Financial News

BERLIN–General Motors Corp., the German government and Canadian auto parts maker Magna International have agreed on the framework of a deal for Magna to take a majority stake in GM’s Opel unit, a person briefed on the negotiations said Friday.

Negotiators were working out the final details and an announcement could come within hours, said the person, who did not want to be identified because talks had not yet finished. It includes Magna International Inc. providing short-term financing to become the preferred negotiating partner for Opel.

The German government would put up a euro1.5 billion ($2.1 billion (U.S.)) bridge loan that would be repaid when the deal is closed.

There was no immediate comment from the German government.

Earlier Friday, Economy Minister Karl-Theodor zu Guttenberg said that GM and Magna were negotiating on "new ideas" from the bidder, which also were being examined by the German government.

The German government was to hold a second round of top-level negotiations on the future of Opel after talks snagged Thursday over new short-term funding needed to move Opel into an independent legal structure. The other suitor for Opel, Fiat Group SpA, stayed away from the talks, saying that it faced "unreasonable" funding demands – but CEO Sergio Marchionne stressed that Fiat was not withdrawing its bid.

Germany is looking for an agreement that will shield Opel – which employs 25,000 people in Germany, nearly half GM Europe’s work force – from a looming GM bankruptcy court filing in the U.S. and extensive restructuring.

The government wants to make it legally independent under a trustee so that any taxpayer assistance does not go to the U.S., then would provide bridge financing while Opel looks for a new, permanent owner.

Aurora-based Magna International Inc. is leading a bid for a majority of Opel from a consortium that also includes Russian lender Sberbank.

Under an earlier offer, Magna, Canada’s largest auto parts maker, bid $1.1 billion (Canadian) to acquire a 20 per cent stake in Opel, with GM and a Russian bank each owning 35 per cent and Opel employees about 10 per cent.

Founded by Austrian-born Frank Stronach half a century ago, Magna, with 70,000 employees, already has a major presence in Europe and assembly operations in Austria through its Magna Styr division.

A takeover of Open would allow the Canadian company to rapidly expand its markets in Europe, particularly in Russia, where the market for new cars is potentially huge payday loans no faxing.

"I expect there to be a result today," said Juergen Ruettgers, the governor of North Rhine-Westphalia state – one of four in Germany that has Opel plants.

A government official, speaking on condition of anonymity because no official announcement had been made, said the meeting was expected to go ahead two hours later than originally expected. The reason for the delay was unclear, as was exactly who would attend.

GM Europe chief Carl-Peter Forster was seen going into the chancellery.

German officials blamed short-term financing needs they said were brought up by GM totaling euros300 million ($418 million (U.S.)) for preventing a decision earlier this week. The government has offered euros1.5 billion in bridge financing.

The government wanted bidders and GM to come up with an agreement on covering the short-term financial needs before Friday’s meeting.

While Magna has previously indicated it would be willing to provide the additional funding, Marchionne said Fiat had decided to pull out of the continuation of the talks Friday because of the requirement for the emergency funds

Marchionne said it was "unreasonable" to expect Fiat to provide such funding because it had not yet had full access to Opel’s financial records and could not determine "its precise financial condition and thus properly frame a merger proposal that would be fair" to both sides.

"The emergency nature of the situation cannot put Fiat in a position to take on extravagant risks," he said in a statement.

Taking over GM’s European operations, including Opel and Britain’s Vauxhall, is a key part of Marchionne’s strategy of creating a car company with the capacity to produce six million vehicles a year, the threshold he says is necessary for an automaker to survive.

Fiat is on the verge of taking control of a 20 per cent stake in Chrysler, pending the completion of restructuring in bankruptcy court in New York.

Separate to the Berlin talks, the European Commission was hosting talks among ministers to coordinate government efforts to save GM’s European operations.

Opel and sister brand Vauxhall also have operations in Belgium, Spain and Poland among other countries. GM officials will not be present.

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It’s been a tradition for years. On certain nights, if you swing by Anheuser-Busch’s St. Louis brewery, hang a left in the lobby at the big eagle statue and head up the stairs to the cafeteria, you will enter a gathering of American Legion Post 299.

Since World War II, the brewer has been the chief patron for the group of local veterans, supplying beer and space for meetings. It also has supplied thousands of dollars in donations every year to the post, whose membership is open to those who both served in the U.S. military and worked for A-B.

But Anheuser-Busch’s cash donations to Post 299 dried up this year. And now, leaders of Post 299 accuse Anheuser-Busch InBev of reneging on its promise to continue supporting it.

"We’d like to have (the funding) restored like it was," said Joseph Holaus, 82, who serves as the post’s adjutant or secretary. "They agreed to do this for us."

A-B’s contributions have helped Post 299 donate to needy children and to veterans over the years, and officers of the Legion post expected the tradition to continue. They say Anheuser-Busch managers told them in a meeting last November — just before InBev bought America’s biggest brewer — that the company would donate $20,000 to the post in 2009.

But in February, the company informed Post 299 it would not make its customary cash donation. Contacted this week, A-B said it is unaware of any discussions of 2009 funding before February. The company indicated it had no record of committing itself to making more cash donations to Post 299.

Anheuser-Busch has been a stalwart sponsor of Post 299 since 1940. Vernon Rothermel, a Korean War medic, has been the post’s finance officer since the earlier 1990s. He remembers annual donations of $8,000 from the brewer — donations that eventually were bumped up to $11,000. And for the last four or five years, Anheuser-Busch has given as much as $22,000 per year to the veterans’ group, said Rothermel, 80. That number included $15,000 in straight donations and $7,000 in an account to cover "free" beer for picnics, conventions and meetings.

A-B declined to discuss its amount of cash-giving to Post 299. Nor did the company explain why it halted its customary cash donations to Post 299 this year.

"We admire the good work of Post 299," David A paperless payday loans. Peacock, the company’s president, said in a statement. "There are many worthy organizations that request our support each year. We remain committed to supporting groups in ways big and small that are working to serve our community."

Anheuser-Busch has a long history of supporting veterans and current armed forces. It provides funds for veterans and families of fallen soldiers, as well as free admission to military families at its theme parks. Earlier this month, the company was honored with the Secretary of Defense Outstanding Public Service Award, the second-highest citation the Department of Defense can award to private citizens for contributions, assistance or support.

A-B officials said they try to support as many groups as feasible. The targeted areas for A-B’s charitable giving include education, the environment, economic development, disaster preparedness and the military. "We evaluate each request and put the money where we feel it will be put to the best use in any given year," Peacock said.

Post 299 veterans say their connection to Anheuser-Busch went beyond money. Beer magnate August A. "Gussie" Busch Jr. was once a member. The post manned a rifle guard at his funeral and lays a wreath on his grave every Sept. 29 — the day of his death.

Holaus has photo albums stuffed with pictures of Busch at Legion events. He pulled them out of a closet in his Sunset Hills home to show a visitor last week.

Anheuser-Busch said it continues to provide a meeting space for Post 299’s monthly meetings and free beer for special events, such as an upcoming picnic.

Still, Post 299 finds its long-term financial future in doubt. Without support from its major corporate donor, the group’s treasury could shrivel. Rothermel figures that the group’s finances would last perhaps three or fours years if the group spent money like it once did. The veterans say they are frustrated and disappointed.

"Let’s face it — we’re talking about a few bucks," said Carl Adam Sr., retired director of brewing operations at Anheuser-Busch, who met some of the Legion guys 30 years ago in St. Louis. "It’s ridiculous."

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Stock markets closed sharply lower yesterday as prices for U.S. Treasury bonds slumped – putting upward pressure on interest rates – while the likelihood increased that General Motors will file for creditor protection.

GM said bondholders rejected its proposal to exchange $27 billion (U.S.) in debt for 10 per cent of the company’s stock, ahead of a Monday deadline for a government-ordered restructuring. GM shares tumbled 20 per cent to $1.15.

"I don’t know that anybody was really expecting something miraculous to happen here," said Jennifer Radman, associate portfolio manager at Caldwell Securities. "It was against the odds from the start."

Toronto’s S&P/TSX composite index slipped 143.74 points to 10,142.16, weighed down by falling financial stocks.

A surge in financials had generated a 216-point gain Tuesday following a well-received quarterly report from Bank of Montreal. BMO stock fell $1.92 (Canadian) to $41.79, wiping out most of Tuesday’s gain of $2.15.

The TSX Venture Exchange lost 4.17 points to 1,092.99. The Canadian dollar declined 0.13 of a cent to 89.33 cents (U.S.).

In New York, the Dow Jones industrial average dropped 173.47 points to 8,300.02.

The Nasdaq composite index declined 19.35 to 1,731 classic car insurance.08 while the S&P 500 index shed 17.27 to 893.06.

The slide accelerated as the benchmark 10-year U.S. Treasury note tumbled, pushing its yield up to 3.66 per cent, from 3.55 per cent Tuesday. The drop came after a Treasury auction of $35 billion in five-year notes, part of $101 billion in debt Washington is issuing this week.

"And you’re going to relate that to the stock market, where all of a sudden you’re going to look for higher yields in (bonds), which pushes stock prices down," said Fred Ketchen, manager of equity trading at Scotia Capital.

In addition to raising borrowing costs for the government, rising debt yields could hamper an economic recovery.

The Toronto financial sector stepped back 2.9 per cent ahead of earnings reports today from CIBC, Scotiabank, TD Bank and National Bank, and tomorrow from Royal Bank. Shares in those banks had gained at least 5 per cent Tuesday, but surrendered more than 2 per cent yesterday.

The Toronto energy sector was little changed as the July crude oil contract added $1 to $63.45 per barrel on the New York Mercantile Exchange.

The Canadian Press

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General Motors is desperately trying to keep its Canadian operations running as its parent heads towards bankruptcy court protection in the United States and possibly Canada during the next week, a top union leader says.

GM is even paying edgy suppliers in advance for parts to assure that production of popular models can continue at assembly plants during any court proceedings when payments might be in doubt, Ken Lewenza, president of the Canadian Auto Workers, said yesterday.

"They have indicated to us they are doing everything possible and in their power to avoid a Canadian shutdown," Lewenza said in an interview. "Whether they are successful remains to be seen."

Chrysler LLC immediately shut down its operations in the U.S. and Canada earlier this month when it gained temporary court protection from creditors south of the border.

Insiders said it did not matter if Chrysler assembly plants stopped production because high inventories could easily meet dealer demand for a short bankruptcy stay of 60 days or longer.

Furthermore, some parts makers had halted deliveries to Chrysler plants on both sides of the border because of payment concerns. Those moves made auto production impossible because a shortage of only a few parts can disrupt output.

The shutdowns have triggered the layoffs of thousands of Chrysler workers and their counterparts at parts makers that were already struggling to stay alive through a major downturn in North American sales in the past year.

A temporary GM shutdown would cause thousands more layoffs here and even more damage to the reeling auto sector, a key cog in Ontario’s economy.

Lewenza explained GM wants to maintain output particularly at operations that build popular models, including the new Chevrolet Camaro sports car and Impala mid-size car in Oshawa and the Chevrolet Equinox sport-utility vehicle at the CAMI plant in Ingersoll.

Already, GM has scheduled overtime at the Oshawa plant for extra Camaro output and just started production of the new generation 2010 Equinox. It is also launching the GMC Terrain in August and does not want any delays for the fall selling season bad credit payday loans.

GM sees the models as important vehicles that will pull motorists into stores so they can consider other cars and trucks.

The company also runs parts plants in St. Catharines and Windsor that depend on U.S. assembly operations.

GM spokesman Stew Low would not comment on any production plans if the parent company pursues court protection in the U.S. and Canada.

"(I) can’t comment on what has not happened," said Low, director of communications for GM of Canada.

But GM Corp. officials have said bankruptcy proceedings in the U.S. are probable within the next week. That appeared more likely yesterday after bondholders rejected an offer whereby they would exchange $27 billion (U.S.) in debt for 10 per cent of a reorganized GM.

Industry watcher Dennis DesRosiers added that whether plants stay open or not will depend on whether GMAC, the automaker’s financing arm, can provide funds for dealers to buy vehicles from factories.

GM, the biggest industrial firm in Canada at one time, faces a June 1 deadline to resubmit a restructuring plan to governments in the U.S. and Canada to receive billions more dollars in additional public loans.

If there is no resolutions of debts with bondholders, GM would have little choice but to seek court protection where a judge would decide.

Also still in dispute is how much government aid would be used to address a huge shortfall in GM of Canada’s pension plans.

This week, GM workers here accepted significant concessions to lower labour costs for the third time in a little more than a year to bolster the restructuring plan and quest for aid. GM’s U.S. workers are now voting on concessions.

Analysts say Chrysler’s bankruptcy protection proceedings, shutdowns and resulting negative media coverage are hurting sales. Early reports say business at Chrysler dealers in Canada plunged more than 50 per cent in the first 20 days of May, despite heavy incentives.

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Consumer nations on Sunday urged producers to keep oil prices stable or risk derailing a fragile global economic recovery, as top exporter Saudi Arabia forecast prices eventually moving towards $75 a barrel.

Group of Eight energy ministers were meeting in Rome against the backdrop of a price rally that has sent oil prices to a six-month high of more than $60 a barrel.

"If oil prices do spike up considerably, that would be a factor in delaying economic recovery," U.S. Energy Secretary Steven Chu told a news conference.

Italian Energy Minister Claudio Scajola said: "A low oil price helps in times of economic crisis but discourages investment and does not guarantee a future of stability. It is necessary to have an equitable and not volatile price that can guarantee global economic growth and also the possibility of investment."

Oil prices have almost doubled from last December’s low and risen well above the $50 level that Saudi Arabia has said it could live with to help nurse the world economy back to growth.

Algeria’s oil minister said an output cut was unlikely when OPEC meets in Vienna on Thursday. Saudi Arabia, the biggest and most influential player in the 12-member producer group, also said OPEC would "probably stay the course."

Saudi Oil Minister Ali al-Naimi offered the prospect of prices and demand eventually rising but declined to speculate on when prices would hit the $75 level producers say is needed to encourage investment.

"Demand will pick up eventually when the economy recovers," Naimi told reporters. "Eventually could be tomorrow or it could be 10 years from now, but eventually it’s going to happen, but when I don’t (know) payday cash loan."

Algeria’s Energy Minister Chakib Khelil predicted oil prices could touch $70 per barrel by end-2010 if the economy recovered, but warned recent price rises were being driven by speculation and a weak dollar rather than fundamentals.

Energy leaders at the summit agreed the financial crisis had dealt a sharp blow to investment in production for the long term. The International Energy Agency warned investment in oil and gas production would fall 21 percent in 2009.

Italian oil company Eni’s president, Roberto Poli, said the "magic range" for prices high enough to spur investment without hurting the economy was $60-$70 per barrel, while Edison CEO Umberto Quadrino put that at $60-$80 per barrel.

"The experience of the last price cycle demonstrated that to ensure steady economic growth, prices should not rise higher than $75 per barrel," Poli said. "Oil price instability and unpredictability are the worst enemies of any well- thought-out plan to build a different energy future."

OPEC ministers are expected to make no change to oil supply at their Vienna meeting as higher prices ease their concerns about overflowing fuel inventories and the deepest fall in demand for years.

A senior Gulf source has said the group will stick to its current targets, but stress the need for full compliance.

But Iran’s OPEC governor said higher oil prices were lulling some OPEC members into a false sense of security. Venezuela said oil markets were over-supplied but it was too early to tell whether an output cut was needed. 

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Boeing Co. leaders say that the U.S. military’s airlift needs are growing and that a Pentagon proposal to halt future orders for the C-17 Globemaster III cargo plane is premature.

Boeing, whose defense unit is headquartered in St. Louis, is trying to rally support for the C-17 on multiple fronts — arguing that ceasing production would erode the U.S. industrial base, costing thousands of jobs at Boeing plants and those of its main suppliers. But Boeing officials also emphasize the plane’s strategic value.

"Right now, since 9/11, the airplane has been flying at about a 15 percent higher rate than was anticipated," said Donald A. Anderson, Boeing’s C-17 program manager in St. Louis. "In addition, they’re talking about rebasing troops in the United States. They’re talking about an increase in the size of the Marines Corps and the Army.

"So it seems like the airlift requirements are growing. And you need airlifters to meet those needs."
Starting with Secretary of Defense Robert Gates’ announcement in early April and continuing through last week, the Pentagon has said it can get by with the 205 C-17s that are either in service or on order. The Air Force also uses the Lockheed Martin C-5 Galaxy to transport weapon systems, cargo and personnel to overseas locations.

Republican Sen. Christopher "Kit" Bond and Democratic Sen. Claire McCaskill, both of Missouri, have written letters supporting more orders of the C-17, and Machinists Union officials have traveled to Washington to show their support for a program that supports 900 jobs in St. Louis.

"This is high political theater," said analyst Richard Aboulafia of The Teal Group in Fairfax, Va. "The bottom line is I don’t think the line is threatened. But it is up to everybody from Department of Defense to Congress to Boeing to the unions to make it look as though it were."

The Defense Department has not sought funding for the C-17 in the last three years. But Congress has stepped in to add funding for more of the $202 million planes through supplemental defense appropriations bills.

Bond and Boeing officials have asked why Gates would halt C-17 orders while there is a study under way into the military’s future air-mobility needs. The results are expected this fall.

"But yet we’re making that decision now to stop the airplane," Anderson said. "So it seems somewhat premature cheap payday loans."

Bond said shutting down production of the C-17 is a "dangerous gamble" and warned that the U.S. can’t afford to "lose the capability to transport safely our troops and equipment to anywhere in the world."

In a letter to President Barack Obama, McCaskill said the U.S. is "literally flying the wings off these planes," and added "this is not the time to end its production, especially in light of projected global mission sets for the U.S. military."

Both legislators also have gone to bat for Boeing’s St. Louis-built F/A-18 Super Hornet, whose future was placed in limbo under the latest Pentagon spending plan.

The C-17 is assembled at a plant in Long Beach, Calif. But the cargo door, cargo ramp, landing-gear pods, nose and engine pylons are built in St. Louis.

A November 2008 report by the Government Accountability Office recommended "careful planning to avoid shutting down the C-17 line prematurely." Both Boeing and the Air Force believe shutting down and restarting production "would not be feasible or cost effective," the report found.

The GAO cited the high costs of hiring and training a new work force, reinstalling equipment to proper working condition and re-establishing a supplier base.

Boeing has delivered the C-17 to other countries, including Australia, Canada and the United Kingdom. The United Arab Emirates has announced its intent to buy four of the planes, and Qatar has ordered two and exercised an option on two additional C-17s.

But Anderson said international sales alone are not enough to sustain the C-17 line. Boeing officials say maintaining C-17 sales to the U.S. Air Force is necessary to keep the price of the planes competitive in the international market.

Defense analyst Loren Thompson of the Lexington Institute in Arlington, Va., said the C-17 is the best strategic airlifter ever built and "a very cogent case" can be made that terminating production at 205 planes would be too early. At the moment, he said, its future will be dictated by Congress.

"Here’s the bottom line to C-17," Thompson said. "If Congress doesn’t add money, there won’t be any more."

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Morocco’s economic expansion may slow to 5.4 percent this year as worker remittances, tourism and exports fall due to the global financial crisis, Trade, Industry and New Technologies Minister Ahmed Chami said.

“We have seen a decrease in the number of tourists visiting” and revenue will grow less than expected, Chami said in a May 21 interview in his Rabat office. “Tourism for the whole year is expected to rise 7 percent, which is a decline from previous estimates.”

A strong harvest is damping the impact of the global crisis on Morocco’s economy, which grew 5.8 percent last year. Wheat production is expected to climb 40 percent and barley production to double because of heavy rainfall in 2009, according to the U.S. Department of Agriculture.

“Without strong agricultural growth, economic growth would likely be flat in 2009,” said Simon Kitchen, a Cairo-based economist at EFG-Hermes. “Exports of goods and services are falling sharply, as are remittances, and credit growth is beginning to slow.”

The grain harvest may reach 10 million metric tons this year, the Moroccan Millers Federation said this month. Agriculture contributed 14 percent of gross domestic product in 2008, according to EFG-Hermes Holding SAE, Egypt’s biggest publicly traded investment bank.

Tourism Revenue

Tourism revenue, which was the biggest foreign currency earner last year at 56.6 billion dirhams ($6.8 billion), dropped as much as 20 percent in January from the year earlier.

Money sent home by the 3 million Moroccan nationals living abroad, mostly in Europe, declined 14 free credit report.3 percent year-on-year in the first-quarter to 10.6 billion dirhams according to the Rabat-based statistical Office de Change. Exports in March tumbled 24.6 percent on lower European demand.

Like many North African economies, Morocco was largely unscathed by the sub-prime fall-out because of restrictions on investment abroad, Chami said. Last year, banks in Morocco could only invest 10 percent of their assets abroad.

Morocco’s benchmark stock index, the Madex index, fell 13.4 percent last year compared with a 42 percent drop in the Morgan Stanley Capital International World Index. The Moroccan stock measure has climbed 1 percent this year.

Economic Measures

In response to the global financial crisis, the Moroccan government earlier this year took measures to boost the economy by encouraging banks to give more loans, spending more money on tourism marketing and offering its expatriates incentives to invest in the North African kingdom, he said.

The government unveiled a plan in April to guarantee credit, offering to refund as much as 65 percent of loans that exporters of textile and automobile parts fail to repay, with a ceiling of 9 million dirhams per company. In May, the government also pledged dozens of million of dollars to boost tourism marketing, Chami said.

The Moroccan central bank on March 24 cut its benchmark interest rate to a six month low of 3.25 percent to boost economic growth.

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NEW YORK–A private research's group forecast of economic activity rose more than expected in April, the first gain in seven months and fresh evidence that the recession could end later this year.

The Conference Board said Thursday its index of leading economic indicators, designed to forecast economic activity in the next three to six months, rose 1 percent last month. Economists surveyed by Thomson Reuters expected a 0.8 per cent increase.

Conference Board economist Ken Goldstein said that means declines in activity could switch to growth in the overall economy in the second half of the year. The recession began in December 2007.

In April, the index posted its biggest gain since November 2005, said Ian Shepherdson, chief U.S. economist at High Frequency Economics. It is now even with its level from last November.

The index is derived from 10 components including stock prices, the money supply, jobless claims and new orders by manufacturers.

The Conference Board said strengths among the components exceeded weaknesses for the first time in more than a year. "This is more broad-based. It's not just the stock market rally,'' Goldstein said.

Seven indicators rose, including stock prices, as the Dow Jones industrials are up by about a third since March. Consumer expectations, the average work week, manufacturers' new orders for consumer goods and deliveries by vendors grew, while initial jobless claims dropped, also a positive.

However, some analysts expressed reservations about the strength of the gain.

"How strong the upturn will be is still in doubt, and it is possible that the improvement in (consumer) sentiment seen the last couple months, which has lifted the index of leading indicators, could stall out," Deutsche Bank chief U no checking account payday advance.S. economist Joseph LaVorgna wrote in a research note. He doesn't expect the economy to grow until early 2010.

Weekly claims for jobless aid had been dragging the index down. The U.S. unemployment rate stands at 8.9 percent and is expected to hit double digits later this year or in 2010.

The Labour Department on Thursday said new requests for jobless benefits fell to a seasonally adjusted 631,000, down from a revised figure of 643,000. Claims had reached a 14-week low of 605,000 earlier this month, which many economists thought heralded an easing in the wave of layoffs.

Earlier this week, computer giant Hewlett-Packard Co. said it would cut 6,400 jobs, or 2 per cent of its work force, while credit-card issuer American Express Co. said it was slashing 4,000 jobs. Beleaguered auto makers General Motors Corp. and Chrysler LLC recently announced they will terminate their contracts with around 2,000 dealerships nationwide, which likely will result in shutdowns for many. The National Automobile Dealers Association, a trade group, said the auto makers' decisions could result in 100,000 job losses.

Meanwhile, the Conference Board said building permits, manufacturers' orders for capital goods and the real money supply weighed down the index last month.

The recession was precipitated by a crisis in housing, and while homebuilders' confidence has ticked higher, both building permits and housing construction fell to record low annual rates in April, the government said earlier this week.

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CHICAGO–Shares of Sears Holdings Corp. soared Friday, a day after the retailer surprised investors by posting a first-quarter profit.

The parent of Sears and Kmart stores announced late Thursday that its first-quarter profit was $26 million, or 21 cents per share. That was a marked improvement from the year before, when the retailer led by financier Edward Lampert lost $56 million, or 43 cents per share.

Excluding one-time items the company earned $47 million, or 38 cents per share, for the three months that ended May 3. Analysts said that the adjusted per share profit was less than 38 cents, but was still sharply better than the forecast loss of 88 cents per share.

Sales fell more than 9 per cent to $10.06 billion, from $11.07 billion.

Sears shares gained up $8 health insurance.76, or 17 per cent, to $58.95 in morning trading Friday.

Barclays analyst Robert Drbul told investors the company's results were "significantly better" and boosted his 2009 and 2010 earnings per share estimates.

"We believe Sears inventory is in better condition," he wrote in a research note published Friday, after the chain cut its inventory levels by more than 8 per cent.

But Deutsche Bank analyst Bill Dreher Jr. said the performance, while strong, might not last. He maintained his "Sell" rating on shares.

"While trends have improved, they may be unsustainable given lack of investment in the business," he wrote Friday.

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NEW YORK – Energy prices tumbled today after the U.S. Federal Reserve predicted that even if the worst of the recession is over, the economy will continue to shrink this year.

Benchmark crude for July delivery tumbled nearly three per cent, or $1.80 to US$60.24 a barrel on the New York Mercantile Exchange. In London, Brent prices fell $1.51 to $59.08 a barrel on the ICE Futures exchange.

The ailing economy has pushed energy prices down because consumers and businesses have reduced spending, whether it's on commuting to work or producing goods.

Today, energy prices fell further after the Labor Department reported that there are nearly 6.7 million people filing for unemployment benefits, the highest total on records dating to 1967.

Major industries that rely on natural gas have pulled back and in addition to layoffs, have idled or shuttered factories.

That has led to a steep drop off in natural gas prices and today, the Energy Department's Energy Information Administration said that last week natural gas in underground storage far exceeded the five-year average. Analysts had expected growth, but not as much as the government reported payday advance low fees.

Prices for natural gas on Nymex tumbled 7.5 per cent.

That can be good news for consumers, because utilities use a lot of natural gas, meaning bills could come down.

Meanwhile, renewed clashes between government troops and militants in Nigeria, part of a long-standing dispute over the distribution of oil revenues from the Niger Delta, continued to support oil prices.

According to JBC Energy, the situation in the Niger Delta “appears to be worsening." JBC estimated that output in Africa's largest crude exporter was down 900,000 barrels a day since the escalation of militant activity in the summer of 2005.

Nigeria is the fifth largest exporter of oil to the United States and problems there can affect energy prices here.

In other Nymex trading, gasoline for June delivery fell 4.1 cents to $1.7685 a gallon – or 46.5 cents a litre – and heating oil dropped 3.44 cents to $1.5067 a gallon. Natural gas for June delivery slid 31.3 cents to $3.785 per 1,000 cubic feet.

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