Sober news. Amid all the talk of surges, meltdowns, debts and strong jobs reports in the US, the number of Americans existing on the country’s food stamps program is approaching 40 million, roughly one in every eight people. The US Department of Agriculture said a record 39.68 million people were enrolled for food stamps during February, an increase of 260,000 from January. The unemployment rate is 9.9% and the under-employment rate is about 15%. The number of people in the food stamps program has set a record each month since reaching 31.78 million in December, 2008. USDA estimates enrollment will average 40.5 million people this fiscal year, which ends on September 30, at a cost of up to $US59 billion and rise to 43.3 million people in the year to September, 2011. So much for the recovery that Wall Street talks about.
Budget day sneakies: There were two notable (three if you include the brawl at Transurban, but that was more the timing of the issue on Monday) sneaks on Budget day. Asciano, the challenged rail and ports operator, whipped out some house cleaning, which included $1.1 billion of impairments on its Patrick ports business. No mention was made of why this was necessary by CEO Mark Rowsthorn, and why it had to be announced yesterday, although from its form, it’s obvious to hide it as best as possible. Embarrassment? Not Asciano!
And the reason for the clean up? It was up to ratings group Moody’s to let us know why the cuts happened. In a separate note, it pointed out there will be a a third stevedore on the wharves in a couple of years: “Moody’s notes that the goodwill value was fixed on Asciano’s demerger from Toll Holdings in 2007, and its subsequent decision to write it off in view of the eventual entry into Australia of a competitive third ports operator, most likely Hutchison Whampoa.” Thanks Moody’s. Perhaps Rowsthorn was shy, or remembered what he said in August 2008 about new competition: Despite the impending arrival of a third stevedore in Brisbane he boasted: “I am confident we can retain market share. Especially as Asciano operated in all Australia’s ports.” But it also confirms that Toll paid too much for Patrick in 2006 and that the spin-off of Asciano was done at silly values to allow Toll justify the first deal.
Sneaky 2: The second sneak was Transfield Infrastructure and its 47.5% owner, Transfield Services. It snuck out a $301 million recapitalisation of the infrastructure group aimed at lowering and extending the fund’s high debt. There’s a $191 million loss-making sale of a wind farm and then a $110 million shareholder fund raising, $30 million of which will come from institutions and $29 million of the remainder will be sub-underwritten by Transfield Services. The revamp has been rumoured for a while, could have been announced on Monday (when the services company’s share price jumped 18c), but like Asciano, though it better to release on a day when attention might be elsewhere. The $110 million issue is being done at a discount of 22%, which is a good guide in the current markets as to the very real need for the infrastructure fund to raise new capital.
No tax cuts in Germany, just spending cuts: The Merkel government has dropped tax cuts indefinitely from its economic agenda in the wake of the €750 billion bailout of the euro and the government’s big loss in the North Rhine-Westphalia state elections on Sunday. So the Free Democrats, who had made tax cuts a big policy, have nothing left and Merkel is now looking for every conceivable saving to not only pay for Greece and the costs of the mega bailout, but to cut Germany’s deficit and debt mountain . Which means the prospects of the German economy hauling the rest of Europe along with it in a consumer-led rebound have vanished. Just the export machine left.
Exports, ja, we’re German: So it was no surprise that Germany’s trade surplus jumped to €17.2 billion ($US22.2 billion) in March from €12.7 billion in February. The Federal Statistics Office said the country’s seasonally adjusted exports jumped 10.7% on a monthly basis, while imports were up by 11.0%. The current account surplus rose by €4.5 billion in March compared to that of the previous month. Exports jumped 23.3% in March, compared with the same month in 2009, while imports were up 18.3%. The office also predicted Germany’s economy will grow 1.4% this year and 1.6% in 2011, after a 5% contraction last year. Those forecasts were made before the bailout. The cuts that have to be made in Spain, Greece, Portugal, Italy and the UK will have an impact on the German export machine. More than half of Germany’s exports go to the rest of Europe. First-quarter growth figures are to be issued tonight across Europe.
China still top: And if you’re wondering, China still leads Germany as the world’s biggest exporter with $US112.11 billion of exports in March, against Germany’s $109.8 billion (that’s at a euro rate of $US1.28).
Flash crash: It’s still a mystery. After executives from the leading stock exchanges, the NYSE and Nasdaq, trooped up to Capitol Hill in Washington to be questioned by Congress this morning, our time, about the Great Crash of 2.45pm, it seems the cause is still unknown. Testimony released early said there was no single explanation for the events of last Thursday afternoon, when the Dow plunged 998.50 points, destroying about $US1 trillion in market value. The events have raised serious questions about the stability of electronic trading and has prompted talk of new regulations. SEC chairman Mary Schapiro said in her early comments that regulators are still sifting through more than 17 million trades in listed equities in the hour beginning at 2pm EDT on May 6 to try to pinpoint the cause. She cited the growth of trading in multiple markets over the past few years for the complexity of the probe. The SEC has sent out subpoenas to various parties.
Super tax. Here’s a great idea for those resources companies opposed to the 40% super tax. Give up your planned expansions, new mines and sell them to Chinese buyers. They want the stuff and seem willing to pay the tax, if this report on the official Xinhua website is any guide. “China’s large steel makers, Sinosteel and Anshan Iron and Steel Corp, said they are willing to continue to invest in Australia, despite a 40 per cent tax on the Australian mining industry. We are reviewing how the tax will impact our companies, and undoubtedly, it will affect costs and profits in our local projects,” Tuesday’s China Daily quoting Sinosteel president Huang Tianwen. He said from a long-term perspective the company is still committed to exploring more overseas resources. Bai Jingpu, vice-president of Anshan Steel, also said the company is evaluating and analysing the impact of the “super tax” on the Australian mining industry, but the company will continue to invest in the country. So, BHP Billiton, Rio Tinto and Xstrata, what do you think? Sell your iron ore, copper, zinc and coal projects to China. They will pay top dollar, maybe not as much for the output, and pay the tax willingly. Put your projects where your mouths are.
Crikey is committed to hosting lively discussions. Help us keep the conversation useful, interesting and welcoming. We aim to publish comments quickly in the interest of promoting robust conversation, but we’re a small team and we deploy filters to protect against legal risk. Occasionally your comment may be held up while we review, but we’re working as fast as we can to keep the conversation rolling.
The Crikey comment section is members-only content. Please subscribe to leave a comment.
The Crikey comment section is members-only content. Please login to leave a comment.