Where have all the pensions gone?

Florida's pension fund owns more than $1 billion of the same downgraded and defaulted debt that sparked a run on a state investment pool for local governments and forced officials to freeze withdrawals. "These were highly inappropriate investments for taxpayers' money,'' said Joseph Mason, a finance professor at Drexel University in Philadelphia. ``This is the tip of the iceberg for pension funds. We know the paper is sitting there. There are substantial subprime-related losses that haven't shown up yet.''

Carmakers ratcheted up warnings on Monday of tough times ahead in the US, after reporting lacklustre November sales. General Motors’ US sales slumped by 11 per cent last month from a year earlier, while Chrysler sales were down 2 per cent and Toyota and Ford posted flat performances in the world’s biggest vehicle market. Industry sales are expected to total about 16m units this year, compared with 16.6m in 2006.


Wall Street's four-biggest securities firms had their earnings estimates cut by JPMorgan Chase & Co., which said additional writedowns on fixed-income assets and a slowdown in mergers and acquisitions will hurt profit.

Citigroup's Sedna Finance SIV had part of its junior-ranking debt downgraded 12 levels by Fitch Ratings after declines in the structured investment vehicle's assets. The average price of the assets held by Sedna has fallen below 97 percent of face value.

H&R Block said on Tuesday the sale of its struggling subprime home lender unit, Option One Mortgage to Cerberus was terminated.

Europe's economy may be more damaged than the European Union has forecast by fallout from the U.S. housing slump as banks curb lending and accelerating price gains prevent central bankers from cutting interest rates, EU finance officials said. Europe's economy may be more damaged than the European Union has forecast by fallout from the U.S. housing slump as banks curb lending and accelerating price gains prevent central bankers from cutting interest rates, EU finance officials said.

Producer prices in the Euro-zone jumped 3.3 percent from last year – the fastest pace in nearly a year – as food costs accelerated the most in fifteen years while energy prices posted strong gains as well. With inflation pressures remaining strong, there is little doubt the ECB will remain hawkish when they meet on Thursday, though they are not expected to raise rates.

U.K. retail sales increased at a faster pace in November as stores attracted customers with price cuts, the British Retail Consortium said. Revenue at outlets open at least a year climbed 1.2 percent from the same month in 2006, compared with a 1 percent gain in October.

The yield on the 10-year German bund extended its steepest daily drop in 1 1/2 months as the cost of money-market borrowing in the euro region soared. Bonds held gains after data showed European producer-price inflation quickened more than economists forecast in October. WestLB AG, Germany's third-largest state-owned bank, and Hamburg-based lender HSH Nordbank AG, bailed out more than $15 billion of troubled investment funds.

The cost of borrowing between banks in the UK rose again, with the one-month rate jumping further above yesterday's nine-year high and the three month rate at its highest level since Sept 18. The London Interbank Offered Rate (Libor) rose further to 6.749 pct on a one-month basis after suddenly spiking to 6.715 pct yesterday. This takes the rate a whole percentage point above the Bank of England's main bank rate of 5.75 pct. On a three-month basis, Libor rates also rose to 6.649 pct from 6.620 pct yesterday. The overnight rate, however, dipped back to 5.847 pct from 5.887 pct yesterday.

The Bank of Canada decided to lower its policy interest rate by 25 basis points to 4.25 percent today and pointed to the economy's vulnerable spots and reduced inflation expectations as the reasons.

Japan's Prime Minister Yasuo Fukuda ordered ministers to develop a policy to soften the blow of higher oil prices on consumers and businesses. The package might include financial support for transport operators and construction companies as well as smaller businesses that have difficulty passing rising oil costs to consumers.

The Nikkei 225 finished at 15,480.19 down 148.78 points (0.95%). In Hong Kong the Hang Seng finished at 28,879.59 up 221.17 points (0.77%). In the mainland the Shanghai Composite finished at 4,915.889 up 47.278 points (0.97%). In Europe afternoon trading the CAC 40 stood at 5,548.30 down 81.16 points (1.44%), the DAX was at 7,813.79 down 23.47 points (0.30%) and the FTSE 100 was at 6,319.00 down 67.60 points (1.06%).