Headlines (Scroll down for complete stories):
1. Economists Upgrade U.S. Outlook; Rate Hike Ahead?
2. Foreign Investors Pour $63 Billion Into China
3. Oil Prices Steady at $53
4. Malaysia Gov't.: GM Seeking Alliance With Proton
1. Economists Upgrade U.S. Outlook; Rate Hike Ahead?
Has the Fed really engineered a soft landing? Some economists have raised their
outlook for fourth quarter 2006 growth based on recent economic data.
Lehman Brothers chief U.S. economist Ethan Harris upped his forecast for fourth
quarter 2006 growth to 3.3 percent, up from a 2.0 percent prediction earlier.
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"After slowing in November, the economy seems to have regained its stride,"
Harris tells AFP. "With the last of the major data in, we are now revising
fourth quarter GDP to an above-trend 3.3 percent. A wide range of indicators has
been stronger than expected. Most important have been the strong consumption
data and the surprising improvement in the trade balance."
The trade deficit improved to a smaller-than-expected $58.2 billion in November
from $58.8 billion in October. The deficit shrunk for the third month in a row
due to rising exports and falling oil prices.
Retail sales increased 0.9 percent in December — the strongest pace in five
months. The slumping housing market has economists on high alert for signs that
the consumer is buckling. However, sliding oil prices apparently have offset the
drag on the so-called "wealth effect" of falling home values.
The improvement in retail sales "will juice up overall real growth in the fourth
quarter to about 3.0 percent — a substantial improvement from only 2.0 percent
in the third quarter," Brian Bethune at research firm Global Insight explains to
AFP.
In addition, employers added a healthy 167,000 new jobs to the economy in
December, keeping the unemployment rate at 4.5 percent. However, wages jumped
4.2 percent, sparking fears of inflationary forces.
The strengthening economy could result in an adverse consequence. The Fed's last
meeting notes showed that it remains concerned about inflation, favoring a rate
hike rather than a rate cut as its next move.
If the economy continues to strengthen and inflation seethes beneath the
surface, there's no stopping the Fed from a rate hike in the coming months.
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2. Foreign Investors Pour $63 Billion Into China
China drew a record $63.0 billion in foreign direct investment (FDI) in 2006, up
5 percent from 2005, the official Xinhua news agency cited Commerce Minister Bo
Xilai as saying on Monday.
It gave no figure for December alone, but China reported cumulative FDI of
$54.26 billion in the first 11 months, pointing to December FDI of around $8.74
billion.
In all of 2005 China drew $60.33 billion in FDI, down slightly from the previous
record of $60.6 billion in 2004.
Xinhua did not explain how it had arrived at the percentage growth figure for
2006. The $63.0 billion figure it reported is 4.43 percent greater than the
$60.3 billion reported for 2005.
The figures cited by the Commerce Ministry do not include investments by
foreigners in the financial sector.
Xinhua also cited Bo as saying that investment overseas by Chinese firms rose 32
percent from a year earlier in 2006, to $16.1 billion.
Beijing, intent to stimulate capital outflows to ease the upward pressure on the
yuan, has been encouraging its companies to invest abroad to secure resources,
build brands and win market share.
Such outbound investments more than doubled in 2005 to $12.3 billion.
© 2007 Reuters.
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3. Oil Prices Steady at $53
Oil prices rose above $53 on Monday, as worries that OPEC could cut output again
to staunch a fund-led rout stoked a rebound from last week's 19-month low.
U.S. crude rose 32 cents to $53.31 a barrel in Globex electronic trading by 0059
GMT.
This extended gains of $1.11 on Friday, when investors covered short positions
for fear of a surprise OPEC output cut announcement.
"Prices sank to quite low levels last week so the market is expecting some sort
of reaction from OPEC," said Tobin Gorey, an analyst at Commonwealth Bank.
"It is possible that they (OPEC) will announce more cuts, I wouldn't rule that
out, but what the market is going to be impressed by is compliance with the
cuts," he added.
Floor trading at the New York Mercantile Exchange is closed on Monday for Martin
Luther King Jr. Day, but electronic markets remain open.
An up to 15 percent decline in oil prices in the last two weeks on fund selling
and mild weather in the U.S. has rung alarm bells for OPEC members, which have
been cutting output since November to halt crude's losses from a record high
near $80 last July.
Algerian Energy and Mines Minister Chakib Khelil said on Saturday OPEC members
were consulting one another on whether to hold an emergency meeting to discuss
the declining prices.
"There are consultations, but no consensus for the moment (on whether to hold
one)," Khelil said.
A senior Iranian oil official echoed Khelil's comments on Sunday and said on the
Oil Ministry's Web site that there was "still no official decision on whether to
hold an emergency meeting soon."
But analysts said OPEC's battle to prevent prices falling further was growing
more difficult with the approach of spring, the seasonal low point for oil
demand.
"Warm weather will continue to ride through in the U.S. and their (OPEC's)
previous cuts haven't even been implemented yet. Given the build up in
inventories, OPEC's task is now greater in trying to cut supplies," Gorey said.
Investors were also betting oil prices would fall further.
Commodity Futures Trading Commission data on Friday showed that speculators on
the New York Mercantile Exchange shifted to a net short position for crude oil
in the week ended Jan. 10.
It was the first time speculators were net short on crude since the week ending
Nov. 7.
OPEC first pledged to implement a 1.2 million barrel cut from Nov. 1, and added
another 500,000 barrels in cuts from Feb. 1, to shore up prices. Some ministers
have previously said that prices should be kept above $60.
© 2007 Reuters.
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4. Malaysia Govt.: GM Seeking Alliance With Proton
General Motors Corp. is seeking an alliance with Malaysia's money-losing
national carmaker Proton, the third foreign manufacturer to express interest, a
government minister confirmed Monday.
Proton, which is losing money and market share amid mounting competition from
local and overseas automakers, hopes to reverse its fortunes with a foreign
strategic partnership.
Second Finance Minister Nor Mohamed Yakcop said GM, the world's largest
automaker, has "shown interest" in Proton.
Germany's Volkswagen AG and France's PSA Peugeot, which are in talks with the
government, are also keen to work with Proton, Nor Mohamed said.
"Their interests come in different forms, different proposals...so we have to
see what is best for us, for Proton," he told reporters.
Nor Mohamed however, declined to specify if the three foreign companies were
keen to take up a stake in Proton, which is 43 percent-owned by government
investment arm, Khazanah Nasional.
"This is for us to decide. They (their proposals) are not identical. We are
considering all three of them," he added.
Proton is expected to name a strategic partner for its manufacturing operations
by March to help halt sagging sales and develop new models.
Malaysia is the biggest passenger car market in Southeast Asia. Gaining a stake
in Proton, which has an underutilized auto plant, could help foreign carmakers
consolidate their position in Asia's booming automotive market.
The Business Times earlier this month reported that GM plans to take up a small
stake at Proton's holding company and acquire a stake in Proton's manufacturing
arm. GM's proposal includes helping Proton build a car for the American market
in five years, it said.
GM spokesman Rob Leggat, in an e-mail to The Associated Press last week, said
the company considers Malaysia an important market and meets frequently with
other automotive firms to discuss areas of mutual interest. He declined to
comment on a possible tie-up with Proton.
Apart from foreign suitors, local companies Naza Group and Mofaz are also
lobbying to buy into Proton. But officials have indicated the government favors
a global partner for Proton.
Analysts have said a foreign alliance, which can provide Proton with technology
and access to the international market, was crucial to Proton's survival and
restructuring plans.
Proton's losses are expected to widen after the company reported a 250.3 million
ringgit ($71.5 million) loss in the three months ended September 2006 because of
lower car sales and rising expenses.
© 2007 Associated Press.
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