Japan disaster another worry for global economy
Japan's earthquake and nuclear crises have put pressure on the already fragile global economy, squeezed supplies of goods from computer chips to auto parts and raised fears of higher interest rates.
The disaster frightened financial markets in Tokyo and on Wall Street on Tuesday. Japan's Nikkei average lost 10 percent, and the Dow Jones industrials fell so quickly after the opening bell that the stock exchange invoked a special rule to reduce volatility.
Yet the damage to the U.S. and world economies is expected to be relatively moderate and short-lived. Oil prices are falling, helping drivers around the world. And the reconstruction expected along Japan's northeastern coast could even provide a jolt of economic growth.
A weaker Japanese economy could help ease global commodity prices because Japan is a major importer of fuel, agricultural products and other raw materials, notes Mark Zandi, chief economist at Moody's Analytics. Oil prices fell more than $4 to $97.18 a barrel Tuesday because of expectations that quake damage will slow Japan's economy and reduce its demand for energy.
Bank of America economist Ethan Harris estimates, the disaster would shave just 0.1 percentage point off global economic growth _ to 4.2 percent this year.
Japan feeds more money to banks as stocks slump
TOKYO (AP) _ Japan's central bank pumped billions more into the financial system Tuesday to quell fears that the country's banks could be overwhelmed by the impact of the massive earthquake and tsunami. Stocks slumped for a second day as a nuclear crisis escalated.
Two cash injections totaling 8 trillion yen ($98 billion) came a day after the Bank of Japan fed a record 15 trillion yen ($184 billion) into money markets and eased monetary policy to support the economy in the aftermath of Friday's 9.0 magnitude quake that has killed thousands.
The injections have helped stabilize currency markets. But stock markets dived for a second day as investors unloaded assets amid escalating worries of a nuclear crisis.
Fed says economic recovery on firmer footing
WASHINGTON (AP) _ The Federal Reserve offered its most optimistic view of the U.S. economy since the recession ended, even as Japan's nuclear crisis stoked new worries around the globe.
The economic recovery is on "firmer footing" and the jobs market is "improving gradually," the Fed declared in its statement released at the conclusion of its meeting Tuesday.
That's a more upbeat tone from its previous meeting on Jan. 26, when Fed policymakers said the rate of economic activity was "insufficient" to bring about "significant improvement" in the job market.
The Fed also downplayed inflation risks. And it dropped the phrase "disappointingly slow" in describing the progress made lowering the nation's unemployment rate. That's a reflection of a nearly full percentage point drop in just three months _ the sharpest decline in unemployment since 1983.
The Fed on Tuesday, in a unanimous decision, said it was maintaining the pace of its $600 billion Treasury bond-purchase program to help the economy grow more strongly and to lower unemployment, which now stands at 8.9 percent.
Japan boosts holdings of US debt in January
WASHINGTON (AP) _ Japan increased its holdings of U.S. government debt for an eighth straight month in January. But the second-largest holder of U.S. Treasury bonds will likely scale back its purchases of foreign holdings, and even sell off some, in coming months to divert money toward rebuilding a nation devastated by a powerful earthquake and an ensuing nuclear crisis.
The Treasury Department said Tuesday that Japan boosted its holdings 0.4 percent to $885.9 billion in January.
Economists said a reduction in Japan's foreign holdings would put some upward pressure on U.S. interest rates. But they cautioned the change would have a limited impact.
The Federal Reserve, which has been buying Treasury securities as part of its efforts to keep interest rates low, would move to counteract any significant increase in rates, they said.
The Treasury report showed that China, the second-largest holder of U.S. debt, reduced its holdings for a third straight month, trimming them 0.5 percent to $1.15 trillion.
Overall, foreign holdings of Treasury securities rose 0.3 percent to $4.45 trillion in January. This data is carefully followed to determine whether foreign countries still have an appetite for Treasury debt at a time of record federal deficits.
Dim homebuilder outlook improves slightly
WASHINGTON (AP) _ Homebuilders' pessimistic outlook improved slightly this month, but it remains dim amid falling home prices and a weak pace of construction.
The National Association of Home Builders said Tuesday that its index of industry sentiment for March improved slightly to 17. That's the first gain in five months, after four straight readings of 16. Any reading below 50 indicates negative sentiment about the market. The index hasn't been above that level since April 2006.
Last year was the worst in more than a decade for sales of previously owned homes and the worst for new-home sales in nearly a half-century.
Fewer homes mean fewer jobs. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the builders' trade group.
Northrop Grumman plans shipbuilding unit spin-off
NEW YORK (AP) _ Defense contractor Northrop Grumman Corp. said Tuesday its board has approved the expected spin-off of its shipbuilding business to stockholders, following nearly a year of mulling alternatives for the struggling unit.
Under terms approved by the board, Northrop Grumman stockholders will receive one share of the shipping business, Huntington Ingalls Industries Inc., for every six shares of Northrop Grumman stock they hold on March 30.
Shares of the shipbuilding business will begin trading under the symbol "HII" the next day.
The unit has struggled from a slowdown in Navy shipbuilding contracts and increased competition from rivals like General Dynamics Corp. Northrop and other defense contractors have also been under pressure from the Pentagon to cut costs, forcing them to shrink.
EU to apply stress tests on its nuclear plants
BRUSSELS (AP) _ Shocked into action by Japan's atomic crisis, European energy officials agreed Tuesday to apply stress tests on nuclear power plants and Germany moved to switch off seven aging reactors _ one of them permanently.
The European Union's energy chief called for a reassessment of the 27-nation bloc's energy policy, and questioned what role nuclear power should have in the future.
Energy ministers, nuclear regulators and industry officials meeting in Brussels found "general agreement" on the need for tough tests to check whether the EU's 143 nuclear reactors could withstand earthquakes and other emergencies, Oettinger said.
The stress tests will be devised using the "strictest" nuclear standards in the bloc and be applied in second half of the year, he said, adding that plants that fail the tests would have to shut down.
Irish unemployment tops 14 pct, hits 17-year high
DUBLIN (AP) _ Unemployment in Ireland has topped 14 percent for the first time since 1994, highlighting the dire financial challenges facing the new government of Prime Minister Enda Kenny.
A Central Statistics Office report Tuesday raised Ireland's previous unemployment calculations over several months. Analysts blamed exceptionally harsh pre-Christmas weather for the surprisingly poor figures and warned that further job losses were inevitable this year.
The report said average October-December unemployment reached 14.1 percent compared with 13.9 percent in the previous quarter. Its seasonally adjusted figures were worse, measuring unemployment at a 17-year high of 14.8 percent in December.
Late card payments fall in Feb. at top issuers
NEW YORK (AP) _ Major credit card companies said their customers' payment habits continued to improve in February.
The top six card issuers on Tuesday all reported lower rates of payments late by a month or more, a positive sign for the industry as it continues to recover from huge write-offs in 2009 and 2010.
Bank of America, Chase, Citibank, American Express, Capital One and Discover all submitted regulatory filings detailing lower rates of delinquent payments than in January, continuing a trend that began early last year.
The rates are expected to continue to drop, reflecting both a strong effort by consumers to make their payments on time and the removal of chronic late payers who have seen their credit cut off from the pool of card users.
By The Associated Press
The Dow Jones industrial average closed down 137.74 points, or 1.1 percent, at 11,855.42. The S&P fell 14.52 points to 1,281.87. The Nasdaq fell 33.64 to 2,667.33 .
Benchmark West Texas Intermediate crude for April delivery dropped $4.01, or 4 percent, to settle at $97.18 per barrel on the New York Mercantile Exchange. Brent crude fell $5.15, or 4.5 percent, to settle at $108.52 per barrel on the ICE Futures exchange.
In other Nymex trading for April contracts, heating oil fell 11 cents to settle at $2.9538 per gallon and gasoline futures lost 15.7 cents to settle at $2.8029 per gallon. Natural gas rose 2.7 cents to settle at $3.941 per 1,000 cubic feet.