- November 12, 2012 - 5:31 PM
In a landmark ruling, an Australian judge found that Standard & Poor's had misled investors by awarding a triple-A rating to a "grotesquely complicated" derivative product. The risky derivative was dreamed up by ABN AMRO, a Dutch bank that had to be rescued during the financial crisis. The judge ordered S&P and the bank to compensate investors, the first time that a ratings agency has been held liable for losses on a financial product it had assessed as top-notch. S&P plans to appeal.
HSBC more than doubled its estimate of the amount it may have to pay in penalties arising from a regulatory investigation in the United States into its business in Mexico. The bank is setting aside $1.5 billion to cover fines that could flow from allegations that drug gangs laundered money through HSBC accounts. Some analysts think that the figure may reach $2 billion.
BNP Paribas reported a quarterly net profit of $1.7 billion. It's a vast improvement on the same quarter last year, when it wrote down the value of its holdings of Greek debt. The French bank also said that it had completed the restructuring of its balance sheet in order to meet capital requirements under the new Basel 3 rules.
France and Belgium injected another combined $7 billion into Dexia, a stricken bank that is still losing money despite a bailout in 2008. The decision is likely to be very unpopular with French and Belgian voters, since governments in both countries are pushing to cut spending on social services in order to ease budget deficits.
Toyota bucked the recent trend of gloomy annual-earnings forecasts from Japanese carmakers, raising the amount of profit it expects to make to $9.7 billion. Like its rivals in Japan, Toyota has suffered from a sharp drop in sales in China, which were down by 44 percent for the company in October compared with the same month last year, because of political tensions over some disputed islands. Its business in America has been thriving, however, mostly driven by demand for its Camry, Corolla and Prius models.
Suzuki decided to stop selling cars in the United States and put its American division into bankruptcy protection. The Japanese carmaker's small vehicles sell well in India and Southeast Asia, but it struggled to compete against bigger American models.
Apple's share of the global market for tablet computers fell sharply in the third quarter, according to IDC, a research firm. Apple's iPad accounted for 50.4 percent of all tablets sold, down from 65.5 percent in the previous quarter, while Amazon, Asus and Samsung all saw their share of the market jump. But consumers may merely have been delaying buying an Apple device, however. The company said that it sold a combined 3 million mini iPads and fourth-generation iPads in the three days since they were first available in shops on Nov. 2.
Vestas, the world's biggest manufacturer of wind turbines, announced plans to cut another 3,000 jobs. It will have reduced its work force by 20 percent this year, following a previous round of layoffs in 2010, as cash-strapped European governments curb their subsidies for wind power and competition from China increases.
The European Union slashed its growth forecast for next year. It now expects output in the 17 eurozone countries to expand by an average of only 0.1 percent, down from its previous forecast of 1 percent, which was issued in May. Germany's economy is predicted to grow by 0.8 percent, whereas Spain's is expected to contract by 1.4 percent and Italy's to shrink by 0.5 percent.
The E.U. also forecast that Spain's budget deficit will reach 6 percent of GDP in 2013, instead of the 4.5 percent Spain agreed to four months ago. This puts more pressure on the government in Madrid to introduce further austerity measures.
Fitch upgraded Turkey's credit rating to BBB- from junk status. It was the country's first investment-grade rating from any of the big agencies since it was plunged into an economic crisis in 1994.
The 18th Chinese Communist Party Congress opened in Beijing. President Hu Jintao, who is stepping down as party chief, admitted in his state-of-the-nation speech that China's development is "unbalanced, uncoordinated and unsustainable," but did not put forward any plans for deep political reform.
Human-rights groups reported that four more Tibetans, including three teenage monks, set fire to themselves in western China on the same day. More than 60 Tibetans have killed themselves this way since last year to protest Chinese policies.
A report commissioned by the French government described the lack of competitiveness in the French economy as an "emergency situation." The International Monetary Fund urged France to cut public spending and reform the labor market, or risk having its economic output fall behind Italy and Spain. Prime Minister Jean-Marc Ayrault, a Socialist, responded by announcing $25 billion of tax breaks for French companies.
© 2013 Star Tribune