NEW YORK, Jan 13 - U.S. investment bank Merrill Lynch & Co Inc is seeking about $4 billion in a second capital raising, and the Kuwait Investment Authority is expected to be a significant investor in the new deal, the Financial Times reported on Sunday, citing people familiar with the matter.
A deal could be announced as soon as midweek, the paper said, citing those people. It added that other investors could come from Europe.
Merrill Lynch was not immediately available for comment.
In December, Merrill Lynch shored up its capital base by as much as $7.5 billion after selling a stake to Singapore’s government and an asset manager.
Merrill is scheduled to report earnings this week.
The New York Times on Friday reported Merrill was expected to suffer $15 billion in losses stemming from bad mortgage investments, almost twice the company’s original estimate
NEW YORK - Regulators are investigating whether several current and former employees at Merrill Lynch & Co Inc improperly placed trades for the brokerage house’s own account ahead of client orders, The Wall Street Journal reported on Monday.
A Merrill Lynch representative was not immediately available for comment.
The report, quoting people familiar with the matter, said the U.S. Securities and Exchange Commission would look into whether some employees improperly stepped in front of orders placed by mutual fund operator Fidelity Investments to gain an unfair advantage.
The practice, called “front-running,” takes advantage of the big stock moves that follow orders from big investment houses, such as Fidelity, to make a profit.
The period under scrutiny covers 2002 through 2005, the report said.
The SEC last year began investigating Merrill’s subprime mortgage portfolio following the company’s report of a $2.3 billion loss for the third quarter.
Ø Support at 3300 has failed to hold The market is struggling to stay above the 3300 support and our initial take for a double bottom formation in December 2007 rebounding off the 3300 low is now at risk. Each rebound wave has turned weaker and we now see diminishing probability of a double-bottom formation materializing.
Ø Triangle formation pointing toward lower range A triangle formation now supports a bearish view, pointing toward further downside as 3300 support has been broken as of last Friday. Next support is likely to be 3179, which is the unfilled gap that was established on 17 Aug 2007.
Ø First 5 days of the year mirror the overall trend of the year. The first 5 days of the year provided us with some hints of the overall market direction for the year. On count, the STI closed more than 4% lower within the first 5 trading days.
Ø Fast remedy is needed by the Fed Markets are watching to see the Federal Reserve's resolve in taking action to resolve its economic woes. Unfortunately, the next FOMC meeting is not due until end Jan and a lot of damage may be inflicted onto equity markets until that deadline.
Ø Forced-selling and margin calls Force-sellings and margin calls are going to kick in this week as we have witnessed the top actives declining by more than 20% within 2 days.
Ø Buy put warrants The put warrants are likely to be the key beneficiaries in such market condition. We recommend a switch to yield plays and buy STI 3300SGAePW080328 put.
Citigroup could write down as much as $24 billion due to subprime and credit-related losses, CNBC has learned. In addition, an estimated 20 thousand layoffs will be part of a comprehensive plan to slash costs and raise capital.
The plans will be unveiled Tuesday, when it reports fourth-quarter earnings. At the same time, Citigroup could also announce that it is cutting its dividend payment.
Citigroup Citigroup IncC 28.56 UNCH 0% NYSE
Quote | Chart | News | Profile | Add to Watchlist [C 28.56 --- UNCH (0%) ] also intends to raise as much as $15 billion from various foreign and domestic entities including Saudi Arabian Prince Alwaleed bin Talal, Citigroup's largest individual shareholder, as America's biggest bank grapples with heavy mortgage market losses.
Alwaleed has owned his Citi stake since the early 1990s and helped engineer a previous rescue plan for the bank more than a dozen years ago. According to a report on the Wall Street Journal's Web site, he is likely to keep his total stake in the bank below 5 percent to avoid regulatory scrutiny
Economists see no quick fix for U.S. downturn By Peter S. Goodman and Floyd Norris Published: January 13, 2008
As leaders in Washington turn their attention to efforts to avert a looming downturn, many economists suggest that it may already be too late to change the course of the economy over the first half of the year, if not longer.
With a wave of negative signs gathering force, economists, policy makers and investors are debating just how much the economy could be damaged in 2008.
Huge and complex, the U.S. economy has in recent years been aided by a global web of finance so elaborate that no one seems capable of fully comprehending it.
That makes it all but impossible to predict how much the economy can be expected to decline before it starts to stabilize.
The answer could be a defining factor in the outcome of the presidential election. Not long ago, the campaign centered on the war in Iraq.
But now, as candidates fan out across the country, visiting places as varied as the factory towns of Michigan and streets lined with unsold condominiums in Las Vegas, voters are increasingly demanding that they focus on the best way to keep the economy from slipping off the tracks.
The measures now being debated in Washington and on the campaign trail - tax rebates, added help for the unemployed and those facing sharply higher heating bills and, most immediately, a move by the Federal Reserve to further cut interest rates - could certainly moderate the severity of a downturn.
Democrats and the Bush administration are considering a package of such measures that could reach $100 billion.
But the forces menacing the economy, like the unraveling of the real estate market and high oil prices, are too entrenched to be swiftly dispatched by government largesse or cheaper credit, some economists say.
"The question is not whether we will have a recession, but how deep and prolonged it will be," said David Rosenberg, the chief North American economist at Merrill Lynch.
"Even if the Fed's moves are going to work, it will not show up until the later part of 2008 or 2009," Rosenberg estimated.
In the view of many analysts, the economy is now in a downward spiral, with each piece of negative news setting off the next. Falling housing prices have eroded the ability of homeowners to borrow against their property, threatening their ability to spend freely.
Concerns about tightening consumer spending have prompted businesses to slow hiring, limiting wage increases and in turn applying the brakes anew to consumer spending.
Not everyone is convinced that the U.S. economy is headed for a recession, defined as six months of economic contraction.
The economy often serves up indications of distress that later turn out to be false warnings.
But some economists think a recession may have begun in December.
In the last two weeks, there have been signs that a substantial downturn may already be unfolding.
The Labor Department reported a sharp slowdown in job creation in December.
Retailers said that sales in December were extremely disappointing, capping the worst gain for a holiday season in five years.
A widely watched index showed manufacturing slowing, despite a weak U.S. dollar that has encouraged growth in exports.
The construction of new homes has already fallen by some 40 percent since the peak in 2006.
The sales of new homes have fallen even faster, suggesting that a large oversupply of places to live will continue to drag down prices.
Home prices have dropped by about 7 percent since the peak in 2006, but some experts suggest they could fall by another 15 to 20 percent before hitting bottom.
"There is still a long way to go," said Nouriel Roubini, an economist at the Stern School of Business at New York University and chairman of the research firm RGE Monitor.
Roubini has long predicted the real estate downturn would cause a severe recession. He envisions foreclosures accelerating this year, and banks counting fresh losses.
That could make them less able to lend and further slow economic activity, not just in the United States but around the world.
"We're facing the risk of a systemic financial crisis," Roubini said. "It's not just subprime mortgages. The same kind of reckless lending has been occurring throughout the financial system.
"And it's not only mortgages: Now it's credit cards and auto loans, where we see problems increasing. The toxic junk is popping up everywhere."
Banks, including commercial banks and investment banks, have so far acknowledged losses of some $100 billion, yet anxiety persists that more large write-offs are coming.
"Firms will go to great lengths to hide or delay reporting losses," said Paul Ashworth of Capital Economics. "What we know now therefore might only be the tip of the iceberg."
In a speech on Thursday, the Federal Reserve chairman, Ben Bernanke, zeroed in on the nervousness of bankers as a prime factor slowing the economy, even as the Fed tried to stimulate it with cheaper credit.
"Developments have prompted banks to become protective of their liquidity and balance sheet capacity and thus to become less willing to provide funding to other market participants," he said.
His comments were widely construed as an assurance that the Fed would soon cut rates again. The Fed has already dropped rates three times since September.
Wall Street has clamored for the Fed to keep lowering rates, cognizant that cheaper credit is generally good not just for encouraging borrowing and spending but also for corporate profits.
But some economists fear that lower rates will simply provide a short-lived lift at the expense of the economy's longer-term health: Cheap money encourages foolish investments, they say, which is precisely how Americans came to experience the evaporation of wealth in the Internet era, followed by housing prices rising beyond any reasonable connection to incomes.
"This appears to be a panic on the part of the Fed," said Michael Darda, chief economist at MKM Partners, a research and trading firm. "The housing bubble was a reaction from the effort to protect us from the collapse of the tech bubble. What's the next bubble going to be as a consequence of trying to protect us against this?"
Darda asserts that the economy would be fine if left to its own devices, maintaining that the job market is healthier than most economists think. He contends that the December jobs report is likely to be revised to show that far more jobs were created than the 18,000 reported by the Labor Department.
"That could be important in terms of reversing the direction," Darda said. "We need to see evidence that the labor market isn't falling apart. That's critical."
But most economists seem convinced that the economy has slowed significantly and say it is the severity of a downturn that is in doubt, not the existence of one.
"If we have a recession with a modest consumer retrenchment, and the rest of the world holds up, this could be three quarters of disappointment," said Robert Barbera, the chief economist of ITG. "The risk is a more dramatic decline for the consumer."
There is little doubt that the Fed will lower its benchmark rate later this month, making it cheaper for banks to lend money to one another.
But there is more doubt whether Washington can quickly agree on fiscal policy moves - that is, raising spending or cutting taxes - in an election year in which the White House and Congress are controlled by different parties.
A recession could pack enormous political consequences. Over the last century, the economy has been in a recession four times in the early part of a presidential election year, according to the National Bureau of Economic Research.
In each of those years - 1920, 1932, 1960 and 1980 - the party of the incumbent president lost the election.
Much discussed now in Washington and on the campaign trail is a potential rebate for taxpayers, similar to one that seemed to lubricate spending during the last recession six years ago. But worries remain over whether such a move could exacerbate inflation, and some doubt that the benefits would be felt rapidly enough to justify the risks.
While tax rebates can encourage spending and generate jobs, Roubini said, the government cannot afford to unleash the significant amounts - $300 billion or $400 billion - that he believes would be required to ensure a substantial rebound in economic growth.
"Whatever they're going to do," he said, "it's going to be cosmetic."
And most economists concur that even meaningful policies will probably take several months to filter through such an enormous economy. By the time they take effect, the country could already be in a recession.
Ex-minister warns on German economy By Bertrand Benoit in Frankfurt
Published: January 13 2008 22:07 | Last updated: January 13 2008 22:07
The German government and the Social Democratic party are conducting a “lethal” economic policy that could inflict substantial damage on the country, according to Wolfgang Clement, a former economics minister and SPD grandee.
His party, junior partner in the ruling coalition, was “gambling away the dividends of past reforms”, Mr Clement told the Financial Times.
The attack – by a one-time party vice-chairman and a close ally of Gerhard Schröder, former SPD chancellor – underlines the extent of the party’s departure from Mr Schröder’s unpopular reform legacy under Kurt Beck, its current chairman who has taken the party sharply to the left.
It also comes at a sensitive time as Mr Beck’s strategy, including a campaign for a universal minimum wage, is being tested at three regional elections this month and next.
With the grudging approval of Angela Merkel, chancellor, and her Christian Democratic Union, Mr Beck managed to have jobless benefits raised last year and a minimum wage imposed on the postal sector.
Mr Clement said: “I used to shut up but I am too alarmed now . . . Everywhere in Europe resistance [to change] is rising. But you cannot stop change. Our government is not rising to its responsibility.”
The postal minimum wage, Mr Clement said, had been “a huge mistake”. The decision had benefited Deutsche Post, the former state monopoly, against private competitors.
“Politicians let themselves be used by vested interests,” he added.
“The ability of employers and employees to set wages without outside interference is precisely what allowed the period of wage restraint that gave us back our competitiveness [over the past five years]. Politicians should always keep their hands off wages.”
Economists claim Mr Clement’s widely reviled social security and labour reforms played a role in lowering unemployment over the past 18 months.
LONDON, Jan 11 (Reuters) - The Baltic Exchange's chief sea freight index <.BADI> for global dry commodities made its biggest one-day drop on Friday since records began in 1985.
But analysts said the fall was not related to growing fears of economic recession.
Dry commodities trading analysts have so far attributed the steep pullback from the all-time high hit last November to a correction at the top of a white-hot market and an expected seasonal downturn in shipments in the first quarter. Sea freight prices on the index have fallen 30 percent since mid-November.
"I don't see any reason why there should be a recession or growth element to this drop," said Jim Lennon a commodities analyst at Macquarie Bank who monitors freight prices.
"We've had this many times before over the last few years. We've had corrections and people have then thought it's over," he said, pinning the decline instead on easing global port congestion and lack of fresh commodity supply. "When I look at steel, prices have hit all-time highs. There's an iron ore shortage in China, the coal market is in chronic short supply and coal prices hit new all time highs this week...it's the reverse," he said.
"What we believe is that, over the next few months, as we see more and more iron ore capcity coming into the market there will be more ships called upon and the market will bounce back.
"Commodity prices are still very high and that's a good gauge of how healthy world demand is," said Peter Norfolk, senior analyst at ship consultancy, Simpson, Spence & Young.
"But a key issue for this year is whether weakness in the U.S. will spread," he said, emphasising that last year the country saw a big slowdown in dry commodities imports like steel and cement. However, Norfolk said the weakness had to be viewed in the context of global seaborne commodities trade. Last year U.S. dry commodities imports represented only 4 percent of world seaborne commodites trade, while China represented 20 percent.
The index, which monitors major trade routes for coal, iron ore, cement and soft commodities such as grains and sugar, sank 384 points, 4.61 percent, to 7,949 -- a four-month low.
The Baltic's Capesize index, which monitors the world's largest class of ship dedicated to hauling iron ore and coal, also saw its biggest one-day drop since records began. Freight brokers at the Baltic Exchange said it was likely that the drop on the capesize index drove the chief index's dramatic decline.
7 comments:
Merrill seeking $4 bln, Kuwait could invest
NEW YORK, Jan 13 - U.S. investment bank Merrill Lynch & Co Inc is seeking about $4 billion in a second capital raising, and the Kuwait Investment Authority is expected to be a significant investor in the new deal, the Financial Times reported on Sunday, citing people familiar with the matter.
A deal could be announced as soon as midweek, the paper said, citing those people. It added that other investors could come from Europe.
Merrill Lynch was not immediately available for comment.
In December, Merrill Lynch shored up its capital base by as much as $7.5 billion after selling a stake to Singapore’s government and an asset manager.
Merrill is scheduled to report earnings this week.
The New York Times on Friday reported Merrill was expected to suffer $15 billion in losses stemming from bad mortgage investments, almost twice the company’s original estimate
SEC probing Merrill on “front running”
NEW YORK - Regulators are investigating whether several current and former employees at Merrill Lynch & Co Inc improperly placed trades for the brokerage house’s own account ahead of client orders, The Wall Street Journal reported on Monday.
A Merrill Lynch representative was not immediately available for comment.
The report, quoting people familiar with the matter, said the U.S. Securities and Exchange Commission would look into whether some employees improperly stepped in front of orders placed by mutual fund operator Fidelity Investments to gain an unfair advantage.
The practice, called “front-running,” takes advantage of the big stock moves that follow orders from big investment houses, such as Fidelity, to make a profit.
The period under scrutiny covers 2002 through 2005, the report said.
The SEC last year began investigating Merrill’s subprime mortgage portfolio following the company’s report of a $2.3 billion loss for the third quarter.
Straits Times Index ? The Arrival of Teddy Bear
Ø Support at 3300 has failed to hold
The market is struggling to stay above the 3300 support and our initial take for a double bottom formation in December 2007 rebounding off the 3300 low is now at risk. Each rebound wave has turned weaker and we now see diminishing probability of a double-bottom formation materializing.
Ø Triangle formation pointing toward lower range A triangle formation now supports a bearish view, pointing toward further downside as 3300 support has been broken as of last Friday. Next support is likely to be 3179, which is the unfilled gap that was established on 17 Aug 2007.
Ø First 5 days of the year mirror the overall trend of the year. The first 5 days of the year provided us with some hints of the overall market direction for the year. On count, the STI closed more than 4% lower within the first 5 trading days.
Ø Fast remedy is needed by the Fed
Markets are watching to see the Federal Reserve's resolve in taking action to resolve its economic woes. Unfortunately, the next FOMC meeting is not due until end Jan and a lot of damage may be inflicted onto equity markets until that deadline.
Ø Forced-selling and margin calls
Force-sellings and margin calls are going to kick in this week as we have witnessed the top actives declining by more than 20% within 2 days.
Ø Buy put warrants
The put warrants are likely to be the key beneficiaries in such market condition. We recommend a switch to yield plays and buy STI 3300SGAePW080328 put.
Citigroup could write down as much as $24 billion due to subprime and credit-related losses, CNBC has learned. In addition, an estimated 20 thousand layoffs will be part of a comprehensive plan to slash costs and raise capital.
The plans will be unveiled Tuesday, when it reports fourth-quarter earnings. At the same time, Citigroup could also announce that it is cutting its dividend payment.
Citigroup Citigroup IncC
28.56 UNCH 0% NYSE
Quote | Chart | News | Profile | Add to Watchlist
[C 28.56 --- UNCH (0%) ] also intends to raise as much as $15 billion from various foreign and domestic entities including Saudi Arabian Prince Alwaleed bin Talal, Citigroup's largest individual shareholder, as America's biggest bank grapples with heavy mortgage market losses.
Alwaleed has owned his Citi stake since the early 1990s and helped engineer a previous rescue plan for the bank more than a dozen years ago. According to a report on the Wall Street Journal's Web site, he is likely to keep his total stake in the bank below 5 percent to avoid regulatory scrutiny
Economists see no quick fix for U.S. downturn
By Peter S. Goodman and Floyd Norris Published: January 13, 2008
As leaders in Washington turn their attention to efforts to avert a looming downturn, many economists suggest that it may already be too late to change the course of the economy over the first half of the year, if not longer.
With a wave of negative signs gathering force, economists, policy makers and investors are debating just how much the economy could be damaged in 2008.
Huge and complex, the U.S. economy has in recent years been aided by a global web of finance so elaborate that no one seems capable of fully comprehending it.
That makes it all but impossible to predict how much the economy can be expected to decline before it starts to stabilize.
The answer could be a defining factor in the outcome of the presidential election. Not long ago, the campaign centered on the war in Iraq.
But now, as candidates fan out across the country, visiting places as varied as the factory towns of Michigan and streets lined with unsold condominiums in Las Vegas, voters are increasingly demanding that they focus on the best way to keep the economy from slipping off the tracks.
The measures now being debated in Washington and on the campaign trail - tax rebates, added help for the unemployed and those facing sharply higher heating bills and, most immediately, a move by the Federal Reserve to further cut interest rates - could certainly moderate the severity of a downturn.
Democrats and the Bush administration are considering a package of such measures that could reach $100 billion.
But the forces menacing the economy, like the unraveling of the real estate market and high oil prices, are too entrenched to be swiftly dispatched by government largesse or cheaper credit, some economists say.
"The question is not whether we will have a recession, but how deep and prolonged it will be," said David Rosenberg, the chief North American economist at Merrill Lynch.
"Even if the Fed's moves are going to work, it will not show up until the later part of 2008 or 2009," Rosenberg estimated.
In the view of many analysts, the economy is now in a downward spiral, with each piece of negative news setting off the next. Falling housing prices have eroded the ability of homeowners to borrow against their property, threatening their ability to spend freely.
Concerns about tightening consumer spending have prompted businesses to slow hiring, limiting wage increases and in turn applying the brakes anew to consumer spending.
Not everyone is convinced that the U.S. economy is headed for a recession, defined as six months of economic contraction.
The economy often serves up indications of distress that later turn out to be false warnings.
But some economists think a recession may have begun in December.
In the last two weeks, there have been signs that a substantial downturn may already be unfolding.
The Labor Department reported a sharp slowdown in job creation in December.
Retailers said that sales in December were extremely disappointing, capping the worst gain for a holiday season in five years.
A widely watched index showed manufacturing slowing, despite a weak U.S. dollar that has encouraged growth in exports.
The construction of new homes has already fallen by some 40 percent since the peak in 2006.
The sales of new homes have fallen even faster, suggesting that a large oversupply of places to live will continue to drag down prices.
Home prices have dropped by about 7 percent since the peak in 2006, but some experts suggest they could fall by another 15 to 20 percent before hitting bottom.
"There is still a long way to go," said Nouriel Roubini, an economist at the Stern School of Business at New York University and chairman of the research firm RGE Monitor.
Roubini has long predicted the real estate downturn would cause a severe recession. He envisions foreclosures accelerating this year, and banks counting fresh losses.
That could make them less able to lend and further slow economic activity, not just in the United States but around the world.
"We're facing the risk of a systemic financial crisis," Roubini said. "It's not just subprime mortgages. The same kind of reckless lending has been occurring throughout the financial system.
"And it's not only mortgages: Now it's credit cards and auto loans, where we see problems increasing. The toxic junk is popping up everywhere."
Banks, including commercial banks and investment banks, have so far acknowledged losses of some $100 billion, yet anxiety persists that more large write-offs are coming.
"Firms will go to great lengths to hide or delay reporting losses," said Paul Ashworth of Capital Economics. "What we know now therefore might only be the tip of the iceberg."
In a speech on Thursday, the Federal Reserve chairman, Ben Bernanke, zeroed in on the nervousness of bankers as a prime factor slowing the economy, even as the Fed tried to stimulate it with cheaper credit.
"Developments have prompted banks to become protective of their liquidity and balance sheet capacity and thus to become less willing to provide funding to other market participants," he said.
His comments were widely construed as an assurance that the Fed would soon cut rates again. The Fed has already dropped rates three times since September.
Wall Street has clamored for the Fed to keep lowering rates, cognizant that cheaper credit is generally good not just for encouraging borrowing and spending but also for corporate profits.
But some economists fear that lower rates will simply provide a short-lived lift at the expense of the economy's longer-term health: Cheap money encourages foolish investments, they say, which is precisely how Americans came to experience the evaporation of wealth in the Internet era, followed by housing prices rising beyond any reasonable connection to incomes.
"This appears to be a panic on the part of the Fed," said Michael Darda, chief economist at MKM Partners, a research and trading firm. "The housing bubble was a reaction from the effort to protect us from the collapse of the tech bubble. What's the next bubble going to be as a consequence of trying to protect us against this?"
Darda asserts that the economy would be fine if left to its own devices, maintaining that the job market is healthier than most economists think. He contends that the December jobs report is likely to be revised to show that far more jobs were created than the 18,000 reported by the Labor Department.
"That could be important in terms of reversing the direction," Darda said. "We need to see evidence that the labor market isn't falling apart. That's critical."
But most economists seem convinced that the economy has slowed significantly and say it is the severity of a downturn that is in doubt, not the existence of one.
"If we have a recession with a modest consumer retrenchment, and the rest of the world holds up, this could be three quarters of disappointment," said Robert Barbera, the chief economist of ITG. "The risk is a more dramatic decline for the consumer."
There is little doubt that the Fed will lower its benchmark rate later this month, making it cheaper for banks to lend money to one another.
But there is more doubt whether Washington can quickly agree on fiscal policy moves - that is, raising spending or cutting taxes - in an election year in which the White House and Congress are controlled by different parties.
A recession could pack enormous political consequences. Over the last century, the economy has been in a recession four times in the early part of a presidential election year, according to the National Bureau of Economic Research.
In each of those years - 1920, 1932, 1960 and 1980 - the party of the incumbent president lost the election.
Much discussed now in Washington and on the campaign trail is a potential rebate for taxpayers, similar to one that seemed to lubricate spending during the last recession six years ago. But worries remain over whether such a move could exacerbate inflation, and some doubt that the benefits would be felt rapidly enough to justify the risks.
While tax rebates can encourage spending and generate jobs, Roubini said, the government cannot afford to unleash the significant amounts - $300 billion or $400 billion - that he believes would be required to ensure a substantial rebound in economic growth.
"Whatever they're going to do," he said, "it's going to be cosmetic."
And most economists concur that even meaningful policies will probably take several months to filter through such an enormous economy. By the time they take effect, the country could already be in a recession.
Ex-minister warns on German economy
By Bertrand Benoit in Frankfurt
Published: January 13 2008 22:07 | Last updated: January 13 2008 22:07
The German government and the Social Democratic party are conducting a “lethal” economic policy that could inflict substantial damage on the country, according to Wolfgang Clement, a former economics minister and SPD grandee.
His party, junior partner in the ruling coalition, was “gambling away the dividends of past reforms”, Mr Clement told the Financial Times.
The attack – by a one-time party vice-chairman and a close ally of Gerhard Schröder, former SPD chancellor – underlines the extent of the party’s departure from Mr Schröder’s unpopular reform legacy under Kurt Beck, its current chairman who has taken the party sharply to the left.
It also comes at a sensitive time as Mr Beck’s strategy, including a campaign for a universal minimum wage, is being tested at three regional elections this month and next.
With the grudging approval of Angela Merkel, chancellor, and her Christian Democratic Union, Mr Beck managed to have jobless benefits raised last year and a minimum wage imposed on the postal sector.
Mr Clement said: “I used to shut up but I am too alarmed now . . . Everywhere in Europe resistance [to change] is rising. But you cannot stop change. Our government is not rising to its responsibility.”
The postal minimum wage, Mr Clement said, had been “a huge mistake”. The decision had benefited Deutsche Post, the former state monopoly, against private competitors.
“Politicians let themselves be used by vested interests,” he added.
“The ability of employers and employees to set wages without outside interference is precisely what allowed the period of wage restraint that gave us back our competitiveness [over the past five years]. Politicians should always keep their hands off wages.”
Economists claim Mr Clement’s widely reviled social security and labour reforms played a role in lowering unemployment over the past 18 months.
Copyright The Financial Times Limited 2008
Baltic dry sea freight index makes record fall
Friday January 11 2008
By Stefano Ambrogi
LONDON, Jan 11 (Reuters) - The Baltic Exchange's chief sea freight index <.BADI> for global dry commodities made its biggest one-day drop on Friday since records began in 1985.
But analysts said the fall was not related to growing fears of economic recession.
Dry commodities trading analysts have so far attributed the steep pullback from the all-time high hit last November to a correction at the top of a white-hot market and an expected seasonal downturn in shipments in the first quarter.
Sea freight prices on the index have fallen 30 percent since mid-November.
"I don't see any reason why there should be a recession or growth element to this drop," said Jim Lennon a commodities analyst at Macquarie Bank who monitors freight prices.
"We've had this many times before over the last few years. We've had corrections and people have then thought it's over," he said, pinning the decline instead on easing global port congestion and lack of fresh commodity supply.
"When I look at steel, prices have hit all-time highs. There's an iron ore shortage in China, the coal market is in chronic short supply and coal prices hit new all time highs this week...it's the reverse," he said.
"What we believe is that, over the next few months, as we see more and more iron ore capcity coming into the market there will be more ships called upon and the market will bounce back.
"Commodity prices are still very high and that's a good gauge of how healthy world demand is," said Peter Norfolk, senior analyst at ship consultancy, Simpson, Spence & Young.
"But a key issue for this year is whether weakness in the U.S. will spread," he said, emphasising that last year the country saw a big slowdown in dry commodities imports like steel and cement.
However, Norfolk said the weakness had to be viewed in the context of global seaborne commodities trade.
Last year U.S. dry commodities imports represented only 4 percent of world seaborne commodites trade, while China represented 20 percent.
The index, which monitors major trade routes for coal, iron ore, cement and soft commodities such as grains and sugar, sank 384 points, 4.61 percent, to 7,949 -- a four-month low.
The Baltic's Capesize index, which monitors the world's largest class of ship dedicated to hauling iron ore and coal, also saw its biggest one-day drop since records began.
Freight brokers at the Baltic Exchange said it was likely that the drop on the capesize index drove the chief index's dramatic decline.
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