WASHINGTON: Federal Reserve Chairman Ben Bernanke said on Tuesday, Sept 15 that the worst U.S. recession since the Great Depression was probably over, but the recovery would be slow and it would take time to create new jobs, according to Reuters.

"Even though from a technical perspective the recession is very likely over at this point, it's still going to feel like a very weak economy for some time," Bernanke said at the Brookings Institution, a Washington think tank.

In declaring the recession over, Bernanke sounded a slightly more upbeat tone than in late August when he had said simply that prospects for a return to growth were good.

However, he cautioned that growth next year would probably be sluggish and that unemployment would only fall slowly.

"The general view of most forecasters is that that pace of growth in 2010 will be moderate, less than you might expect given the depth of the recession because of ongoing headwinds," Bernanke said, citing tight credit conditions and other economic restraints.

He spoke on the one-year anniversary of the collapse of Lehman Brothers investment bank, an event that sparked a global financial panic, and a week before Fed officials meet to review their policy options.

The Fed -- the U.S. central bank -- slashed benchmark interest rates to near zero in December and has been buying mortgage-related securities and longer-term U.S. Treasury debt to give the economy a lift.

Bernanke, in a nod to recent relatively upbeat economic signals, said it was possible the recovery could be stronger than expected, but cautioned that it could also be weaker.

"There are risks on both sides of that forecast," he said. "But if we do in fact see moderate growth, but not growth much more than the underlying potential growth rate, then unfortunately, unemployment will be slow to come down."

Bernanke's comments implicitly acknowledged the possibility of a stronger-than-expected "V-shaped" U.S. recovery. The latest Blue Chip survey of economists predicts that growth will expand by a brisk 3 percent annual rate in the third quarter.

Economists generally estimate U.S. trend potential growth to be around 2.5 percent. Growth above that level would be needed to bring down the unemployment rate, which hit a 26-year high of 9.7 percent last month.

After its last meeting on Aug 11-12, the Fed said the "substantial" slack in the economy would likely keep inflation subdued for some time, adding that exceptionally low interest rates would likely be needed for "an extended period."

Fed policymakers meet next Tuesday and Wednesday and are expected to opt to keep stimulating the economy via ultra-low interest rates and massive asset purchases.

With the benchmark interbank lending rate virtually at zero, the Fed has focused on driving down other borrowing costs by buying mortgage-related debt and U.S. government bonds. - Reuters (Read more inside ..)

Written by Reuters

Saturday, 05 September 2009 08:05

NEW YORK: US stocks closed higher on Friday, Sept 4 as investors focused on the bright side of a mixed payrolls report that showed smaller-than-expected job cuts in August, although the unemployment rate hit a 26-year high, according to Reuters.

The market was relatively flat in morning trade before sharply rising around noon, with all major indexes gaining around 1 percent.

"Yes, the unemployment rate was a little worse than expected, but the wild card was the non-farm payrolls, which came out better than forecast," said Robert Francello, head of equity trading for Apex Capital in San Francisco.

"It's providing relief as we get near the close, and some people are covering shorts here before the long weekend."

Gains were broad-based, with TECHNOLOGY [] shares leading the charge. Semiconductor stocks rose after Intel Corp's chief executive said aging personal computers and Microsoft's launch of Windows 7 will prompt companies to start spending on PCs next year.

Intel was up 1.1 percent at US$19.64 and Microsoft closed at US$24.62, up 2.1 percent, both in Nasdaq trading.

The PHLX semiconductor index rose 2.7 percent.

Novellus rose 2.9 percent to US$19.63 after the semiconductor manufacturing tool maker lifted its forecasts for the current quarter.

The Dow Jones industrial average climbed 96.66 points, or 1.03 percent, to end at 9,441.27. The Standard & Poor's 500 Index gained 13.16 points, or 1.31 percent, to 1,016.40. The Nasdaq Composite Index rose 35.58 points, or 1.79 percent, to close at 2,018.78.

But for the week, the Dow was down 1.1 percent, the S&P 500 was off 1.2 percent and the Nasdaq lost 0.5 percent due to a sharp sell-off in the first three days of the week.

Declines in payrolls for August were the smallest in a year, but the unemployment rate rose to a level not reached since June 1983, according to the Labor Department. Wall Street views a rebound in the labor market as a key component to an economic recovery.

Shares of memory chip developer Rambus Inc shot up 11.4 percent to US$17.75 on Nasdaq on speculation that rival Samsung Electronics would buy the company for US$25 to US$27.50 per share.

International Business Machines Corp shares helped lead the Dow industrials' advance, rising 1 percent to US$117.46 on the New York Stock Exchange.

Among financial stocks, shares of mortgage fund providers Fannie Mae and Freddie Mac rose on news that they were back in compliance with New York Stock Exchange share listing rules, reinstating somewhat their respectability among investors.

Fannie Mae gained 7.9 percent to US$1.77 and Freddie Mac rose 5.4 percent to US$1.97. - Reuters (Read more inside ..)

Reader’s Digest Association Inc., publisher of the widely read Reader’s Digest magazine, said Monday it would likely file for Chapter 11 bankruptcy for its U.S. businesses to cut its debt load. Bankruptcy financing of $150 million already committed.

The media company, known worldwide for its family-friendly namesake magazine, been trying to slash costs and boost growth since it was taken private in 2007 by an investor group led by Ripplewood Holdings LLC.
The bankruptcy would take the form of a so-called pre-arranged filing, Reader’s Digest said in a statement. A pre-arranged filing comes after a company has already reached deals with its lenders to cut its debt.
The Chapter 11 filing will apply only to the company’s U.S. businesses. Its operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be affected.
“Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives,” said President and Chief Executive Officer Mary Berner, in a statement.
Reader’s Digest calls itself the the world’s largest paid-circulation magazine.
The Pleasantville, N.Y., media company said the bankruptcy would help facilitate an agreement with lenders to exchange a portion of its $1.6 billion in senior secured debt for equity, and transfer company ownership to the lender group.

The agreement, which is subject to court approval, also includes a commitment from some members of the senior lender group to provide $150 million in debtor-in-possession financing, which would help fund operations during the reorganization. The pre-arranged plan proposes to cut debt by 75% to $550 million from the current $2.2 billion.

The company has offices in 44 countries, marketing books, magazines, educational products, recorded music collections and home video products. It also publishes food magazine Every Day with Rachael Ray. (Read more inside ..)

The Walt Disney Co. announced Monday that it has agreed to purchase comic book and action hero company Marvel Entertainment for about $4 billion.
The deal pairs a comic book publisher that just recently began to produce its own movies with one of the largest international media companies in the world.
“This is perfect from a strategic perspective,” Disney Chief Executive Robert Iger told CNNMoney.com. “This treasure trove of over 5,000 characters offers Disney the ability to do what we do best.”
On a conference call with investors, Iger said the deal will allow Disney to sell Marvel’s vast array of characters and properties across different media platforms and in many more markets. For instance, Iger said that Disney’s Pixar animation unit was excited about the opportunities that a Marvel acquisition could yield.
“Spider-Man will appear in ‘A Bug’s Life’ sequel,” joked Barclays Capital analyst Anthony DiClemente.
The deal would give Disney some content that appeals more to boys, a market it has been looking to develop, Iger said. Disney XD, a television station and video game unit, already had a deal with Marvel to use some of the comic book company’s action heroes in its content.
“Disney is the perfect home for Marvel’s fantastic library of characters given its proven ability to expand content creation and licensing businesses,” said Marvel Chief Executive Ike Perlmutter. “This is an unparalleled opportunity for Marvel to build upon its vibrant brand and character properties by accessing Disney’s tremendous global organization and infrastructure around the world.”
Disney Chief Financial Officer Tom Staggs noted that Marvel owns the rights to many action-hero characters that are not widely known, which Disney anticipates bringing to the forefront for future movies or TV shows should the deal go through.
If Marvel shareholders approve the deal, they would receive $30 per share in cash and 0.745 shares of Disney for each share of Marvel that they hold. The deal is valued at $50 per Marvel share, more than a 29% premium, based on Friday’s closing price.
Disney said it will issue about 59 million shares as a result of a deal, but it will repurchase as many shares over the course of the 12 months following the deal’s closing.
Marvel has launched a large number of action-hero movies over the past decade, including “Spider-Man,” “X-Men,” “The Fantastic Four” and “The Incredible Hulk.”
Last summer’s “Iron Man” blockbuster earned just under $100 million over three days, the second-best non-sequel opening ever, according to Entertainment Weekly. “Iron Man” was the first Marvel movie to be fully financed and produced by the comic book company.
But Marvel still holds deals with Paramount, Sony and Fox for future movies, including several more Spider-Man films. Marvel chairman Morton Handel estimated that the company has about five more films with Paramount and intends to honor the current contracts it has with other movie studios, even if the Disney deal is inked before the contracts expire.
Marvel pays Paramount, the comic book company’s primary movie distributor, between $20 million and $60 million per movie in distribution fees, according to Barton Crockett, analyst at Lazard Capital Markets.
Crockett said Disney would likely become the sole distributor of Marvel’s movies in the future, giving it a “full plate” of movie releases, including Pixar, Marvel and its own films (Read more inside ..)