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Retail sales beat expectations
Same store sales at many retailers were stronger than expected in September. But analysts say consumers remain cautious amid rising unemployment.
CHICAGO (Reuters) -- U.S. retailers, including Macy's Inc. and Abercrombie & Fitch, surprised Wall Street with better-than-expected September sales, suggesting shoppers could be loosening their purse strings ahead of the crucial holiday season.
This year's later Labor Day holiday pushed a good chunk of sales from August into September, but analysts had wondered if rising unemployment would weigh more heavily on spending.
Sales of clothing for the back-to-school season fueled many retailers' performances, especially in the early part of the month, as did easier results comparisons from a year ago.
Based on results from 24 retailers, 16 beat Wall Street estimates, and another six are due to report, according to Thomson Reuters data.
"I think the consumer is dipping their toe back into the discretionary waters right now, but just their toe," said Retail Metrics President Ken Perkins.
Many retailers continued to post declines in sales at stores open at least a year, but the drops were more moderate than analysts had forecast.
At Macy's (M, Fortune 500), sales fell 2.3%, half as much as analysts anticipated. Its shares rose 2.7% to $19.10 in premarket trading.
Teen apparel retailer Abercrombie (ANF) saw same-store sales drop 18%, but that was better than the 21% decline predicted by analysts. Its shares rose 4.6% to $34.15.
Limited (LTD, Fortune 500) and Children's Place (PLCE) were among those retailers that posted same-store sales increases.
Besides increasing joblessness, holiday spending could be further constrained by consumer aversion to debt. Total U.S. consumer credit posted a deeper-than-expected drop in August, suggesting consumers are opting to cut their debt rather than spend.
Back-to-school helps
Aeropostale Inc (ARO)., American Eagle Outfitters Inc. (AEO) and Gymboree Corp. (GYMB) raised their quarterly profit forecasts. Still, not all of the gains are coming from stronger sales. Gymboree's optimism stemmed mainly from inventory control and taking fewer markdowns.
Gap Inc.'s (GAP, Fortune 500) sales fell more than anticipated, but its shares rose 3% after the company said margins came in significantly above last year.
Limited, whose chains include Victoria's Secret, posted a 1% increase in sales at stores open at least a year. Analysts expected a 2.4% decline.
Children's Place Retail Stores Inc. also reported an unexpected 4% rise in comparable sales. The results were aided by strong growth online, which the company includes in that figure.
"To see a retailer be very weak this September means that there probably has been a fundamental shift in consumption of their product," said Doug Conn, managing director and retail credit specialist at Hexagon Securities.
Analysts had forecast an average decline of 1.1% in September sales at stores open at least a year, according to Thomson Reuters data. That would be the smallest monthly drop since September 2008, when same-store sales fell 0.9%.
Retailers have posted consecutive declines in monthly same-store sales since September 2008, when Lehman Brothers' bankruptcy triggered a global financial crisis. In the previous month, retailers had notched a 0.2% gain.
More air travel misery on the way
As the economy picks up, so will air travel. That could mean more delayed flights, according to a new report by the Brookings Institution.
NEW YORK (CNNMoney.com) -- If you think flying is a miserable experience now, just wait until 2010.
Air travel has been declining since 2008 as a result of the recession. But it is expected to pick up next year, resulting in more headaches for travelers, according to a study released Thursday.
The study from the Brookings Institution, a nonprofit public policy organization based in Washington, said the downturn in travel has a "silver lining of freeing up airport capacity and improved on-time arrival rates. But these silver linings will disappear...in 2010."
The result: More delays.
This adds to the current hardship of traveling, considering that in every year since 2000, at least 15% of flights have been delayed at least 15 minutes, the study said.
Part of the problem is the "antiquated" air traffic control system, and the difficulties in establishing the more advanced Next Generation Air Transportation System, or NextGen, which is still three to nine years away from implementation, according to Brookings.
"Once reason that policymakers can feel confident that such performance will continue to suffer is the reality that the same antiquated air traffic control system will be in place to manage our every-busier skies," the study said.
High-speed rail could free the skies
Air passenger travel in 2008 and 2009 has suffered its most significant declines since the terrorist attacks of Sept. 11, 2001, and the recession is to blame, reported Brookings.
Air travel in the United States experienced its first annualized drop in September 2008 since the World Trade Center and Pentagon attacks of 2001, and these declines continued through March 2009, according to the most recent data from Brookings.
This is in stark contrast to the gains that occurred between 1990 and 2008, when U.S. airports increased passenger and flight levels by 60%, the institute said.
Brookings offered several solutions to alleviate air travel congestion when it picks up again, including increased investment in rail corridors. This would help free up the skies, the study said, noting that half of all flights are between cities that are less than 500 miles apart.
The challenge for high-speed rail travel is that it must be able to compete with air travel. The study noted that "at distances of less than 400 miles high-speed rail can meet or beat air travel times, while the capability wanes up to and past 500 miles."
As part of his stimulus plan, President Obama is pledging $13 billion into an ambitious high-speed rail project.
David Castelveter, spokesman for the Air Transport Association, the airline industry group, said that cutting capacity is not the problem, because it occurs on the "least popular routes." Also, he said the airline industry is reluctant to end short-range flights.
"We can continue to serve the small communities we serve today, and not eliminate it, as these studies suggest," he said.
Castelveter said the air traffic control system must be modernized. A change from radar to digital satellite technology would reduce the spacing between flights and relieve congestion, he said.
"Whether it's next year, or [the next] two years, the economy will ultimately recover and the industry will attempt to grow," Castelveter said. "Our great concern is the fact that this government has yet to move forward aggressively with modernization of the air traffic control system."
500,000 helped by Obama mortgage rescue
The administration reaches its goal a few weeks early. But it remains to be seen how many of these trial modifications will work.
NEW YORK (CNNMoney.com) -- Loan servicing companies have put 500,000 troubled borrowers into trial mortgage modifications, the Obama administration said Thursday.
The administration set that target in late July after it came under fire for not helping homeowners fast enough.
Officials increased the pressure on servicers to speed up their implementation of the president's foreclosure prevention plan, which calls for reducing eligible borrowers' monthly payments to no more than 31% of their pre-tax income. Servicers had until Nov. 1 to hit the half-a-million mark.
The administration also released a related report Thursday showing that 16% of eligible troubled borrowers at least 60 days delinquent were placed into trial modifications as of the end of September. This is up from 12% a month earlier.
President Obama announced the $75 billion initiative in February and the first institutions to join began accepting applications in April.
The plan, which was projected to help up to 4 million homeowners, puts qualified borrowers into three-month trial modifications before the adjustment is made final. Servicers, borrowers and investors can get financial incentives to participate.
Servicers' performance, however, remains very even.
Saxon Mortgage Services once again led the pack with 41% of eligible delinquent borrowers in trial modifications, while Citigroup (C, Fortune 500) and Aurora Loan Servicers following at 33%. JPMorgan Chase (JPM, Fortune 500) has put 27% of its clients into trial modifications, while Wells Fargo (WFC, Fortune 500) has placed 20% and Bank of America (BAC, Fortune 500) 11%.
Have you finished your trial modification period under the president's foreclosure prevention plan? Were you approved for a permanent modification or rejected and are facing foreclosure? Please email your stories to CNNMoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.
Gold is also being supported by persistent concerns that government efforts to stimulate the economy will cause inflation to rise in the future. Precious metals are seen as a hedge against rising prices because they store value better than other types assets.
"Though inflation is not an issue now, it's going to come back with force," said Kathy Lien, director of currency research at Global Forex Trading. "And that's why people are going long gold."
Some traders say the rally has been fueled by large investment funds and that the market is ripe for a correction given the strength of the recent push.
At the same time, demand for the metal from jewelry fabricators has been weak and record prices tend to bring out sellers of scrap gold, which makes for a poor fundamental backdrop.
But others say gold is poised to continue its bull run as the fallout from rock-bottom interest rates and U.S. fiscal policies drives investor demand.
Foster said he expects gold to peak near $1,300 an ounce next spring.
"The things that the Treasury and the Fed are doing to the U.S. financial system are setting gold up to be supported for some time," he said.
It's China's world. (We just live in it)
After a shopping spree for natural resources, the Chinese are shifting to automakers, high-tech firms, and real estate. Where will they strike next?
(Fortune Magazine) -- You wouldn't think the men who run the oil-rich country of Nigeria would have much spring in their step these days. The nation is plagued by a never-ending guerrilla war, one that has trimmed the country's oil production to two-thirds of its potential capacity.
But now Nigeria is in the process of renewing production licenses for some of its most prolific offshore fields, and there's a new player in town making the traditional oil powers from the West (Royal Dutch Shell (RDSA), Exxon Mobil (XOM, Fortune 500), Total (TOT)) very nervous -- and the Nigerian government very happy.
CNOOC (CEO), one of China's three largest oil companies, is trying to pick off some of the licenses; indeed, the Beijing-based company wants to secure no less than one-sixth of the African nation's production. And CNOOC, apparently, isn't screwing around.
Tanimu Yakubu, an economic adviser to the Nigerian President, recently told the Financial Times that the Chinese company is "really offering multiples of what the existing producers are pledging [for licenses]." Then he added giddily: "We love this kind of competition."
China's acquisitions
Oil in Nigeria (and the Congo and Brazil and Kazakhstan and ...). Natural gas in Iran. Iron ore in Australia. China's hunt for natural resources around the globe, which began in earnest earlier this decade, has intensified as never before.
In September alone, China's sovereign wealth fund, the China Investment Corp. (CIC), shelled out nearly $1 billion to buy an 11% stake in JSC KazMunaiGas Exploration Production, a Kazakhstan oil and gas company. Just a week earlier CIC paid $850 million to acquire 14.9% of Noble Group, the Hong Kong commodity-trading powerhouse. Earlier this summer the China Development Bank lent Petrobras, the Brazilian national oil company, $10 billion to help fund exploration in deep waters off Brazil.
So far this decade China has spent an estimated $115 billion on foreign acquisitions. Now that the nation is sitting on massive foreign-exchange wealth ($2.1 trillion and counting), it is eager to find something (anything!) to invest in besides U.S. Treasury debt.
In 2008, China's investments abroad doubled from $25 billion to $50 billion. Yes, China still lags the U.S., which, as the world's largest exporter of capital, invested $318 billion abroad last year. Yet in many ways, China has only begun. And it won't stop anytime soon.
Though still focused mainly on the natural resources that power its economy, China is now, slowly but surely, broadening its foreign-investment horizons. Both the government and private firms are beginning to look beyond the developing world for assets.
Already the Chinese have bought stakes in foreign banks, utilities, and semiconductor companies. This is a hugely consequential step, both for China and for the global economy.
In the first decade of the 21st century, China established itself as the world's workshop. The next decade (if things go right) could see China emerge as the world's leading exporter of capital.
As Daniel Rosen, the coauthor of a recent study on China's foreign investment and a principal at the Rhodium Group, a New York City consultancy, puts it, "Increasing foreign direct investment is the next critical step in China's integration into the global economy."
How critical? China's recycling of the dollars it earns via its trade surpluses is a key part of the "rebalancing" of China's economy that everyone knows needs to occur. China saves too much, consumes too little, and has been overly reliant on exports to fuel its economic growth.
The current binge of growth at home -- nearly 8% in the first half of 2009 -- has been driven by a huge upsurge in credit growth from state-owned banks, as well as massive government stimulus spending. Neither is sustainable, and indeed, policymakers in China have already begun to rein in the surge in bank lending.
Make no mistake, the way Beijing has generated growth in 2009, however impressive it may look from afar, will prove to be an aberration. Once this period of crisis passes, China has no choice but to confront the necessity to drive up household incomes and private consumption.
This macroeconomic adjustment will, among other things, require a stronger renminbi to boost the Chinese consumer's purchasing power. A more valuable currency will also make foreign assets cheaper for acquisitions, driving microeconomic decisions at the company level.
From factory to owner
The implications for Chinese companies are huge. Becoming the world's factory has pretty much taken China's economy as far as it can.
As consultant Rosen puts it, "For a lot of Chinese companies, domestic economies of scale are now maxed out." China's corporate sector does not need to invest in and run factories that sell sneakers for Nike or toys for Mattel or auto parts for Magna. Chinese companies need to become Nike, Mattel, and Magna. They need, in consultant-speak, to move up the value chain.
Another reason the Chinese are buying stakes in foreign companies -- or buying them outright -- is that so few domestic companies have experience operating in the U.S. or Europe. Everything -- from the regulatory and legal environments to auditing and consumer safety standards -- is alien to the Chinese.
Arguably the most painless mode of entry for them is outright acquisition. That's what Chinese computer maker Lenovo did when it bought IBM's PC business in 2005 -- one of the few high-profile acquisitions of a U.S. business by a mainland company. Lenovo had a dominant position in PCs at home but little presence abroad. The acquisition changed that instantly. Lenovo has since worked hard to maintain the image of a global, as opposed to a Chinese, company.
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D20P BUY A GBP/USD 1.6066
take profit 1.6086
stoploss 1.6036
CLOSED NOT TOUCHED +0 pips
Daily Forex Signal Sunday 12 OCT 2009
D20P SELL B GBP/USD 1.5874
take profit 1.5854
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Daily Forex Signal Tuesday 13 OCT 2009
D20P SELL A GBP/USD 1.5781
take profit 1.5761
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Daily Forex Signal Wednesday 14 OCT 2009
D20P BUY B GBP/USD 1.5893
take profit 1.5913
stoploss 1.5863
CLOSED NOT TOUCHED +0 pips