Rates and Consumer in focus

European Central Bank President Jean- Claude Trichet said the bank is ready to act "pre-emptively'' to quell inflation even after signs of slowing economic growth prevented the bank from raising interest rates. The ECB kept its benchmark interest rate at 4 percent.

German Finance Minister Peer Steinbrueck Wednesday expressed understanding for the 8% pay rise the ver.di trade union has demanded on behalf of the 1.3 million public sector workers it represents.

Euro-zone GDP growth is expected to slow to 0.5 pct in the fourth quarter of last year and to 0.4 pct in the first and second quarters of 2008, according to the main economic institutes of Germany, France and Italy.

Switzerland is likely to see another year of strong growth, Swiss economy minister Doris Leuthard said at a media briefing in Bern. She also reiterated the government's 2008 growth forecast of 1.9 pct.

The Bank of England kept its benchmark interest rate unchanged today as policy makers assessed the effects of last month's reduction on the economy.

Bernanke will give fresh clues to the Fed's thinking today in a speech in Washington. Goldman Sachs Group Inc., JPMorgan Chase & Co. and Barclays Capital Inc. are all predicting a reduction in the main rate to 3.75 percent.

The recession risks in the US economy stem mostly from the financial markets' problems, St. Louis Federal Reserve Bank President William Poole said yesterday, but those problems do not yet justify predicting a recession. He said in response to a question from a reporter that "if the evidence suggests a substantial policy easing -- the term you used -- is appropriate, I don't think we will face a risk from adverse inflation expectations consequences.''

The chief executive of UPS Inc. said Wednesday that the country is at increased risk of falling into a recession and it's not clear when the economy will rebound. "....overall economic growth is lethargic."

Inflation in Mexico reached one of its lowest levels in history in 2007, the Bank of Mexico announced Wednesday. The National Consumer Price Index rose 0.41 percent in December, bringing inflation for the year to 3.76 percent, from 4.05 percent in 2006, the bank said.

Wal-Mart Stores Inc., the world's largest retailer, said December sales climbed 2.4 percent, higher than analysts' estimates. Target’s unadjusted same-store sales fell 5 per cent. JC Penney’s comparable department store sales fell 7.5 per cent, Macy’s posted a 7.9 per cent fall, while Gap’s same-store sales were down 6 per cent

Holiday sales in the U.S. climbed 4.5 percent, ahead of ShopperTrak RCT Corp.'s forecast, as retailers lured customers with discounts on clothing and electronics. The gain exceeded the projection of a 3.6 percent increase.

J Sainsbury Plc, Britain's third- biggest supermarket chain, reported sales growth that exceeded analysts' estimates after offering Christmas discounts on televisions and DVDs.

Metro AG, Germany's largest retailer, said 2007 sales increased 10 percent, beating analysts' estimates and fueling the stock's biggest gain since 2003. Domestic sales, which account for about 42 percent of total revenue, rose 5.5 percent in the year. Fourth-quarter sales rose 8.3 percent to 19.9 billion euros, compared with an average analyst estimate of 19.7 billion euros.

Figures from the Australian Bureau of Statistics show retail sales grew by a stronger than expected 0.8 per cent in November, giving the fastest annual growth rate since 2004, of 8.1 per cent.

David Nadler, vice-chairman at insurers Marsh & McLennan, said: "Systemic financial risk is the most immediate and, from the point of view of economic cost, most severe risk facing the global economy. A potential recession in the US and the knock-on effects of a collapse in asset prices, such as housing and shares, could throw the world economy into chaos, says a study from the World Economic Forum.

Countrywide said the foreclosure rate doubled to 1.44 percent from 0.70 percent a year earlier, and rose from November's 1.28 percent. The delinquency rate rose to 7.20 percent of unpaid balances from 4.60 percent a year earlier.

Warren Buffett’s Berkshire Hathaway went ahead with plans to set up a new bond insurance company last month, just weeks after receiving an unusual call from New York state’s insurance regulator urging it to enter the multi-billion dollar market. "....we can’t afford to have this industry go into a tailspin’.”

So much for the theory that the credit crunch would declaw Carl Icahn and Nelson Peltz. New data compiled by FactSet Shark Watch, which tracks shareholder activism, show that these investors are, well, as active as ever.

Bear Stearns(BSC) won’t take more wirtedowns because the firm is “adequately marked” to market on its investments, CEO Alan Schwartz said in an interview. Schwartz said the company is “comfortable” with its positions and isn’t looking to raise capital.

Citigroup, Merrill Seek More Foreign Capital. Merrill is expected to get $3 billion to $4 billion, much of it from a Middle Eastern government investment fund. Citi could get as much as $10 billion, likely all from foreign governments.

Freddie Mac may be downgraded by Moody's Investors Service because the damage from loan defaults could be worse than the ratings company expected.

Capital One Financial reduced its full- year profit forecast by about 20 percent because of swelling loan losses in a weakening U.S. economy. The decline was caused by $1.9 billion of loan-loss provisions and $80 million in legal reserves in the fourth quarter.

Chancellor of the Exchequer Alistair Darling said it might not be possible for companies to finance a rescue of Northern Rock and that shareholders of the bank should have realized that their investment may be worth nothing.

The CEOs of Total and ConocoPhillips question mainstream forecasts for supply, suggesting the era of "plateau oil" is nearer than many in the business have admitted.

Developing economies in the Asia-Pacific region will face a slight slowdown in 2008 as exports are likely to fall due to a wobbly United States economy, a UN report said Wednesday. India's economy is expected to grow 9.0 percent in 2008 while China's growth is forecast at 10.8 percent.

Bank Hapoalim Ltd., Israel's second- biggest lender by assets, wrote down $380 million on its structured investment vehicles and mortgage-backed bonds.

Aluminum producer Alcoa Inc. said Wednesday its fourth-quarter earnings soared 76 percent, buoyed by the pending sale of its packaging and consumer businesses. Quarterly revenue fell to $7.39 billion from $7.84 billion last year, due to lower metal prices and the exclusion of results from a soft alloy extrusion business that is now part of a joint venture.

The three-month euro interbank offered rate, or Euribor, dropped 1 basis point to 4.59 percent. It was at a seven-year high of 4.95 percent on Dec.12. The comparable pound rate fell 5 basis points to 5.6 percent, the lowest since April 2007. The cost of borrowing dollars for one month dropped 5 basis points to 4.32 percent. The so- called TED spread, was 114 basis points, from 221 basis points on Dec. 11, and up from 42 basis points in July, 2007. The one-month Libor OIS spread, viewed as an indirect measure of the availability of funds in the money market, has narrowed to 30 basis points, from 110 basis points on Dec. 4, and up from 8 basis points on July 31, 2007.

Asia: Nikkei down 1.45% to 14388.11, Hang Seng down 1.30% to 27255.73. Refiners and utilities fell in Shanghai and Hong Kong following China's announcement of a freeze in fuel and power prices to curb inflation. China Petroleum & Chemical Corp., or Sinopec (SNP), fell 5.7% in Hong Kong and 3% in Shanghai; Huaneng Power (HNP) fell 4.5% and 3.2%.
European stocks declined for the sixth time in seven days, led by chemical makers, metal producers and engineering companies, on speculation inflation may keep central banks from cutting interest rates to stoke economic growth. National benchmarks declined in 15 of the 18 western European markets. The U.K.'s FTSE 100 sank 0.9 percent, while Germany's DAX and France's CAC 40 lost 0.5 percent. The Stoxx 50 fell 0.7 percent and the Euro Stoxx 50, a measure for the euro region, dropped 0.4 percent.