Actual finance blog

China has given the go-ahead for several local authorities to sell bonds as it moves to bridge financing shortfalls and prevent debt defaults by overextended provinces.

The Ministry of Finance said in a notice Thursday that Shanghai, Zhejiang and Guangdong provinces and Shenzhen, a special economic zone bordering Hong Kong, would be allowed to issue three-year and five-year bonds on a trial basis, subject to quotas.

China normally prohibits local governments from issuing bonds directly or from taking bank loans, confining such bonds to those issued by the central government on their behalf.

Local governments owe about 10.7 trillion yuan ($1.7 trillion) in debt through financing vehicles set up to support construction projects. Issuing bonds would help them to honor those obligations.

Instructions outlined by the ministry suggests plans for strict central government oversight of the program.

Bond quotas set for one year cannot be carried over to another, it says.

Funds raised by local government bond sales will be kept in a special account of the finance ministry which will oversee payment of interest and principal.

The ministry said the local governments also should provide timely information to the public regarding local economic and financial conditions.

With highway and railway projects running short of cash, Zhejiang province, west of Shanghai, plans to issue 8 billion yuan ($1.3 billion) worth of bonds to fund infrastructure projects this year, the official Xinhua News Agency reported earlier.

It characterized the plan as the beginning of a shift in how local government projects are financed.

Much of the money is also expected to be earmarked for so-called “affordable housing” projects.

Cities have been ordered to speed up construction of such housing, but many already debt-encumbered localities reportedly lack the financial wherewithal to follow through.

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Asian stock markets advanced Monday, bolstered by improved U.S. retail sales and Europe’s renewed efforts to contain its debt crisis.

Japan’s Nikkei 225 stock average rose 1.5 percent to 8,881.42, hitting a six-week intraday high at one point.

Hong Kong’s Hang Seng jumped 1.7 percent to 18,824.07, South Korea’s Kospi was up 1.2 percent at 18,824.07 and Australia’s S&P/ASX 200 climbed 1.8 percent to 4,282.30.

Sentiment brightened after stronger retail sales data in the U.S., leading to gains on Wall Street before the weekend. The Dow Jones Industrials rose 1.4 percent to close at 11,644.49 on Friday.

Retail sales, which are a key barometer of consumer spending, recorded the biggest gain in seven months in September and double what economists were expecting. The data added to signs that the world’s biggest economy may avoid another recession.

Worries about Europe’s debt problems also eased following a meeting of Group of 20 finance chiefs over the weekend in Paris.

The group opened the door for the International Monetary Fund to play a bigger role in fighting the escalating debt troubles among countries that use the euro common currency. It also said eurozone ministers will “decisively address the current challenges through a comprehensive plan” to be unveiled on Oct paydayloans. 23.

In currencies, the dollar edged up to 77.24 yen from 77.22 late Friday. The euro fell to $1.3851 from $1.3875.

With the dollar holding above the 77-yen line, investors sent Japanese exporters higher. Sony Corp. surged 4.6 percent, while Toyota Motor Corp. 2.4 percent.

Missing out on the rally was camera and precision instruments maker Olympus Corp., which plunged after firing its British CEO on Friday after just six months.

The issue tumbled more than 22 percent, following a double-digit slide before the weekend. Several ratings agencies issued downgrades, while media reports said Michael Woodford was dismissed after questioning Olympus executives about improper corporate governance and several acquisitions before he arrived.

Benchmark oil for November delivery was up 35 cents at $87.15 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.57 to settle at $86.80 in New York on Friday.

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Gannett Co.’s new CEO took over just in time to discuss third-quarter earnings, which are expected to reflect depressing trends facing the largest U.S. newspaper publisher. The numbers are due out before the stock market opens Monday.

WHAT TO WATCH FOR: Gannett’s results will be broken down by Gracia Martore, who was named the company’s CEO earlier this month after Craig Dubow resigned for health reasons. The biggest concern for investors is whether its long-running slump in print advertising worsened during the July-September period. The owner of USA Today and more than 80 other dailies has already warned investors that advertising revenue in its newspaper division fell in the quarter, extending a decline that began in 2006.

It will be a bad sign if the decline is worse than the 7 percent year-over-year decline that the company’s newspapers suffered in the April-June period.

Gannett’s situation isn’t unusual. As advertisers continue to spend more on the Internet, most major newspaper publishers have struggled. Newspapers have garnered some digital advertising, but those gains haven’t come close to making up for losses on the print side.

Gannett has more of a cushion than some of its peers because it also owns 23 television stations.

To help offset the sharp drop in advertising, Gannett and other newspaper publishers have resorted to layoffs and furloughs.

WHY IT MATTERS: Gannett, which is based in McLean, Va., will be the first major U.S. newspaper owner to report its third-quarter results, giving investors a better sense how the industry is holding up as the economy sputters.

WHAT’S EXPECTED: Analysts polled by FactSet expect Gannett to earn 44 cents per share on revenue of $1.28 billion.

LAST YEAR’S QUARTER: Gannett earned $101 million, or 43 cents per share, on revenue of $1.31 billion.

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Netflix’s Internet video library is adding TV shows from the CW network in an effort to appeal to younger subscribers and help offset the upcoming loss of another contract that supplied customers with other popular entertainment options.

Under a four-year licensing deal announced Thursday, Netflix will have the right to show the previous seasons of TV series that CW airs through the network’s 2014-15 programming window. Netflix will retain the streaming rights to some of the series until 2019.

The previous seasons of several current CW shows, including “The Vampire Diaries” and “Gossip Girl,” will be available in Netflix’s Internet video library Saturday. Other CW series will debut in January.

Financial terms weren’t disclosed. The episodes will be available through a Netflix service that streams video over high-speed Internet connections to TVs, computers and a variety of mobile devices.

The agreement with CW’s owners CBS Corp. and Time Warner Inc.’s Warner Bros. comes at a low point for Netflix Inc. The company is scrambling to overcome a series of setbacks that have hammered the company’s stock price and driven away hordes of subscribers during the past three months.

The trouble began in July when Netflix announced it was raising its prices by as much as 60 percent for U.S. subscribers that wanted to stream video and rents DVDs through the mail. Things got worse last month when Starz Entertainment broke off talks to renew a key Internet streaming deal and Netflix announced plans to spin off its DVD-by-mail service into a separate website called Qwikster.

As part of its damage control, Netflix earlier this week abandoned the Qwikster spin-off. The company, which is based in Los Gatos, Calif., is hoping to minimize the blowback from losing the Starz streaming rights by buying other content that will keep subscribers happy.

Netflix desperately needs to make amends credit reports free. Its stock price has plummeted by about 60 percent since mid-July and its subscribers have been fleeing. When the company releases its third-quarter earnings on Oct. 24, Netflix is expect to report it ended September with about 24 million U.S. subscribers _ 600,000 fewer than it had in June.

Netflix shares rose $4.35, or 3.8 percent, to $117.97 in afternoon trading.

Since the Starz negotiations collapsed, Netflix has gained the streaming rights to TV shows and movies from AMC Networks Inc., DreamWorks Animation and now the CW network. The movies and TV special from DreamWorks won’t be available before Netflix loses the right to stream films from Walt Disney Co.’s studios and other programming when the Startz deal expires early next year.

CW targets younger TV viewers with series that include “Supernatural,” “Nikita” and “90210.” It’s a demographic that Netflix also wants to reach because so many teenagers are growing up watching video on any device with a high-speed Internet connection.

“This is programming for the on-demand generation and we hope this agreement deepens the relationships viewers already have with these powerful entertainment brands,” said Ted Sarandos, Netflix’s chief content officer.

The CW deal also will make Netflix’s Internet video library look even more like a TV rerun service. Netflix says old TV shows account for about 60 percent of the video watched on the streaming service. The company would like to add even more TV programming, but Time Warner so far has staunchly refused to license HBO productions such as “The Sopranos,” “The Wire” and “Deadwood” because it views Netflix as a threat to its pay-TV channel.

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Kirin Holdings Co. says that a Brazilian court has revoked an injunction blocking the company’s $2.5 billion takeover of Brazilian beer producer Schincariol.

The ruling in Sao Paulo paves the way for the Japanese beer maker to assume control of Schincariol and gain a valuable foothold in the rapidly growing Brazilian market.

In August, Kirin announced a $2.5 billion deal to buy the 50.45 percent stake owned by brothers Alexandre and Adriano Schincariol. Minority shareholders _ their cousins _ opposed the transaction and successfully requested an injunction.

Kirin, Japan’s No. 2 brewer, appealed the decision.

Schincariol is Brazil’s second-largest beer producer, known for brands such as Nova Schin, Devassa and Bem Loura.

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Several thousand Occupy Wall Street protesters have marched to New York City’s Washington Square Park for a peaceful general assembly.

Demonstrators marched Saturday from Manhattan’s Zuccotti Park, the group’s unofficial headquarters where protesters have been camped out for the last 22 days. The trek was peaceful and orderly.

On Wednesday, dozens were arrested when thousands marched on Wall Street in their biggest show of support yet. Last Saturday, 700 people were arrested after they spilled onto the roadway while crossing the Brooklyn Bridge.

Protesters are speaking out against corporate greed and the gap between the rich and poor. They say they have no leaders and are making decisions by consensus.

Supporters have donated food, clothing and medical supplies. Some drop off their offerings, while others have mailed them.

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The European banking system is teetering. Congress lurches from one government shutdown crisis to another. Unemployment in the U.S. is stuck at 9 percent with no improvement in sight.

Amid it all, the stock market has gone manic-depressive, jumping one day and tanking the next business card. The Dow Jones industrial average is off 5.7 percent for the year.

That leaves the risk-shy investor yearning for shelter

ST. LOUIS 

LONDON — World stocks and the euro fell sharply on Monday as investors feared a messy Greek default within weeks unless Athens implements the austerity measures demanded by its international lenders.

International lenders told Greece on Monday that it must shrink its public sector and improve tax collection to secure a vital 8 billion euro rescue payment next month.

After a rare four-day rally in world stocks last week, markets fear the crisis is worsening again after Greece’s prime minister cancelled a U.S. trip to chair an emergency cabinet meeting at home and German Chancellor Angela Merkel suffered a regional election loss.

EU finance ministers also failed to make progress on the debt crisis at the weekend, and the focus is now shifting to a conference call between Greece and its international lenders at 1600 GMT to see how Greece plans to make up its budget shortfall and avoid a disorderly default.

With the gloom so widespread, investors took little comfort from expectations that the Federal Reserve would introduce new measures to stimulate the U.S. economy later this week.

“It’s no more a link between markets and economics, but a link between markets and politics. The politicians should have seen the crisis coming and done more, but the problem is they are not proactive,” said Koen De Leus, strategist at KBC Securities, in Brussels.

“We are just going from one crisis to another. It’s a nightmare for the markets.”

The MSCI world equity index fell 1.1 per cent on the day, after posting its biggest weekly gain since early July last week in buying largely driven by short-term players.

Long-term asset managers have been either staying on the sidelines, or steadily cutting back on exposure to risky assets. The MSCI index is around 5 per cent above its one-year low hit earlier in September.

European stocks lost nearly 2 per cent, led by sharp losses on the banking sector, while emerging stocks dropped nearly 2.2 per cent. U.S. stock futures pointed to a weaker open on Wall Street later.

The euro fell more than 1 per cent to $1.3632.

POLICY RISKS

Events this week promise a heavy dose of policy action.

Finance ministers of the BRIC emerging economies — Brazil, Russia, India and China — meet later this week to discuss steps to offer support to the euro zone.

Market sentiment may change if they buy euro-denominated bonds, as suggested in preliminary talks, after the European Central Bank’s 70 billion euro bond-buying spree over the last five weeks or so failed to stop the crisis from spreading to Spain and Italy.

Investors will also be watching U.S. President Barack Obama’s deficit-reduction plan on Monday aimed at covering the cost of his recent jobs bill.

U.S. crude oil was down 1.4 per cent to $86.76 a barrel.

Bund futures rose 78 ticks.

The dollar gained 0.7 per cent against a basket of major currencies, supported by expectations that new Fed measures would be focused on the maturities of the debt it buys rather than on expanding its already swollen balance sheet.

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President Barack Obama is keeping up his appeal for public support of his $447 billion proposal to boost jobs and consumer spending by urging Americans to press Congress to pass the legislation. “No more division or delay,” he said.

In his weekly radio and Internet address Saturday, he focused on a message that has become central to a presidency struggling to address stubbornly high unemployment numbers and dipping approval of his handling of the economy.

The president announced his jobs legislation to a joint session of Congress last week and has since gone outside Washington to build a case for its passage. He has been to Virginia, Ohio and North Carolina.

“The No. 1 issue for the people I meet is how we can get back to a place where we’re creating good, middle-class jobs that pay well and offer some security,” he said.

His address Saturday came in the face of sobering public opinion ratings for the president.

A New York Times/CBS News poll released Friday showed nearly half of those surveyed worried the economy was headed for another recession and nearly three out of four said they believe the country is on the wrong track.

Obama’s proposal would reduce payroll taxes on workers, cut them in half for most businesses and offer incentives for employers to hire. It would spend tens of billions of dollars on new public works projects, extend unemployment benefits for long-term jobless and help states and localities avoid layoffs of teachers and emergency workers.

On Monday, Obama plans to spell out a long-term debt stabilizing plan that aims to cut the deficit by about $2 trillion over 10 years. Obama is making his proposal to a special congressional committee that has been charged with lowering deficit by $1.2 trillion to $1.5 trillion.

“But right now, we’ve got to get Congress to pass this jobs bill,” Obama said.

Obama’s jobs plan has received a tepid reception from Republicans, who are willing to consider some of his tax relief proposals, but not his spending plans. His proposal to pay for the plan with limits on tax deductions and closing corporate tax loopholes is facing stiff GOP resistance and even Democrats have pushed back on some of those provisions in the past.

In an interview with MSNBC that aired Saturday, House Minority Leader Nancy Pelosi, D-Calif., said simply approving tax cuts without including spending on public works and local and state government assistance would not do enough to spur the economy.

“To take one piece or another, it doesn’t create the dynamism we need,” she said.

Still, despite his demand for quick passage, Obama is not likely to get immediate action even in the Democratic-led Senate, where Majority Leader Harry Reid has said there are some other issues that need to be dealt with first, including transportation money.

In the Republican address, Rep. Peter Roskam of Illinois called on Obama to reduce regulations on businesses, saying government agency rules were choking off hiring. “Washington has become a red tape factory,” he said.

He acknowledged Obama’s decision to scrub a clean-air regulation that aimed to reduce health-threatening smog. “He can cancel more,” Roskam said.

He pressed Obama to push the Democratic-controlled Senate to adopt House Republican initiatives, including legislation that would give Congress veto power over certain high-cost regulations.

“Job creators should be able to focus on their work - not on Washington’s busy-work,” he said.

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