the five would probably not be large enough to sink the deal, it could drive up the overall cost of the bailout, which was part of a July 21 eurozone agreement that gave the 17-country eurozone new powers designed to help a country before it is in full crisis.

The demands have also laid bare the tensions over how to deal with Europe’s debt crisis, which has already seen Greece, Ireland and Portugal bailed out.

The July 21 deal “is not in doubt, because it is of vital importance to the eurozone,” Venizelos told Skai radio, adding that the agreement was not just about his country.

“It is a decision that concerns Greece as part of a much more general problem,” he said.

Venizelos stressed the collateral deal with Finland depended on approval by other eurozone members and that the Finns had wanted to make it public. Athens, he said, would have preferred to wait until after the issue had been discussed by the eurozone members before announcing it.

The minister, who assumed his position in late June following a political crisis in Greece, stressed the need for clear messages from the eurozone, saying there were political and financial “side effect(s) each time the eurozone doesn’t send clear messages.”

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When a deep-pockets acquirer meets a reluctant target, a few more dollars will often turn “no” into an enthusiastic “yes.”

That’s not the case with Ralcorp, a St. Louis company that has just slammed the door in its suitor’s face for the third time.

ConAgra Foods, the Omaha, Neb.-based maker of Orville Redenbacher popcorn and Peter Pan peanut butter, wants this deal badly. It approached Ralcorp in March with a cash-and-stock offer of $82 a share, which it sweetened to $86 in May and to $94, all in cash, last week. The latest bid values Ralcorp at $5.2 billion.

Ralcorp has refused to even meet with ConAgra, and Chairman William Stiritz sent a letter on Friday saying the two companies “have nothing further to discuss.”

Just saying “no” isn’t usually an effective takeover defense, but Stiritz, when he’s not writing rejection letters, has moved to reshape Ralcorp by spinning off the Post cereal business and acquiring a unit that makes private-label bread dough.

Analysts say the dough deal will add to profits from Day 1, but the spinoff’s success is less certain. Ralcorp is betting that its two parts

The leader of Italy’s largest union is threatening a general strike against an austerity package approved by Premier Silvio Berlusconi’s government to balance the budget by 2013 and avoid financial collapse.

Susanna Camusso, leader of the CGIL labor confederation, says a strike is the only way to “change the inequity of this package.” She told the La Repubblica newspaper on Sunday that union officials will meet Aug. 23 to set a strike date.

Berlusconi says the euro45.5 billion ($64.8 billion) austerity package _ which raises taxes, cuts political jobs and consolidates small towns _ has won praise from the European Central Bank and leaders including German Chancellor Angela Merkel. But opposition is emerging from his own coalition, and the head of an entrepreneurs’ association has also criticized parts of it.

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The economy might not be on the brink of another recession after all.

Consumers, who drive most economic growth, spent more on cars, furniture, electronics and other goods in July _ and more in May and June than previously thought. That burst of activity is encouraging because it shows many Americans were willing to spend despite high unemployment, scant pay raises, steep gas prices and diminished wealth.

If it keeps up, the economy might rebound after growing at an annual rate of just 0.8 percent in the first half of 2011.

That’s a big if.

Whether Americans remain willing to spend freely despite the stock markets’ wild swings will determine whether the second half of the year is any better than the first. Their 401(k) retirement accounts have shrunk.

A sustained stock-market decline tends to slow consumer spending because it reduces wealth, especially for upper-income Americans. The richest 10 percent of Americans own 80 percent of stocks. And the richest 20 percent drive about 40 percent of consumer spending, analysts say.

That loss of wealth may help explain a report Friday that consumer sentiment hit a 31-year low in August. The Thomson Reuters/University of Michigan’s survey, completed early this week, showed that market turmoil and the political strife over raising the federal debt ceiling rattled consumers.

“The fact that retail sales held up over the last few months … is a positive economic development,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. “However, the true test will be to see if consumer activity held up in the face of recent financial market gyrations and slumping economic confidence. So the August data will be of much greater significance.”

The Dow finished Friday with a gain of 125.71 points, or 1.1 percent, to close at 11,269.02. That means the turbulent week in the end dragged the market down just 1.5 percent after it had plummeted as much as 6.3 percent.

The Dow is still down about 11 percent since July 21.

Worries about the markets and the economy already seem to have caused some shoppers to pull back. The International Council of Shopping Centers-Goldman Sachs index, which tracks revenue at stores open at least a year, has shown two straight weekly declines.

Claire Sanders Swift, a Washington media consultant, said that after the stock market plunged, she “sent her baby sitter home early and called her broker.”

“I keep trying to remind myself we’ve been through this rodeo before,” she said early this week. “The fear is making me not want to spend.”

It’s a pivotal moment for the nation’s retailers. They’re in the midst of back-to-school season and are planning for Christmas sales. Together, the two shopping seasons represent up to half their annual revenue.

Retailers are concerned that the weak economy and stock market turmoil could cause shoppers to retreat as they did when the financial crisis hit in 2008. Back then, spending plunged so much that some retailers slashed prices up to 80 percent just to draw shoppers to stores. Others sold jewelry and clothing to liquidators for pennies on the dollar. Some went out of business.

This time, retailers seem better prepared. They’ve kept inventories lean to avoid being stuck with huge piles of marked-down products.

Jeff Landis of Chicago-based Montopoli Custom Clothiers said because business has been quiet the past few weeks, he’s decided to delay stocking up on fabric for custom suits for fall. And Geoff Stern, owner of Toy Professor, a toy store in Summit, N payday loans for bad credit.J., said sales this week were down about 25 percent from a typical August week.

Until late this week, a batch of poor economic data and a gloomy outlook from the Federal Reserve set off fears that the economy might be about to slide into another recession. That threat appears to have diminished. But it’s hardly gone away.

Still overhanging the financial markets and the U.S. economy is concern that Europe’s debt crisis will spread through the U.S. financial system. Investors worry that Italy and Spain, two of Europe’s biggest economies, might be unable to pay all their debts.

If they couldn’t, big European banks that hold huge amounts of government debt would be at risk of failure. That possibility, in turn, could harm many large U.S. banks with close relationships with their European counterparts.

The mildly positive economic figures in recent days have at least given economists cause for hope. Layoffs are down. Retail sales are up. Gas prices have fallen. Employers added 117,000 jobs last month. That isn’t enough to significantly lower the unemployment rate, now at 9.1 percent. But it was more than expected and was an improvement after two dismal months for hiring.

Retail sales rose 0.5 percent last month, the Commerce Department said Friday. It was the best showing since March. The government also revised up its estimates of sales for the previous two months. Even after excluding gas station sales, which were boosted by a rise in gas prices, sales rose 0.3 percent in July.

It was the second encouraging signal for the economy in as many days. On Thursday, the Dow rocketed up 423 points after the government said the number of people applying for unemployment benefits dropped below 400,000 for the first time since April.

Consumers may feel better later this month as gas prices drop further, economists said. That would help increase their confidence. Gas prices have fallen 10 cents to $3.60 a gallon in the past week _ down from nearly $4 a gallon in early May.

In addition, stock prices have rebounded slightly since the consumer sentiment survey was completed early this week, said Paul Dales, an economist at Capital Economics.

“Confidence is very unlikely to stay this low for long,” Dales said.

Most large retailers are remaining optimistic. Macy’s Inc., Kohl’s Inc. and Nordstrom Inc. have boosted their annual profit outlooks. Yet they’re also concerned about the risk that conditions will worsen.

J.C. Penney said Friday that it expects its earnings this quarter to trail Wall Street estimates.

“The tumultuous last 10 days or so haven’t given our core customer, the middle income family, any reason to be more confident,” said CEO Myron E. Ullman III.

The retail sales report is the government’s first read on consumer spending for the July-September quarter. In June, consumers cut spending for the first time in 20 months, a troubling sign.

Demand for cars has been low this year. But part of the reason is that dealers have had trouble stocking popular models because of parts shortages related to Japan’s earthquake in March. Those disruptions are easing, which could boost auto sales in August.

And that would confirm the optimism sparked by the retail-sales report Friday.

“At this point, a mild report is a good report,” said Chris Christopher, an economist at IHS Global Insight.

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A new report says sales of U.S. magazines at newsstands and other retail outlets fell 9 percent in the first six months of the year in a sign of readers trimming discretionary spending.

Although overall circulation was down just 1 percent, the larger drop in the single-copy sales figure is troubling for magazine publishers. That’s because publishers typically make more from those sales than from subscriptions, which are sold at a discount so publishers can boost circulation and lure advertisers low fee payday advance.

Single-copy sales have been steadily declining. The Audit Bureau of Circulations, an industry trade group, says that in the latest period, the 418 titles examined sold 29.8 million copies at retail outlets, compared with 32.8 million a year earlier. Overall circulation was 301 million, down from 305 million.

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The Senate emphatically passed emergency legislation Tuesday to avoid a first-ever government default, rushing the legislation to President Barack Obama for his signature just hours before the deadline. The vote was 74-26.

Obama planned to sign the bill promptly and also was making remarks at the White House.

Tuesday’s vote capped an extraordinarily difficult Washington battle pitting tea party Republican forces in the House against Obama and Democrats controlling the Senate. The resulting compromise paired an essential increase in the government’s borrowing cap with promises of more than $2 trillion of budget cuts over the next decade.

Much of the measure, which the House passed Monday night, was negotiated on terms set by House Speaker John Boehner, including a demand that any increase in the nation’s borrowing cap be matched by spending cuts. But the legislation also meets demands made by Obama, including debt-limit increases large enough to keep the government funded into 2013 and curbs on growth of the Pentagon budget.

“We’ve had to settle for less than we wanted, but what we’ve achieved is in no way insignificant,” said Senate GOP leader Mitch McConnell of Kentucky. “But I think it was the view of those in my party that we’d try to get as much spending cuts as we could from a government we didn’t control. And that’s what we’ve done with this bipartisan agreement.”

Many supporters of the legislation lamented what they saw as flaws and the intense partisanship from which it was forged. In the end, it was a lowest-common-denominators approach that puts off tough decisions on tax increases and cuts to entitlement programs like Medicare.

“What troubles me about it is that the bipartisan compromise also represents a kind of bipartisan agreement by each party to yield to the other party’s most politically and ideologically sensitive priority,” said Joseph Lieberman, I-Conn. “In the case of Democrats, it’s to protect entitlement spending. … In the case of Republicans, it’s to not raise taxes.”

The measure would provide an immediate $400 billion increase in the $14.3 trillion U.S. borrowing cap, with $500 billion more assured this fall. That $900 billion would be matched by cuts to agency budgets over the next 10 years.

The Senate vote was never in doubt after Majority Leader Harry Reid, D-Nev., and McConnell signed on. But like Monday’s House vote, defections came from liberal Democrats unhappy that Obama gave too much ground in the talks, as well as from conservative Republicans who said the measure would barely dent deficits that require the government to borrow more than 40 cents of every dollar it spends.

“This is a time for us to make tough choices as compared to kick the can down the road one more time,” said freshman GOP Sen. Jerry Moran of Kansas.

The measure sets up a fall drama that promises to again test the ability of Obama and Republicans to work cooperatively. It establishes a special bipartisan committee to draft legislation to find up to $1.5 trillion more in deficit cuts for a vote later this year. They’re likely to come from such programs as federal retirement benefits, farm subsidies, Medicare and Medicaid. The savings would be matched by a further increase in the borrowing cap.

There’s no guarantee the committee, to be evenly split between the warring parties, will agree on such legislation. But there are powerful incentives to do so because more budget gridlock would trigger a crippling round of automatic cuts across much of the budget, including Pentagon coffers.

And questions linger about the effect the grueling political free-for-all will have on the U.S. credit rating.

Treasury Secretary Timothy Geithner told ABC News that he didn’t know whether the debt-limit fight would cause America’s AAA credit rating to be downgraded. “It’s not my judgment to make,” he said. Geithner also said he fears world confidence in the United States was damaged by “this spectacle.”

Enactment of the measure provides welcome closure for Obama, who has seen his poll numbers sag during the debt-limit battle.

GOP presidential candidates such as Mitt Romney and Michele Bachmann issued statements opposing the legislation.

“As with any compromise, the outcome is far from satisfying,” Obama conceded in a video his re-election campaign sent to millions of Democrats.

In a tweet, the president was more positive: “The debt agreement makes a significant down payment to reduce the deficit _ finding savings in both defense and domestic spending.”

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Executives from the country’s biggest banks met with U.S. Treasury officials Friday to discuss how debt auctions will be handled if Congress fails to raise the borrowing limit before Tuesday’s deadline.

Treasury officials met in New York with representatives from 20 large banks that serve as primary dealers for the sale of Treasury securities. They took questions amid growing concern that the borrowing limit will not be raised in time to avoid a default on the debt. And they discussed the possibility of delaying or reducing the size of the upcoming auctions if the debt limit is not raised.

Some of the banks recommended that the government use short-term Treasury bills, called cash management bills, in place of a full refunding auction. That would raise some debt but not as much as a refunding. So it could keep Treasury under the current $14.3 trillion borrowing limit.

No decisions were announced at the meeting, and Treasury provided no details of how the government will decide which bills to pay should the borrowing limit not be raised. A statement said the meeting was to prepare for an upcoming quarterly debt auction.

White House spokesman Jay Carney said the administration did not plan to provide the public with details Friday on how the government will prioritize payments. Carney said the administration plans to lay out its contingency plans, but it would wait until closer to next Tuesday’s deadline.

Treasury makes 80 million payments a month.

If the debt ceiling is not raised, Treasury will not have the ability after Aug. 2 to borrow new debt. But it would still be able to refinance debt that is maturing as long as the operation does not increase the total debt supply. Treasury has to borrow on average $125 billion in new debt each month and refinance $500 billion in maturing debt.

The next quarterly auction is scheduled for the week of Aug. 8. If it is not postponed, Treasury is scheduled to release its borrowing plans at a news conference Wednesday. Market participants had expected that Treasury would announce plans to borrow around $72 billion, the same amount that the government raised at the last refunding auction in May.

Scott Sherman, an interest-rate strategist at Credit Suisse, said that if the debt ceiling is not raised by Tuesday, Treasury will have to decide whether to proceed with a tentative schedule for the debt auctions the week or Aug. 8 or announce plans to trim the size of those auctions to keep under the current debt limit.

Moody’s Investors Service said late Friday that the United States should be able to keep its triple-A credit rating as long as Washington works out a deal that lets it continue to pay bondholders.

“If the debt limit is not raised before Aug. 2, we believe that Treasury would give priority to debt service payments and could thus postpone a potential debt default for a number of days,” Moody’s said in its new report. “Revenues would be more than adequate for some period of time to meet those payments although other outlays would be severely reduced as a result.”

Private economists believe the government would pay bond holders first if the debt limit is not raised. If the Treasury missed a bond payment, the country would likely default on its debt. That could rattle markets and increase borrowing costs on most consumer and business loans, many of which are linked to the rates on Treasurys.

Some economists say the government will have enough cash on hand to meet interest payments and some other payments until as late as Aug. 15.

Officials of the bond-trading divisions of JPMorgan, Goldman Sachs, Citigroup and the other big banks attended the meeting at the New York Federal Reserve Bank.

Treasury would normally meet with half of the 20 dealers before a quarterly auction. However, given the heighted concerns surrounding the debt stalemate, Treasury decided to expand the discussions to include all 20 banks.

Treasury said in its statement that the general consensus among the banks participating in the discussion was that Congress “should act as quickly as possible to raise the debt ceiling for as long a period as possible to lift the cloud of uncertainty from the economy.”

The Obama administration wants Congress to increase the borrowing limit to last beyond the November 2012 elections. Republicans in the House want a smaller initial increase, and second increases tied to more spending cuts that would take place next year before the election.

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The NFL Players Association executive board and 32 team reps voted unanimously Monday to approve the terms of a deal with owners to the end the 4 1/2-month lockout.

Owners overwhelmingly approved a proposal last week, but some unresolved issues still needed to be reviewed to satisfy players; the owners do not need to vote again.

The sides worked through the weekend and wrapped up the details Monday morning on a final pact that is for 10 years, without an opt-out clause, a person familiar with the deal told the AP on condition of anonymity.

Owners decided in 2008 to opt out of the league’s old labor contract, which expired March 11. That’s when the owners locked out the players, creating the NFL’s first work stoppage since 1987.

NFLPA head DeMaurice Smith stepped outside of the group’s headquarters in Washington at about 2 p.m. to announce that players approved the pact.

“I know it has been a very long process since the day we stood here that night in March,” Smith said. “But our guys stood together when nobody thought we would. And football is back because of it.”

As he spoke, Smith was flanked by NFLPA president Kevin Mawae, Saints quarterback Drew Brees, Colts center Jeff Saturday and Ravens defensive back Domonique Foxworth, key members of the players’ negotiating team instant payday loan lenders. Brees is one of 10 plaintiffs in the antitrust lawsuit that players filed against the league.

Moments later, NFL Commissioner Roger Goodell walked into the building, joined by owners Bob Kraft of the New England Patriots, John Mara of the New York Giants and Jerry Richardson of the Carolina Panthers.

“I believe it’s important that we talk about the future of football as a partnership,” Smith said.

A tentative timeline would allow NFL clubs to start signing 2011 draft picks and rookie free agents on Tuesday. Conversations with veteran free agents also could start Tuesday, and their signings could begin Friday.

Under the proposed schedule, training camps would open for 10 of the 32 teams on Wednesday, 10 more on Thursday, another 10 on Friday, and the last two teams on Sunday.

Both sides set up informational conference calls for Monday afternoon to go over the details of the agreement. The NFLPA told player agents they would be coached in particular on the guidelines and schedule for signing free agents and rookies; the NFL alerted general managers and coaches they would be briefed in separate calls.

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