Financial News

Italian business confidence fell more than expected to a record low as the worst recession since 1992 and the fallout of the 18-month long financial crisis hurt sales, prompting companies to cut output and jobs.

The Isae Institute’s business confidence index dropped to 66.6 in December from a revised 71.6 in November, the Rome-based research center said today. That was less than the median forecast of 70.6 in a survey of 15 economists by Bloomberg News.

“These figures are consistent with the picture of a deep recession in the manufacturing industry,” said Paolo Mameli, an economist at Intesa Sanpaolo in Milan. “As there is usually a three-month gap between this data and the industrial production, we forecast that the economy will contract further next year and won’t resume growing anyway until the last quarter of 2009.”

Italy entered its fourth recession in seven years in the third quarter as the global economic slowdown aggravated the effects of waning productivity and competitiveness of its companies. Italian employers’ lobby Confindustria predicts the recession will extend through next year, the longest Italian slump since the end of World War II.

The decline in optimism mirrored growing pessimism among executives of Italy’s biggest trading partners. French business optimism fell to a 15-year low, a report showed on Dec. 19, while German confidence declined to its lowest since 1982, a Dec. 18 report showed.

Consumer Slump

Households are also responding to the economic contraction by cutting back on spending. Italian consumer confidence fell in December to the lowest in four months on concern that the recession would put more workers out of jobs payday loans. Italy’s unemployment rate held at a two-year high in the third quarter.

The European Central Bank has cut its key interest rate by 175 basis points to 2.5 percent since early October to combat the slowdown. Investors bet it will lower borrowing costs to at least 2 percent in January, Eonia forward contracts show.

The global financial crisis is forcing companies to scale back production and is making it harder for them to borrow funds for investment. The euro interbank offered rate, or Euribor, “has fallen in the last few months, but it remains on high levels,” European Central Bank Executive Council member Lorenzo Bini Smaghi said on Dec. 23, news agency Ansa reported.

About 13 percent of Italian companies trying to get loans are being turned down, either because banks refused to lend or because the costs involved were considered excessive, Isae said today in data included in the confidence report.

Italy joined other European countries in implementing measures to boost the finances of banks to help spur lending. The Italian plan, which will cost as much as 20 billion euros ($28 billion), won the support of European Union regulators. The government will be able to buy so-called subordinated bonds to help boost the banks’ core tier 1 capital ratios, the European Commission, the EU executive in Brussels, said in a Dec. 23 statement.

Isae conducted its survey of 4,000 companies between Dec. 1 and Dec. 18.

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Upon learning that a federal regulator helped a troubled thrift look more financially stable than it was shortly before it collapsed, analysts said it is worrisome to think that more banks have been able to hide their problems.

It was revealed this week that a regulator in the Office of Thrift Supervision in May approved a backdated infusion of $18 million for IndyMac Bancorp, a big thrift that failed in July, costing the federal insurance fund for banks nearly $9 billion.

The Treasury Department’s inspector general also found that OTS had allowed other thrifts to record capital infusions in an earlier period than when they were received.

"It’s scary," said Bert Ely, a banking industry consultant based in Alexandria, Va. "The question is, Who else?"

Other banks skirting close to their minimum required capital levels also may have been allowed such leeway by regulators, misleading investors about their financial health, Ely said.

The allowance for backdating capital injections by OTS "does raise a lot of issues about what’s happened in the 20 years" since the savings and loan crisis, said Roy Smith, a professor of finance at the Stern School of Business at New York University. "Did the people who should have known about this, know about it in the first place?"

But Michael Stevens, senior vice president for regulatory policy at the Conference of State Bank Supervisors, said "it strikes me as very unusual and not something that I would think is widespread or a common practice."

It is not only OTS coming under criticism.

"You have a competition in laxity" among the regulators, said former Rep. John LaFalce, who was the senior Democrat on the House Financial Services Committee from 1999 to 2003.

Lax oversight of the industry by the OTS, the Federal Reserve and the Office of the Comptroller of the Currency, which oversees national banks, has been cited by LaFalce and others as a factor in worsening the subprime mortgage crisis.

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Darrel Dochow, a high-ranking OTS official, who in May allowed Pasadena, Calif.-based IndyMac to backdate the cash infusion from its parent to March 31, has been reassigned within the agency.

Dochow was the agency’s top supervisory official in the late 1980s during the savings and loan crisis. He was demoted in March 1990 but later rose through the agency again to become director of the Western region.

Bob Garsson, a spokesman for the comptroller’s office, and Fed spokeswoman Susan Stawick said Tuesday that their agencies don’t allow any backdating of capital injections by banks they supervise.

Among those who should have known about IndyMac’s backdating were the examiners at the Federal Deposit Insurance Corp., the secondary regulator for U.S. financial institutions, Ely said.

FDIC spokesman David Barr said the agency declined to comment on the backdating issue. OTS spokeswoman Janet Frank also declined comment.

IndyMac had about $32 billion in assets when it was seized by the FDIC in July. Renamed IndyMac Federal Bank, its failure cost the federal bank insurance fund an estimated $8.9 billion. It was the second-largest bank to fail this year, which has seen the collapse of 25 federally insured financial institutions amid the tumult of the mortgage crisis and the recession.

The $18 million backdated cash infusion would appear as a drop in the bucket for a bank gutted by billions in losses from soured mortgages, yet it was sufficient to enable IndyMac to maintain its rating as a "well capitalized" institution and avoid regulatory restrictions. For example, it didn’t have to get a waiver from the FDIC to accept brokered deposits.

IndyMac relied heavily on brokered deposits, sold by securities firms to customers outside of a bank’s local area, which can carry higher interest rates but also can be riskier than traditional deposit accounts because they may not fall within the federal insurance limit.

Seattle-based thrift Washington Mutual Inc. in September became the biggest bank to collapse in U.S. history, with around $307 billion in assets. It was acquired by JPMorgan Chase & Co. for $1.9 billion.

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Walgreen Co posted a smaller-than-expected quarterly profit and again cut its store opening plans as consumers spent less, sending its shares down more than 4 percent on Monday.

The drugstore operator has suffered as cost-conscious consumers buy only items on sale, shop closer to their paydays and use their credit cards less often.

Walgreen is redesigning stores and adding more groceries to appeal to busy shoppers. It is also expanding into new healthcare areas, such as clinics and offering injectable medications.

Profit fell to $408 million, or 41 cents per share, in the first quarter ended November 30, from $456 million, or 46 cents per share, a year earlier.

Analysts on average were expecting earnings of 46 cents per share, according to Reuters Estimates.

Sales rose 6.6 percent to $14.9 billion. Sales at stores open at least a year increased just 1.7 percent after rising 5.4 percent a year earlier.

Walgreen first scaled back its store opening plans in July. In October, it lost out to rival CVS Caremark Corp in buying West Coast chain Longs Drug Stores, and its chief executive abruptly left the company.

On Monday, Walgreen said it would reduce its store openings to a rate of 4 percent to 4.5 percent in 2010 and 2.5 percent to 3 percent in 2011. In July it set plans to slow store openings to 5 percent by 2011 health insurance companies.

Slowing store openings should save $500 million beyond the $500 million capital expenditure reductions announced in July, Walgreen said.

The company’s shares fell $1.11, or 4.3 percent, to $24.97. The stock has fared better than those of other drugstore chains this year. Through Friday, Walgreen was down 31.5 percent, while CVS had fallen 32.2 percent and Rite Aid had plummeted 87.5 percent.

CUTTING PRICES

A slower expansion rate should give Walgreen the flexibility to spruce up existing stores and invest in areas such as buying prescription files and opening more Take Care clinics at stores and offices, said President Gregory Wasson.

In the past, drugstores could typically charge more for groceries and other goods because customers shopped there for convenience, not for value.

Now that consumers have curbed spending, Walgreen has cut prices on basic items to keep shoppers from switching to other retailers, such as Wal-Mart Stores Inc.

Walgreen has also seen more cost-conscious shoppers, particularly those with little or no insurance, sign up for a low-cost drug plan it introduced in late 2007. 

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In today’s economic downturn, many businesses have yet to discover a hidden resource – graduate students.

They’re full of fresh, up-to-date ideas and they work for less – at least when they start.

For instance, when Ryerson University student Angie Wu received her masters degree this year, her employers saw it as an investment borne fruit.

Her studies in electrical computer engineering helped Wu develop a breakthrough program for her pipeline testing company.

Graduate students like Wu are the next potential scoop for growing small to mid-sized companies. And more and more GTA businesses are taking notice.

In fact, late last month, 50 GTA businesses gathered at the Innovation Synergy Centre in Markham to find out more.

"Graduate students are a rich source of talent," says Paul Rivett, director of the centre’s Research & Development Partnerships.

"Their advanced degree gives them a leading edge. They work at a very high level within their thin slice of field."

Rivett points out many mid-size companies need to hire those who have the know-how on the latest, advanced technology in order to stay ahead.

"They can’t have any `pie in the sky’ research these days. Years ago it was `innovate and grow.’ Now it’s `innovate or die,’" he says.

His organization’s seminar was geared toward niche businesses, like Wu’s employer, Mississauga-based Pressure Pipe Inspection Co.

Pressure Pipe investigates freshwater and waste water concrete pipes. Wu started interning for them last year. Her contribution, a program called "acoustic non-destructive emission testing", uses signal extraction and recognition technology pay day loan lenders. Wires used to reinforce pipelines need to be regularly checked for mishaps. Sensors put into those wires will monitor breakdowns, catching sounds caused by corrosion. Wu’s program assesses those sounds, determining which are non-threatening – such as water, rain, or traffic noises – and which should be looked into.

Wu trained the company’s analysts to use her program, and now works full-time as a system developer. She says without Ryerson faculty help, she would never have found this job. "What interested me the most about this job is the industry application I get along with work experience," Wu says.

Her boss, Kong Xlangjie, agrees.

"Students and professors work well with our team," he says. "They understand our objectives, and they provide lots of fundamental expertise to solve technological challenges."

Xlangjie and his senior staff come from a graduate student background as well, and have had a long history of taking in university students for research projects.

Markham’s synergy centre essentially acts as the matchmaker between companies and grad students at Ryerson and York University, but relies on third-party help to complete the set-ups. Ryerson is overseen by the Ontario Centres of Excellence, while York works with Accelerate Ontario. To date, the centre has produced more than 100 matches.

"We work very well as a regional innovation network," Rivett says. "We’re always on the lookout for new projects in different skill domains."

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WASHINGTON–Rates on 30-year-fixed mortgages dropped this week to their lowest levels in at least 37 years, as the Federal Reserve pledged to pour money into the mortgage market in an effort to spur the moribund U.S. housing market.

Freddie Mac, the mortgage company, reported Thursday that average rates on 30-year fixed-rate mortgages dropped to 5.19 per cent, down from the year's previous low of 5.47 per cent, set last week.

The rate is the lowest since Freddie Mac's weekly mortgage rate survey began in April 1971.

Mortgage rates started falling after the Federal Reserve launched a sweeping new effort in late November to aid the U.S. housing market by purchasing up to $600 billion of mortgage-related securities and other debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

A daily survey found that the national average rate fell even lower Wednesday. Rates on 30-year, fixed mortgages was 5.06 per cent, according to financial publisher HSH Associates, the lowest since the 1960s and down from 5.3 per cent Tuesday.

It was the best news in months for anyone looking to lock in a 30-year, fixed-rate mortgage. But it was not expected to be a cure-all, and borrowers already in danger of foreclosure probably won't be able to take advantage because only borrowers with stellar credit can qualify.

"It's a call to action for homeowners looking to get out of adjustable-rate mortgages," said Greg McBride, senior financial analyst at Bankrate.com. "Unfortunately, it's not an equal-opportunity party.''

Meanwhile, rates this week fell on 15-year fixed-rate mortgages to an average of 4.92 per cent, down from 5.2 per cent last week, Freddie Mac said.

Rates on five-year, adjustable-rate mortgages fell to 5 cheap pay day loans.6 per cent, compared with 5.82 per cent last week. Rates on one-year, adjustable-rate mortgages dropped to 4.94 per cent, from 5.09 per cent last week.

The rates do not include add-on fees known as points. The nationwide fee for 30-year and 15-year mortgages averaged 0.7 point last week. The fee on five-year, adjustable-rate mortgages averaged 0.6 point, while the fee on one-year adjustable-rate mortgages averaged 0.5 point.

Mortgage application volume jumped last week, fueled by borrowers seizing on lower rates to refinance home loans, the Mortgage Bankers Association said Wednesday.

The trade group's seasonally adjusted application index rose 2.9 per cent for the week ended Dec 12.

The Federal Reserve, aiming to free up lending and jolt the economy back to life, on Tuesday cut the federal funds rate from 1 per cent to a target range of zero to 0.25 per cent and pledged to keep funneling money into the market for mortgage investments.

Mortgage brokers are already reporting a surge of calls from borrowers trying to take advantage of the Federal Reserve's extraordinary actions.

On Wednesday, some mortgage brokers were quoting interest rates of close to 4.5 per cent for people with strong credit and hefty down payments.

Falling interest rates mean Americans could suddenly find billions of extra dollars in their pockets at a time when consumers have sharply cut back on spending in the face of rising unemployment and declining household wealth. But many experts believe that the interest rate cuts alone won't be enough to jump-start the economy.

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South African inflation slowed for a third consecutive month in November, easing to an annual 12.1 percent and adding to speculation the central bank will shave as much as 3 percentage points of its key interest rate next year.

The CPIX inflation rate, which excludes mortgage costs, fell from 12.4 percent in October, Pretoria-based Statistics South Africa said on its Web site today. Inflation was expected to slow to 11.8 percent, according to the median estimate of 17 economists surveyed by Bloomberg. Prices rose 0.2 percent in the month.

The Reserve Bank cut its benchmark interest rate by half a percentage point to 11.5 percent on Dec. 11, the first reduction in more than three years, as economic growth slumped to a decade low and oil prices plunged. Inflation will probably ease into the bank’s 3 percent to 6 percent target range by the third quarter of next year, Governor Tito Mboweni.

“Even though today’s number is higher than expected, it doesn’t change our view that interest rates will come down,” said Carmen Altenkirch, an economist at Nedbank Group Ltd., South Africa’s fourth-largest bank. “Inflation is going to be a lot lower next year. We expect interest rate cuts of 300 basis points.”

The rand was at 9.945 against the dollar as of 1:20 p.m. in Johannesburg from 9.9551 before the data was released. The yield on the R153 government bond, due 2010, dropped 31 basis points to 7.2 percent.

Global Recession

A recession in the U.S., the euro region and Japan and falling commodity prices are slowing inflation worldwide wired payday loan. The U.S. Federal Reserve cut its main interest rate to as low as zero yesterday for the first time.

“All scenario exercises that we went through show inflation is going to radically come down,” Mboweni said on Dec. 11. The rand “remains the most significant upside risk to the inflation outlook.”

The central bank will begin targeting the headline inflation rate from next year, after the statistics office makes changes to the way it measures the housing category in the consumer price index. The weighting of food will be reduced, possibly cutting the inflation rate, the statistics office said on July 1. The changes will be applied to the January inflation data, which is published in February.

Headline inflation, which includes mortgage costs, slowed to 11.8 percent last month from 12.1 percent in October, the statistics office said today. The core inflation rate, which excludes mortgage interest and some food items, dropped to 12.6 percent from 13.1 percent.

Oil has dropped 61 percent in New York since Sept. 1, prompting the government to cut gasoline prices by 18 percent on Dec. 3, even as the rand weakened.

A slump in economic growth may also help to ease price pressures. Six interest rate increases since June last year slashed consumer spending, while exports waned, slowing annualized economic growth to 0.2 percent in the third quarter from 5.1 percent in the previous three months.

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Canada’s struggling automakers will get roughly $3.4 billion in emergency aid to "keep the doors open" – but only if the Americans put money on the table first, says federal Industry Minister Tony Clement.

The aid is also conditional on restructuring plans by the Canadian arms of General Motors, Ford and Chrysler meeting government approval, Clement told a news conference last night.

"The federal and the Ontario governments are prepared to move quickly if and when the Americans approve a support package," Clement said following weeks of talks between Ottawa and Queen’s Park.

"It’s absolutely not a blank cheque … we have to protect the interests of the taxpayer. This is about conditional support based on their long-term plans, based on them working with the parts suppliers, based on the unions being at the table, based on the United States continuing to be part of the solution."

The U.S. government pulled the auto industry from the brink of collapse earlier yesterday with a pledge for interim financial aid, although an amount is still being worked out.

In an escalating crisis, the Bush administration said it would step in to provide billions of dollars in loans and lines of credit for the next few months to reeling GM, Ford and Chrysler in the United States.

The move came after Republicans in the U.S. Senate stunned the industry by refusing to pass an interim $14 billion (U.S.) rescue bill late Thursday.

The Canadian aid package will be proportional to any U.S. assistance, based on the Canadian share of North American auto production, putting the price tag to taxpayers at about $3.4 billion (Canadian) based on the $14 billion American proposal.

The final amount "depends on what the U.S. administration comes up with," Clement said.

In total, the Canadian automakers are seeking up to $6.8 billion in emergency and long-term aid to cope with plunging sales and the need to restructure operations.

Hopes for a bailout didn’t stop the automakers from announcing yesterday a slew of production cuts and temporary layoffs later this month and into the new year.

The governments still need to work on details of conditions that the automakers will face, said Clement, who walked away from reporters when asked how soon the companies could expect to receive money. A source close to the federal-provincial negotiations said the auto companies should not expect cheques immediately, because they will have to prove they have met the conditions first and that will take time.

"There will be some back and forth with the auto companies after the announcement’s made," the source said.

The Canadian announcement detailing the amount of aid and how it will be shared among the automakers will come "a short time" after a U.S. package is finalized, the source added.

Both GM and Chrysler have said they need emergency cash before year’s end to stay afloat. Ford does not have an immediate cash flow crunch and is seeking a government-backed line of credit for future needs.

Clement made the announcement in Toronto shortly after Premier Dalton McGuinty and Prime Minister Stephen Harper met secretly in Ottawa for an hour late yesterday afternoon.

McGuinty said the two governments had to intervene given the huge number of auto assembly, parts and related jobs at stake.

"If 400,000 folks were to go on employment insurance that would cost us billions and billions," the premier told CTV.

While Ontario had been arguing that emergency aid should be solely a federal responsibility, with the province providing money later to help the automakers retool their plants, it appears Ontario taxpayers will be on the hook after all.

"We are in this together," said a provincial source.

That means Ontario’s forecast $500 million deficit for this fiscal year could balloon because of the auto aid deal.

Earlier in the day, the New Democrats were critical of any plans to wait for American aid payday loan no fax no credit check.

"That’s a very dangerous game for Ontario workers and Ontario communities because you can end up with a pattern that works against Ontario," warned party leader Howard Hampton.

GM and Chrysler have indicated they will run out of cash to operate their U.S. and Canadian plants within weeks, which would also cripple hundreds of parts companies and stall production at other automakers who rely on them.

That would push the U.S. and Canadian economies into a deeper recession and trigger heavier job losses. Lack of aid could also force one or more automakers and many suppliers into temporary court protection from creditors, creating a crisis in consumer confidence that would eventually lead to their demise.

Even as the U.S. and Canadian governments work on details of interim and long-term aid packages, the downturn in the two economies prompted more major production cuts.

Chrysler will close its giant Windsor minivan plant for more than a month; GM is extending a stoppage at its Oshawa car factory and Honda said it would slow Civic production in Alliston. Ford is curbing production at its Oakville plant by a total of 10 weeks. In the U.S., the Detroit Three were seeking $14 billion immediately and more than $35 billion in total aid from the U.S. government. None of the automakers and their Canadian subsidiaries have revealed publicly how they would spend government aid nor provided any details of plant closures, shrinkage of operations or job losses. That has led to opposition demands for more transparency in talks for aid.

The Canadian Auto Workers union, which represents more than 30,000 production workers and skilled tradespeople at the three companies, had urged the federal and Ontario governments to move quickly in confirming aid.

"It has been a roller-coaster for our members … and for our communities who rely so heavily on the auto industry," said union president Ken Lewenza.

Outside the sprawling GM operations in Oshawa, auto worker Debbie Comartin’s voice began to choke and her eyes welled up in tears because of some public opposition to government aid.

"They’re not looking at what we’ve put back into the community," Comartin said, adding she feels the public has turned its back on auto workers.

Comartin, a 21-year GM veteran, said she is willing to take a pay cut but now worries about losing her benefits and pension.

"The worst fear is that if they go bankrupt, we will lose everything."

In Washington, administration officials offered no information on what funds it would tap for interim aid, or the amount, terms and conditions for the automakers, workers and other stakeholders.

The U.S. Senate rejected the $14 billion aid plan after the United Auto Workers union refused demands from primarily southern Republicans for wage cuts at the three companies. The UAW charged that Republican senators who oppose the aid hail from states where governments have used billions of dollars in incentives to attract plant investments from non-unionized foreign-based automakers.

Lewenza, whose union is also under pressure to accept some concessions, said U.S. politicians are using workers as "scapegoats" in the battle for public aid.

"We could work for free for the next month and it wouldn’t sell one more car," he said.

The downturn in the North American economy, tighter credit and soaring fuel prices have hammered auto sales this year in the U.S. and created a liquidity crisis for the Detroit-based companies.

However, other automakers are now also feeling the pain and slashing output.

With files from Isabel Teotonio and Robert Benzie

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The Toronto stock market fell more than 150 points yesterday as the Bank of Canada declared the economy was moving into a recession and cut its main interest rate by three-quarters of a point to 1.5 per cent.

Bank stocks led the way down as Toronto’s S&P/TSX composite index fell 169.56 points, or 1.98 per cent to 8,397.56. Royal Bank led a 4.7 per cent drop in financial shares after saying it will sell as much as $2.3 billion of new common stock.

“Royal’s issue has shaken market confidence a bit,” said Michael Sprung, president of Sprung & Co. Investment Counsel in Toronto. “The public’s constantly told how strong the banks are, and yet they have to come to market at depressed prices. Its not good for shareholders.”

RBC lost $2.21 to $35.29 while TD Bank was down $3.40 to $42.10.

The loonie closed down 0.66 cents (U.S.) at 79.08 cents after dropping more than a cent shortly after the central bank cut its key rate to the lowest level since 1958 and added that "the global recession will be broader and deeper than previously anticipated."

The telecom sector was off 2.25 per cent as BCE Inc. fell $2.15 (Canadian) to $22 car insurance.50.

The industrial sector gave back 1.4 per cent as Canadian National Railway declined $1.56 to $42.75.

The energy sector was flat as oil prices flattened on expectations of weakening demand. The January crude contract in New York fell $1.64 (U.S.) to $42.07 a barrel.

The gold sector rose 1.45 per cent with the February bullion contract ahead $4.90 to $774.20. Barrick Gold Corp. faded 75 cents (Canadian) to $35.10.

Falling financial stocks also sent New York markets sharply lower, as did negative outlooks from FedEx Corp. and Texas Instruments Inc. New York’s Dow Jones industrial average fell 242.85 points to 8,691.33, while the Nasdaq composite index fell 24.4 points to 1,547.34. The S&P 500 index dropped 21.03 points to 888.67.

Traders were disheartened as chip maker Texas Instruments warned of sales and profits running "significantly" below expectations, and FedEx cut its forecast as the weak economy crushes parcel deliveries.

From the Star’s wire services

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SIOUX FALLS, S.D. – Oil prices rebounded from four-year lows and shot above US$43 a barrel Monday as OPEC floated the possibility of a "severe" production cut and several countries announced new measures to boost their economies.

Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said Saturday that the cartel could announce a "severe" reduction of output quotas at its next meeting on Dec. 17 in Algeria.

"Obviously when OPEC talks like this they always give the market a boost, but the question is how sustainable it's going to be," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "OPEC can talk the talk but they have a hard time walking the walk."

Light, sweet crude for January delivery gained $2.82 to $43.63 a barrel on the New York Mercantile Exchange. On Friday, the contract dropped nearly $3 to settle at $40.81 and prices fell as low as $40.50, levels last seen in December 2004.

Khelil would not specify how deep the output cut would be, but noted that some analysts are predicting a decrease of as much as 2 million barrels per day.

An output decision that startles markets would help bolster plunging oil prices, Khelil said in an interview with The Associated Press.

"The best way is to surprise them," he said. "I hope it will.''

David Moore, a commodity strategist with Commonwealth Bank of Australia in Sydney, predicted that OPEC will cut production by at least 1 million barrels a day.

"The possibility of OPEC moving to tighten up the oil market is real," Moore said. "As we get closer to the meeting, people may get more wary that OPEC may make a large cut."

OPEC announced a production cut of 1.5 million barrels a day in October and investors largely ignored it, focusing instead on a global economic slowdown that has weakened crude demand.

Oil prices were also buoyed by gains in the equity markets fast pay day loans.

The Dow Jones industrial average gained more than 200 points Monday after U.S. president-elect Barack Obama announced over the weekend plans for the largest U.S. public works spending program in 50 years. The effort is designed to boost the crippled U.S. economy by putting thousands of people to work building schools and other construction projects.

European and Asian stock markets surged on reports that China will look at new steps to expand its $586 billion stimulus package and India plans to spend an additional $4 billion and take other steps to boost its economy.

The price of oil has fallen about 70 per cent since peaking at $147.27 in July.

Nobuo Tanaka, executive director of the International Energy Agency, said he expects only slight growth in oil demand in 2009 if current economic conditions continue.

But a total global decline remains a possibility if a slump hits the economies of China, India or the Middle East, Tanaka said Monday at United Nations climate talks in Poland.

The agency recently slashed its global oil demand forecasts for the period to 2013, saying the world oil market had been shaken by high prices earlier this year followed by the global economic slowdown.

In other Nymex trading, natural gas for January delivery slid 3.4 cents to 5.109 per 1,000 cubic feet on news that Dow Chemical Co. would close 20 plants and temporarily idle another 180 facilities to reign in costs amid the economic recession.

"If you've got Dow Chemical shutting all these plants, it's definitely going to play into the bearish psychology of the market here a little bit," Flynn said.

Gasoline futures rose 6.55 cents to 96.67 cents. Heating oil gained 7.4 cents to $1.50 a gallon.

In London, January Brent crude jumped $3.49 to $43.23.

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The region’s job market continued its slump in October. According to new figures released Tuesday, more than 98,000 St. Louisans were looking for work that month and couldn’t find it.

That’s 6.9 percent of the work force, up from 5.3 percent in the same month last year, and ahead of the national average.

The data, issued by the Bureau of Labor Statistics, is the latest evidence yet that the weakening national economy is hitting home here in St. Louis.

While this region hasn’t seen the waves of mass layoffs that have struck areas more dependent on the housing and financial services industries, the credit crunch, spending slowdown and general economic anxiety are certainly having an impact here, said Russ Signorino, a labor market analyst with the United Way of Greater St. Louis.

"People aren’t spending. Businesses aren’t spending. Government’s not spending," he said. "And nobody’s hiring."

The losses are pretty much across the board. Every industry but health care and education has shed jobs locally over the last year, according to a separate survey released last week. The steepest declines are in manufacturing, where one in 25 jobs has disappeared in the last year.

Many of those were the 2,400 workers laid off at Chrysler’s two Fenton assembly plants this fall, and from St online payday loan. Louis-area suppliers. Local leaders worry there may be more cuts to come as the auto industry gets battered in the weak economy. Other large employers ranging from casinos to telecommunications companies have announced cuts here lately.

And the economy is likely to get worse before it gets better.

That’s what Scott Colbert told a roomful of local businesspeople in Clayton Tuesday at Commerce Trust Co.’s annual Economic Breakfast.

Colbert, the bank’s director of fixed income management and its "de facto economist," said he expects the national unemployment rate to approach 8 percent next year, which would be its highest level since the deep recession of the early 1980s. That bodes poorly for the broader economy.

"It’s quite easy to see that with growing unemployment, we’re going to have continued contraction," he said.

The next clue will come Friday morning, when the government issues national jobless figures for November. Most analysts expect they will go up again.

tlogan@post-dispatch.com | 314-340-8291

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