26 10 / 2011
Where oil prices will be in June 2012?
Wars and revolutions across the Middle East and North Africa and the Japanese earthquake and tsunami have sent oil and gas prices soaring with economists worrying over the impact of escalating energy costs on global growth. Last week, for the first time in a decade, the Organization of Petroleum Exporting Countries failed to reach an agreement to boost the output as Saudi Arabia did not convince the others that world’s economy will need more fuel.
From June 13 to June 15, Reuters Global Energy and Climate Summit 2011 will feature more than 60 global decision-makers in the energy and climate businesses to discuss the challenges facing the 21st century. This is your chance to give us your forecast on whether oil prices are more likely to got back to their peak of $147 per barrel hit on 2008, or below the current range of around $120.
Where do you see oil prices trading in June 2012?
Between 70 and 90
Between 90 and 110
Between 110 and 130
Over 130
View Results
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17 10 / 2011
UPDATE 4-Charles Schwab misses slightly as markets weigh
* Client trading picks up in quarter* Shares down 3.9 percentBy John McCrankOct 17 (Reuters) - U.S. discount brokerage Charles Schwab
Corp’s third-quarter profit rose, just missing
estimates, as higher trading levels were not enough to offset a
combination of headwinds that included weaker equity markets
and interest rates.The company’s shares were down 3.9 percent at $12.25 in
early afternoon trading on the New York Stock Exchange.The impasse over the U.S. debt ceiling, the downgrading of
the U.S. credit rating, and concerns that Europe’s sovereign
debt crisis could drag the world’s economy back into recession
led to a 14 percent drop in U.S. equities in the quarter, as
measured by the S&P 500 index.That drop, along with softer short-term interest rates led
to a 7 percent sequential drop in Schwab’s asset management and
administration fees.”Schwab is feeling the brunt of a second-half environment
that’s really tough on brokers, with the market levels falling,
the interest rates tightening up on already tightening
margins,” said Ed Ditmire, and analyst at Macquarie Research.Schwab said on Monday it earned $220 million, or 18 cents a
share in the quarter, compared to $124 million, or 10 cents a
share, a year earlier. Analysts had been expecting 19 cents a
share, according to Thomson Reuters I/B/E/S.In the third quarter alone, the Schwab’s shares tumbled
over 31 percent, as investors worried weaker markets would
crimp profits at retail brokerages in the short term.CLIENTS STAY ENGAGEDBut the volatility also led to more client trades. Schwab
said its clients executed a record 1,005,000 trades on a single
day in August when the volatility was at its peak.Third-quarter daily average revenue trades - a widely
watched measure of client activity - were up 39 percent at
Schwab from a year earlier and up 22 percent from the second
quarter this year, to 323,100.Average revenue per trade, however, fell 2 percent from
both the year earlier and the second quarter to $12.04.”The so-called silver lining, which is high trading
volumes, help Schwab less than other firms because it gets less
of its revenue from trading commissions than other firms,”
Ditmire said.Overall revenue at San Francisco-based Schwab rose 11
percent to $1.18 billion, compared to analysts’ expectations of
$1.19 billion.Schwab has been waiving client fees on money market funds
for several quarters now because with the low interest rate
environment, returns could be nonexistent to negative.The firm said it waived $160 million in fees in the
quarter, compared to $128 million in the prior quarter, due to
the lower short-term rates.SHORT-TERM CHALLENGES REMAINThe waivers, as well as Schwab’s net interest margin, came
in weaker-than-expected, said Alex Kramm, an analyst at UBS.”While rates have started to move higher again lately,
metrics will likely deteriorate further in 4Q11,” Kramm said in
a note to clients.Schwab said it is looking into expense controls to help
offset some of the market headwinds, which Kramm said “could
represent a slight positive.”Total expenses came to $821 million, down 5 percent from a
year earlier. Expenses related to its $1 billion acquisition of
options trading firm optionsXpress came in at an estimated $12
million to $14 million of pretax charges.”The one-time costs related to that (deal) came in higher
than we would have thought,” Howard Chen, an analyst at Credit
Suisse, said in an interview. He had been expecting around $10
million in expenses related to the deal this quarter.”Within the core franchise, I think Schwab posted fairly
resilient results in what was a very challenging summer for all
investors,” he added.Total client assets were up 7 percent from a year ago at
$1.576 trillion.Net new assets in the quarter, including those from
optionsXpress deal and major clearing inflows, totaled $86
billion. Minus the acquisition and inflows, core net new assets
were up 21 percent from a year earlier at $17.6 billion.Schwab’s competitors include E*Trade Financial Corp , which is due to report its quarterly results on
Wednesday, and TD Ameritrade which reports next week.
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12 10 / 2011
FEATURE-Arab Spring exposes Jordan’s economic policy rifts
* Growth languishes at low levels* Fears that government could raid c.bank funds* To remain heavily dependent on foreign aidBy Suleiman Al-KhalidiAMMAN, Oct 12 (Reuters) - Jordan’s former central bank
chief, ousted by the government last month after security
personnel surrounded the bank to stop him entering, says he
fears for the country’s economic stability as rising government
spending pushes state finances deeper into the red.”Am I conceited because I speak my view and don’t agree with
government policies that will create problems in the future?”
Faris Abdul Hamid Sharaf told reporters, responding to public
criticism of him by Prime Minister Marouf al-Bakhit.Just several years ago, Jordan was viewed by many
businessmen as an economic success story; under reforms guided
by the International Monetary Fund, it became one of the Middle
East’s most open economies.Now, political unrest across the Arab world has pushed
Jordan into a big increase in government spending on salaries,
food and energy subsidies and its social safety network, in an
effort to head off domestic protests by placating the country’s
poor. Millions of dollars of state money have been channelled to
tribal areas that provide the backbone of support for the
Hashemite royal family regime.This has prompted the government to increase state spending
this year by over 700 million dinars from its original plan to
6.95 billion dinars ($9.8 billion) through two supplementary
annexes to the 2011 budget.That makes the government’s budget deficit target this year,
5.5 percent of gross domestic product, look much too optimistic;
economists and bankers think the deficit will be nearly 7
percent. Public debt was already rising before the additional
spending — at the end of August it stood at 12 billion dinars
or 57 percent of GDP. Including debt incurred by the national
electric power company and guaranteed by the government, it is
already above a legal limit set by Jordan of 60 percent,
according to the finance ministry.”The government is saying the deficit is a small price to
pay in return for maintaining social peace and security. They
are pursuing a policy of political convenience and appeasement.
But they are just postponing problems at a higher cost,” said
Jawad Anani, a leading economist and former deputy prime
minister.Earlier this year, Jordan’s economy was officially expected
to grow around 3 percent in 2011, much slower than the average 7
percent seen over the last decade during a boom fed by high aid
levels and capital inflows and investments.But even 3 percent may not be attainable, officials now
concede privately, as the kingdom is still struggling to recover
from the global downturn of 2008-2009, which cut remittances
from Jordanian expatriates in the Gulf.Another blow to state finances is a record energy bill that
is expected to top $4.5 billion after the disruption of Egyptian
gas supplies to Jordan due to sabotage of the pipeline in the
Sinai region. This prompted the kingdom to switch to more
expensive diesel fuel to generate electricity.”The government cannot touch or change 90 percent of the
expenditure allocations in the budget. Economic conditions are
not comforting,” an exasperated Finance Minister Mohammad Abu
Hammour told Reuters.TENSIONSThese tensions spilled over last month in the government’s
sacking from the central bank of the 41-year-old Sharaf, a
U.S.-educated banker who is the son of Abdul Hamid Sharaf, a
former liberal prime minister who tried to modernise the
country’s tribe-based political structure before his death in
1980.Sharaf said he did not know why he was ousted, suggesting it
might be because he had “fought corruption within the banking
sector and stood up against the entry of criminal elements”.But disagreements over economic policy appeared at least
partly responsible. Sharaf, known as a fierce advocate of fiscal
discipline, had repeatedly warned that wasteful subsidies were
distorting the economy and hindering IMF-guided reforms.Sharaf also had forthright views on the need to rationalise
Jordan’s secret army expenditure. This made him enemies in a
bloated military patronage system.Prime Minister Bakhit, a conservative former general, said
publicly that Sharaf’s free-market views ran contrary to the
populist agenda of a government which claims to defend ordinary
Jordanians from the abuses of the business elite. The current
government came to power in February, during the Arab Spring
unrest in the region, after King Abdullah sacked an unpopular
pro-business prime minister.Regardless of the specific issues at stake, the government’s
action against the central bank governor, who was only ten
months into a five-year tenure, raised questions about the
predictability of economic policy-making.”It sends a very, very bad signal. This was a political
mistake of huge dimensions. This is a very worrying
development,” said one senior Western diplomat, who requested
anonymity.Sharaf, who described his dismissal as illegal, was replaced
by a long-time veteran of the bank, Mohammad Said Shaheen, a
deputy governor. He is expected to focus on the central bank’s
traditional role of defending the dinar currency, which is
pegged to the U.S. dollar.INDEPENDENCEIn March this year, Sharaf stood up to the government when
it sought to overdraw its account at the central bank to pay
civil servants’ salaries. He wrote to Bakhit and the finance
ministry saying they had three days to come up with the funds, a
rare move in a country where influential politicians are rarely
challenged over spending.”If you overdraw it’s a form of printing money. I am not
going to let the government find an illegal window of
financing,” he said.Now some economists and businessmen fear that with Sharaf
out of the way, the government could seek to finance its budget
deficit by raiding funds at the central bank.”If the central bank succumbs to pressure to give advances
to the government to alleviate pressure on the budget by taking
on more public debt, the bank could become a government puppet,”
said Anani.Prominent commercial banker Mufleh Aqel said, “The
independence of the central bank must be maintained under all
circumstances so that it does not fall under the government’s
influence — especially at a time of expanding social programmes
that appease rather than solve fundamental problems facing the
economy.”Jordan’s key role in protecting geopolitical stability in
the Middle East makes it one of the highest per capita
recipients of foreign aid in the world, according to figures
from USAID, the U.S. aid agency. In the past, foreign aid has
sometimes financed almost half the country’s budget deficit;
Anani and others credit a $1.4 billion cash injection by Saudi
Arabia this year for keeping the economy afloat.Last year Jordan issued its first sovereign Eurobond on the
international market, raising $750 million. Abu Hammour said the
price of those bonds had now dropped about 10 percent in
secondary market trading, though he attributed this to pressure
on bond prices across the region in the wake of the Arab Spring,
and did not rule out Jordan returning to international debt
markets next year.Weak global markets may make it hard for Jordan to issue
another international bond, however. In that case, the
government will have to continue relying heavily on foreign aid
in the coming year. But the fiscal pressures on Jordan mean the
aid may not be enough to support solid economic growth;
economists worry large government debt issues to local banks to
fund the deficit will crowd out credit to the private sector.”Jordan has to resort to more stringent fiscal policies and
ask people to tighten their belts. Otherwise we might become
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12 10 / 2011
EPA says to finalize air rule on mercury in November
An EPA spokeswoman said the agency was on track to finalize the rule, which targets older, inefficient power plants fired by coal and oil, as expected by November 16. The agency is under court order to finalize the rule, also known as the maximum achievable control technology, or MACT, rule for utilities.Late Monday, 25 states filed a brief with the U.S. District Court in Washington urging the court to push EPA to delay finalization of the rule until November 16, 2012 or later, complaining the standard would kill jobs and saddle industry with costs at the worst possible time.The agency is under pressure from business groups and Republicans in the House of Representatives to ease or delay a raft of air pollution rules. This month, the House passed a bill that would delay air rules including the mercury standard. But the measure faces an uphill battle in the Senate and the White House has said President Barack Obama would veto it.The rule could affect power plants EPA has said the mercury rule would save $5 to $13 in health benefits for every dollar that is spent to reduce the pollution and create jobs in pollution control industries.More than half of all coal-fired power plants have already deployed the pollution control technologies that allow them to meet the standards, the EPA said.
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