With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world.
Bernanke Sees Late-09 Turnaround; Canadian Dollar Hits Six-Month High; Kraft Beats 1Q Estimates; South Africa Unemployment Hits 23.5%; Service Sector Gains Ground; AIG's First Quarter Loss Expected to Shrink; Some Traders Oppose Up-Tick Rule; Chile's Peso Rallies to 7-Month High Against Dollar
U.S. Federal Reserve Chairman Ben Bernanke said the U.S. economy will begin to "turn up later this year," contingent upon the financial sector's continued improvement, Reuters reported. Speaking to a congressional committee, Bernanke said the housing market may be bottoming out and pointed to improving consumer spending.
The Canadian dollar hit its highest point since November. "The market is now willing to embrace risk and move clean of the safety associated with the U.S. dollar," Stewart Hall, an economist in Toronto at HSBC Securities, told Bloomberg. "The Canadian dollar has the potential to be a high-yielding currency if the commodity story once again gains traction and moves forward."
Price increases and cost-cutting measures helped Kraft Foods Inc. (NYSE: KFT) post higher-than-expected first-quarter profit. The food company also reaffirmed its 2009 earnings and revenue forecast, Reuters reported.
South Africa's unemployment rate jumped to 23.5% in the first quarter, as Africa's largest economy likely slipped into recession for the first time in 17 years, Bloomberg reported. "Manufacturing and mining are under strain, and we can expect these numbers to worsen," Fanie Joubert, an economist at Efficient Group, told Bloomberg. "We're unlikely to see a recovery until the fourth quarter."
The U.S. service sector is beginning to show signs that the worst may be behind it as the Institute for Supply Management's index of non- manufacturing businesses contracted less than forecast in April. The index of service businesses, which make up almost 90% of the economy, rose to 43.7 from 40.8 the prior month, according to the Tempe, Arizona-based group. Readings below 50 signal contraction. Separately, a survey of chief executives found the highest level of confidence in three years, as home purchases and retail sales rose, another signal that the economic slump is abating, Bloomberg reported.
Shares of American International Group Inc. (NYSE: AIG), once the world's largest insurer, rallied in New York trading yesterday (Tuesday), on speculation the insurer's first quarter loss narrowed from its record $61.7 billion net loss in the fourth quarter, Reuters reported. AIG, was rescued with a taxpayer lifeline last year after severe mortgage losses left it unable to meet collateral postings with counterparties. It currently needs to pay back about $80 billion in borrowings from the U.S. Treasury and Federal Reserve.
Several Wall Street traders and mutual funds, including Fidelity Investments and General Electric Co. (NYSE: GE), oppose bringing back the so-called "uptick rule," which may deter U.S. regulators from resurrecting the provision, Bloomberg reported. At a public meeting in Washington, several executives from companies that blame short-sellers for driving down share prices said they prefer an alternative to the uptick. The Securities and Exchange Commission scrapped the almost 70-year-old uptick provision in July 2007 after studies determined it wasn't relevant in markets dominated by fast-paced electronic trading. SEC Chairman Mary Schapiro said any new rules will uphold the benefits of short-selling while restricting market abuses.
Chile's peso firmed to a seven-month high yesterday (Tuesday) on dollar weakness and better-than-expected domestic growth data. "The main elements that influenced the peso...were the fall of the dollar against the euro, and also the economic data, which was negative, but better-than-expected," one currency trader in Santiago told Reuters. The peso is now up 12.2% against the dollar year to date after slumping 22.3% in 2008.