Economic Calendar

Saturday, April 21, 2012

Aviva Mistakenly Fires 1,300 Employees at Investment Unit

By Noah Buhayar - Apr 21, 2012 5:17 AM GMT+0700

Aviva Plc (AV/), the U.K.’s second- biggest insurer by market value, said the company’s investment unit mistakenly sent an e-mail dismissing its entire staff before retracting the message.

The e-mail, which was sent by the Aviva Investors human resources department to 1,300 employees globally, told recipients to turn over company property as they left the building and reminded them of their obligation to guard the firm’s confidential information, according to Paul Lockstone, spokesman for the unit of the London-based insurer.

Aviva Plc, Britain's biggest property insurer. Photographer: Lloyd Sturdy via Bloomberg

“It was intended that this e-mail should have gone to one single person,” Lockstone said by phone. “Unfortunately, as a result of a clerical error, it was sent to all of the Investors staff worldwide.” Most people recognized immediately that the e-mail was a mistake, he said, adding, “From time to time, things go wrong.”

The human resources department issued an apology “fairly quickly” after the message was sent, Lockstone said. The e-mail is part of the company’s administration process when people leave the organization, he said. News of the mistake was reported earlier today by the Daily Telegraph.

Aviva has been scaling back its asset-management business as the European debt crisis and the deteriorating U.K. economy crimps sales. The insurer said in January it would cut 160 jobs at the unit. Some of the employees affected by that process still haven’t departed, Lockstone said.

Shares of Aviva gained 2 percent to 305.5 pence in London today. The insurer has increased 1.6 percent this year.

To contact the reporter on this story: Noah Buhayar in New York at

To contact the editor responsible for this story: Dan Kraut at


Slump Taught Profligate Americans Value of Saving: Economy

By Timothy R. Homan - Apr 21, 2012 4:03 AM GMT+0700

Americans are likely to keep rebuilding their savings for years to come as the specter of job losses and the meltdown in stocks triggered by the recession lingers, economists say.

Households are putting money away at a pace more than double that leading up to the economic slump. The saving rate has averaged 4.8 percent since June 2009, when the 18-month contraction ended, compared with 2.2 percent in the three years leading up the downturn.

Customers at a BJ's Wholesale Club Inc. store in Falls Church, Virginia. Photographer: Andrew Harrer/Bloomberg

April 19 (Bloomberg) -- Jack Micenko, an analyst at Susquehanna International Group LLP, talks about the U.S. housing market and his investment strategy for home builders. He speaks with Trish Regan and Adam Johnson on Bloomberg Television's "Street Smart." Frederick Cannon, director of research at Keefe, Bruyette & Woods Inc., also speaks. (Source: Bloomberg)

Audio Download: Nomura’s Zentner Sees Inflation Rate Falling

“Households are going to be mired in this deleveraging environment for a few more years,” Ellen Zentner, a senior U.S. economist at Nomura Securities International Inc. in New York, said in a telephone interview. “That’s not atypical following a financial crisis.”

The need to boost cash reserves and pay down debt may eclipse the urge to be the first on the block to drive the newest model car, stemming a recent decrease in the saving rate. Almost three years into the recovery, the economy has yet to regain even half the 8.8 million jobs lost or the $16.4 trillion in household net worth washed away as a result of the recession, indicating consumers will want to keep a bigger cash cushion.

“A savings rate in the neighborhood of 5 percent is one that would allow consumers to prepare for long-term obligations and yet will support the economy in the short-term,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.

Pent-Up Demand

Pent-up demand for automobiles helped propel a 0.8 percent gain in consumer spending in February, the biggest in seven months, according to Commerce Department data. The pickup carried over into March as figures this week showed retail sales also advanced 0.8 percent, reflecting stepped-up purchases of furniture, clothes and electronics.

Stronger earnings, reflecting in part the recent pickup in sales, are boosting share prices. The Standard & Poor’s 500 Index climbed 0.1 percent to 1,378.53 at the 4 p.m. close in New York. General Electric Co. (GE), Microsoft Corp. (MSFT) and Schlumberger Ltd. reported profits that topped analysts’ estimates.

Shares also rose on better economic news elsewhere. A report today showed German business confidence unexpectedly increased in April for a sixth month.

Recent Drop

The increase in U.S. consumer spending pushed the saving rate down to 3.7 percent in February, the lowest in more than two years and matching the level in August 2009 as the weakest of the current expansion, Commerce Department data show.

Such profligacy will probably not go unchecked, according to analysts like LeBas. The ups and downs of the job market underscore the need to keep saving, he said.

“If the labor markets are volatile, you have a higher chance of losing your job and, therefore, as an individual you need to save more,” he said.

Last month was a case in point. Employers added 120,000 workers to payrolls, less than the lowest estimate of economists surveyed by Bloomberg News and the poorest showing in five months, Labor Department figures showed. The jobless rate dropped to a three-year low of 8.2 percent as some of the unemployed stopped looking for work.

Andrew Hedberg, a Minneapolis resident who’s been without a job since losing a seasonal position at Macy’s Inc. about a year ago, is among those knowing first-hand the importance of having money stowed away.

Insurance Policy

“I’ve had to dip into my savings,” said Hedberg, 38. “I’m certainly glad that I had savings available to me because not everyone does. It bolsters my belief that savings is the best investment, like an insurance policy that I can make for myself.”

By keeping borrowing costs low to spur spending and growth, Federal Reserve policy makers have had a hand in the recent decrease in the rate at which nest eggs are rebuilt, said LeBas. Near-zero interest rates on savings accounts reduce the opportunity cost of putting that cash to work, he said.

“The Federal Reserve, with its low-rate policy, has been subsidizing consumers’ ability to spend by reducing the desire to save,” said LeBas. The central bank “has actually been more effective than most people recognize in that they’ve really convinced consumers to spend rather than save, thereby supporting short-term economic activity,” he said.

Fed’s Influence

Fed policy makers have kept their benchmark rate near zero since December 2008. Central bank officials have said they plan to keep interest rates low through late 2014.

The recent decline in the saving rate, the share of after- tax income that Americans are able to sock away, including individual retirement accounts and 401(k)s, may also be a statistical mirage that will eventually be revised away, according to economists like Stuart Hoffman. That indicates spending may not decelerate.

“They’ll probably revise the savings rate back up,” Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburg, said in an interview. “I don’t believe you’re going to see consumer spending die out.”

Revisions to gross domestic product figures on Feb. 29 showed wages and salaries from July through September rose $107.2 billion, up from the $24.8 billion gain initially reported. Updates issued last month showed they climbed another $89.1 billion in the fourth quarter, up from an initial estimate of $66.1 billion.

Baby-Boom Bias

Additionally, while initial contributions to IRAs and 401(k)s are included in savings, the capital gains from those funds are not. That means the rate will probably be held down over the next decade as the Baby Boom generation retires and starts spending those proceeds.

Other economists, such as Ken Mayland, believe the current pace of household spending is unsustainable.

“Consumers have been working down their personal savings rate to sustain a spending style,” Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio, said in a telephone interview. “That can only go on so long.”

To contact the reporter on this story: Timothy R. Homan in Washington at

To contact the editor responsible for this story: Christopher Wellisz at


Disney’s Film Chief Ross Resigns After ‘John Carter’ Loss

By Michael White - Apr 21, 2012 3:12 AM GMT+0700

Rich Ross, chairman of Walt Disney Co. (DIS)’s film unit, resigned following the company’s $200 million loss on the science-fiction picture “John Carter,” possibly the biggest ever for a single movie.

The departure of Ross, 50, who has run the division since October 2009 and previously led the Disney Channel, was announced today in a statement. A successor wasn’t named.

Willem Dafor, left, and Taylor Kitsch in "John Carter." Photograph: Walt Disney Pictures/Everett Collection

April 20 (Bloomberg) -- Rich Ross, chairman of Walt Disney Co.’s film unit, resigned following the company’s $200 million loss on the science-fiction picture “John Carter,” possibly the biggest ever for a single movie. Bloomberg's Jon Erlichman reports on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

Rich Ross arrives to Vanity Fair & Fisker Automotive Toast Dreamworks Pictures Golden Globes Best Drama Nominations 'The Help' And 'War Horse' at Cecconi's Restaurant on Jan. 13, 2012 in Los Angeles, California. Photographer: John Shearer/Getty Images for Vanity Fair

Disney Chief Executive Officer Robert Iger’s strategy of producing fewer films, built around marketable characters such as those from its Pixar and Marvel units, faltered with the failure of “John Carter.” The movie will lead to a quarterly loss of as much as $120 million for the studio, the first since Ross succeeded Dick Cook as chairman.

“I don’t know that anybody is shocked,” said Martin Pyykkonen, an analyst with Wedge Partners in Greenwood Village, Colorado, who doesn’t rate stocks. “‘John Carter’ was a debacle and probably the last straw,” he said, citing past disappointments including “Mars Needs Moms.”

Disney, based in Burbank, California, gained 0.6 percent to $42.35 at the close in New York. The shares have risen 13 percent this year.

Ross, a 15-year Disney veteran, previously worked at and led the Disney Channel, creating shows including “High School Musical” and “Hannah Montana,” starring Miley Cyrus.

“I appreciate his countless contributions throughout his entire career at Disney, and expect he will have tremendous success in whatever he chooses to do next,” Iger said in the statement.

Studio Ranking

Disney ranks seventh among studios in 2012 domestic ticket sales with $186.7 million, according to researcher Box Office Mojo. “John Carter,” made for about $250 million, generated $269.4 million in worldwide ticket sales, a sum shared with cinema operators.

The film went over budget and was poorly marketed, Pyykkonen said. Studio marketing chief MT Carney, an outsider hired by Ross in 2010, left in January, before the movie opened.

Matthew Harrigan, an analyst at Wunderlich Securities in Denver who has followed the industry for 20 years, said last month the loss on “John Carter” was the biggest he’d seen.

The studio’s “Marvel’s The Avengers,” estimated by Internet Movie Database to cost $220 million, opens May 4 to mark the start of the traditional summer film season in the U.S.

Disney reports fiscal second-quarter earnings on May 8. The company is expected to post a profit of 57 cents a share, the average of 28 estimates compiled by Bloomberg, on revenue of $9.56 billion. The company had net income of $942 million, or 49 cents a share, on revenue of $9.08 billion a year earlier.

To contact the reporter on this story: Michael White in Los Angeles at

To contact the editor responsible for this story: Anthony Palazzo at


U.S. Stocks Rise on Earnings Reports, Europe Optimism

By Whitney Kisling - Apr 21, 2012 3:36 AM GMT+0700

U.S. stocks rose, snapping a two- day decline for the Standard & Poor’s 500 Index, as profits from companies including Microsoft (MSFT) Corp. and General Electric Co. (GE) beat estimates and German business confidence improved.

Equities pared gains as Apple Inc. (AAPL) slid 2.5 percent, extending its loss since April 9 to 9.9 percent. Microsoft, the largest software maker, rose 4.6 percent. GE jumped 1.2 percent as profit gains at the energy business outpaced finance for the first time in two years. McDonald’s Corp. added 0.7 percent amid higher-than-estimated earnings. Bank of America Corp. tumbled 4.7 percent, driving financial shares lower.

The S&P 500 gained 0.1 percent to 1,378.53 at 4 p.m. New York time, as the benchmark index for American equities completed a 0.6 percent weekly advance. The Dow Jones Industrial Average rose 65.16 points, or 0.5 percent, to 13,029.26 today. More than 6.6 billion shares changed hands on U.S. exchanges, or 1.1 percent below the three-month average.

“On the back of some weaker recent economic data, the earnings story continues to showcase that companies can wring out some profits here,” James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “With the constant noise in the background of Europe we seem to be focusing more on the domestic story, at least today. That just gives more credence to the fact that the recovery continues to be in place.”

Profits for the 94 companies in the S&P 500 that reported quarterly results since April 10 beat estimates by 8.5 percent, according to data compiled by Bloomberg. The benchmark gauge for U.S. equities has risen 9.6 percent in 2012, even after the index lost 0.6 percent yesterday as home sales fell and jobless claims were more than forecast.

German Confidence

A report today showed German business confidence unexpectedly increased for a sixth month in April, adding to evidence that Europe’s largest economy can weather the sovereign-debt crisis.

Seven out of 10 industries in the S&P 500 advanced today as utilities and consumer-staples companies gained the most.

Microsoft rose 4.6 percent, the most in three months, to $32.42. The software maker reported fiscal third-quarter profit that topped estimates on better-than-expected sales of Windows and Office software for businesses. Corporate demand for Windows computers made up for tepid interest from consumers opting for tablet machines.

GE rose 1.2 percent to $19.36. Chief Executive Officer Jeffrey Immelt is increasing the focus on divisions that make gas turbines, jet engines and diesel locomotives while shrinking GE Capital’s balance sheet. He has pledged to boost industrial income this year by 5 percent to 10 percent, excluding the effect of acquisitions, while expanding margins.

Work Boots

Honeywell International Inc. (HON) rallied 2.4 percent to $59.39. The maker of products from flight controls to work boots raised its 2012 forecast after posting quarterly profit that beat analysts’ estimates on demand for aircraft parts and energy technology.

Schlumberger Ltd. (SLB) gained 2.7 percent to $71.70. The world’s largest oilfield-services provider reported first-quarter profit rose 38 percent as customers increased higher margin deep-water drilling around the globe in response to climbing crude prices.

E*Trade gained the most in the S&P 500, rising 6.1 percent to $10.48, as quarterly profit and revenue exceeded estimates. The company said loan-loss provisions fell 41 percent to $72 million from the fourth quarter. The retail broker posted four years of losses through 2010, partly because of the subprime mortgage market collapse in 2007.

McDonald’s Gain

McDonald’s Corp. (MCD) added 0.7 percent to $95.94. The world’s largest restaurant chain reported a 4.8 percent gain in first- quarter profit as new menu items such as Chicken McBites attracted U.S. consumers.

SanDisk, which makes memory chips used in mobile devices, declined 11 percent, the most in the S&P 500, to $35.91 after giving a second-quarter sales forecast that fell short of some analysts’ estimates. Chip production at SanDisk and its rivals is outpacing demand, causing prices to fall, Chief Executive Officer Sanjay Mehrotra said on a conference call with analysts yesterday. Some of the company’s customers also ordered fewer chips for mobile phones than SanDisk had predicted, he said.

To contact the reporter on this story: Whitney Kisling in New York at

To contact the editor responsible for this story: Nick Baker at


Plane Crash Kills 127 People Near Pakistan’s Capital

By Haris Anwar and Farhan Sharif - Apr 21, 2012 4:21 AM GMT+0700

Investigators recovered the flight data recorder of a Bhoja Air jet that crashed yesterday near Islamabad, Pakistan, and killed 127 people in the nation’s worst such accident in almost two years.

The disaster occurred as the twin-engine Boeing Co. 737-200 carrying 118 passengers and 9 crew members was on approach to land at the Pakistani capital on a flight from Karachi, Pakistan, said Salman Tahir, a Bhoja Air spokesman.

Pakistani rescue workers search through debris in Hussain Abad after the crash of a Bhoja Air Boeing 737 plane in the outskirts of Islamabad on April 20, 2012. Photographer: Farooq Naeem/AFP/Getty Images

The jet went down during thunderstorms, and air traffic controllers lost contact about 6:40 p.m. local time, according to GEO TV, which also reported on the retrieval of the so-called black box. The recorder logs data such as speed and engine performance that will offer clues to the cause of the crash.

Pakistan’s President Asif Ali Zardari ordered a probe into the accident, while Chicago-based Boeing said it was prepared to send technical experts to assist and the U.S. National Transportation Safety Board said it was in touch with Pakistan officials to offer support.

One eyewitness said the plane was on fire in midair before the crash, GEO TV reported. Parts of the fuselage, a door and at least one body of a woman facedown and dressed in a full-body veil were shown in footage aired by CNN.

It was Pakistan’s worst air crash since July 2010, when an Airbus SAS jetliner slammed into a rain-soaked hillside at Islamabad, killing all 152 people onboard in the nation’s deadliest air disaster. Two other accidents in the same year killed 33 more, according to AviationSafety Network’s website.

Pakistan has a category 1 safety rating from the U.S. Federal Aviation Administration, which means it meets international standards.

Last Delivery 1988

The 737-200 that crashed was at least 24 years old, because Boeing’s last delivery of that model was in 1988, according to the Chicago-based planemaker’s website. Tahir, the spokesman, didn’t immediately have the age of the jet.

The accident left closely held Bhoja Air with three aircraft: two 737-200s and one 737-400, Tahir said. Boeing stopped making the 737-400 in 2000.

Bhoja Air, based in Karachi, started operations in November 1993 by leasing a Boeing 737-200 and connecting Pakistani cities including Lahore and Quetta, according to the airline’s website. The carrier shut down in 2000 because of financial difficulties and restarted operations last month, Tahir said. Bhoja Air is the second-biggest private carrier in the country.

The U.S. NTSB is gathering information about the accident and “opening up a channel of communication with the folks in Pakistan,” said Peter Knudson, a spokesman for the agency in Washington. The NTSB didn’t yet know its level of involvement, Knudson said yesterday.

Boeing said the dispatching of technical specialists to a crash investigation is a common practice with incidents involving a plane it made. The 737 is the world’s most widely flown jetliner.

To contact the reporters on this story: Haris Anwar in Islamabad at; Farhan Sharif in Karachi at

To contact the editors responsible for this story: Naween Mangi at; Neil Denslow at