BackObama says stimulus working but warns of weak data
Obama says stimulus working but warns of weak data
PremiumWashington: US President Barack Obama said on Tuesday his economic measures were starting to work but government data showed an unexpected drop in US retail sales in March and US stocks retreated sharply.
Goldman Sachs sold $5 billion of stock a day after the bank sparked confidence with its first-quarter profit, saying it wanted to pay back $10 billion in government bailout money it does not need.
But a source familiar with the Obama administration’s thinking said the US Treasury was worried Goldman’s repayment could make other banks appear weak.
In Europe, disappointing earnings at Dutch electronics giant Philips added to evidence the recession was still taking its toll, while Swiss bank UBS was set to cut more jobs.
Intel Corp beat forecasts with its results and said it believed personal computer sales hit bottom in the first quarter. But the world’s top chipmaker did not give a formal revenue outlook for the current quarter, sending its shares down 4.6% in after-hours trade.
Obama said moves to recapitalize banks, strengthen the housing market and rescue the auto sector were “necessary pieces of the recovery puzzle."
“And taken together, these actions are starting to generate signs of economic progress," he said in a speech on the moves taken since he took office. “There is no doubt that times are still tough. By no means are we out of the woods yet."
Blaming “irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street," Obama appeared to be trying to reassure Americans of better times ahead as his presidency nears the symbolic 100-day mark.
His efforts have support, with a Gallup poll released on Monday showing 71% of Americans were confident Obama will manage the economy properly.
Boosting economies
The steps by Obama’s team to kick-start the world’s largest economy are being closely watched by policy-makers worldwide, although differences persist about how to stimulate growth and look after businesses and workers at home.
In Geneva, envoys to the World Trade Organization agreed there was no imminent threat of tit-for-tat protectionist wars but also that there was no room for complacency.
Russian Finance Minister Alexei Kudrin said Moscow may borrow abroad next year for the first time in a decade.
Spanish Prime Minister Jose Luis Rodriguez Zapatero, who last week fired his economy minister, said Madrid was ready to implement more economic stimulus measures if necessary.
US Federal Reserve chairman Ben Bernanke said there were hopeful signs, including the latest data on home sales, homebuilding and consumer spending, as well as sales of new cars.
But both Bernanke and White House adviser Christina Romer said the economy was still contracting.
Investors will get fresh insights on the health of US manufacturers on Wednesday with industrial production data that is expected to show a drop of 1 percent in March, narrower than the 1.5% slide in February.
Over the next week or so, heavyweight industrial companies including General Electric, United Technologies and 3M will report quarterly results that are forecast to feature double-digit falls in profit.
At Caterpillar, the news may be particularly stark, with most analysts predicting the world’s No. 1 maker of building equipment will be the first blue-chip industrial to report a quarterly loss in this downturn.
In the banking sector, Goldman’s results may raise expectations for rivals due to report soon, including JPMorgan Chase on Thursday, Citigroup on Friday and Bank of America and Morgan Stanley next week.
Data weighs on US markets
U.S. stocks ended down more than 1.5% as the poor numbers for retail sales and falling producer prices offset better-than-expected quarterly results from healthcare group Johnson & Johnson.
General Motors shares fell from earlier highs after the auto giant’s bondholders said completing its restructuring outside bankruptcy was increasingly unlikely. GM, operating with $13.4 billion in emergency federal loans, has until 1 June to win concessions from creditors and the auto workers union.
As rival Chrysler pins its hopes on a tie-up with Italy’s Fiat, sources said its first-lien lenders were preparing a counter-offer for the Treasury that may include equity and cash in exchange for abandoning claims to some $7 billion in debt.
Mexico’s auto production and exports fell in March but at a slower pace than in the previous two months, suggesting the worst may be over for the sector, industry data showed. Mexico exports most of the cars it produces to the United States.
Outside Wall Street, shares rose on the Goldman Sachs results, with European banks especially getting a boost despite the weak US data.
The dollar and yen rose as the US data and caution before the string of corporate earnings boosted safe-haven flows. US Treasury debt prices climbed as investors moved out of riskier investments.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
